Report: Labels Spent $4.5B Promoting Artists

The music industry has often tried to downplay broadcasting’s free promotion of artists as it fights for a performance royalty from AM/FM radio. But, according to InsideRadio,  a new report from the International Federation of the Phonographic Industry (IFPI) sheds some light on the size of the cost-savings benefit from that exposure since marketing costs are the biggest expense for record labels.

The Investing in Music report shows labels spent $4.5 billion on promoting artists in 2015, including $1.7 billion on direct marketing expenses.

A&R (“Artists & Repertoire”) expenses—which cover the discovery and development of new acts—cost another $2.8 billion. Combined marketing and A&R represent 27% of all revenue brought in by the record companies.

IFPI also reports the typical cost to break worldwide artists now averages between $500,000-$2 million. That includes an average of $200,000-$700,000 on marketing expenses alone. “This is the biggest item of spending, where labels have a key impact,” the report says.

But the real expense could be $2.4 billion more each year, according to an economic analysis conducted for the National Association of Broadcasters. That’s how much it says radio provides each year in free promotion that helps drive music sales, concert tickets and merchandise sales. “Free radio airplay provides the recording industry increased popularity, visibility and sales for both established and upcoming artists,” the NAB Policy Agenda says, noting that beyond record spins, stations support acts with concert promotion, on-air interviews and social media marketing. “Recognizing the promotional value of free radio airplay, Congress has repeatedly rejected the record labels’ attempts to impose a harmful performance tax on local radio stations,” the NAB says.