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Typical Album Project: How Labels Would Invest and Get Returns.

We all know that the album culture is on its death bed in Kenya, largely due to the large investments required and which the labels/artists cant find and also the piracy issue. You can realise I have intentionally left out fans not buying the music as a problem since this can easily be averted. So I came up with a research into how much money an album would cost and what strategies would guarantee returns plus what the profit margins would be. I have also included marketing objectives, project assumptions and a detailed analysis of the cash spent, possible revenues and finally, the bottomline, profits.

Album Project Objectives:

a)To produce, promote, market and distribute a quality album that would sell 100,ooo physical copies (CDs).
b)To take advantage of the album marketing and promotion to sell merchandise for the artist amd the record label.
c)To promote the album using tours, as this would also act as a revenue stream.
d)To position the artist and record label to get product endorsement deals and patnerships.

Album Project Assumptions:

a)The artist or Band whose album is to be released enjoys national support.
b)The figures we are using are conservative and only serves the purpose of illustration.
c)The record label would be able to seek money for the project financing.
d)The Artist has a good manager who can supervise his/her creative process, recording and distribution.
e)The record label has its own production equipment, otherwise we will use a figure to illustrate the amount possibly required.
f)The album project contains between 12 and 15 singles and for illustrative purposes we will call it The UnBeatable Project.
g)The label has access to retail points like record stores, supermarkets, bookshops or boutiques.

A. Project Costs

a) Recording and Mastering

We are going to assume a Ksh. 200,000 production fee. This would include recording, mixing and mastering expenses. Also in this, we assume that the record label will provide vocalists and a voice coach, wherever possible. The point of all this is to produce quality content that would be able to sell.

b) Promotion and Marketing

This is where the musicians and labels fail, more often. For purposes of understanding, I will say that one must ensure that the marketing strategy they utilise, focuses on not just gaining fans, but consumers too. Or, you must convert the former to the latter. Fans wait until you release music on Youtube and then Tweet about it; consumers ask you where the album copies can be bought.

-3 Music Videos (Ksh. 150,000)– these videos for three singles off the album, will serve the purpose of promoting the project and may be released as follows: two before album release and one in the week of release.
-Album Cover and Photography (Ksh. 10,000)– a well illustrated album cover and professional artist photographs are a good way to promote the album.
-Twitter Promotion package(Ksh. 100,000)– this will be used to pay influencers with the purpose of creating an online buzz. Of that amount, dedicate 60% before release and the rest after release.
-Facebook Ads (Ksh. 50,000)– You will need to create Facebook Ads and I suggest you use it only after release so that the purpose is to drive consumer traffic to downlad/sales website and your retailing points.
-Publicity Costs (Ksh. 50,000): As previously assumed, the artist has a manager and so you’ll only need a publicity guy to communicate with the radio, Tv, blogs and clubs about the project and create the buzz on the media.
-Touring and Road shows (Ksh. 400,000)– These will ensure that the artist perfoms in a number of venues, mostly in the remote areas of the country to promote the album there too.
-Content marketing expert (Ksh. 100,000)– this guy will ensure that the online audience is engaged with videos informing them of the album news and features of the artists. Also, the content marketer will create a small blog say, theubeatableproject.com so as as to post news, videos and details about the album.
-100 Promotional CDS (Ksh. 20,000)– these will be taken to media houses and will contain the released singles.
-200 promotional teeshirts (Ksh. 40,000)– teeshirts will be given out during club shows, media tours and roadshows.
-Other promo items Ksh. 80,000 – This includes poster,flyers and banners.

TOTAL MArketing/Promotion Cost = Ksh. 1,000,000

c) Distribution Costs

As we expressed we are using 100,000 copies as the number of albums we target to sell at a whole sale price of Ksh. 300 (Retailers will be required to sell at Ksh. 400). We are going to get a company that can quickly press the CDs are hope we budget for Ksh. 150 per copy.

Note: To save on initial investment cost, we will press the CDs in 10,000-CD batches.

-Pressing and branding CDs: 100,000 copies X Ksh. 150 per copy = Ksh. 15,000,000 (since we are doing only 10,000 at a time, we will spend Ksh. 1.5 million per batch.)
-Warehouse: for storing the consignement before dispatch to various retailers. We will rent a store for Ksh. 30,000 for ten months. Thats comes to: Ksh. 300,000
-Distribution cost: use of 4 lorries and transport personnel to dispatch the boxes to various destinations in 10 days. These will be able to deliver to all locations. KSH. 10,000 per lorry X 4 lorries X 10 days=Ksh. 400,000

TOTAL DISTRIBUTION COST = Ksh. 15,700,000

Thus, GROSS Total= 200,000 + 15,700,000 + 1,000,000= Ksh. 16.9M

(Total amount for production marketing and distribution is Ksh. 16. 9 million)

B. Project Benefits

a) CD sales

We assume, 95% will be sold.

95% X 100,000 CDs X 300 per CD wholesale= Ksh. 28,500,000

b) Album Streams/Downloads

Streaming revenues from Spotify, iTunes plus local services like Waabeh and Mkito woul likely bring in Ksh 200,000

c) Album-related Merchandise sales

Over the 10-month period, sales would be 1000 shirts at a profit of 300 per shirt i.e Ksh. 300,000
400 Caps at a profit of 200 per cap= Ksh. 80,000
Other merch sales: Ksh. 30,000

Total Merch Sales= Ksh. 410,000

d) Returns from Touring and shows:

We assume that the label will get a Ksh. 200 per attendee for 50 shows with an average attendance of 150 people.

=> 50 shoes X 150 people per show X 200 per person = Ksh. 1,500,000

e) Sponsorship or Product Endorsements during tours and club gigs.

At least Ksh. 1 million

Thus, Total Benefits (revenue fromAlbum)- 28.5 Million + 0.2 million + 0.41 Million + 1.5 million + 1 million= Ksh. 31,610,000
C. Project Profits

Profit=> Total benefits- Gross Total costs= 31.61M-16.9M= Ksh. 14.71 Million

CONCLUSION:

We can now breathe freely and agree that there would be profits awaiting, should all that pertains to quality production, proper promotion and marketing and utilisation of the best distribution system is well considered.

Written by Philip Nyalenda.

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