The Music Business

These are my observations of the music business. I put them here because I used to teach music to young people and they seemed to ask me a lot of questions like "Why do you teach?" and " I heard you on the radio last week, so how rich are you?"

I hope this clears up some confusion! As always, I appreciate feedback from U.

Here is how it basically works.

There are two ends to the music biz spectrum. They are the "product" end and the "service" end. I personally have spent many years on the service end and I really don't consider it to actually be part of the general music biz. Most folks in the service end are really in a different business than music. For example: If your main job is to service (play) weddings week after week, then you are really in the wedding biz, not the music biz. If your job is holding down a gig at a restaurant or bar, then you are really in the bar or restaurant support business, not the music biz.

You get to be in the music biz when you get to the "product” end. This is when you have a product for sale on the shelf (or on the net) that contains YOUR music. When someone pulls out their wallet FOR THE SOLE PURPOSE of buying your music, a transaction takes place. (Again, that means they didn’t get a free dinner or beer, but came there specifically to hear YOUR music). You then receive your share of the proceeds from the SALE of the music product and before you can say "Giddy Up" you are in the Music Biz!

So, in a nutshell, if the bulk of your income is not from CD sales, song royalties or the leasing of publishing rights, then you are really in or are supporting some 'other' biz and are probably NOT in the music business.

A lot of young and not so young musicians have asked me why some famous musicians who play "all the time" don’t seem to be too well off. They see big name stars on tour or on MTV and get the (false) impression that these folks are highly paid for these appearances. In fact, it is usually just the opposite. These well known acts actually PAY money for advertising their products on MTV or in concerts. It’s just like car companies that advertise during your favorite TV show. They pay to have their products shown in the hope that someone may get off their couch and go and BUY that product. When someone goes out and BUYS the product, that is when the artist (or car company) receives money. Not when you see them on TV.

Concerts were the same as commercials for many years but so much anymore. Traditionally, concert promotion was an expense on the artist’s income statement just like the advertising expense of MTV (or in the case of 1950s "Payola" when record companies illegally paid off radio stations to play/promote certain products). In the 60s and 70s bands would strive to break even between gate receipts and road expenses. They hoped that after 3 or 4 months on the road they can sell enough tickets to cover the HUGE expenses of the lighting contractors, hall rent, HUGE insurance/liability costs (which skyrocketed after 1978 when 12 people were trampled to death at a Cincinnati WHO concert), sound reinforcement contractor, road crews, hotel and travel coordinator and the list never ends. The record company puts up the front money for all of this, then would deduct it (and add a healthy premium for themselves) from record sales and merchandising. If the company did not recoup all of the touring expenses from the bands record sales, then the band would be liable for the difference (PLUS interest on the debt) to be paid out of future product sales. That is why after a big "sold out' tour of a band at the end of its cycle (I site any one of the many "farewell" tours of the WHO) you would often see a "Greatest Hits" album or some repackaging of old familiar music afterward. That was the record company’s attempt to recoup their losses.

For those not old enough to remember the Beatles, the FIRST thing they did once their sales were established, was to quit touring and save the promo expense. Same with the Stones until 1969, when the biz started to change again and they needed to go "door to door" and sell the product.

SO, to sum up, bands would tour essentially for free. They hoped that when 25,000 people saw them jump around for 2 hrs, maybe blow something up on the stage, smash some expensive guitars, or in the case of Alice Cooper (remember him?) put his head in a guillotine, that they would be impressed enough by all of that to go out the next day and BUY THE ALBUM.

This changed in the mid 80s as a result of Michael Jackson’s Victory Tour. In his case, the people ALREADY had the album.

Folks, we are talking 30 MILLION UNITS PLUS in sales BEFORE THE PROMO TOUR! Jackson then decided to do a stadium tour and announced the ticket price. It would be $30 PER ticket (the norm at the time was $10 to $15 for someone REALLY big). Also, you could only buy a ticket through the mail. There were NO onsite sales. Of course, every show (that’s every seat in the stadium plus the folding chairs that totally covered the playing field) was sold. CHA-CHING!! BADA BING! He made money on tour! He became the first star to make a profit on his advertising. Today a $30 seat is completly unheard of. Rock and Roll is for rich folks or people willing to be late on the rent.

Today tours are for profit as well as reminding the audience of the "back catalog" by playing the oldies. This is to prompt folks to download the repackaged or remixed product to the Ipod or some other medium for the upteenth time. Many of these bands no longer have any viable NEW product to sell, but they can still maintain huge cash flow by repackaging their older line.

So, what does this all mean for a young person starting out in music? I hope you use the above information to properly set your goals. Do not assume that just because you pack your local bar, that you can make a living playing music. You WILL make a great living for the bar OWNER. He or she will LOVE you! But you may not make a very good living for yourself.

Your goal if you are interested in music biz, should focus on sales of product, acquiring publishing rights and receiving copyright royalties. This is how musicians make money. They (w/ VERY rare exceptions-and I can’t even think of one) do not make money by playing a musical instrument, no matter how well they may play it. John Lennon is considered a great musician along with Jimi Hendrix. Both played guitar, but neither one received money for playing their guitars. Lennon got rich from SELLING records and from songwriter royalties. Hendrix also made money from SELLING records and to a much lesser extent, songwriter royalties. Both of these guys (and countless others) got royally screwed out of the big money which comes from the leasing of publishing rights. This is how record producers and some artists (Jackson, McCartney) really do become rich.

Publishing rights means (and I am simplifying, please email me if you really want to get into this subject) that if you own the rights to a copyrighted work, you will receive a fee EVERY time that work is performed or published, That means when someone buys the sheet music to "Feelings', the guy who owns those rights get a fee. Every time it’s played on the radio--cha-ching! Fee! When you hear Zeppelin's "Rock and Roll" on the Cadillac commercial- FEE! The artist is NOT usually the one who owns these rights!! I don’t know who owns "Rock and Roll" but they are making a FORTUNE from those commercials-- and is probably NOT anyone in Led Zeppelin. The artist who created the work often does not understand that this is "where the REAL money is" in the music biz. It’s not in touring or being cool or famous. It’s in the publishing!

The Beatles never owned their publishing and got NONE of that money. Michael Jackson's estate owns most of the Beatles catalog and leases those rights out to companies for fees.

He also owns many other catalogs (for one, he owns the entire Sly and the Family Stone catalog) as does McCartney. McCartney (who says he could not afford to buy publishing rights to the Beatles catalog when it went up for sale in the early 80s) does own many Broadway show rights like Hello Dolly. He owns the Buddy Holly catalog and reaped great rewards when "the Buddy Holly Story’ movie came out and a lot of major artists of the day (like Linda Ronstant) were covering Holly tunes. Most of that money went to Paul because he owned that publishing. You would never live long enough to play enough gigs to equal the cash flow from publishing. So, if you are ever facing a table of lawyers while signing a record distribution deal (soon to be a thing of the past), be sure YOUR lawyer included publishing rights in your deal.

If he didn’t bring this issue to you, you picked the WRONG lawyer.

I would love to hear your thoughts and questions on this (to me) interesting topic. Please email me!