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Published 12 February 2013 12:08, Updated 21 February 2013 08:18
Gotye, known to his parents as Wally De Backer, at the Grammys with New Zealand singer Kimbra. Annual revenue for Gotye live shows is estimated to be $19 million. Photo: Getty Images
Singer and songwriter Wally De Backer, better known to audiences around the world as Gotye, won three Grammy awards on Monday in Los Angeles, making him one of the most internationally acclaimed Australian artists of all time.
Gotye’s song Somebody That I Used to Know has been a hit in more than 30 countries, including the lucrative US market where it reached top spot on the Billboard chart. It has sold an estimated 13.5 million copies worldwide.
De Backer has undoubtedly become very wealthy from the song he wrote in his parent’s barn – but perhaps not as wealthy as you might think.
There are many ways to make money as a performing artist and technological developments are expanding the possibilities. YouTube has become a primary source for delivering music to an audience in recent years.
The problem for De Backer and others like him, however, is that YouTube isn’t a big revenue spinner, despite impressive numbers of views.
As of Tuesday morning, the video clip for Somebody That I Used to Know had been watched 374 million times on Gotye’s YouTube channel since its release in 2011 (non-official versions and several parodies have been highly popular as well).
It’s a huge amount by world standards. South Korean poster-boy Psy is one of the few to have had more views on YouTube; his Gangnam Style video has been viewed a record 1.3 billion times.
When the Gangnam Style clip had been watched 1.2 billion times, earlier this year, Google chief business officer Nikesh Arora was quoted as suggesting that total advertising revenue generated from those views could be as high as $US8 million ($7.8 million).
Application of the same pay-per-view rate suggests that Gotye’s song could have pulled in about $2.4 million but this probably substantially overstates the true figure.
Apart from having less advertising on his site (a crucial determinant in YouTube revenue), the rate per view increases with the number of views (that is, the more times it is viewed, the more money you get per view). Distributions to Gotye’s distributors and other partners also need to be made from this amount.
In short, it is highly unlikely that De Backer has made even $1 million from his song being watched more than 373 million times online.
Single sales are a better source of income for De Backer but this too can produce a smaller result than it would first appear.
About 13.5 million copies of Somebody That I Used To Know are believed to have been sold worldwide. About half of these were in the US where the song retails at US99¢ on iTunes. Prices vary per country but locally it sells for $2.19.
Assuming an average price of $1.50, total revenue for digital sales is likely to be in the vicinity of $20 million. That sounds like a lot but De Backer’s cut is most likely to be less than $2 million.
Artists typically get no more than 10 per cent of revenue from iTunes sales after Apple and record labels take their share. Similarly small cuts are common for physical sales of CD singles and albums.
Apart from the use of New Zealand singer Kimbra’s distinctive vocals, De Backer also has to pay for a sample he uses in the beginning of the song by the late Brazilian jazz composer Luiz Bonfá.
The use of samples has been a common trap for many artists, most famously Men At Work, who ran into legal problems recently for their use of Kookaburra Sits In The Old Gum Tree in their international hit Down Under.
De Backer has not disclosed his individual royalty agreement with the owner of the Bonfá’s music but he has been upfront about its importance to his song.
The use of the sample is likely to significantly reduce his royalty entitlement, perhaps by 50 per cent. According to Australasian Performing Right Association, Bonfá is considered a joint writer of the song.
For many musical artists, the best way to make money is by touring, and De Backer has done this extensively. In 2012, Gotye had shows in Australia, Japan, Europe and throughout the US. Between August and November he played at least 46 shows at venues including the 6000-seat Radio City Music Hall in New York City where tickets sold for $US50 each.
For last year’s BRW Top 50 Entertainers – which conservatively valued his income for the year to June 30, 2012, at $2.5 million – annual revenue from Gotye’s shows was estimated to be $19 million but De Backer and other performers are likely to have got less than 20 per cent of that after promoter and venue costs were deducted.
The good news for De Backer is that his ability to demand bigger margins has risen following his success with Somebody That I Used To Know.
The global interest in the song also opens up new opportunities for income generation, including television and film royalty deals.
Songs with wide appeal also have a long shelf life; De Backer will continue to earn royalties for his song for many years.
Making estimates is difficult but on available evidence it seems reasonable to assume that De Backer has made gross income of between $5 million and $10 million from his hit song and related endeavours.
The challenge now is for him to write another one with equal revenue-generating appeal.
Additional reporting by Allan Xavier.