Music and money

Making money making music is not the easiest thing in the world.

Becoming a professional musician before Napster (b. 1999 – d. 2002) required playing a very clearly defined game: you would attract the attention of a record label, they would give you support (i.e. money, contacts and skills) to record your music and market your album. You would make some money touring, but the main benefits from concerts would be the mass promotion of your record. So: selling records would be your main source of income. Records would be sold in record stores and at retailers’ where the shelf space was physically limited, thus you would need the deep pockets of a record label to be able to secure your slot.

With Napster and the web in general, discovery and fruition of music have radically (and forever) changed. First, for a long period of time pirated mp3 music files became the accepted norm. Then in 2001 Apple released the iPod and with it the download store iTunes. A new market was born, and people started paying for recorded music again.

Then the web went mobile, and streaming and Youtube came along. The need for ownership decreased and people started to accept ads and other limitations in their videos and music clips in exchange for free music, and to get rid of the annoyances some people started paying a fee (usually 9.99 US$/month). Paying subscribers have access to tens of millions of songs that can also be played offline, so long as you pay the fee and have free storage on your device.

So nowadays recorded music is being sold in physical formats (less and less), as downloads (less and less) or via streaming/Youtube (more and more).

From a financial standpoint all these revolutions have had major consequences. It is not uncommon to hear that the recording industry worldwide has halved in the past twenty years, from 30bn US$ to 15bn $. In real terms (i.e. adjusting values by inflation) the fall has been much higher, of about 70%.

But something has been going on at the same time.

Touring has become an increasingly more important part of how musicians make money. Concert ticket prices have skyrocketed in the main markets (USA, UK, Japan…).

Recording music became much less expensive thanks to technology. And music distribution moved from the hands of big retailers to those of “Big Tech” (Apple, Google, Amazon…), since recorded music has become mostly a digital product.

All this had a number of consequences.

Reaching fans can now be done with no intermediaries, and this is referred to as “Direct to Fan” (or D2F) engagement. Sales, promotions, interactions can all happen online.

An endless flow of new music has invaded the world, making it very hard to get anyone’s attention to listen to a specific track/artist/album. There only seem to be two solutions to this. One is to have massive marketing budgets. The second is to directly engage with fans in order to give them unique experiences that they truly value. We did talk about this in a previous post about building tribes.

This radically new landscape also allows (and at the same time demands) artists to work with a number of revenue streams that, if managed properly, can add up to interesting overall revenues.

Here are the main revenue streams for today’s musicians:

  • Sales of recorded music:
    • downloads
    • streaming
    • CDs (especially at concerts and/or as “special limited editions”)
    • vinyl (a growing niche market)
  • Merchandising sales:
    • tshirts and other memorabilia
    • autographed items
    • digital items (sheet music, special pictures/videos etc)
  • Royalties collection:
    • publishing / licensing / synchronisation
    • internet radio
    • live performances
  • YouTube Ads
  • Sponsorships
  • Private gigs
  • Composing on demand
  • Session work
  • Lessons (on and offline)
  • Writing (books, articles, blog posts…)
  • Speaking engagements
  • Blogging

A specific mention for crowd-funding, which is not on the list because it is not a revenue stream. This is a way in which a band or artist can collect money in exchange of future products/experiences. Via this advance-payment, the actual realisation of these products/projects can be carried out.  So crowd-funding is two things: a sales and promotion channel AND a funding platform. We will dig into it in a future post.

So, does every musician have to tap into each and everyone of these streams? Of course not, not all of them are for everyone. My point here is that a lot can be done in today’s world through knowledge, right tools and hard work. A fourth element needs to be added (particularly when things go particularly well and complexity kicks in): right team (from bandmates to manager, producer etc).

In this post I only talked about money but at the end of the day let’s not forget that music is emotion. If the emotion, the experience, the connection fan-artist is there, the opportunities for turning this into livelihood and an economic success are there too.

Let me close by quoting Jim James, singer of My Morning Jacket:

“The band can’t exist without the crowd, and the crowd wouldn’t be there if it wasn’t for the band, and it really is something magical that people need. It’s the thing that the internet can never kill.”