CMU:DIY

Tips: How you make money from music

By | Published on Thursday 21 March 2013

Chris Coke

CMU Business Editor Chris Cooke provides an introduction to the three main ways artists and their business partners make money.

Our new Music In 2013 training course, the first edition of which is just reaching its climax, looks at the various different ways that artists can make money in 2013, how a fanbase must be built and understood to maximise the potential, and at the kinds of business deals and partners that are needed for that potential to be unlocked.

Once artists start writing songs, performing live and building a fanbase there are an assortment of ways that they can start to generate revenue, though all of those routes to income fall into one of three areas.

Intellectual Property
Firstly, artists create intellectual property, whether that be the separate copyrights that exist in the songs they write and the recordings they make, or the trademarks that can be developed out of an act’s name, or other IP that is created along the way.

The core ‘music rights’, the copyrights that exist in an artist’s lyrics, musical compositions and sound recordings, can be monetised in various ways.

Only the copyright owner has the automatic right to copy, adapt or perform in public any one musical work or recording. If someone else wants to own or make a copy of a record, or to adapt a composition, or to perform a song or play a recording in public, they need the copyright owner’s permission. And you grant that permission in return for money. This is how copyrights make money.

Sometimes copyright owners directly exploit their automatic rights – eg making copies of a sound recording onto a CD or printing album artwork onto a t-shirt and selling them. Other times copyright owners allow others to exploit the automatic rights for a fee – eg allowing iTunes to let consumers download copies of sound recordings to their PCs and smartphones or allowing a brand to use a song to soundtrack a TV advert.

The latter approach is called ‘licensing’, and once music rights owners get into that game they can choose to licence their content directly or through the collective licensing system.

With the former a rights owner does a direct deal with the company wanting to use a song or recording (eg with a sync deal with a brand and its advertising agency). Other times a consortium of rights owners, or often all music rights owners, will choose to licence through one ‘blanket licence’, sharing the money that comes in based on what tracks are actually used when (eg when music is licensed for use on radio via collecting societies PRS and PPL).

Live Performance
Artists also make money through live performance. If people will pay to be in the same room as a band while they play their songs live, then obviously there is money to be made there!

Though it’s worth remembering that the live industry makes as much money by selling beer and food to gig goers as they do from selling tickets (especially at the grass roots end of the market, where the profit margins on gigs are very tight indeed).

The Fan Relationship
And finally, once artists have a sizeable fanbase, the ‘fan relationship’ can be montesied in a number of ways. If you have a big fanbase, brands will pay money to be associated with you, simply so they can reach and impress the fans.

Other companies will pay to create products around the band’s name and identity, knowing that fans will buy them. And, on a more basic level, there is much mileage to me had in the internet age from the simple fan club, where fans will pay a sum of money each year just to officially be part of the artist’s gang.

So, lots of ways for artists to generate revenue from their output. Though, before new acts give up the day job, these revenue streams are only valuable if you create content that other people want to copy and perform, and if you build the size of fanbase that will fill gig venues, buy lots of endorsed products, and pay a premium for fan services.

Achieving that takes time, money and know-how, which is where the music business comes in, companies who will provide expertise and, sometimes, cash, to enable this potential to be me maximised and unlocked. But on what terms will those music companies work?

In the aforementioned Music In 2013 course we go into all this in much more detail, before outlining how fanbases can be built, and discussing the kinds of deals that can be done with music firms, from the classic record deal to something rather different.

For more information on the CMU Insights training courses click here.



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