Debunking another music business myth

Have a quick read over here at an essay by Dave Winer about podcasting economics. Dave claims, and I wholeheartedly agree that the music and media industries are basically slave labor industries (my words), designed to make corporate executives rich, and leave the artists/writers with nothing, if not in debt.

This has been my personal experience as well. It’s been discussed all over the place by many people including myself, so I won’t dive into the evils of standard record contract economics for now.

But: A commenter named “JoeSmith” left this on Dave’s essay:

“While musicians can’t make money off of records, they can make money touring, producing, merchandising etc… For artists, the records turn out to be promotional fodder for these money-making (for them) endeavors…”

Joe: Your alternative income sources are, for the most part and for most artists, mythical and nonviable. Let me explain…

1. Most bands don’t make money touring. At least in venues where it’s possible to hold enough people, and nice enough an environment for sound, and in general, to charge money — touring is not a money making option for most bands. And it isn’t just because most musicians have to rely on (often crappy) day jobs to pay rent while they’re starting out, and can’t take the time to do the travel that touring requires. Touring is very expensive: Artists need financial backing from venues, record companies and promoters, and cooperation with radio stations and record stores.

A few points of fact: The venues are in the pockets of the big companies, almost to the same extent that the artists are. They rely on radio stations owned by national conglomerates like Clear Channel for promotion. Clear Channel basically only promotes artists that come from the record companies’ hit lists, and if you’re not one of them, then no promotion — and no ticket sales. Venues rely on record company affiliated, national booking agencies to negotiate the shows — these are big companies with their own legal ways of scamming artists (and venues) out of their worth.

The booking agencies, record companies, radio conglomerates, CD distributers and record chains all have to play the politics of their relationships nicely with each other, because the whole house of cards comes down if they don’t. This means that artists, who are not unionized, have almost no negotiating power or voice when it comes to negotiating with any of these companies, or with the music venues.

What’s more: Ticket prices are so high that people generally will only see bands that they are already a fan of. Most likely this is because they heard something on a movie or the radio — again controlled by the record industry.

Even worse, many venues in the United States, and more and more in Europe, do what’s commonly called “pay to play”. Basically they force the band, as part of their contract to perform at the venue, to buy, up-front, x-number of tickets. Usually this is 1/5 to 1/3 of the available tickets for the show. They buy them at full price. It generates enough money for the venue that they break even, regardless of whether a single person comes to the show. But most bands can’t afford it or can’t afford the risk if not enough people come to the show.

The pay-to-play phenomenon does all kinds of destructive things to the economics of touring, besides just putting up the obvious barriers for new (and poor) musicians. For example, since the venue is already break-even, they have little or no vested interest in the success of the event. They have less incentive to do their own advertising and promotion, and they have no reason to pressure the radio stations or the companies that control them, to promote (or accept other promotion) on behalf of the band.

And remember the record company? They were supposed to help promote right? Well, they rely on distributors and chain stores to stock your CD. They won’t promote your show unless they think they’ll make money directly, and they know they can’t do that unless the CD is in the stores. What would be the point? They don’t make any money unless your fans go buy your music.

2. Merchandising is controlled by record companies. Let’s ignore the fact that the primary venue for selling band merchandise is the same venue that nobody will come to because nobody will promote the event. Assume for a moment that I’ve got a full house. Who’s selling the merchandise?

A little known fact: Almost all first time record deals are signed along side of merchandising and publishing deals with partner companies, that are often owned by the same parent company as the record label itself. If you won’t sign the merchandising or publishing deals, the record company won’t sign the record deal. If that didn’t sink in, stop now and read it again.

What does this mean? Well, it means that the record company (for all intents and purposes) has their hand in the merchandising pot as well. They do the same kinds of advances with the same kind of diseconomy for the artists as the record deals themselves. Bands, even if they have a successful merchandising business, often don’t make a cent, or end up owing their merchandising company money.

What’s even worse here is that the contracts invariably are exclusive. The bands aren’t allowed any more to produce their own T-shirts, stickers, beach towels, flash lights, bongs, or anything at all that can be sold for money, at the venues they play or anywhere, the Internet included. The merchandising companies aggressively assert their exclusivity rights. Remember all those shady guys who sell knock-off T-shirts from the trunks of their cars at big concerts? This is who they’re hiding from — not the bands.

So — even if I’ve got a successful band with a sold out venue — which maybe made enough money to get there, pay my crew, and run the logistics of the show — but not much more — even if I’ve got a full house, I can’t make money from merchandising, and more than likely, the merchandising company hasn’t even set up a booth for me because I’m not a big name act yet — so often times, nobody is making money on merchandising.

Mind you, often the merchandising companies will ignore bands selling their own merchandise at shows where the company doesn’t have its own representative, but if you start to get big, expect them to put a quick stop to that, and then ask you to repay their 85% to 90% share of the stuff you already sold.

My advice: Start your own label. Do your own promotion. Do your own merchandise. Never, never, never sign a deal with a major record company unless it’s clear to you, and to your team of lawyers that you’ll never want for money again, at the moment that the deal is signed. Any other deal you’re likely to see is slave labor, and believe me, someone is getting rich off of it, and it’s not you.

Update: Thanks to Dave for the link.

Update: Aaron quotes Hunter S. Thompson on the music biz, in the comments on Dave’s essay:

“The music business is a cruel and shallow money trench, a long plastic hallway where thieves and pimps run free, and good men die like dogs. There’s also a negative side.”

See also: The Problem With Music by Steve Albini.


  1. jbr said:

    hey Jake, i have often wondered why more bands don’t use blogs and social software to break this music paradigm. maybe, i am too much of dreamer and believer in the triumph of the earnest, talented little guy over the big corporate greed machine.

    basically, all of the tools are in place to get heard without the push of a record company…entire cds can be hung on a web site and if you are good, you will get noticed by the on-line community. to me, it’s no different than blogging….popular bloggers are “read” because they have something that draws interest…we can easily gauge their draw by technorati, etc…it really should be no different for a band dedicated to establishing a strong web presence…

    again, maybe this is too naive, but it seems logical…

    May 24, 2005
  2. Jake Savin said:

    There are some bands that are very hip to their online presence, but it’s true that very few really get blogging. The ones that do are often either too careful to say anything of real interest, or too busy to post often enough to make their blogs really popular.

    I also hate to say it, but many bands don’t really have much to *say*. They may have great musical talent, but aren’t good writers, or don’t articulate their ideas very well in prose. Just think, for example, of how few really interesting interviews you hear with pop musicians, especially the younger ones.

    As in any field, there are a few really exceptional people who both have great ideas and can talk about them in a meaningful way, and the rest are somewhat lacking in one or both traits.

    May 24, 2005
  3. js said:

    I’ll apologize later if I missed the gist while I was skimming, but the first thing that pops out at me is the misuse of “most” in “most bands don’t make money touring.”

    Most bands don’t make money. Period. Full stop.

    Most bands don’t make money at touring, most bands don’t make money on record sales, most bands don’t make money licensing.

    Bands that combine luck, talent and hard work do. You have to remember that before going off on any ramble about how, like, the big venues are all in the hands of the man, man.

    Yes, it costs money to tour. But a good regional tour can be put together for a couple of grand, and can take in twice that. What that means is a) having a decent sounding demo to shop around (which can be made pretty cheaply, and we’ll discount the costs of making music from touring, because the band is already doing that if they’re a band), b) not being a dick to bookers, c) planning a smart, doable itinerary, d) working with local press to make sure there’s coverage.

    That Clear Channel owns Pine Knob (or the DTE music theater or whatever the fuck they call it now) doesn’t impact a band playing at the Elbow Room. A smart (small) band should be able to pull in $200 to $400 a night (at least), and should be playing every night on tour. They should be able to eat for $4 per person per day (the secret: grocery stores rather than fast food), and they should have a reasonable tour vehicle (van) rather than renting. It means a little more in upfront costs, but they save on per diems. They should be willing to sleep in it.

    Really, the biggest problem that touring bands that I’ve talked to in the last couple years have had has been the escalating costs of gas. Aside from that, getting in and out should be no problem if they’re, again, hard working and professional.

    Indie bands, punk bands, they’ve been making this model work for decades. But to make it work, you have to approach being in a band as a second job, and plan, plan, plan.

    October 31, 2007
  4. Jake Savin said:

    Thanks for the comment, js. While I pretty much agree with what you say, I think our misunderstanding stems from talking about two different kinds of bands. The type I’m referring to are the successful bands with major-label contracts. (Or bands on so-called Indie labels which are owned by majors.)

    Basically unless you have extraordinary clout, you can’t expect to make any money playing the game the way they want you to, no matter how famous you get. At least not until your contract term runs out. And most bands don’t last that long.

    Anyway, it sounds like you’re a musician as well, so good luck in your career. I hope you can break free of the one-off side-job tours, and make a real career for yourself in music. Just don’t do anything on a contract before you’re really sure you understand what you’re getting into.

    November 5, 2007

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