Contemporary Marketing 16th Edition by Louis Boone,David Kurtz

Exercise 11

Recording artists earn only about 9 percent in royalties per CD, using a royalty base of retail price less 25 percent for packaging costs. The rest goes to the producer and to cover recording costs, promotion, copies given away to radio stations and reviewers, and other costs such as videos. What do you think happens to the artist's royalties when a CD is marked down to sell faster? Consider two cases: (a) the marked-down CD sells more copies; and (b) it sells the same number of copies as before.