MUSIC BUSINESS RESOURCES FROM CMU
Making Money From Live Music
Find out about more about how artists make money from their live performances and about the live music industry – the people artists work with when it comes to managing and monetising their live performances and touring activity.
#01: Artists work with various partners on their shows and tours
Artists work with various business partners in the live music industry in order to stage their shows and tours, including promoters, agents, venues and ticket agents, plus everyone involved in the management and delivery of each show and tour.
| The promoter is usually the financial risk taker on each show. They will either pay the artist a set fee or will commit to share the profits from tickets sales with the artist, but with a minimum guarantee, so the artist knows that however many tickets are sold they will make a minimum amount of money from the show. The promoter also books and pays for the venue, puts the tickets on sale and works with the artist and their team on marketing. Promoters also often have their own marketing channels via which they can sell tickets. Some promoters are based within venues and mainly or exclusively promote shows in that space. Other promoters books shows into lots of different venues, maybe within one region, or maybe nationally or in multiple countries. Some promoters are also involved in organising festivals – sometimes exclusively or sometimes alongside promoting other gigs and tours. |
| Artists will initially build their own relationships and negotiate bookings with promoters, usually in their local area. Though as an artist’s career progresses, they will probably ally with a booking agent. The agent then looks for opportunities for the artist to play live – utilising their contacts – and then negotiates the deals with each promoter, and generally advises the artist on how to grow the live side of their career. Artists often work with multiple different promoters at any one time. Even if they primarily work with one promoter on their own shows, they will want to play other people’s shows as well as festivals and private events. Hence the need for an agent specifically looking for opportunities and negotiating deals. Agents usually work on a commission basis, taking a percentage of whatever fee the artist earns. The most common agent commission is 10%, though some agents who provide extra support might charge something like 15%. |
| The most visible business partners on the live side of the music industry are obviously the venues that host the shows. It is generally promoters that hire the venues, though artists will have a relationship with the people that work there. As noted, venues might also have in-house promoters that book at least some of the shows or regular nights the venue hosts. |
| Then there is the ticket agent, the company that facilitates the sale of tickets. The ticket agent obviously provides the website and app via which people buy their tickets, and the accompanying customer support. But they can also be important marketing partners for an artist and promoter, helping to sell the show by utilising their data and networks. Plus they may also provide important cash flow for the promoter. |
| Finally there is everyone involved in actually delivering the show or tour, so tour management and production management, and everyone working behind the scenes on the show. Depending on their specific role and how things are set up, these people may work for the artist, the promoter or the venue. The number of people involved varies hugely depending on the scale and budget of the show. |
#02: For artists, key live music revenue streams are ticket sales, merch sales and song royalties
Live performance is obviously a key revenue stream for many artists – and the most obvious way that gigs and tours make money is through the sale of tickets.
What the artist earns from the show may be directly linked to ticket sales. Early-career artists often promote their own shows, seeking to cover costs and make a profit by selling tickets. And even once an artist is working with promoters, as noted, their deal with each promoter will often be a share of the profits from selling tickets.
And while the promoter will also usually offer the artist a minimum guarantee – or may simply pay the artist a fixed fee – guarantees and fees, especially for headline artists, are usually based on projected ticket sales income.
However, it’s important to remember that there are other ways artists make money from their live shows – in particular merchandise sales and song royalties.
| Shows provide a great opportunity for artists to sell merchandise to fans. At a grassroots level, artists or their team will usually run the merch stall and get to keep any money generated. At bigger venues, the venue might help run the merch stall, but will then usually take a cut of the money in return. |
| If an artist performs their own songs, then additional song royalties are due. This is because copyright provides songwriters with control over the performance of their music, and therefore the venue or promoter hosting or staging the performance needs to buy a licence to cover each performance. Even when the artist is the songwriter, that licence will usually be issued to the venue or promoter by the relevant collecting society, PRS in the UK. So the artist’s song royalties are in addition to any guarantee or fee they are directly paid. The venue or promoter pays what is due to PRS, which in turn pays the relevant songwriters and, if they are published, also their music publishers. |
Merchandise sales and song royalties are technically intellectual property revenue streams rather than live performance revenue streams, but the live show provides a platform where merch can be sold and song copyrights exploited. So they are part of the live business too.
It’s important artists maximise merchandise sales and collect all their song royalties from their shows. Especially as – at the grassroots level – the fee or split of ticket money that the artist receives isn’t necessarily enough to ensure the gig is profitable for the artist, once all the costs of getting to and delivering the show are covered.
#03: For the industry, key live music revenue streams are ticket sales, food and drink, and brand money
On the industry side of all this, ticket sales are also an important revenue stream, because the promoter will get a cut of the profits from ticket sales. Although that will often be a minority cut, with the artist getting a majority of the profits.
But – just like artists – promoters and venues have other ways of making money too. Food and drink is a key revenue stream for the live music business. While fans are in the venue – or at the festival – there is a captive audience that can be sold food, drink and other services. For venues in particular, food and drink sales can be key.
Brands also spend quite a lot of money in live music through sponsorship and other marketing activity. Brands might want their name above the door of the venue or on the festival poster; or access to tickets to give away to customers and VIPs; or simply to be able to offer their customers priority access to tickets to in-demand shows.
If a brand gets involved in a specific show or tour, then the artist will be part of that deal. But often brands work with venues and festivals more generally, and artists are not usually involved in that kind of activity.
#04: Artists work their way up the live music ladder – early on gigs are as much about fanbase building as making money
As an artist’s career progresses they will work their way up the live music ladder, playing bigger capacity venues and appearing higher up the bill at festivals as their fanbase starts to grow.
That journey will often begin with open mic nights, or performances in bars and cafes, or support or guest slots at regular gig or club nights.
The artist then starts playing at grassroots venues, then bigger clubs and small theatres, then the bigger theatres and concert halls, and – possibly, albeit in a minority of cases – onto arenas and stadiums.
There are a lot of economies of scale in live music, which means the bigger the audience the bigger the profit margin. Of course some artists will put a lot more into production for bigger shows on bigger stages, but the real challenge is making a profit when you are playing to 60 people a show.
At that level it is really important that the artist minimises their costs, and also maximises merchandise sales and collects any song royalties they are due, in addition to any fee, to ensure they go into profit.
That said, early on in an artist’s career playing live is often as much about fanbase building as it is making money. Getting out and playing live is a great way to engage potential new fans and to enhance the relationship with existing fans – growing the fanbase and the artist’s business.
With that in mind, artists should always be looking for subtle ways to encourage audience members to check out their music and other content online, and to connect with the artist on an ongoing basis via digital channels.
#05: Artists should be clear who is delivering what on any one show
When an artist is booked to play a show, they need to be very clear what they are delivering in return for their guarantee or fee – ie what are they paying for out of that guarantee or fee, and what is the promoter paying for on top.
Every deal is different, but a common approach is that the artist and their team are responsible for getting to the venue and for everything that happens on stage, while the promoter handles everything else.
That means at least some of the artist’s guarantee or fee will be spent on travel and the cost of delivering the show, it is not all profit. Plus the agent will usually take 10% of whatever money the artist receives – applying that commission before any costs.
Where the artist is earning a share of the profits from ticket sales, they should also be clear what costs the promoter will deduct from that money before the profit is calculated. Additional promoter costs will reduce how much profit there is to share.
Sometimes, especially early on in an artist’s career, the artist promotes their own shows and directly negotiates a deal with the venue. In this scenario, the artist needs to be really clear what the venue is providing in return for its rental fee, including in terms of staff and kit – nothing should ever be assumed!