MUSIC BUSINESS RESOURCES FROM CMU
Making Money From Music
To understand the music industry you need to understand how music-makers make money. Find out how frontline artists generate revenue – and the music industry partners they work to with as they grow their frontline artist businesses.
#01: We can organise a frontline artist’s revenue streams into three main categories
Frontline artists – also sometimes called featured artists – are the music-makers who are up front on stage, who build a brand and release music under that brand, and who seek to grow and monetise a fanbase.
Frontline artists are part of the wider music-maker community, which also includes the backing vocalists, session musicians, composers, songwriters, beat-makers, studio producers and audio engineers who work more behind the scenes.
Frontline artists make money in a number of different ways. But those various different revenue streams can be organised into three main categories…
> Frontline artists create and exploit intellectual property.
> Frontline artists stage and monetise live performances.
> Frontline artists build and monetise a fan relationship.
#02: Frontline artists create a number of different kinds of intellectual property, each of which can be monetised
When we talk about intellectual property in the context of music we are mainly concerned with copyright, a legal concept which provides creators with certain controls over the outputs of their creativity.
Copyright provides this control over both songs and recordings. By song, we mean any combination of lyrics, composition, rhythm and melody together. By recording, we mean when a performance of a song is captured in a master recording.
Copyright treats these two things separately. So we have the song rights, also referred to as the publishing rights. And the recording rights, aka master rights.
Because of copyright, if third parties want to make use of a song or a recording, they need permission from whoever owns the copyright in that song or recording. The copyright owner charges for that permission, which is how copyright makes money.
In more practical terms, frontline artists and their business partners generate money from their songs and recordings in the following ways…
| By doing deals with digital platforms that utilise music, like download stores, streaming services, and social media and user-generated content platforms. |
| By selling physical discs like CDs and vinyl records. |
| By selling licences for when recorded music is broadcast, played in public, or synchronised into a TV show, movie, game or advert. |
| Song rights also make money whenever a song is performed live in public, or by selling or otherwise licensing sheet music or lyrics. |
Copyright also provides control over visual works, like artwork, photos, illustrations, infographics and any kind of picture.
Frontline artists also create a lot of visual works which can generate additional income, mainly by selling merchandise that incorporates those visuals.
One thing copyright does not protect is names – whether that’s an artist’s real name, their performer name or a band name.
However, there is another branch of intellectual property that can be used to protect an artist’s name and therefore their brand, which is trademark.
The big difference between copyright and trademark is that copyright is automatic whereas trademarks need to be registered.
When an artist writes a song or records a track it is automatically protected by copyright – they have control. But to protect their brand, an artist needs to go through the trademark registration process.
For this reason, frontline artists don’t tend to think about trademarks until they have business partners on board.
However, it is worth noting that for the most successful artists, trademarks are incredibly lucrative, because companies will pay lots of money for permission to use the artist’s brand on their products.
#03: Live performance is monetised through ticket sales – though there are other important revenues too
When it comes to the live side of a frontline artist’s business, the key revenue stream is ticket sales. If people are willing to pay to be in a room with the artist when they perform their music, we can monetise that live performance.
That said, artists have other ways of making money from live as well. First, they often sell merchandise at their shows. And second, if they are performing their own songs, they are due royalties because the copyright in those songs is being exploited.
Of course, both merchandise sales and song royalties are actually intellectual property revenue streams, but live shows provide a forum where merchandise and song rights can be monetised.
For the industry, there are also other important revenue streams from live shows. First, you sell audience members food and drink while they are at the show.
Second, brands often spend money to have a presence at shows, venues and festivals, or to have access to tickets for their customers or VIPs.
#04: Additional revenues can be generated by monetising the fan relationship
To make money from their intellectual property and live performances, frontline artists obviously need to find an audience and build a fanbase.
However, once a fanbase has been built, there are probably other ways to connect with and generate revenue from that audience – and especially the core fanbase of committed fans and superfans.
There are various digital platforms and tools that artists use to build and monetise the fanbase, including social media; email; online communities and forums; e-commerce, membership and fan-funding platforms; and digital gifting tools.
Some of these platforms and tools mainly help to build and understand a fanbase, while others enable the monetisation of the fan relationship by encouraging and enabling fans to spend money with the artist
Online direct-to-fan activity has traditionally involved running an online store where the artist increases their intellectual property and live performance income, eg by directly selling physical discs, merchandise and tickets to fans.
Sales and revenues can be maximised via these channels by employing things like pre-orders, fan-funding and bundling – where fans get discounts or extra benefits if they commit early and/or buy multiple products.
However, an increasing number of artists are also generating extra income by providing the core fanbase with premium digital content and experiences.
That might include selling access to exclusive content that is behind a pay-wall; or monetising livestreaming by selling tickets or using digital gifting tools on social media apps; or selling memberships to or taking donations from fans.
The music industry at large is still learning how to capitalise on these direct-to-fan opportunities – and it seems likely these revenue streams will become even more significant in the years ahead.
#05: Most music industry people and companies focus on one revenue stream – so frontline artists have multiple business partners
The music industry consists of people and companies that help frontline artists make money from their music – ie to pursue all the opportunities and unlock all the revenue streams we have mentioned above.
Most people and companies in the music industry focus on one set of revenue streams. So you have people and companies focused on intellectual property revenue streams. People and companies focused on live performance. And an emerging third strand of the music industry focused on the direct-to-fan relationship.
Actually, with intellectual property, most people and companies specialise even further, focusing on one kind of IP.
So artists work with one set of business partners on their recording rights – either a record label or a music distributor, plus their local recording rights collecting society (which is PPL in the UK).
And they work with another set of business partners on their song rights – either a music publisher or rights administrator, plus their local song rights collecting society (which is PRS in the UK).
There will then be a third set of business partners – including a merchandiser – focused on monetising the artist’s visual rights and trademarks through merchandise and brand licensing deals
On the live side, artists work with a promoter on their shows and tours. In fact, they will usually work with many different promoters at any one time, which is why they also have a booking agent on their team who looks for opportunities to play live and negotiates any deals.
Where artists are promoting their own shows, they may also have direct relationships with both venues and ticket agents, the latter also helping to market shows and possibly providing some cash flow. And when artists go on tour they will hire a person or team to handle tour and production management.
The direct-to-fan side of the business is still evolving, but includes the digital platforms artists use, as well as people and companies who work on direct-to-fan strategy, creating content and managing fan communication, and doing fulfilment of any mail-order purchases.
In addition to all these music companies, its important to understand that each music-maker is also running a business – and these music-maker businesses sit at the heart of the music industry, engaging the services of everyone else.
Most frontline artists also hire a manager or management team to help run that music-maker business. The manager oversees the running of the artist’s company and manages day-to-day relationships with all the other business partners. The manager is also the one business partner involved in every revenue stream.
Music-makers will also usually hire a lawyer to advise on deals and an accountant to manage the finances. The manager, lawyer and accountant then all work together to advise on and oversee the long term development of the music-maker’s business.