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Here, too, there is still a fair amount of wiggle room for the label. For example, the record label may be paying personnel $10 per hour but charge a retail price of $40 per hour when charging the cost of the personnel to the album as a direct cost.

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The record label company is making a profit of $30 per employee per hour, because it pays $10 but receives $40. Profit can be reinvested into a company, allowing it to change its course of business, pay more to its employees, charge a lower price to consumers for each recording album, etc. This is wiggle room – opportunity to do things by differently, or to make mistakes. (As for the phrase “wiggle room” itself, imagine you’re stuck in a coffin underground but you have a little room to wiggle your fingers, toes, shoulders!)

  • Hi. Thanks a lot for the explanation. – Itamar May 1 at 4:40

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