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Download music costs
online retail cost breakdowns

Music download retail costs

This page covers download retail costs after audio production. This is how to cost your own music downloads and how retailers cost theirs.

The CD costs page gives a detailed breakdown of recorded music component costs and prices.

Pricing downloads isn’t the same as pricing CDs. With CDs you need to recover costs that occur before the sale (e.g. CDs, packing material, stamps). With downloads more costs can be covered by digital music aggregators or online payment services, and you aren’t buying any stock.

Also, a mail order CD could reasonably sell anywhere between £2.50 and £15 but the going rate for a download track is normally between 50p and £1.

The component costs of a retail music download

It’s hard to make a case for selling music downloads from your own site these days. The tools are there (Payloadz provides a partly bundled solution) and it’s possible to do it, but an aggregator will bundle all these costs for you and get your downloads onto the main music retail sites.

Components of a retail download
Running costsAnnual credit card payment gateway fee, etc.
Retail servicesdigital aggregation and retail commission
Credit card commission4.5% of the retail price (for WorldPay payment options)
BandwidthIf you sell from your own site you’ll need about 1Gb for 200 plays or downloads
JOL8% of site revenue (minimum £20,000 a year)
Writer incomeCovered by JOL if the writer is separate
Publisher incomeCovered by JOL if the publisher is separate
VAT17.5% of the retail price (UK sales)

Some one-off costs and running costs might be paid out of writer, artist, label or publisher income. This page assumes the artist is also the performer—otherwise allow for session payments or points for collaborators.

Cost breakdown using a retail aggregator

If you use a music download aggregator your online retail costs are covered.

Retail costsNote
4.5%credit card commissione.g. WorldPay, a specific running cost
17.5%VATif annual turnover is over £60,000
8%JOLpaid by most mainstream retail sites

So if you use a download aggregator the tax issues are different from selling your own CDs. You may also want to join the collection societies for your share of JOL and PPL income.

If you sell your own downloads the price you charge is up to you but be sure your tax is covered. At 79p/track you’d need to pay the VAT on about 76,000 tracks a year (if you sell them from your own site) so keep 17.5% safe unless you’re certain you won’t sell that many.

Your income should also cover some general one-off and running costs, and if you don’t have evidence for that it’ll become taxable as income too (I allowed 10% on the CD costs page).

Example cost breakdown with an aggregator

Here’s what a 79p download earns through an aggregator:

Digital aggregator cost breakdown
Record labelRecording owners51pto share with artists etc.
DistributionAggregator5pnormally feeding many retailers
RetailWeb site23pcovers VAT, JOL, etc.
Pie chart diagram of UK CD cost breakdown: pressing, distribution, retail, royalties and tax

Example cost breakdown for a big label download

Here’s how a big label download breaks down in more detail:

Big Label download cost breakdown
Record labelArtist royalty5pdepends on the label deal
Label share46pdepends on the artist deal
DistributionAggregator5pcovers encoding and submission
RetailRetailer2.9palso covers card fees
JOL6.3ppublishing (8% of site revenue)
VAT13.8psales tax (17.5% of retail price)
Pie chart diagram of UK CD cost breakdown: pressing, distribution, retail, royalties and tax

These breakdowns are based on published aggregator fees, reported artist earnings and fixed costs (JOL, VAT). There is no standard or average, and big label discounts apply in a similar way to CDs. Big labels also pay considerable sums for promoting their releases on download retail sites.

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