Dr. Yezdani Explains Why Fire Records Follows The Lump sum Model

January 29, 2010

There has been a lot of discussion for the past year on the business models on which record labels of Pakistan operate. The industry somewhat hasn’t been intact and everyone has different beliefs.

Our recent post about why people don’t buy CDs ignited a whole new discussion. Dr. Akbar Yezdani, COO Fire Records made some points to explain why they can’t afford to have royalty-based business model.

Talking about the lump sum model that Fire Records operate on, he said

It is a misconception that the artist doesn’t get anything. They get a hefty amount paid in lump sum plus the cost of the videos and promotions and press conferences and so on. Internationally if you study the royalty model, all the costs are deducted from the artists royalties and then what is left (if any thing at all) the artist gets. Therefore, the lump sum model is getting more and more acceptance and is being practiced even in the western markets. so the idea that the artist doesn’t get any thing is totally not true. if the artist doesn’t get any thing thing then why are they producing music to begin with…….doesn’t make sense does it? now the only way a label can make money after it has paid and taken care of the artist, paid the cost of production, made videos and spent on promotions, is to charge license fees from channels, and sales of the CDs. If labels wont make money they will stop investing in music and thereby only a few artists who have the money and can afford to spend for making music will make a few songs and then they will stop as well. So guys you see when you don’t pay for music , the labels stop investing in music. And believe me making an album, its videos, its promotions and payments to artists are very expensive. For every new album even by a new artist that you see with videos costs a minimum of 3 – 4 million and forget about the cost on a main stream artist that his huge.
He believes that this model has to be continued because the album sales alone can’t even let the company break even.
He continued
Believe me there are hardly any margins because no one buys cds these days and pretty soon this all will dry up if we don’t start to buy music legitimately. To break even expense on one new artist we should sell 100,000 cds at least, do u think we even sell 2,000? Ask around the music shops in the market and they will tell u what’s happening on the ground. Your channels choose to play bollywood and your listners choose to download music for free. If we were doing this in strict sense of business we should either be getting into bollywood or close shop

That’s also the reason why the latest releases by Fire Records included soundtrack of “Karthik Calling Karthik”, a bollywood film. I think, if releasing bollywood music helps continue the production of Pakistani music, it’s a fine step by Fire Records.

To read the complete discussion, please see this