RIAA Graphs updated to 2014: These graphs update the charts in the RIAA charts in the Introduction with regard to income from recorded music.
This chart above indicates that income from recorded music remained flat in 2014, although the chart below shows that accounting for inflation, income from recorded music including all formats continued to decline. But the decline was not as steep as between 1999 and 2010. The reason that income from recorded music has stabilized in recent years is income from paid subscriptions such as Spotify’s streaming service and income from non-interactive streaming such as Pandora and Sirius, has increased.
The chart below shows that despite the good news that income from digital subscription services and advertiser supported streaming has increased, the recording industry is still much poorer than the first year the RIAA measured income from recorded music in 1973.
The chart above shows the continuing sharp decline of the CD format.
The chart above shows that income from downloading continued to decline, whereas income from Internet Radio and Sirius (“SoundExchange Distributions”), “Paid Subscriptions” (lead by Spotify and Rhapsody), and “On-Demand Srtreaming” (lead by free Spotify and YouTube) all increased.
The chart below shows that, in contrast to CDs, digital distribution of music is growing.
The above chart shows that monies generated by use of masters in TV, movies, ad campaigns and other audiovisual uses remained flat in 2014.
Original Introduction: I am re-publishing the original introduction because the charts are in color, and clearer than the hard copies of the 4th edition.
It is a mistake to equate the recording industry with the entire music business. There are two other major components: music publishing (which is the business of generating money from songs rather than records), and live performance and touring. The recording industry has experienced a cataclysmic decline during the digital era, beginning in 1999 with the emergence of the original Napster, but the music publishing business, which has always been much smaller than the recording industry, has also declined, although not as much. On the other hand, the live performance and touring business is thriving and in better shape than it was at the dawn of the digital era. Spending to see iconic artists such as Paul McCartney, Bon Jovi and U2 as well as younger superstars such as Taylor Swift, Beyonce and Justin Timberlake, has increased three-fold. In addition, for these famous artists, there is additional money to be made from “branding,” that is, partnering with corporations to use their celebrity status to create even more money than they make from selling records. But most people who pursue careers as artists or songwriters continue to struggle financially just as they did before the digital era.
The irony is that technologies created and nourished the recording and music publishing businesses from the inventions of the record player and radio to the introduction of new distribution formats, such as the CD. But in the last 15 years, technology (specifically digital technology) has taken back much of that financial success by creating a panoply of ways—some illegal and some legal—to consume recorded music without paying for it. And now, the only sector of the business that is growing, live performance, is the part that existed before technology itself.
I. Current State of the Recording Industry
Cataclysmic Decline in Revenue
The following graph, which was generated by data from the Recording Industry Association of America (“RIAA”), shows the crisis that has beset the recording industry:
The graph shows that in 1999, income from sales and licenses of recorded music in the United States was approximately 14.5 billion dollars. Since that year revenues have dropped to less than 7 billion – a decline of more than 50 percent. Accounting for inflation the drop is even worse. This graphic shows that, when accounting for inflation, the record business is only about one third of what it used to be in terms of income; revenues have declined by more than 65 percent.
In fact, accounting for inflation, the recording industry is at its lowest level since the RIAA began keeping tabs on industry-wide income in 1973.
The numbers above indicate that the record business has declined horribly. However, these numbers also indicate that since the publication of the last edition of this book, things have not gotten significantly worse. By 2010, gross revenues had declined to approximately 7.01 billion dollars. Although by 2013, revenues continued to decline to 6.99 billion, the decrease (less than 1 percent) has not been as severe as in prior years since 1999. This is not exactly good news, but it’s the best news that can be reported.
Worldwide, the figures are even bleaker. According to a report from the International Federation of the Phonographic Industry (IFPI) issued in early 2014, global revenues from recorded music fell 3.9 percent to approximately $15 billion in 2013. In 1999, those revenues exceeded $38 billion according to IFPI’s report in 2000. That’s a steeper decline than in the U.S.
Reasons for Decline
Many have speculated on the causes for the decline of the recording business. The two main theories are (1) the Internet has made it easy to provide and share unauthorized music, and (2) the major record companies did not react fast enough to the digital revolution. These critics maintain that the labels did not act early enough to create or support alternatives to free music, and by the time they backed the launch of iTunes in 2003, it was already too late to cure the fans of their habit of getting music for free from unauthorized services such as the original Napster, followed by Kazaa, then Limewire, and now bittorent sites. I think both theories are true, but for as much as any other reason, I think the emergence of iTunes itself was incredibly harmful to the business. iTunes turned what had been an album business into a singles business. Steve Jobs’ insistence on offering to sell individual tracks encouraged those people who continued to actually buy records to “cherry pick” their favorite songs rather than pay for an entire album. The labels probably thought they did not have a choice as they were desperate to do something to compete with free and monetized digital music. I discuss these theories, corresponding events, and the recording business’ continuing efforts to battle piracy in Part III of this book.
The Majors: Further Consolidation but Continuing Relevance
As income went down, consolidation of the “majors,” which still distributes over 80 percent of recorded music, has continued. Instead of the five majors that were present in the 90’s when I was at Sony (specifically, Sony, BMG, EMI, Warner, and Universal), there are now only three. However, they are still relevant because, unlike most indies, they (1) still provide (although not as often) significant advances that provide enough money for new and emerging artists to live on and tour with in order to establish themselves, and (2) (and more importantly) are still the only players that can provide the worldwide marketing, promotion money, manpower, and expertise to raise up an unknown, English art school student such as Adele (Sony) or an obscure, New Zealand school-girl (Lorde) to superstar status. Even Prince who famously declared war on his label, Warner, many years ago, has decided to re-join the fold. He decided to re-sign with Warner in 2014, probably because of a massive cash offer and because of the world-wide marketing machine at the label’s disposal. See Chapter 1 for my interview with David Massey, President of Island Records.
The Emergence of Streaming as the Revenue Model of the Future
Revenues from CDs, as the following chart indicates, continue to descend:
However, for the first time since the introduction of iTunes, income from downloading has declined as well:
The current hope of the recording business is the possibility that streaming can save the day. There are three types of streaming as we discuss in much more detail in Part I of this book. They are:
1. Non-interactive “Internet radio” type services such as Pandora, Sirius XM, iRadio, iHeart Radio, Songza, etc.
2. Advertising-based interactive streaming such as the free versions of Spotify and Pandora.
3. Subscription services, such as premium Spotify, Rhapsody, and Google Play Music. </NL>
Pandora claims that it pays approximately 50 percent if its income in royalties to the recording industry (via Sound Exchange as we discuss in more detail in Part 1). Spotify claims it is paying an even greater percentage of its income to the labels (although those deals are confidential). It is true that these three sources of new income have been growing, as the following chart indicates:
However, if you compare downloading with streaming, the majority of money still comes from downloading:
Paid Subscription Versus Ad-Supported, On Demand Streaming
Which generates more money? Subscription, hands down. The goal of many of the services has been to convert “free,” ad-supported listeners to premium subscribers. As the chart immediately above indicates, most of the money from interactive streaming comes from subscriptions (“Paid Subscriptions” as opposed to “On-Demand Streaming Ad-Supported”). This is also the case for Pandora. Pandora has 76 million active users and only 2.5 million paid subscribers. That’s 3.3 percent. However, the subscribers account for over 18 percent of Pandora’s income.
The money that music streaming services such as Spotify and Pandora earn from advertising is limited because money from advertisers will always be at the mercy of marketing budgets, which have been slow to adopt streaming audio as a place to buy. Neither Pandora nor Spotify are profitable; in 2013, Pandora lost $38 million.
Lack of Success in Converting Listeners to Customers
Pandora charges $4.99 per month for premium service (no ads); Spotify Premium, Rhapsody and Google Play all charge $9.99 per month (no ads and mobile service).
Streaming services have had limited success converting users to paying customers. Spotify, for instance, has 40 million active users, but only one out of four users are paid subscribers. In May of 2014, Spotify announced that it had reached 10 million subscribers worldwide. Still, converting free listeners to paying subscribers has been a tough slog. It took Spotify approximately 6 years since its launch in 2008 to get to that number, and they still have 30 million free listeners. As discussed above, Pandora has only 2.5 million paid subscribers. Although there are 76 million active listeners, premium subscribers only account for approximately 3.3 percent. And Rhapsody, which has been in the game for 13 years, has only just recently hit 1.7 million subscribers.
Will Streaming Turn-around the Record Business’s Cataclysmic Decline?
Although the success of streaming has softened the losses that the Recording Industry has experienced year after year, the recording industry (1) has not recovered at all and (2) is still declining, although not as fast as it was in prior years. The conversion rates from free to subscription by Spotify and Pandora are disappointing. Expecting people to pay $10 per month, or any amount of money per month, seems quaint if not absurd, when you consider how easily available music is for free, sometimes by the same services that are asking money for premium listening, and more often by quasi legal software and apps such as programs for converting YouTube to MP3’s or apps that make free playlists from YouTube.
In order for the streaming services can have significant financial success, the mobile services must partner-up with the music streaming services in a meaningful fashion. So far, most of those partnerships have been allowing customers of wireless service to get a “special deal” for a premium music service. For instance, when Beats Music rolled out in January, 2014, AT&T offered an exclusive $14.99 family plan to let five users stream to ten devices total. Despite a Superbowl ad featuring Ellen DeGeneres, this strategy was a disappointment. People are used to free music—period—whether they get it from authorized services, such as Pandora, from sharing on private networks, converting YouTube to MP3s, using services such as Ustatube to make playlists of any videos, or bittorent sites such as µTorrent.
Up to now, with the exception of a deal between a small carrier, Cricket Wireless, which was recently purchased by AT&T, and a music service called Muve Music, the large carriers have not included a music service in the cost of its basic subscription. If they did, the consumers would still perceive the music service as “free” even if the carrier increased the cost of the basic service and shared the additional amount with the services. In turn, the services would be paying more money in royalties to the recording business.
But the carriers have been reluctant to take this step precisely because users can already get free music from Pandora, or apps such as InstaTube which allows you to make playlists from YouTube. They are making a lot of money already without bundling music services, so they lack the incentive to develop these bundling partnerships with the streaming services. For instance, AT&T recently came out with a plan to offer Premium Spotify free with basic subscriptions, but only for a limited time.
Apple’s Purchase of Beats Music
On May 29, 2014, Apple announced that it would purchase Beats Music for three billion dollars. In so doing, they acquired both the financially successful Beats headphones business and the far-from-successful Beats Music streaming subscription service discussed above. Apple may have wanted the streaming service even more than the revenue from the headphones business. Downloading is going down, and streaming is going up. Apple already has an Internet radio service, iRadio, but Beats puts Apple in the interactive streaming business. With over 150 billion dollars in reserve revenue, the three billion that they paid for Beats was a drop in the bucket. Apple could also decide to charge less for subscriptions for Beats Music than Spotify or the other streaming services charge, or give Beats away for free for a limited period of time to purchasers of new iPhones or even bundle the service with the price of an iPhone, that is, give it away free. Even if Apple had to pay major record labels minimum guarantees or advances and lose money on Beats Music, Apple could increase sales of their gadgets. This was exactly Steve Jobs’ strategy for initiating iTunes. Although the iTunes store has sold over 25 billion songs worldwide, no one can be sure how much Apple has profited from iTunes. That’s because the store generally pays 70% for music content including recording and songs (see Chapter 1 for a breakdown of how much they pay for each), and on top of that, Apple has to pay for bandwidth, marketing, transaction costs, staff, overhead and other expenses. But it is beyond dispute that, after the introduction of iTunes in 2003, Apple’s sales of iPods, introduced in 2001, skyrocketed.
In January 2007, Apple reported record quarterly revenue of $7.1 billion, of which 48% was made from iPod sales.Apple has made even more money from iPhones than iPods. In fact, iPhones are the most profitable product on earth. In the first quarter of 2014, which runs from the beginning of October to the end of December, the company earned a record $57.6 billion in revenue; 56% of that income came from iPhones and only 7.6 % came from iTunes, and some of that revenue was from movies, videos, and other content besides songs. But like iPods, the success of iPhones is largely based on its ability to play recorded music including free services such as YouTube and Pandora, and apps that allow you to listen to free music without advertising such as InstaTube. The point is that Apple has used music to sell technology more than it has used technology to sell music. And if Apple bundles or discounts Beats Music with purchases of new iPhones, Apple will sell even more iPhones.
For how much the streaming services pay labels and indie artists see Chapter 6, as well as how much they pay major labels, and how much the labels pay (or in many cases don’t pay) their artists.
Licensing Recordings for movies, TV, games and ad campaigns
Besides record sales, downloads, and streaming, the recording industry makes money from licensing recorded music for use in movies, TV, video games, ad campaigns. In Section II we discuss in detail how much producers can expect to pay the record companies and artists. But it is worth noting here that despite the hype to the contrary, licensing recordings for movies, commercials, games and television has not grown in the last several years. The RIAA, which has only kept track of these number is in the last several years has this data on income from ”master-use” licenses:
II. Music Publishing Business: Performance Income Up; Mechanical Income Down; Total Income, Stagnant
The good news about music publishing is that it has not suffered the dizzying bloodletting that the recording industry has endured. Essentially revenues from music publishing worldwide remained approximately the same as they were in 1999, that is, approximately six billion worldwide and two billion in the U.S. alone. The bad news is (i) accounting for inflation total revenue have remained stagnant and (ii) the music publishing has never been as big as the recording business. At its height, music publishing’s income of 6 billion was only a fraction of the income flowing from record sales at 38 billion (and now $15 billion).
What are publishing Revenues?
|Public performance royalties: These are monies from the public performance of songs on radio, TV, venues including nightclubs and restaurants as well streaming services.
• Mechanical royalties: These are monies from the inclusion of songs in records sold in any format including downloads as well as CDs, cassettes and vinyl.• Sync fees: These are fees from the “fixation” of music in an audiovisual work such as movie, TV show, TV ad campaign webisode, concert video or video game.• Other: Songwriters and music publishers also receive income for the use of their content in other categories, such as sheet music and lyric websites.
Over the years since 199, mechanical income has plummeted as income from sales of records have declined, but publishers have somewhat compensated for that decline by making more money from performance and sych.
Global Publishing Revenues
The National Music Publishers Association (“NMPA”) started issuing reports on total publishing revenue from 1995 – a few years before the recording industry experienced its highest income ever (1999). In 1999, global income from recorded music was $38 billion. In the same year, global publishing revenues were only $6.4 billion. NMPA continued issuing reports until 2001. These are the total global figures for each year:
Global Music Publishing Revenues
1995 – 2001 ($Millions)
NMPA stopped issuing reports after 2001. The following data was published in 2011 by Ender Analysis, which shows global publishing income from 2005 and estimates revenues after 2010:
These data show that during the period from 1999 to 2013, while the recording business declined from $38 billion down to $15 billion, the publishing business declined from approximately $6.5 billion to approximately $5.5 billion. This was not as steep a decline as the recording business has suffered, but the figures indicate the publishing business was never as big as the recording business in the first place.
The Ender chart also shows that although mechanical income from downloading has increased total mechanical income has shrunk rapidly because income from digital mechanicals is not making up for losses from declining CD sales. though This mirrors the decline in the decline of income from record sales. The Enders chart also shows that performance income has been steadily increasing and has kept the music publishing business from imploding to the extent that the record business has.
U.S. Publishing Revenues
According to the NMPA’s reports, income in the U.S. from publishing income from 1995 to 2001 was as follows in billions of dollars:
|1.1||1.2||Webpage unavailable||Webpage unavailable||1.49||1.66||1.56|
In June 2014, the NMPA announced publishing income figures for the first time since 2001. According to the NMPA, revenue across all income sources totaled 2.2 billion dollars in 2013. This is a moderate increase since 1999 when the business generated 1.49 billion dollars, but accounting for inflation income the value of that amount in 2014 dollars is 2.13. So real growth from 1999 to 2014 has been stagnant.
In its June 2014 announcement the NMPA detailed the industry value in the following breakdown of publishing revenue in the U.S.:
• Performance License – 52 percent (1.14 billion)
• Mechanical License – 23 percent (506 million)
• Sync License – 20 percent (440 million)
• Other – 5 percent
In 2001, the NMPA reported that 752.29 million came from performance income, 584.24 from mechanical, and 157.92 from synch. Obviously, performance and synch income have increased, but mechanical income decreased from 39% of total publishing revenue to 23%.
It makes sense that publishing has not suffered as much as the recording business. According to RIAA stats, in its peak year in 1999, when the recording industry made over $14.5 billion in the U.S. alone, almost all of the income was generated from sales of recorded music.
The largest segment of music publishing, on the other hand, has always been public performance. As we will discuss in Part I, the recording industry is not entitled to this kind of revenue except for digital transmission. The bottom line is that publishing has not declined as violently as the record business, but publishing was never as important as the recording industry in terms of the overall income generated by the music business.
III. Current State of the Touring and Live Performance Business
Touring and live performance make up the third leg of the stool of the music business and have fared much better in the digital era than either the recording industry or the music publishing business.
According to Pollstar, the Concert Industry’s leading business trade publication, the total size of the North American concert business, hit a record high of $5.1 billion. “That’s a particularly surprising number in light of the fact that in 2000, the total was only $1.7 billion.” That is over a three-fold increase over the same period of time that the recording industry lost three quarters of its value in the U.S. and around the world, while the music publishing business remained stagnant. So if there is hope for the music business, it’s with this third leg of the stool that existed before the recording or music publishing business even began.
Mozart and Beethoven were playing to packed houses before Edison invented the first record player, and music publishing was indeed nothing but selling hand-made transcriptions. It is truly paradoxical that technology helped push the music business to soaring levels following the invention of the record player and radio to the end of millennium. But new developments in technology in the last 15 years have reduced the music business to near rubble, except for the part of the business that existed prior to the modern era.
Perhaps another ironic fact is that the same recent technology that is hurting the recording and publishing businesses so badly is actually helping the live performance business. According to Billboard, concert attendance has thrived during the digital era “because of the extremely targeted and efficient marketing opportunities afforded by new media and strategic use of mobile, social, email, channel marketing and digital sales channels.”
Given the importance of the live music business, let’s explore the economics of the touring business and the people who profit from its surge. Also according to Pollstar:
The Top 145 Tours of North America hit a new record high at $2.79 billion. That represents a 10.3 percent increase over 2012.
However, the money from live performance and touring is not democratically distributed. It is largely reserved for the most celebrated artists. It is true that for iconic artists and superstars, there is more money in touring now than ever before. The chart below shows gross revenues from the top 145 North American tours and is based on data from Pollstar.
|GROSS MILLIONS||ARTIST||AVERAGE TICKET PRICE|
|$87.7||The Rolling Stones||$228|
|$69.0||Jay Z / Justin Timberlake||$110|
|$43.1||Zac Brown Band||$50|
|$40.2||Dave Matthews Band||$56|
|$31.4||New Kids On The Block||$62|
|$30.3||Maroon 5 / Kelly Clarkson||$49|
|$24.3||Bob Seger & The Silver Bullet Band||$84|
|$21.2||Mumford & Sons||$44|
|$19.7||Swedish House Mafia||$68|
|$16.9||Selena Gomez & The Scene||$50|
|$15.5||Goo Goo Dolls / matchbox twenty||$37|
|$14.7||“Vans Warped Tour”||$30|
|$14.4||Nine Inch Nails||$73|
|$14.1||“Gentlemen Of The Road Stopovers” / Mumford & Sons||$101|
|$11.7||Vicente Fernandez / Vicente Fernandez Jr.||$116|
|$11.2||Emmanuel / Manuel Mijares||$67|
|$10.6||Macklemore & Ryan Lewis||$38|
|$10.5||“Americanarama Festival Of Music” / Bob Dylan||$57|
|$9.6||The Avett Brothers||$40|
|$9.3||Earth, Wind & Fire||$52|
|$8.5||Mary J. Blige||$61|
|$8.4||B. B. King||$58|
|$8.3||Florida Georgia Line||$28|
|$8.2||Marco Antonio Solis||$72|
|$7.8||The Tragically Hip||$65|
|$7.6||Big Time Rush / Victoria Justice||$31|
|$7.4||The Allman Brothers Band||$88|
|$7.0||The Postal Service||$41|
|$6.9||Fall Out Boy||$35|
|$6.9||Wiz Khalifa / A$AP Rocky||$26|
|$6.8||“Winter Jam / Tobymac||$12|
|$6.3||Straight No Chaser||$42|
|$6.0||Shinedown / Three Days Grace||$39|
|$6.0||Steve Miller Band||$62|
|$5.7||Styx / REO Speedwagon||$38|
|$5.7||A Day To Remember||$33|
|$5.7||Tom Petty & The Heartbreakers||$80|
Gross Income vs. Guarantees and Net Profits
When looking at the numbers, it is important to note that not all the money flows to the artists. The touring business for top stars generally works as follows:
The artist is paid a “guarantee” up front. The promoter (the two largest in the U.S. are Live Nation or AEG) pays a guarantee to the artist up front for each show. The promoter also pays the artist’s travel expenses, sound and lighting, the cost of the venue (e.g. stadium or amphitheater) and other costs associated with the show. The cost of the venue itself can be six figures and up. Generally, after deducting all these costs from income from ticket sales, the promoter pays the artist 85 percent to 90 percent of net income, keeping the balance for its services. Therefore, the artists’ share of the Pollstar numbers is a great deal less than the overall money generated by touring. However, top artists can still demand enormous guarantees. The following information is from a database reporting the minimum guarantees of major artists:
- Taylor Swift: $1,000,000- $4,000,000
- The Rolling Stones: $1,500,000- $3,000,000
- U2: $1,500,000- $4,000,000
- Bon Jovi: $1,000,000- $5,000,000
- Bruce Springsteen: $200,000 – $1,000,000
Anecdote from My Own Practice
I was authorized by a successful promoter to offer a $2.7 million guarantee to an iconic artist for two concerts in two cities in Japan during a one week period. In addition, the artist received 90% of ticket sales after expenses. That amount equaled more than 3 million dollars. Not bad for a week’s pay.
Top D.J.’s also get PAID
In the last ten years or so “EDM” has emerged as one of the leading genres of music at least fior live performance. Festivals such as Electric Daisy CarnivalMysteryland, Ultra Music Festival, and Electic Zoo in the U.S. and Tomorrowland, Ultra Europe in Europe and Mysteryland in both attract tens of thousand of fans who pay good money to writhe to the beats of their favorite DJs. And the top DJs can make from $300,000 to $1 million or more for a headlining gig at major festivals. Billboard recently names about two dozen DJs in this category.
Stars vs. Indie Artists and Baby Bands: A True Case of “Income Inequality”
The economics of touring and live performance for a baby band or even an established indie band with a following are radically different than “A” list performers and top D.J.’s. A band at a small venue can expect to receive a portion of ticket sales for his show. If tickets sell for $15 and the band of four musicians sells 50 tickets they might expect to make 50 x $15 = $750 minus 20 percent to the club to cover light and sound and 15 percent payable to a promoter who helped book the club and promote the show. That would leave approximately $400 for the bands or $100 each.
Established indie bands or emerging artists with a “buzz” who can book medium size venues such as Irving Plaza or the main room at Webster Hall in New York, and who call sell 500 tickets at $25 to $50 can expect to come away with approximately several thousand (See discussion in Chapter 1 of Music in Ad Campaigns) to over $10,000 for a show. Although this is respectable, it’s an incredibly low fraction of the $1 billion to $4 million guarantee that Taylor Swift can demand for a show. The problem is that there are only so many artists who have the fame and huge numbers of fans to fill arenas or stadiums.
Jazz musicians may make $50 to $150 a night for playing at a club. The leader usually receives all the money and pays the sideman what he deems fair. The leader can make up to $500 at a small club and has to share that money with the band. A jazz artist who was headlining at a small club in Manhattan told me she didn’t even know what the club would pay her since she was sure that whatever she got was to be negligible.
On the other hand if a jazz artist is one of a select group who can pull in paying crowds to up-scale clubs, he or she can demand $1000 a night or more and some can even make six figures for a week long engagement. But according to research of the Future of Music Coalition (FMC), a non-profit organization specializing in education, research and advocacy for musicians, only 2% to 3% of full-time jazz musicians make more than $100,000 per year, and that includes all sources of revenue, such as record sales as well as live performances.
For the same top artists who are making millions from touring and live performance there are additional millions to be made from “branding.” According to the Future of the Music Coalition, branding includes traditional forms of revenue such as merchandise sales, endorsements and corporate support for tours. Stars can make millions in royalties (usually 30-40% of the retail selling price) from sales of mugs, t-shirts and other “merch” sold at arena and stadium concerts. Artist endorsement of products stretches back for generations. For instance Nat King Cole, the great singer and pianist, was a pitchman for Camel cigarettes in the 50’s. Regarding corporate tour support, over a decade ago, I drafted documents on behalf of Dodge Viper who paid millions to Aerosmith in connection with a tour. Dodge received benefits such as having his name appear on stage, Aerosmith meet-and-greets with Viper dealers, and a national commercial using an Aerosmith song. Also, each member of the band had to promise to use “reasonable efforts” to drive a Viper which Dodge provided gratis.
In the last several years, “branding” has really taken on new meaning as the deals have become far less obvious than the old income streams referred to in the last paragraph. For instance, branding can include judging positions on reality TV shows. Last season, Jennifer Lopez was paid an astounding $17.5 million to return to her post as judge on American Idol earning more than Britney Spears who was paid to do The X Factor for $15 million.
Today, according to certain industry experts, the primary way to maximize money in the music business is to turn the artist itself into a brand — then do everything in one’s power to maximize that brand’s value. For instance, Taylor Swift, for her last album “Red,” had a list of marketing partners who left virtually no category unturned, including a branded store in Walgreens that sold Swift-themed merchandise incorporating artwork from “Red:” t-shirts, bracelets, backpacks, tour books, posters, journals, notebooks, calendars, iPhone and iPad accessories and other items. Swift also launched her own line of sneakers for Keds. In addition, she inked a deal for a new fragrance with Elizabeth Arden, “Enchanted,” that followed up the hugely successful “Wonderstruck,” the No. 2 women’s scent launch in 2011. The list embraces only a fraction of the branding deals.
The best deals, in addition to being lucrative, also make an artist’s brand more appealing for future endeavors. Steven Tyler was cast as a judge on ‘American Idol’ and earned a fat check — around $10 million. But the show also introduced Tyler to a new generation, and became a showcase for Tyler’s personal style, which helped him land deals with fashion companies. According to Tyler’s attorney: “We did a deal with Tommy Hilfiger’s rock-and-roll line, Andrew Charles, last year. And that was successful because we had a debut of his own menswear and womenswear. Now we’re putting together a deal with a very prominent fashion executive and business owner, and Tyler is doing his own line.”
As we discuss in the first part of this introduction, income from recorded music is down more than 75 percent from its peak in 1999. While touring can be very lucrative, tours are also expensive to produce. As we discussed above, they aren’t necessarily as profitable for the artist as they initially appear. Touring can generate a great deal of income as the Pollstar Top North American Money making tours shows. But, the artist may only receive their basic guarantees because expenses can eat up “net” revenues. For that reason, major artists and their “teams” (manager, lawyer, business manager, etc.) have gotten increasingly creative with their business ventures.
Tyler’s attorney told the Huffington Post, “Ten years ago, if you had a hit song on the radio, and you had a great tour, then you’d sell a million records, two million records. That’s not necessarily the case anymore. But today, if you have a hit song and you have a sold-out tour, then other ancillary opportunities are available to you: sponsorships, endorsements, TV, movie, animated features … all different types of things, … [r]ecording an album really has become like a promotional tool.”
Beyonce is another great example of an artist who makes a great deal of money from branding as well as live performance. According to Forbes:
Queen B played 95 shows, bringing in an average $2.4 million per stop, according to Pollstar….
But Beyoncé doesn’t stop with music — she’s built a small business empire. She earns millions endorsing companies like H&M and Pepsi. She has a line of fragrances with names like Heat, Rise and Pulse, and then there’s her clothing company House of Dereon, which features jeans, shoes and accessories. All together we estimate that Beyoncé earned $115 million between June 1, 2013 and June 1, 2014.
V. Current Conditions for most full-time musicians
Jean Cook, the program director at the Future of Music Coalition, told the Huffington Post that just 2 percent of musicians’ total income in America comes from “brand-related revenue.” “Anybody who’s able to leverage their brand and get income from it is probably doing fairly well,” she said. “But most people are not in a position to leverage their brand.”
In fact, the Future of Music Coalition found that musicians made an average of about $34,000 off their music in America, before deducting expenses from touring and recording.
In contrast to major artists, most musicians don’t have the brand recognition of Steven Tyler, so they couldn’t land those deals even with the best attorneys and managers in the industry. According to Cook’s data, though, side-jobs end up boosting the average total income for a musician to $49,000, pre-expenses — still less than a tenth of a percent of what Taylor Swift generates.
“Musicians are poor,” Cook said, “There’s no getting around that. Freelance musicians have to tie together a lot of different things to make a living, and don’t have a lot of support from their teams. There are successful musicians — but the vast majority of people aren’t that.”
Perhaps the digital era has made things even worse for most artists. David Lowery developed a theory he calls the “New Boss,” even worse than the “Old Boss.” Lowery points out that under the old label system, when the labels were healthy enough to sign a lot of artists, they provided production costs and advances. The artists may never have seen recording royalties (see why in Chapter 1), but at least they did not have to pay to produce and market their records, and the labels provided additional money to live on—sometimes enough to buy a new car or a house. If the artist caught on, the artist could become very rich. Now, most “successful” indie recording artists have to pay for their own records, receive very modest payments from downloading or streaming, and tour almost constantly to make a living.
According to FMC research, it is impossible to tell whether musicians’ incomes have gone up or down in recent years. There are just too many variables including whether a person is performing music for a living on a full-time basis, expenses for recording and touring, and whether income from teaching is included or not. One thing is for sure: the promise that the Internet would create a worldwide market for record sales without the help of labels, and that many artists would be able to sustain themselves from recording and uploading their own tracks via their websites or iTunes, and other stores through aggregators such as TuneCore or CD Baby, has been profoundly disappointing. Even in 2008, it was estimated that there were 10 million tracks on iTunes that were never downloaded – not even once. Despite the hype put out by some of these companies, musicians often spend more money using these companies to upload their songs to iTunes or Amazon, than they make from sales.
But if you are an indie artist, Part IV of this book contains some smart tips and some real success stories of how artists can use digital tools, such as YouTube, to succeed without wasting time and money.
Per the data in the RIAA website, total revenue from recorded music in the U.S. in 2013 was 6996.1 billion (including synch income), in 1999 (in 2013 dollars) the total was 20393.7. 6996.1 divided by 20393.7 = 34.3%. Note the RIAA only started counting synch income in 2009, and as of 2014 it totaled 189.7 million dollars. So the drop is actually greater than 34.3%.
 Although over 9 percent accounting for inflation.
 http://www.ifpi.org/content/library/worldsales2000.pdf The IFPI report tries hard to put the best face on some disappointing stats by stating:
Overall, recorded music revenues grew in Europe and Latin America and continued to stabilize in the US, growing 0.8 per cent in trade terms. Music sales on a global scale, however, were sharply influenced by a steep 16.7 per cent fall in Japan, the world’s second largest market. Outside Japan, global music revenues fell (0.1 per cent decrease); including Japan, they fell 3.9 per cent to an estimated US$15 billion.
But the decline in Japan is shocking as it is the second biggest market in the world. The report glows about the increase in money from streaming services:
New services with big global ambitions are launching, such as Beats and iTunes Radio — services that we hope will soon spread around the world. Meanwhile, the existing international services, such as Deezer, Google Play, iTunes, Spotify and YouTube are generating income in many new markets following their global expansion. The competition is intense and consumer choice is ever-widening — these are very positive dynamics in the development of the digital music landscape.
However, a Wall Street Journal article pointed out that the decline in Japan could well be caused by the very media that the IPFI report is so optimistic about. The Wall Street journal points to several reasons for the steep downturn in Japan including a steep decline in sales of ringtones, the most telling remarks were about the damage created by YouTube’s arrival in Japan:
[S]ales of CDs at Tower Records Japan, the country’s largest music chain, with 84 outlets, have been in decline. “People increasingly listen to music through free access sites like YouTube,” said company spokesman Tatsuro Yagawa.
Tatsuyoshi Kimura, a 22-year-old college student, used to spend 3,000 to 4,000 yen a month on CDs. But he rarely spends money on music any more, he says. “There are many sites like YouTube where I can listen to music free,” he said. “That was not possible five years ago.”
We discuss both the good and bad impacts in Section III of this book.
 “Pandora’s revenue from 2006 to 2013, by source (in million U.S. dollars)” by Statista., 2014, http://www.statista.com/statistics/190918/revenue-sources-of-pandora-since-2007/
 “Are there any music streaming standouts?” By Kapitall, May 28, 2014, http://www.nasdaq.com/article/are-there-any-music-streaming-standouts-cm356928
 They also tend to lock their customers into contracts that make it pricey to switch to another cell phone provider, thus reducing churn that might otherwise be controlled by offering a more attractive set of features (including ad-free music streaming).
 “iTunes Store Sets New Record with 25 Billion Songs Sold”. Apple Press Info. Apple, Inc. 6 February 2013. Retrieved April 18, 2013.
 “Apple Reports First Quarter Results”. Apple Press Info. January 17, 2007.
 “Apple’s iPhone Is Now The Most Profitable Business In The World” by Henry Blodget, April 25, 2012
 “Apple breaks revenue, iPhone, and iPad records in Q1 of 2014” by Andrew Cunningham, Jan 27, 2014 http://arstechnica.com/apple/2014/01/apple-breaks-revenue-iphone-and-ipad-records-in-q1-of-2014/
 We talk about all these revenue streams in greater detail in Part I and how to clear songs for use in records and audiovisual works in Part II.
 http://www.pollstar.com/news_article.aspx?ID=808976 1/10/14
 “What The Top Djs Are Paid Per Gig” by Ray Waddell, Billboard, 7/5/14 p. 47. Those DJs are: Deadmau5, Calvin Harris, Tiesto, Skrillex, David Guette, Avicii, Steve Aoki, Pretty Lights, Kaskade, Steve Angello, Martin Garrix, Bassnectar, Hardwell, Nicky Romero, Zedd, Disclosure, Afrojack, Paul Van Dyke, Diplo and Eric Prydz.
 Jennifer Lopez lands $17.5m deal to return to American Idol” by Heidi Parker, August 30, 2013,
See e.g., “ How Taylor Swift’s ‘Red’ Is Getting A Boost From Branding Mega-Deals” by Andrew Hampp , October 22, 2012
 Musicians’ Income Can Still Be Huge — With The Right Brand, Team by Joe Satran, 07/31/2012, www.huffingtonpost.com/2012/07/30/musicians-income_n_1719908.html
 “Beyoncé Knowles Tops The FORBES Celebrity 100 List” by Dorothy Pomerantz, Forbes 6/30/14. http://www.forbes.com/sites/dorothypomerantz/2014/06/30/beyonce-knowles-tops-the-forbes-celebrity-100-list/
 “Meet The New Boss, Worse Than The Old Boss? “April 15, 2012
 “Are Musicians Making More or Less Money?” http://money.futureofmusic.org/are-musicians-making-more-or-less-money/
“10 million digital music tracks left unsold” by, December 22, 2008. http://www.techradar.com/us/news/world-of-tech/broadband/web/internet/10-million-digital-music-tracks-left-unsold-496820