Working out how to make a living as a musician can seem daunting, but there some proven paths to financial success within our industry. We outline for you 6 ways you can make money in the music industry.
By Charles Hoffman, Black Ghost Audio
Let’s start with a reassurance: It is possible to make money, and perhaps a career, out of music.
Artists like U2, Metallica, Bruno Mars and Ed Sheeran are making millions of dollars each year from their music, and independent artists a few tiers below that are making ends meet from their creative output.
But how are they pulling this off? We're going to take a look at the revenue streams that successful artists are tapping into that allow them to sustain and even thrive off a career in the music industry. You're also going to learn how to set up these revenue streams yourself.
1. Streaming Royalties
Leading U.S. recorded music revenues by format have changed substantially over time. In the ‘70s, LP/EPs were dominating the industry, but as time went on, cassettes, CDs, and paid downloads had their turn in the spotlight. In 2020, paid subscriptions for streaming services accounted for 57.7% ($7.0b) of total recorded music revenue for the year in the U.S.—the $9.99/month you spend on Spotify contributed to this significant value.
When people stream your music through streaming services like Spotify, Apple Music, Tidal, etc., you get financially compensated by each streaming service. The amount you're paid varies greatly based on the streaming service, along with other factors like the listener's country and location, whether the listener has a paid subscription or free account, your royalty rate, along with relative pricing and currencies in different regions.
According to Ditto Music's royalty calculator, which is based on figures from the USA, you can see how the payout rates of different streaming services compare to one another. Keep in mind that these numbers likely won't be an exact match to your royalty statements due to the influence of multiple factors.
- 1,000 YouTube Streams = $0.69
- 1,000 Pandora Streams = $1.33
- 1,000 Amazon Music Streams = $4.02
- 1,000 Spotify Streams = $4.37
- 1,000 Deezer Streams = $6.76
- 1,000 Google Play Streams = $6.76
- 1,000 Apple Music Streams = $7.35
- 1,000 Tidal Streams = $12.50
- 1,000 Napster Streams = $19.00
As the data shows, you could be making anywhere from $0.69 to $19.00 per 1,000 streams depending on the streaming service that you upload your music to. Beyond each streaming service's payout rate, you need to consider the number of people that use each streaming service. How many people do you know that use Spotify versus Napster? Even though Napster pays out substantially more per stream than Spotify, Spotify has 155 million paying subscribers versus Napster's 3 million paying subscribers. With more than 50 times the number of subscribers on Spotify, you're likely going to have more people stream your music on this platform than via Napster.
Luckily, you can upload your music to more than one music streaming service. A music distributor like DistroKid or TuneCore makes this process extremely simple—you upload your music to the music distributor's online platform, and they distribute it to a variety of streaming services on your behalf. Every distributor offers unique pricing options and perks, so do some research to determine which distributor will best meet your needs.
2. Performance Royalties
When your music is broadcast publicly on the radio (terrestrial or satellite), played on television (including commercials), performed at live venues (by you or another act), played on internet radio (like Pandora), and in public establishments (bars, restaurants, etc.), you can make money in the form of performance royalties. Businesses pay a blanket license fee to performing rights organizations (PROs) to be able to play music, and PROs use these license fees to pay songwriters and publishers.
The big three PROs in the United States include ASCAP, BMI, and SESAC. If you live in a different country, there's likely a separate PRO that will collect performance royalties on your behalf. For example, the PRO in Canada is SOCAN. PROs work internationally with one another to collect performance royalties for their songwriters and publishers. If you release a song that becomes a smash hit on the radio in Germany, GEMA will collect performance royalties and redirect those funds to the PRO that you've signed up for within your home country. In return, it's expected that the PRO(s) in your country will do the same for German songwriters and publishers. ASCAP, BMI, and SESAC all have international agreements with PROs outside of the United States.
If you're not currently signed up with a PRO and there's music that you've released into the world, you're quite likely missing out on revenue. According to DIY Musician, "Some publishing experts claim that the amount of performance royalties distributed to songwriters and publishers each year accounts for as much as 30-35% of the total available publishing royalties — so there’s huge money being generated from the 'performance' or broadcast of songs and compositions in public."
ASCAP, BMI, and SESAC each offer various member benefits. ASCAP and BMI are both non-profit organizations that charge a membership fee. There's a $50 application fee to sign up with ASCAP as a writer or publisher, or a $100 application fee to sign up with ASCAP as a writer and publisher. It's free to sign up with BMI as a songwriter, but you need to pay $150 to sign up as a publisher. SESAC is a for-profit organization that's free to join, but members must be invited. ASCAP and BMI are likely your two primary options if you live in the United States. Also, if you don't have a publishing company, don't worry. Keep reading to find out how to acquire one.
3. Mechanical Royalties
Every song has two copyrights attached to it—a composition copyright and a recording copyright. The composition is the song as it is written, which includes lyrics, music notation, etc. In contrast, the recording copyright deals with the recorded version of the song (the master) that is distributed. If multiple recorded versions of a song exist, such as a studio recording and a live performance recording, the same composition copyright would apply to both, but a different recording copyright would exist for each recording. Songwriters cash in on the composition copyright, while performers profit off the recording copyright.
For example, if you wrote a song from scratch and recorded it, you would own both the composition copyright and recording copyright. If another performer records their own version of your song, you will own the composition copyright of the song they record, but they will own the recording copyright. This means that you're owed money whenever someone else records and distributes their own version of a song that you've written.
Artists and record companies are required to pay for a mechanical license—which results in a mechanical royalty for songwriters and publishers—when they record their own version of a composition. Back in the day, songs were produced via physical mediums like piano rolls, CDs, cassettes, and vinyl—this is where the term "mechanical" comes from. Songs are primarily distributed online now, but they still generate mechanical royalties that need to be paid to songwriters and publishers.
PROs like ASCAP and BMI do not collect mechanical royalties. For that, you need to turn to an admin publishing company that will hunt down mechanical royalties for you—these types of companies often keep a small commission to perform this service. The issue with attempting to collect mechanical royalties yourself is that there are 60 different mechanical rights organizations (MROs) around the world, and trying to deal with each one of them individually just isn't practical. Instead, it's much easier to work with a company that will deal with them on your behalf. Two notable admin publishing companies include Songtrust and Sentric—you only need to sign up with one.
Another option is to use a traditional publishing company that keeps a much larger percentage of your publishing royalties but helps you "get cuts, get into writer rooms, write for the stars, and pay advances,” according to Ari Herstand. Publishing companies have an admin department, and in many cases, they use Songtrust or Sentric for their admin. Whether you decide to sign up with an admin publishing company or a traditional publishing company, you should take the necessary steps to collect the mechanical royalties due to you.
4. Sync Licensing Fees
You've probably heard of artists being paid a lot of money when their music is used in a television show, film or commercial, but how does this actually work? Well, a music director is often hired onto a television show or film, and it's their job to search for music that fits appropriately within each scene. When they find a song that they want to use, they track down the song's publisher to acquire a sync license—this license allows them to "sync" the song with visual images on a screen. A good publisher will negotiate a high sync fee for you; since your publisher makes a commission, it's in their best interest to do this. Each time the show/film is aired, you're potentially eligible to collect performance royalties as well.
If you don't have a traditional publisher that will facilitate the sale of sync licenses for you, you can upload your music to one or more music libraries like PremiumBeat, Audio Jungle, or Artlist.io. These websites add your music to their library, which creators (YouTubers, filmmakers, etc.) can browse. When a creator finds a song that they want to use, they either pay for a license on a per track basis, or their membership fee covers the cost of the license—this depends on the website. The duration and scope of the license are determined by the website too.
Assuming that you decide to upload your music to a music library, you need to determine if you're going to exclusively license music through a single website or diversify by licensing your music non-exclusively through multiple websites. The benefit of licensing your music exclusively is that you can often garner a higher payout from a single music licensing website, but the downside is that your music will not appear in as many libraries. There are pros and cons to licensing your music exclusively vs. non-exclusively. Consider licensing some songs exclusively and some songs non-exclusively to test the waters.
Due to COVID-19, the North American concert industry lost more than $30 billion in 2020. But with vaccines currently being rolled out, artists will be able to start touring again at some point. As mentioned by Jem Aswad, "The projected $30+ billion figure includes unreported events, ancillary revenues, including sponsorships, ticketing, concessions, merch, transportation, restaurants, hotels, and other economic activity tied to the live events, according to the report." Due to the unprecedented nature of 2020, analyzing data from previous years will provide a more accurate representation of the significant impact that touring can have on your career once the music industry stabilizes.
In 2018, 52% of Americans attended a show, and live music ticket sales alone accounted for $22.94 billion worldwide in 2019. Based on Billboard's “2018 Money Makers” report, U2 took home $54.4 million in 2018, but only $2.4 million came from their recorded work; the majority of their take-home pay came from their Joshua Tree Tour. Garth Brooks took home $52.2 million in 2018—$46.7 million was a result of his 390-day concert tour. Metallica saw significant sales ($8.7 million), streaming revenue ($2.2 million), and publishing revenue ($1.6 million) in 2018, but their take-home touring revenue ($30.7 million) still amounted to almost three times their other revenue streams combined. Based on Billboard's report, touring accounted for a significant majority of all 50 artists’ take-home pay—in many cases, adding up to more than each artist’s sales revenue, steaming revenue and publishing revenue combined.
You can organize small tours yourself by reaching out to promoters in neighboring cities or contacting larger acts to see if touring with them as an opener is a possibility. When you’re starting out, you probably aren't going to make a lot of money from touring, but it's a good way to get your name out there and expand your fanbase.
To organize a large-scale tour, it's probably in your best interest to work with a booking agent; they have connections with promoters and can leverage other artists on their roster to get you booked. For example, they may provide a venue with a big-time artist from their roster on the condition that you play as the opener. Commonly, booking agents reach out to you, as opposed to the other way around. Once you've achieved some level of success on your own and proven that there's an audience interested in your music, you'll start to appear on the radar of booking agents.
6. Selling Merch
Merchandise sales allow you to boost revenue while on tour. Fans who have just watched you perform and who enjoyed the performance are quite likely to buy your merch. Setting up an online merch shop through a website like Teespring is simple and will allow you to sell merch in the off-season when you aren't touring. With Teespring and other similar websites, you pick the type of product (t-shirt, hoodie, etc.) that you want to add your logo to, and then fans can order your merch online. Some of the perks of using Teespring are that you can sell merch via TikTok, YouTube, Instagram and Twitch. Teespring is also print-on-demand, meaning that you don't have to order a box of merch ahead of time and hope that you're able to sell all of it. When someone orders one of your shirts through Teespring, the company prints it and ships it to them.
Based on data collected by atVenu, the top three merch sale genres by average $/head were K-pop ($7.85/head), pop ($6.83/head), and hard rock ($5.78/head) via atVenu in 2019 through August. The top three markets by average $/head were San Antonio, TX ($7.48/head), Salt Lake City, UT ($7.11/head) and Orlando, FL ($6.88/head). Unsurprisingly, the top-selling item was a t-shirt accounting for $5,111,483, with the next top-seller being a hoodie—accounting for $531,209 in sales. Since these numbers solely take into account atVenu sales, it doesn't necessarily reflect the industry as a whole, but the genre, location, and the type of product you choose to sell clearly influence merch sales. Keep this in mind when you start developing your merch lineup.
Streaming royalties, performance royalties, mechanical royalties, sync licensing fees, touring, and merch sales are your bread and butter—you can start cashing in on many of these revenue streams immediately. All that's required is that you create a few different website accounts and spend some time providing the information that you're asked for. Having done this, you'll be multiple steps closer to sustaining a career as an artist in the music industry.
Charles Hoffman is the owner of Black Ghost Audio—a website that provides free music production tips, tutorials, gear roundups, and premium online video courses. Visit Black Ghost Audio to learn how to produce music online.
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