Comprehensive Study Notes on the Music Business
The Music Business Overview
Historical Evolution of the Music Business
Mid 1800s:
Components: Compositions + Live Performance = Music Business
Turn of the 20th Century:
Components: Compositions + Recordings + Live Performance = Music Business
Major Events Leading to the “Death of the Music Business”
1906: Introduction of the Victrola (record player)
1923: Popularity of radio depresses record sales
1927: With public accession to new music on the radio, record sales soar to 140 million.
1932: The Great Depression leads record sales to plummet to an all-time low of 6 million.
1959-1970: Introduction of the cassette leads to portable music.
1989: Launch of Digital Audio Tape (DAT).
1999: Advent of Napster, signaling a major shift in music consumption.
2008: Launch of Spotify, transitioning to streaming services.
Key Music Industry Organizations
Performing Rights Organizations (PROs)
Responsibilities: Collect fees for public performance of musical compositions and distribute royalties to songwriters and publishers.
Note: PROs do not cover sales of records, CDs, or downloads.
Key PROs:
SESAC: Society of European Stage Authors and Composers
ASCAP: American Society of Composers, Authors and Publishers
BMI: Broadcast Music, Inc.
Funding Flow:
USER (radio, TV, venue, etc.) → PRO (BMI, ASCAP) → Rights Holder (songwriters, publishers)
Labor Unions
AFM: American Federation of Musicians
SAG/AFTRA: Screen Actors Guild + American Federation of Television and Radio Artists
Trade Organizations
RIAA: Recording Industry Association of America
Role: Certifies sales numbers
NARAS: National Academy of Recording Arts and Sciences
Composition: Recording industry professionals
Role: Votes on and awards Grammys
NAMM: National Association of Music Merchants
Composition: Equipment manufacturers and retailers
NMPA: National Publishers Association
Additional Organizations
IFPI: International Federation of Phonographic Industries
Role: Worldwide recording trade organization
Music Biz: Music Business Association
Role: Non-profit membership organization advancing and promoting music commerce
SoundScan and Sound Exchange
SoundScan
Function: Tracks record sales
Sound Exchange
Function: Non-profit organization that collects & distributes royalties for recording artists and masters' rights owners for recordings used on satellite/internet radio and cable TV music channels.
Major Trade Publications
Billboard: Focus on music business and major recording charts.
Pollstar: Focus on live concert industry.
Major Label Groups
Sony Music
Universal Music Group (UMG)
Warner Music Group
Major Concert Promoters and Booking Agencies
Concert Promoters
Live Nation
AEG
Booking Agencies
Creative Artists Agency
William Morris Endeavor (WME)
Wasserman
United Talent Agency (UTA)
Artist Management
Biggest Artist Management Companies by Audience
Full Stop: 63 clients (e.g., Harry Styles, Cardi B, Maroon 5, Meghan Trainor)
Red Light Management: 418 clients (e.g., Enrique Iglesias, Dave Matthews)
Roc Nation: 62 clients (e.g., Jay-Z, Rihanna, J Balvin)
SALXCO: 62 clients (e.g., The Weekend, Doja Cat, Metro Boomin)
SB Projects: 27 clients (e.g., Justin Bieber, Ariana Grande, Black Eyed Peas)
The Artist Team’s Source of Power
Factors: Money + Access + Recent Success + Body of Work
Financial Concepts in the Music Business
Gross vs Net
Gross: Total amount of money received.
Example: Paid $15/hour for 10 hours → Gross = .
Net: Amount remaining after expenses or taxes are deducted.
Example: Band gets paid $1000 for a gig, rented PA system for $250 → Gross = , Net = .
Roles in the Artist Team
The Manager
Central figure in all business activities
Involved in major decisions, acting as a buffer between the artist and external parties
Responsibilities include:
Promoting the artist’s career
Hiring crew
Fields offers
Communicates with labels
Authorizes decisions
Payment: 15-20% of artist's gross income.
Gross income encompasses all earnings: recorded music sales, streaming, touring, etc.
The Booking Agent
Responsibilities:
Arranges live performances, routes, books concert tours
Collects deposits for concerts
Commission: 10% of performance fees, excluding merch sales.
Licensing: In some states, required to be licensed by the American Federation of Musicians.
Business Manager
Responsibilities:
Manages artist’s finances (pay bills, handle investments, file taxes, manage royalties)
Payment: 5% of artist’s gross income; can also charge a monthly fee or hourly.
Attorney
Responsibilities:
Handles contractual details and negotiations
Payment structure: Hourly, flat fee, or percentage of deal negotiated (10% of any deal; 5% of gross income).
Publicist
Responsibilities:
Manages press communication (reviews, interviews)
Arranges media appearances (e.g., radio, TV)
Payment: Monthly retainer for the life of a PR campaign.
Key Clauses in Contracts
Sunset Clause
Definition: Contractual item stating how commissions phase out when a team member stops working for the artist.
Key Person Clause
Definition: In a management contract, specifies that the artist can terminate the contract if their key person (manager) leaves the organization.
Live Concert Business
Key Relationships
Artist → Manager → Agent → Talent Buyer/Promoter → Venue Contact
Manager’s Role: Works closely with the artist to create a tour plan, communicates specifics to the booking agent.
The Agent's Responsibilities
Routes tours and negotiates deals with promoters, including:
Ticket pricing, merch agreements, and on-sale dates
Hospitality & tech riders
The Promoter
Responsibilities include:
Pay the artist, invest in the concert, and handle marketing and promotion.
Assumes financial risk (profit from successful shows, lose from flops).
The Talent Buyer
Works for the promoter or venue, responsible for booking shows and communicating with agents directly.
Concert Touring Crew
Tour Manager: Advances shows and ensures everything is on schedule.
Sound Engineers:
Front of House: Mixes sound for the audience.
Monitor: Mixes sound for the artists.
Lighting Designer, Merch Person, Stage Techs contribute to the event.
Gig Deals
Sales and Payment Processes
Hold: Agents can hold a date at a venue before confirming with a contract.
Deposit: Typically ranges from 10-50% of the guaranteed payment for confirmed shows.
No deposit on door-deal shows.
Settlement Post-Show
Tour manager and promoter’s representative review ticket revenue and expenses.
Ticket Types
Soft Ticket Events: Performance as part of a larger event (e.g., music festivals).
Hard Ticket Events: Performance is the main reason for the event (e.g., standalone concerts).
Underplay: Performing in smaller venues to ensure a full audience.
Financial Concepts Post-Show
Manifest: Blueprint for ticket sales to avoid promoter fraud.
House Nut: Venue expenses.
Cap: Venue capacity.
Money Flow Structure
Pre-Show: Deposit (%) → Fan → Tickets → Promoter → Booking Agent.
Post-Show Settlement: Sales go to the promoter, then to the touring team and business manager.
Types of Touring Deals
Guarantee Deals
Definition: Artists receive a fixed fee, regardless of attendance or ticket sales.
Commonly used for private events (weddings, festivals).
Door Deals
Definition: Artists are compensated based on a percentage of ticket sales after event expenses.
Example of calculation:
500 tickets sold at $10 each = .
Costs (Sound & Production = + Door personnel = ) = .
Artist receives 70% of net income after deductions.
Guarantee vs. Percentage of Net
Example:
guarantee or 80% of net.
Ticket sales of post-expenses result in varying earnings for the artist based on which deal is higher.
Split Point Deals
Common in different touring levels, combining guarantee payments with a profit percentage.
Artist receives a portion (ranges from 70-90%) in profit after costs covered.
Amphitheatre Standard Deal
Example: 90% of Gross Box Office Revenue (GBOR).
Ticketing Deals
Venues may grant exclusive ticketing rights, affecting how profits are distributed among promoters and ticketing companies.
Merchandising in Concerts
Types of Merchandise
Tour Merch: Sold directly at concerts.
Retail Merch: Available through online stores or standard retail.
Hard Goods: Recorded music sold traditionally.
Soft Goods: Clothing or accessories.
Per Head Calculation
Definition: Average merchandise sales per ticket sold, siginifying sales viability and stock needs for tours.
Example Calculation
Total sales divided by the number of tickets sold (excluding complementary tickets).
Hall Fees
Definition: Venues charge a percentage (10-40%) of merchandise sales to sell within the space.
Importance: Has become more common as major concert promoters own many venues.
Tour Manager Insight on Merchandise
Strategies to Boost Sales:
Dedicated merch personnel can significantly enhance sales.
New merchandise items, particularly shirts, tend to perform well.
Signed items (records, posters) and iconic logos are always popular.
How to Negotiate Merch Deals
Artists typically license their name and image to merch companies, earning a royalty (30-40%) from sales.
Merch companies often pay upfront advances, recouped from future royalties.
Comparison: Merchandiser vs DIY
Merchandiser
Advantages: Convenience, low risk, upfront cash.
Earnings: Typically 30-40% of gross sales.
Additional Services: Can offer design input.
DIY (Do It Yourself)
Advantages: Higher profit margins, control over quality, and design.
Earnings: 100% of sales post-expenses.
Considerations: Requires upfront costs and logistical management.
Ideal Artists for Each Approach
Merchandiser is best suited for:
Larger tours needing cash upfront or lacking means to manage inventory effectively.
DIY works well for:
Independent artists or those frequently touring with operational capability to manage merchandise.
Conclusion
The evolving landscape of the music business hinges on clear understanding and strategic management roles to navigate the complex financial, contractual, and promotional aspects efficiently.