I found this interesting interview with Toby Marks. It breaks down the costs and percentages at each level of the production stage of getting a CD to a customer.

It seems that the biggest misconception about profits in record companies arise from where the percentages are taken. The record company's percentage is taken from the sale price to the distributor. The artist gets their percentage from the published price to the dealer. The PPD is a much higher figure than the cost to the distributor so, in this breakdown, the record company makes just over 6% of retail price whereas the artist gets nearly 9% of retail price.

Out of this, the record company has to pay for mastering, artwork and wages to freelancers - I guess the artist pays for the recording.

I'm sure these figures can vary case to case, but if this is even a ballpark figure, then the 'record companies keep 85%' argument is dead in the water. Just because the artist only gets 15 percent doesn't mean the record company gets the rest. It would seem from this example that the artist takes a bigger cut than the record company.

If the artist also happens to be the writer, then they get an extra 3 - 4.5% of retail on top of that.

What if the major labels are also the distributors? If that's the case then the figures are a little different. The distributor gets just over 13% of retail, added to the 6% makes a total to the record company of 19% of retail, from which they have to pay several to many times the costs of getting a CD to market than the artist.

These figures add up to a theoretical maximum to the artist of 18.5% and a theoretical maximum to the record company of 19% of retail price.

Y'know. If these figures stand up, it all sounds perfectly fair to me. Infact, I'd go as far as to say the artist gets a pretty good deal considering the amount of work they do. But that last bit's just my opinion.