Making Money from your Music

A lot of people want to get into music, but very few understand how they'll be paid once they do. Knowing more about the money means you'll be better armed to take on the business on your own terms.

Sales income

This is probably what most people think being a successful musician is all about: making money from selling records. In practice though, this often represents a relatively small percentage of income for musicians.

When you're starting out, it's often more important to think of record sales in terms of promotion rather than income. On a small deal, there isn't normally a great deal of money knocking around. What's actually more useful is the opportunities that having a release on a label with national distribution can offer you.
When you come to sign a bigger deal, it's usual to take some of your sales income as advances.
Once you do start selling stuff, your label will claim these advances back.

Paying off your advances – or 'recouping' as people call it – can have implications that go far beyond money.

If an act is running at a loss from their first album, the label is likely to want to keep a tight rein on things when it's time to record the next one. If it's a big loss then it's unlikely that there will even be a second album. The act will be 'released from their contract' (or in less polite terms: dropped).

If the act recoups, the label will have a lot more confidence in them and will give them a greater degree of creative freedom to make the next record.

Advances have to go a long way. It's not unusual for a large label to advance an act over £100,000 when they sign a deal. But there will be a lot of takers for that money.
Manager will take 20% for all the work they did getting the act signed. The taxman will want a slice,  legal fees can be £10,000 plus.
Other expenses such as new instruments. Finally, when all that stuff's been deducted the musicians can split what's left to live off.

The money will need to last because any more income from the label will take a while to come through. Obviously, there won't be anything until the record is released, but then it takes time for the money to filter through from the shops to the label and finally to the musicians themselves.

Licensing

Another source of income from records is licensing. This is a catch-all term for any situation where music is used commercially in some way other than simple album and CD sales on your own label.

Falls into two categories:

    sales of songs as part of a compilation or mix CD
    the use of music in TV, films or adverts.

The first of these is a bit of a movable feast. If you're signed to a small dance label and a DJ uses one of your tracks on a mix CD, it can massively boost your income as a musician. It's also great exposure for your act and can launch your career internationally.
When it comes to TV, films and adverts it's probably true that the money is less important than the exposure. Although the fees for the use of music in an advert particularly can be pretty large, they pale into nothing compared to the money they can generate in the long term by boosting your sales and putting your name on the map as an artist.
A demo or white label you've been selling yourselves gets picked up and released on a profit split basis. Or if you've put out a successful single on a small label then a bigger label may step in and buy you out.
Publishing

Publishing is where the real money in the music business lies. Whereas record labels deal with recordings, music publishers deal with songs.

Songwriters are due for money whenever their songs are used commercially. That does include label stuff like selling CDs and MP3s, but it also includes other uses of music.

For example, when you buy a ringtone you're not buying a recording as such but you are buying a bit of someone's song. And that means that the person who wrote the song is entitled to a slice of the income.

Publishing also covers public performance of songs, which means everything from musicians playing the song live to playing records on the radio and TV, and even things like pub jukeboxes and gym classes.

Publishing is a lower-risk business than running a label.

A publisher will normally pay their writers an advance which, although it may be tens of thousands of pounds, is a lot less than the label's outlay. That's pretty much it until the records start selling and getting played on the radio, when they collect the income. So there's much less at stake for a publisher.

Mechanical royalties, or 'mechanicals', are one source of publishing income. They're the royalties due for copies of songs made 'for reproduction my mechanical means'.

This is an old-fashioned term from the days of wind-up gramophones. These days 'mechanical means' includes CDs, MP3s, mobile phone ringtones, even things like alarm clocks and cuddly toys that play tunes.

Performance royalties

The other main source of publishing income is through public performance. Everyone who plays any kind of music in a public place, from a hairdressing salon to a national radio station, must buy a license in order to do so. The fees from these licenses are collected up and distributed to the writers of music.

You don't need to be signed or have a publishing deal to collect royalties. Even a demo which gets airplay generates a performance royalty for its writers.

As an example of how lucrative this can be, BBC Radio 1's license fee works out at about £18 per minute of music they play - or nearly £60 for a three-minute record.

When you think that a tune on Radio 1's 'A' list can get anything up to 40 plays a week for five weeks or so, that's a fair old wedge.  if you wrote the tune.

Live music venues must also report the music that's played in them. So if you're a writing member of your band, you may well make royalties from playing your own songs on tour. Performance royalties also apply to DJs playing records in clubs.

Other income streams

It's unusual to get high fees for appearing on a TV programme or radio show most don't pay anything at all. It's a mutual thing – the producers get content for their programme and you get a way of promoting your record.

Touring is not a money-spinner. Audiences these days expect great sound and sophisticated light-shows. All that equipment costs to hire. And roadies are highly paid technicians. Add the costs of hotels, air fares, shipping costs, health & safety insurance, and you could never charge enough on the door to have any money left to keep for yourself. Most tours aim to break even, and many lose money.

There is a related area that is a definite money spinner for acts: merchandising. The sales of t-shirts, hoodies, wrist-bands and posters can be a healthy source of income but it is harder than it used to be.