Thanks, Bruce.
For retail sales, normally the mark up is given in points of the retail price, which is what I think Bruce is referring to. So an Acoustic Sounds tape album that retails for $450, may have a 40 point margin (or wholesale price of $270). That would be a markup of 67% from wholesale.
The Tape Project and Acoustic Sounds tape albums are two reelers which sell for $450. The retail price of the blank tapes with metal reels is around $125 for the two reels. If they are buying in quantity, they may be able to lower their tape cost by 20%, don't think it would be much more than that. Added to that is the cost of the album box, which is probably contracted out, labor for mastering, duplication, quality control, royalties for the use of the tapes, logistical costs of getting the tapes, testing them (and sometime rejecting the tapes if the masters are defective), and then packaging and shipping costs - not including postage.
Also making running masters, if you are doing runs like TP and AS do, including any editing - like reducing three track masters to two track running masters, like AS does with their RCA tapes. If you are making copies from master tapes, then you need to figure in the cost of the master tape production and amortize that cost, unless you have used the tape to make CD's or otherwise recouped the production cost. Labor costs also include all the costs involved in determining what tapes to do and the negotiations to actually procure the tapes. There is the additional cost of marketing - advertising, promotion (attending shows, including transporting the necessary equipment and paying fees).
The cost of the machines (amortized over their expected lifetime), maintenance and repair of the machines. The cost of the machines is a sunk cost - it has to be made before the first tape can produced, and is not easily recovered if the business is not successful.
Of course there is the general overhead of the operation (renting of building, cost of communications - computers, telephone, internet,etc., financing costs - either borrowing money or use of your own capital, accounting and legal costs, and general administration - answering the phones and email, attending meetings, arranging travel, etc., etc. ). Having run a business for a decade (a non-profit operating foundation that I founded and grew, so it had to break even and build a small surplus), we had a very low general overhead of about 10%. However, that was after we grew to about $35M in annual revenue. When we were smaller, the general overhead was more like 20% or more, since we didn't have as much economy of scale. I would guess that just about all of the companies involved in producing tapes are quite small. They either have fairly high overhead or are writing off the overhead on other parts of their business - like what I think Acoustic Sounds is probably doing. Of course, they probably want to make some profit, so that will be on top of that, and then taxes are paid on the net profit.
Bruce has an important additional point - the inventory cost, if not everything is sold, you are eating that cost.
If I were going into the tape production business, I would make sure I had another job that was producing a steady income (or a rich aunt or wealthy patron). I think that is what just about everyone is doing who is in the tape production business. It is like the question of how to make a small fortune in the winery business. Start with a big fortune. Elusive Disc has the easy job - just selling the tapes, especially if they can return unsold material. Not as easy if they have to buy inventory and eat defective product (like they often do for vinyl or other music products they sell).
Larry
Larry