By John Seay, Atlanta Entertainment Lawyer: The Seay Firm LLC (@TheSeayFirmLLC)
Part 1 of this blog post discusses the Artist Revenue Streams project and provides insight on monetizing activities in the music industry and its related fields. Part 2 of this blog post provides helpful definitions of common industry terms relating to revenue.
The Future of Music Coalition (FMC), a non-profit organization that specializes in education, research, and advocacy on behalf of musicians, recently released some interesting data from a music revenue research project. The project, known as the Artist Revenue Streams project, was designed to assess how musicians generate income. Pulling data from in-person interviews with musicians, case studies, and an online survey, the FMC analyzed the data before sorting it graphically in an effort to educate the music industry and in particular musicians on the myriad streams of available revenue.
The results of the Artist Revenue Streams project were largely in keeping with what industry professionals might expect, but the various percentages of the individual revenue streams presented a helpful snapshot of an industry quickly moving away from a physical product royalty model towards a multifaceted royalty model where artists reap less money from more diverse streams of revenue. You can peruse the website dedicated to the Artist Revenue Streams project here, and read the blog post that precipitated that project here.
Note that, as the FMC points out, songs have two copyrights, one in the sound recording and one in the composition, and who owns those rights may affect who gets paid what from a given revenue stream. If that concept confuses you (as it did me), then check out the article entitled, “Legislative Strategies for Enabling the Success of Online Music Purveyors,” at the bottom of this page. Below are some highlights from the FMC links, as well as some general thoughts on making it in the music industry.
Multiple Sources of Income
The blog post that precipitated the Artist Revenue Streams project identified 29 streams of potential revenue for artists. The Artist Revenue Streams project increased that number to 42. The results of the Artist Revenue Streams project confirmed that artists are drawing revenue from many more sources of revenue than they were even five years ago. With traditional streams of revenue diminishing in the digital space, musicians must actively seek out some of the other less traditional revenue opportunities.
If you’re relying solely on revenue from sales of physical product, you might find yourself struggling. Instead, make sure you are fully monetizing your band’s online activities. If you’re band is on YouTube, then consider enrolling in the YouTube Partner Program to collect shared advertising revenue. You’re probably already registered with a performing rights society such as ASCAP, BMI or SESAC, but are you also registered with SoundExchange for your digital performance royalties? What about the Alliance of Artists and Record Companies (AARC) for royalties stemming from the digital recordings of your songs, foreign private copying levies, and foreign record rental royalties?
If you already have accounts with these services, then at least make sure that your information is up to date. Sure, some of these additional streams of revenue might not amount to much, but every penny counts, and one day your share of that revenue might significantly increase. One of the first things I advise my clients to do if they have not done so already is to enroll in SoundExchange and the AARC. There is usually money on the table waiting for you, and it’s free and relatively easy to join.
The Importance of Income from Live Performances
The Artist Revenue Streams project found that money from live performances was on average the biggest slice of the aggregated revenue pie. Digital media can’t quite replicate the experience of actually attending a live performance. Playing live shows can—assuming your band is good—positively impact artists on a variety of levels. Artists make money from their live performances, either via a guarantee or a percentage of the door, or some other probably shady metric. If they have actual fans, then artists also sell merchandise at their shows. Playing live shows also increases your exposure to potential fans who might continue to attend your shows, proselytize for you, and maybe even one day buy a t-shirt.
But remember the difference between “gross” and “net” income. A mini tour may earn you $4,000 in gross income, but after you account for the high cost of gas, meals on the road, hotels if applicable, paying your band members if applicable, you might only net a couple hundred dollars. Of course, hopefully you’ve made some fans on the road, in which case you can view your tour, which may have been a financial failure, as a “loss leader” for future sales. That means that the next time around, your stellar performance from the previous months may help you draw a bigger audience for your shows, which usually means more money, both from the venue and sales of merchandize. Note that if you’re operating on such thin margins, then even a couple of bucks from SoundExchange may be the difference between coming home having lost money, broken even, or made money.
Note that, even taking into account the concept of “loss leading,” which for many bands is a concept that never translates into actual increased income, your band probably shouldn’t book a mega tour without engaging in some significant strategizing. Which cities should you hit up on your tour, and which venues should you play in each of those cities? How long should you be on the road? Do you need to contact various independent weeklies for interviews or mentions in the paper? What about college radio? How does that work?
Ask your friends or your friendly neighborhood industry professional. Read some articles online. But by all means, put some thought into what you’re doing. Consider making a budget and estimating expenses. If you’re booking the tour yourself, try to get guarantees from your venues, even though as a smaller band you might not get them. Contact your friends in each of the cities you’re playing an invite them out to the show as well as to help promote the show on your behalf. Local media and especially college radio are often eager to interview touring bands. Instead of sleeping in the van between cities, consider placing some strategic phone calls or emails. Your marketing campaign starts with you.
Other Sources of Income
Unless you’re independently wealthy, you probably have other expenses to pay, such as your rent and bills. Maybe you also need money to take out your significant other every now and again to make up for all the time you’re on the road. Day-jobs are great when flexible, but at some point you may need to totally bite the bullet and fully devote yourself to your craft. What are some other sources of income you can avail yourself of in such situations? You can make money as a session musician or sideman. As a music teacher or producer. You can raise money to fund your next album or tour (thereby enabling you to funnel some of your other revenue towards paying your bills) through a crowd-funding site like Kickstarter, Pledge Music, or Indiegogo. Those sites have worked wonders for even small bands desperate to raise some money to help them initiate a creative project.
If you sign a record or publishing deal, then you may receive monetary advances. Be careful though about advances—they are almost always recoupable from future revenues and potentially subject to some creative accounting on the part of the company. Consult an attorney or another contact in the industry before signing off on complicated deals. In fact, some industry professionals advise minimizing your advance in favor of recouping your account earlier in the process. There are pros and cons to each method. The bottom line as with most aspects of the music industry, is if you’re working with good people at good companies, then it really shouldn’t matter that much. Although that being said, there is nothing wrong with having an accountant double-check your royalty statements.
The takeaway from the FMC’s research is that most artists wear different hats in the music industry and receive money from a variety of different sources. Set yourself up for success by making sure you are collecting any money that you can. The FMC articles linked to above can serve as check lists of sorts, or at least as a list of helpful suggestions, for ways you can monetize your craft in the absence of royalties from sales of physical product.