Who is the incredible bonehead who said rappers make mad loot? Wrong, wrong, wrong, wrong, wrong!! Because the fans expect their favorite artists to be crazy paid and livin' large, this puts an incredible amount of pressure on the artists to appear wealthy. And it's not just the fans; I can't tell you how many times I've been out with rappers along with people in the industry, and the industry slobs have expected the artists to pick up the dinner check. I've even seen people cop an attitude if the artist doesn't pay for everything. This is small minded and ignorant because the artist is ALWAYS the last to get paid.

Once an artist releases a record, the pressure is on to portray a successful image to their friends, families, fans, and people around the way. People expect the artist to be well dressed, drive a phat car, etc. Think about it: Don't you expect the artist "to look like an artist?"

Sadly, when an artist gets signed to a label deal, especially a rap artist, he or she receives somewhere between 8 to 13 points. What this means is 8% to 13% of the retail sales price, after the record label recoups the money it puts out (the advance, the sample clearances, the producers, usually half the cost of the video, any cash outlays for the artist, etc.). The artist has to sell hella units to make any money back. Here's an example of a relatively fair record deal for a new rap artist with some clout in the industry and a terrific attorney:

ROYALTY RATE: 12% "All in deal" (artist pays for producers).
We're going to assume that there are three artists in the group, and they split everything equally. We're also going to assume that they produce their own tracks themselves.
Suggested retail list price: $10.98, less 15% packaging deduction (usually 20%). $9.33 gets paid on 85% of records sold ("free goods") 7.93. So the artist 12% is equal to about 96 cents per record.
Let's assume that they are a hit and their record goes gold (although it is rare that a first record blows up like this)

GOLD RECORD = 500,000 units sold x 96 cents = $480,000. Looks like a nice chunk of loot, huh? Watch this. Now the label recoups what they've spent. Independent promotion, half the video cost, some tour support, all those limo rides, all those out of town trips for the artist and their friend, etc.

So the artists actually receive $19,333 each for their gold album, and it two years when the reserves are liquidated, IF they've recouped, they will receive another $63,000. IF they recouped. Guess who keeps track of all of the accounting? The label. Most contracts are "cross-collaterized", which means if the artist does not recoup on the first album, the money will be paid back out of the second album. Also, if the money is not recouped on the second album, repayment can come out of the "in reserve" funds from the first album, if the funds have not already been liquidated.

Even after the reserves are paid, each artist only actually made 50 cents per unit based on this example. The label made about $2.68 per unit. This example doesn't include any additional costs for an outside producer to come in and do a remix, and you know how often that happens.

So each artist in this group has received a total of about $82,000. After legal expenses and cost of new clothing to wear on stage while touring, etc., each artist has probably made a total of $75,000 before paying taxes (which the artist is responsible for - remember Kool Moe Dee?). Let's look at the time line now. Let's assume the artists had no jobs when they started this. They spent 4 months putting their demo together and getting their tracks just right. They spent another 6 months to a year getting to know who all the players are in the hip hop industry and shopping their demo tape. After signing to a label, it took another 8 months to make an album and get it through all of the label's bureaucracy. When the first single dropped, the group went into promotion mode and traveled all over promoting the single at radio, retail, concerts, and publications. This was another six months. The record label decided to push three singles of the album so it was another year before they got you back in the studio to make album number two. This scenario has been a total of 36 months. Each member of the group made $75,000 for a three year investment of time, which averages out to be $25,000 per year. In corporate America, that works out to be $12 per hour (before taxes). Think about that the next time you see your favorite artist drive by in that Benz. I do.