Katy Perry's Perfect Game

Jan 19, 2012
Originally published on January 20, 2012 2:55 pm

If you listen to commercial radio, this is not news: Katy Perry had a huge year. She went No.1 five times. She was the most played artist on the radio. But the record industry is so weird, it's 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?" I asked.

"As far as I know, yes," he said.

"How do you not know?!"

"I believe we did. Absolutely," he said.

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. Tavel 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 $2 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. Tavel says it could cost up to $250,000 just to get the first single played on radio — special promotions, free merchandise and gifts.

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 24 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. Thirty cents goes to the songwriters (including Katy Perry). The label gets the rest. Perry has to pay back the recording costs and the advance 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 is 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.

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Transcript

RENEE MONTAGNE, HOST:

Let's turn for a few minutes to one person we know has won big - Katy Perry. In 2011, the pop singer was the most played artist on the radio. She went number one five times. And her album "Teenage Dream" was massively popular.

Strangely, in the record industry it's hard to know if this kind of success translates into huge amounts of money. Zoe Chace of NPR's Planet Money team tries to answer that question, how much a label can make by sending an artist to the top of the charts.

ZOE CHACE, BYLINE: This would seem like a simple question. So I walked over to Katy Perry's record label in Manhattan. She's on Capital, which is under EMI. I met Greg Thompson, a record exec. And I asked.

I know it was an expensive record and pushing out the singles was expensive. Did you guys end up in the black? Did you recoup?

GREG THOMPSON: As far as I know, yes.

CHACE: Let's just pause for a second here. Katy Perry, number one artist by all of these measures, and the exec at her label isn't sure?

How do you not know?

THOMPSON: No, I believe we did, absolutely.

CHACE: It's actually complicated. And it's also something the record labels don't like to talk about. EMI wouldn't show me the numbers. So I decided to do some back of the envelope calculations and figure out for myself. There's two things we need to know. How much did they bring in and how much did it cost?

THOMPSON: You know, we invested substantially to make a great record.

CHACE: What does substantially mean? I called up Andy Tavel, he's an entertainment lawyer. He's had clients like Mary J. Blige and the Cure. First expense? The album itself. How much did it cost to record "Teenage Dream?"

ANDY TAVEL, ENTERTAINMENT LAWYER: One point five million to up, perhaps, even up to $2 million.

CHACE: Why so expensive? Look at this track.

(SOUNDBITE OF SONG, "CALIFORNIA GURLS")

SNOOP DOGG: Greeting, loved ones. Let's take a journey.

CHACE: That's Snoop Dogg. He's pricy. And the production underneath.

(SOUNDBITE OF SONG, "CALIFORNIA GURLS")

CHACE: That's the sound of the top producers in the business - Dr. Luke and Max Martin. They charge about $100,000 each track, according to Tavel. Twelve songs on the album, it starts to add up. On top of this, there's Katy Perry's advance.

LAWYER: That advance could have been perhaps a million dollars net, perhaps two million dollars. I can't say for certain.

CHACE: That's $1.5 million in recording costs plus a one million dollar advance, $2.5 million shelled out by the record company before anyone's heard the album. Remember, a song is not a hit song unless you hear it everywhere.

(SOUNDBITE OF MUSIC)

CHACE: This is our next expense. Andy Tavel says it could cost up to $250,000 just to get the first single played on radio. Special promotions, free merchandise, and presents.

I walked into Rob Wagman's office. He's a program director at a Top 40 station; there was a painting of Katy Perry on the wall. She's naked, wrapped in a cloud of cotton candy.

ROB WAGMAN: They usually send that out before the next single.

CHACE: The Katy Perry songs also tested well - and Top 40 played them. So, a boatload of money goes to Katy, thousands of dollars to people like Snoop, the producers, the radio, around $4 million in cost is our estimate. Now, how would they make it back? What we do know is what Katy Perry sold in the United States - two million albums, 25 million digital tracks. And EMI, the record label, only makes pennies on the dollar.

Here's EMI exec Greg Thompson again.

THOMPSON: Being in the business of pennies...

CHACE: Mm-hmm.

THOMPSON: ...at the large scale can actually be good business.

CHACE: Let's say you buy the "One That Got Away," that's the sixth single, off iTunes for 99 cents, 30 percent off the top goes to Apple, 15 cents goes to the songwriters who wrote lines like this...

(SOUNDBITE OF SONG, "THE ONE THAT GOT AWAY")

KATY PERRY: (Singing) In another life I would be your girl.

CHACE: And Katy Perry gets a cut of the songwriting credit for adding lines like this...

(SOUNDBITE OF SONG, "THE ONE THAT GOT AWAY")

PERRY: (Singing) The one, one, one, one.

CHACE: The label gets the rest. By our estimate, the record-shattering, top-charting Katy Perry made her label around $8 million in music sales, in the U.S. That's not even counting revenue from movie trailers or commercials or overseas sales. But the record industry's in trouble, right?

LAWYER: The problem is that their batting average isn't high enough - that those success stories like Katy Perry are, unfortunately, too few and far between.

CHACE: EMI needs a whole roster of Katy Perrys to make money hand over fist the way they used to. But they hit it out of the park with this one.

Zoe Chace, NPR News, New York.

(SOUNDBITE OF SONG, "THE ONE THAT GOT AWAY")

PERRY: (Singing) Summer after high school when we first met, we make out in you Mustang to Radiohead. Talk about our future like we had a clue. Never planned that one day I'd be losing you. In another...

MONTAGNE: You're listening to MORNING EDITION from NPR News. Transcript provided by NPR, Copyright NPR.