Knowing how tough it is for young musicians to fund their band, I wondered how much does it cost to start a band? It’s more expensive than I imagined. $15,000 USD (about £12,000 GBP) was what I came up with based on the costs of collective gear, rehearsal space, website and hosting, photography, design, learning to play, merchandise, first CD pressing, etc. This doesn’t include transportation, living expenses, touring, promotion, and advertising costs. It’s a lot of money for a group of four or five people to come up with, and the expenses keep snowballing every month. The next question is how to make money with music online, at shows, and from other sources. Below, I’ll explain my approach and best tips for how to make money from your music and fund your band.
THE PART EVERYBODY SKIPS
Before diving into the specific revenue streams and how to make money from music online, let’s consider the process and strategy. The first 10 items cover that. If you want to skip steps, this is not the blog for you. But if you want to understand how I’ve approached sales at Century Media and Fearless Records for the past 15 years, here it is. Here are 35 tips on how to make money with music online, around the world, and many other places you may have overlooked.
THE APPROACH TO MUSIC SALES
1. WHAT YOU ARE CREATING IS A VALUABLE ASSET
The music you create, and the brand you establish are valuable assets. It’s why you saw a handful of large independent labels get bought out by larger labels and investment companies in 2015 and 2016. Understand what you have. A recorded asset, a publishing asset, lyrics, and something that can monetize in dozens of ways listed below. So an asset is something that if nourished can provide money for an eternity, and can make you money while you are sleeping.
2. LEAD WITH YOUR BEST STUFF
According to Ecology.com every day there are 360,000 births in the world. Sixteen years ago that was closer to 300,000. If your target fans are 16 years olds, that means every day there are 300,000 new potential fans for your band. Think of them when you release content. Because every day you have a chance to put your best songs, best photos, best product out there for people to make a choice. Conversely when you put bad material out there, you are missing an opportunity. Review your material, photos, images, from time to time. Finally, if you’re not proud of it, or you have something that is an improvement, take them down, or bury them.
3. MAKING MONEY WILL PREPARE YOU FOR GETTING SIGNED
What? Bear with me. Most bands have been struggling to make ends meet, so when a label offers them a $25,000 advance it seems like such a large sum of money, and the opportunity to make even more. But if your band is already financially stable it won’t seem like such a big deal. When the label does a Dr. Evil with the pinky and says “We’ll offer you $25,000 dollars” as an advance, you want to be in a position to negotiate a better record deal. Maybe a joint venture. In addition, you could cut a deal that dedicates more of those dollars to marketing, music videos, advertising, or upgrading your live show.
4. PREPARATION ABRAHAM LINCOLN STYLE
Keep this quote from Abraham Lincoln in mind. “If asked to chop down a cherry tree in four hours; I would spend three hours sharpening the ax and one hour cutting down the tree.” Apply this to your money making ventures. This ties nicely with leading with your best content.
5. THE SHOPPING EXPERIENCE – WHAT IS YOURS LIKE?
We don’t want to equate music sales to buying electronics, shoes, or clothes. The point I want to make is that the consumption of your music needs to be a polished and effortless experience. Think about the process of buying an Apple product, or shopping on Amazon. If those don’t appeal to you, think of your favorite brand and why you like buying from them over and over again. Go through the process of discovering and buying your band’s brand and products. Is it ideal? Does your best stuff come up first? Did you find the track you want coming up first? What’s preventing people from discovering or buying your music and merchandise? Is it the algorithm? The price? Somebody else’s content? Optimize the discovery and conversion process for your band.
6. 1,000 TRUE FANS
This is a concept you may have heard about. It was created by Kevin Kelly, founder of Wired Magazine, in a blog post he wrote called 1,000 True Fans. It’s a math equation that makes a lot of sense for musicians, especially unsigned bands. If you are a creator, and you have direct access to your fans and no record label or publisher in your way, you can maximize the income from 1,000 true fans and still make the same living as you would having a much larger audience.
True fans are the ones that consume everything you create and are just waiting to buy whatever you put out next. They’re the first to buy tickets. They’ll buy all editions, versions, and all 5 colors of your vinyl pressings. The math he uses simply says if you make $100 from 1,000 fans ($100,000), it’s better than making $1 from 100,000 fans. It’s not for everybody though. It requires a lot of energy and investment to nourish these 1,000 fans. If you don’t like the idea of serving a thousand or a few thousand fans, and engaging them so directly, it might not be for you. The idea of having less fans doesn’t sound like a good idea. But the real point is to show you that in the beginning, if you focus on 1,000, and you really serve that audience, your fans will multiply naturally well beyond that. Also you will be more in tune with your audience and know what they like.
7. TARGET AUDIENCE – DO YOU HAVE ONE?
Can you describe your ideal fan? Where are they spending time? Make sure you have a strong presence wherever they are. To learn more about this, read my post about Music Marketing, which I consider to be the most important post on this blog.
8. TRAFFIC IS POWERFUL
Think about traffic as anybody searching for something and being directed to consume your music. Examples are Google Search, your website, Facebook, Pandora, YouTube, Instagram, Twitter, etc. Make sure to have an easy to find link to Spotify, Apple, Amazon, YouTube in all of these places when a potential fan encounters them.
9. ADVERTISING, UH… WHAT?
Weren’t expecting to see advertising on a post about how to make money? You need traffic and awareness. Advertising achieves both. And if you convert your traffic right it will make you money. Advertising is not just for albums. You need to advertise for singles, EPs, and even streaming. Facebook ads can generate 3x returns.
10. PRE-ORDERS ARE MORE IMPORTANT THAN POST RELEASE CAMPAIGNS
The bigger your pre-order is, the better your first week sales will be, and your project will establish a much bigger footprint. As a result of all of the preparation, awareness, and branding in the pre-order process, you will increase your sales during the life of the project.
ALL THE DIFFERENT WAYS TO MAKE MONEY
11. IT’S CRAZY NOT TO CROWDFUND
If it takes $15,000 to start a band, you can imagine the expenses keep rolling in as the months and years go on. Fundraising or crowdfunding has been a brilliant use of technology. There are plenty of great options to choose from. Pledge Music, Kickstarter, and Indiegogo for example. Don’t wing it in this space because the experts in this field have discovered some great tricks to increase pre-orders. Make sure to do what the best and most successful bands have done, and get creative.
12. MP3 SALES
iTunes, Amazon, and Google Play are the mainstays in MP3 music. While this revenue stream is in decline, it still is a massive source of sales.
13. STREAMING OUTLETS
Collectively, streaming makes up a little more than 50% of all music sales (as of January 2017). Spotify, Apple Music, Pandora, YouTube, Amazon, Google Play, and Deezer make up the majority of streams.
14. MUSICAL PLASTIC…CDS AND VINYL
CD’s and Vinyl can be a major source of income depending on your distribution. While selling CD and Vinyl at shows can be 25% of your income each night, the profit from physical music is higher than t-shirts or clothing. Furthermore, if you are unsigned or on a small independent label that doesn’t have physical distribution there is another good option. CDBaby has a partnership with Alliance Entertainment, the largest wholesale provider of music, movies, and video games in the United States. In North America, Target, Amazon, Best Buy, Wal-Mart, FYE, and independent shops make up the physical marketplace.
In addition, vinyl sales are still growing for certain styles of music. Pop punk fore example, can be equivalent or better than CD format.
15. MERCHANDISE & DIRECT TO CUSTOMER (D2C)
For bands with a young audience, merchandise can be the lifeblood of their business. To become great at merchandising you have to follow the same practices that any clothing or fashion brand would adhere to. So i’ll be doing a post about this, and giving tips on merchandise mistakes to avoid.
16. NOT JUST TICKET SALES…
Of course ticket sales are a huge revenue stream for your band. But did you know the PRO’s ASCAP and BMI have systems in place where you can collect a royalty on each live performance by submitting your setlist?
17. VIP TICKET PACKAGES / VIP EXPERIENCE / FAN CLUBS
If you’re the type that likes to sign autographs and hang with the fans, then you can look forward to selling them upgrades with the help of these VIP ticket experience companies. This ties in nicely with the 1,000 True Fans concept mentioned above. Ticket upgrades are a powerful revenue source, and something the artist should always strive to retain. Most of all don’t sell these rights. There are some fantastic players in this space to partner with. Here are some companies that have shown dedication to rock musicicans.
Wonderful Union, Sound Rink, and Terrific Ticketing are the companies I recommend.
18. MONTHLY HEADLINE SERIES
Headlining shows on a weekend can be the best money you make in the early days. Another thing you can do is create and brand a monthly headline show for your band that has a theme. This is a creative way to approach your local market. Futhermore, you can invite different support acts each time to keep the bill fresh and build community in your scene. Now, if you can’t come up with an interesting way to keep people engaged and coming back monthly, don’t use this strategy. But, I like this strategy for several reasons. It gives you focus. You can put your energy into promoting one event per/month. In addition it prevents overplaying your market. You can still jump on as support for large national acts here and there. But you’ll be less willing to do those when you can headline instead. Finally use this to strengthen your brand and show your creativity. Make it fun.
19. ADMIN PUBLISHING COMPANIES
Admin Publishing Companies like SongTrust, Audiam, CD Baby Pro, and TuneCore Publishing are built for the DIY unsigned artist. These are all best in class services and completely above bar. Also they make things much easier so you can focus on writing, building a fanbase, and all the other things that take up your time. Admin publishing companies make it easier to manage your various publishing components, so you don’t have to register and keep track of dozens of accounts around the world. For instance, they will register you with your choice of PRO in the US (ASCAP, BMI, SESAC) and other PRO’s around the world . While you do have an admin fee, it’s much easier than having to do that on your own.
20. PERFORMANCE ROYALTIES
Performance royalties are a global revenue stream generated from radio airplay, music venues, malls, bars, sports venues, college campuses, etc. The more work you put into the steps mentioned earlier, the bigger these performance royalties will be. So to learn more about Performance Royalties please read this post.
21. MECHANICAL ROYALTIES
If you distribute through CD Baby or Tunecore, I recommend you use their Publishing entities CD Baby Pro or TuneCore Publishing. Another good option is SongTrust because they are highly adept at YouTube collection. If you are signed to a label or a 3rd party owns your master, you can start your own publishing company and have Harry Fox Agency (Now owned by SESAC) manage this part of your publishing rights.
22. SOUNDEXCHANGE PAYS FOR PANDORA, SIRIUSXM, AND MUSIC CHOICE
Digital Performance royalties on non-interactive streaming services on the internet like Pandora, SiriusXM, and Music Choice. Learn more about SoundExchange.
23. YOUTUBE HAS FOUR WAYS TO MONETIZE. KNOW THEM.
There are four ways to earn money from YouTube, so make sure you are collecting on all levels. If you’re not using TuneCore Publishing or CD Baby Pro, you can register with these collection companies that can automate your YouTube revenue collection. They are InDmusic, AdRev, and Audiam.
Four Ways YouTube Pays
1) A royalty for the sound recording owner (Audio/Master) collected by your distributor (CDBaby/Tunecore/etc)
2) A royalty for the content owner (Visual) collected by your Admin Co.
3) A performance royalty for the public broadcast of the song (Performance) collected by your PRO
4) A mechanical royalty for the interactive stream of the song (Composition/Publishing) collected by your Admin Co.
24. AARC ROYALTIES
Alliance of Artists and Recording Companies is a non-profit that represents US based featured recording artists and sound recording copyright owners globally. They collect and distribute royalties from hometaping/private copy royalties and rental royalties. Furthermore the collect for the AHRA, which collects royalties generated from sales of blank CDs, personal audio devices, automobile systems, media centers, and satellite radio devices that have music recording capabilities. Learn more here.
25. SYNCH (SYNCHRONIZATION) FEES FOR TV, FILM, VIDEO GAMES, AND ADS.
Music placements in TV, Video, Film, Video Games, and Advertisements. For a company or individual to use your composition in “synchronization” with motion picture, they need a “synch” license and a negotiated fee to pay you for that use. Also they need a master license, and a fee for the “master” use, but that does not have to do with publishing. And if you own your master, then they need to obtain the master license from you. And if a label owns your master, they need to obtain the master license from the label. In addition, every synch has two fees involved; A master fee, and a publishing fee. Therefore those need to be agreed on in two separate contracts. Research and contact music supervisors yourself to start. Be wary of signing any exclusive agreements to pitch your music, or you risk not getting signed by a publisher or label.
26. PARTNERSHIPS & PAID APPEARANCES
Each year commercial brands pay billions of dollars to musicians and music rights owners. It requires working with somebody that has relationships with brands (across all sectors of the economy), advertising agencies (who represent the brands), personal managers and agents of celebrities, and film and tv. They can leverage these relationships to foster brand partnerships that pay you. Often called a “tie up”. Sometimes it’s just playing a company party and getting a fee for that.
27. INSTORE MEDIA PLAY
You can license your music directly with the few global Instore Media Play companies like Mood Media, PlayNetwork, or ScreenPlay. When you go in a clothing store, elevator, or restaurant and you hear music, it is licensed by one of these companies.
28. MUSIC VIDEO DISTRIBUTION
In addition to putting your music video on YouTube, there are hundreds if not thousands of outlets that will play your music video. To reach them you can enlist the services of music video distribution companies. Some examples are here.
HIP Video Promo, Rive Video, and Trendsetter are my favorites. I’ve personally used all three. They are talented hard working people, and they an get your music video out there online, closed network, and broadcast. Furthermore this will generate more performance royalties for you, not to mention expose your music to huge audiences.
29. GOVERNMENT SPONSORED PROGRAMS & GRANTS
Some examples of Government Sponsored programs are below. You must be a citizen of the country in order to qualify. Most governments offer grants and assistance to fund the arts, some better than others. It’s disappointing that music is such a powerful cultural source, but only allot less than 10% of their cultural budgets to musicians. The United States is in jeopardy of losing their organization completely, so it’s important for musicians to speak up about this issue now. I went to the website where I was hoping to point you in order to apply for a grant, and this is what it says right now (here). It seems rather dire. I found an email address to the director if you want to voice your support for the program and get active. Ann Meier Baker firstname.lastname@example.org
National Endowment For The Arts (United States) https://www.arts.gov/grants/apply-for-a-grant
Factor (Canada ) https://www.factor.ca/
Ontario Music Fund (Canada) http://www.omdc.on.ca/music/the_ontario_music_fund.htm
Arts Council England (England) http://www.artscouncil.org.uk/
Australian Council For The Arts (Australia) http://www.australiacouncil.gov.au/
Swedish Arts Council (Sweden)l http://www.kulturradet.se/en/In-English/
Also, we there are philanthropic organizations like those found on this list at Inside Philanthropy. https://www.insidephilanthropy.com/fundraising-music-grants/
Finally The Grammy’s organization has a nice list too. https://www.grammy.org/musicares/disaster-relief
30. INTERNATIONAL LICENSING
If you are looking to get your physical CDs and vinyl marketed and promoted outside of your home territory, you have the option of licensing your master recording to a foreign record label or distributor. It’s nice to have local people promoting in the territory you are targeting. The physical market is still large in Japan, so it’s not uncommon to hear from Japanese labels seeking to license your master for the Japan market. In Europe, since several languages are spoken, it’s important to work with a partner that has staff in each important territory for rock music (Scandinavia, Benelux, Germany, and the UK). Consequently most European companies will want to handle the continent of Europe, and that’s OK. It’s better than splitting it up, because it creates lots of problems with distribution and royalty collection. Also Australia is a unique market that can be great for licensing too.
Finally, the important thing to remember here is only grant exclusive rights to a partner for a limited period of time, and only in the territory that you trust them to be proficient in. Because they may try to do a land grab in other non-traditional music markets like South Africa, Israel, China, Philippines, India. Don’t let them. So retain your digital rights in those territories, since they will not be actively marketing in them, and you will be with social media and email marketing.
HELPFUL STRATEGIES TO HELP YOU MAXIMIZE YOUR MUSIC INCOME
31. TRACK DEVELOPMENT PLANS ARE THE NEW MARKETING PLANS
In the new streaming dominant marketplace, track development plans are the key to a successful album cycle. So if you’re interested in seeing my track development plan, I’ve written extensively about this in another article here.
32. HAVE FOCUS AND THE 80/20 RULE
This is a crazy long list. Don’t have too many distractions for your customers, however at least make them aware of each option sometime during your album cycle. The 80/20 rule proves that 80% of your income will come from 20% of these revenue streams. Therefore when asking the customer to buy or stream, the best bet is to focus on the top two or three streaming outlets, top two MP3 Outlets, Top two Physical Outlets. Also you can use an infographic to steer your audience where you want them to purchase.
33. WHAT IS SEGMENTING YOUR FANS?
Direct new incoming fans to your best content. Most likely a music video, or your focus track. It’s tempting to keep refreshing with new songs every month, but remember to lead with your best stuff when prospecting for new fans. Direct Old fans to NEW stuff through messaging on social media, your newsletter, and links further down your website and news feeds. So segment your email list into super fans, so you can deliver them new content directly. Most of all don’t keep pounding your best fans with the same focus track over and over again.
34. DON’T SELL YOURSELF SHORT
Follow for a track or share for a track promotions are cool. Also charity events are an exception. But otherwise get paid for your time and work and don’t do too much free stuff.
35. A PENNY SAVED IS A PENNY EARNED
Finally, let’s be smart with our money. Keep everything in house where possible, seek endorsements and sponsorships (strings, drumsticks, drumheads). Used gear. Try to get artist discounts where possible. Ask for it every time, even if you know it’s not offered. Stay at people’s houses when touring.
I hope you learned a few things and how to make money with music online and elsewhere. Most of all, I would love to hear your comments, questions, and additions in the comments below.