The Economics of Music

MoneyMoneyIt actually started as a discussion in the car between me and my wife. I did various rough calculations in the head figuring out what the outcome is from various scenarios related to music and money. So here are similar thoughts, I fired up the MacOSX calculator to quickly calculate various scenarios.

Let’s say you are a bar band that plays four times a month, four people, and here in USA a typical payment from such gigs is between 300 and 400 dollars. So let’s say you get $100 each, or $400 a month, or roughly $4800 or let’s say $4000 a year in case you can’t get that many gigs. If you are really busy, it’s twice or $8000. Now, to be fair you need to register this as income or INS will get back to you later with a huge fee, so let’s say you pay 30% as tax from the $4000, or $2800 a year. Now, as you see, it’s hard to live with this income unless you don’t pay for rent, no health insurance and so on. If you have a family, it’s close to impossible to live with such sums. And I didn’t even take ino account expenses such as gear, gas/transportation and so on.

Let’s say you play in a band that could get gigs six times a month with venues where they ask $15 as entrance fee and could get let’s say 400 fans to show up. As a band this is already a nice situation, to have a public of 400 +/- 100 to show up each time. The venue generates $6000 for each event plus possible money from selling alcohol, but let’s say that they offset this with the costs of the place, hiring bartenders et rest. Of theĀ  $6000, it might be that all kind of forces such as promoters et rest take $1000, still $5000 to split between each member. To exclude any other costs in a four-person band, let’s just assume that each one gets $1000 for the two-hour job. Not bad.

Now if you play 72 times a year, quite a lot, it is $72000 minus taxes, or $50000. One could live with that, as long as someone is frugal and don’t expect to drive the latest car or live in a big house. Still, it’s hard to justify costs as a family bread bringer with this income, doable, but tough.

If you get to the next bracket, play venues with +1000 people, more expensive tickets, it will get to a decent level, but few could reach to this place. I somethings think that reading Rolling Stones is the phone catalogue of such acts.

The thing that helps a lot in USA and Europe is that due to the geographic spread it is easy to create events across all weekends all-year-round, provided you have a very good agent, and of course if you are good to start with.

Now, looking at the recording business, let’s say you have a single that sells 4000 copies on iTunes/Emusic et rest, and this is a lot. Depending on your deal with the label you get everything from 25% of the profit up to close to %100 (you own the label.). So it’s everything between $1k and close to $4k. Not bad, but few could sell this amount of tracks, it depends on your background, catalogue, marketing and so forth. There’s definitely not that much money in selling records today.

You could get some licensing fees from licensed music, films et rest, or BMI/ASCAP licensing fees, again those are not that much unless you belong to the top-1000 artists such as Prince/Elton John/Beatles et rest.

What I’m trying to state is that someone could have an exclusive revenue stream from music, but it is a rare exception rather than the norm. In other words, if you are young and an aspiring musician, please do so but also put in place an alternate career wherefrom you could get revenue. If nothing else, you could purchase a nice guitar every second year or so.

2 Comments:

  1. For iTunes/eMusic sales, even if you get 100% of the royalties, it’ll be lower than a dollar a sale. I’d have to check the exact %, but it strikes me iTunes pays out 70% (so 70 cents per download) and eMusic is less than that (their rate varies depending on your share of total downloads per month). So recording revenue is even worse than you suggest.

  2. Yes, you are right. Even worse are the eMusic royalties.

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