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Katy Perry’s Perfect Game

Filed by KOSU News in Business.
January 20, 2012

If you listen to commercial radio, this is not news: Katy Perry had a huge year. She went number one five times. She was the most played artist on the radio. But the record industry is so weird, it’s actually hard to know whether this kind of success translates into huge amounts of money.

So we asked.

I walked over to Katy Perry’s record label. She’s on Capital, which is under EMI. I met Greg Thompson, executive vice president of marketing and promotion at EMI.

“Did you guys end up in the black?”

“As far as I know, yes.”

“How do you not know?!”

“I believe we did. Absolutely.”

But how much did they spend on Katy Perry? And how much did they make?

Here’s what EMI did say: “We invested substantially to make a great record.”

What does “substantially” mean? I called up Andy Tavel, an entertainment lawyer. He’s had clients like Mary J. Blige and the Cure. I ran into Dr. John in his lobby. He helped me think through what EMI spent on Katy Perry.

The first expense is the album itself.

Why so expensive? Take “California Gurls.” It features Snoop Dogg. He’s pricey. And the producers on the song — Dr. Luke and Max Martin (among others)– who charge around $100,000 per song. And there are 12 tracks on the album.

Then there’s Katy Perry’s advance. “That advance could have been perhaps a million dollars net, maybe two million — I can’t say for certain,” Tavel says.

So the record company has shelled out millions of dollars before anyone has even heard the album.

Next expense: Getting the album played on Top 40 radio. Andy Tavel says it could cost up to $250,000 dollars just to get the first single played on radio — special promotions, free merchandise, and presents.

For example: the painting of Katy Perry on one program director’s wall. She’s naked, wrapped in a cloud of cotton candy. (That’s also the album cover image, but seeing it painted is somehow different.)

Tavel figures the album cost the label somewhere around $4 million.

They made all that — and much more — on the sales of Katy Perry singles.

“Being in the business of pennies,” Greg Thompson, the EMI record exec says, “can actually be a good business.”

Here’s what Katy Perry sold in the United States: 2 million albums and 25 million digital tracks. That’s not a lot of albums. That is a LOT of songs. At a dollar a pop.

Back to the back of the envelope: Let’s say you bought “The One That Got Away” for 99 cents on iTunes. Thirty cents goes to Apple. Fifteen cents goes to the songwriters (including Katy Perry).

The label gets the rest. Perry has to pay the recording costs back and the advance back out of her royalties.

By my estimate, the record-shattering, chart-topping Katy Perry made her label around $8 million in U.S. music sales. And that doesn’t even count revenue from movie trailers, commercials, or foreign sales.

But, Katy Perry notwithstanding, the record industry’s still in trouble.

“The problem is, their batting average isn’t high enough,” Tavel says. “Those success stories like Katy Perry are unfortunately too few and far between.”

EMI needs a whole roster of Katy Perrys. [Copyright 2012 National Public Radio]

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