Are Musicians Making More or Less Money?

Posted on July 2nd, 2012 by Kristin Thomson in What We're Learning. 8 Comments

A recent series of blog posts about musicians, music, and income have found various writers claiming – each with a level of certainty – that musicians are making more money/less money today than in years past.

In the “musicians are making less money” camp are writers who focus on the disruptions in the sound recordings sales market. They not only point to the problems with piracy, but also the shift away from album sales to singles sales, both of which have diverted consumer dollars away from physical CD sales. Simple math suggests that musicians are making less on recorded music sales because an increasing amount of royalty payments are based on sales of 99 cent singles, not $15 albums. Or, even worse, consumers aren’t paying anything at all. We have written extensively about this in our sound recording income report. Bloggers also attribute a loss of musician income to: (a) a drop in record label support; (b) the fact that artists/bands now have to pay for things that labels used to pay for; and (c) increased competition, which has clogged up touring schedules and made it harder to make money on the road.

Hang on, say the bloggers who think “musicians are making more money”. Look at the explosion of income from digital sources. TuneCore’s client base is on track to earn over $175,000,000 in gross revenue from the digital sale of their music.  SoundExchange has paid out over $1 billion in digital royalties over its history. Others talk about an increasing number of artists on tour, a rising number of concerts per year, and successful Kickstarter campaigns. These are impressive achievements, and signals that many of the structures and services that have developed have allowed more and more musicians to participate in the digital marketplace, and that money is flowing through the system.

But none of these measures can tell us whether musicians are making more or less money today than in years past. Why? Two core reasons:

1. Musicians’ income can’t be described by referencing isolated income streams.

Survey data on number of roles in which musicians said they are earning some money

Recent pronouncements about musicians’ earning capacity tend to point to data that supports their specific point of view, whether it’s retail sales, digital sales, digital performance royalties or live shows receipts. These singular income streams are then used as a proxy to talk about the joys or woes of the entire musician population. But each of these measures is insufficient, for two reasons.

First, not all of these income streams are directly received by musicians. For instance, the recipient of income from on-demand streaming income is not the musician, but the record label (or aggregator), who then pays the artist according to their contract/relationship.  How much each musician receives of this income varies according to the relationship.

Second, these singular measures are incomplete. There are over two dozen revenue streams available to US-based musicians based on the contours of copyright law and business practice, and the vast majority of artists rely on an ever-shifting composite of income sources based on their compositions, sound recordings, performances, brand, and their knowledge of their craft. It is insufficient to look at just one revenue stream – whether it’s digital sales, box office totals or retail sales – and declare that this is the state of musicians’ income.

If we truly want to measure musicians’ earning capacity, the only way to do it is to ask them. Directly. And not just about their Spotify payments or their iTunes sales, but about all of their music-related income, from the well-documented (retail sales, digital sales, on-demand streams), to the obscure, to the personally-negotiated (grants, commissions, how much they made doing session work, merchandise sales…the list goes on). Because only they know about the mix of income sources on which they rely.

2. It’s difficult to measure the costs of doing business.

Conversations about musicians’ income almost never distinguish between “gross” income and “net” income.  And there’s a good reason why – it’s really hard to calculate musicians’ net income because of the huge variation in the level of financial responsibility any given artist might have over the costs of doing business. Think about this example:

A rock band is signed to a mid-size indie label. The band pays for the studio time to record their album, but the indie label pays for manufacturing, promotion and distribution. The band goes on tour (without tour support from their label), pockets all of the cash from the shows, but is also responsible for paying for gas, travel, lodging, and any crew salaries.  And their booking agent gets a percentage. The band just breaks even on tour costs, and each band member splits the net profits on the merchandise sales (which the band paid for themselves).  Six months later, they get a royalty check from their label for digital sales/streams of their albums, and the songwriters get a check from their PRO for some performances.

In this one example above, there is a jumble of gross and net income. Sometimes the band is the recipient of money after expenses have been taken out by another party (royalties from their label, or from their PRO). Other times they receive a gross sum, and they are responsible for paying for associated expenses (tour or merchandise money, at least in this hypothetical case). And this is just one example!  Each artist’s situation will be slightly different, and will likely change over time.

Even though it’s difficult to calculate, acknowledging the cost side of musicians’ careers is critical in understanding how much money musicians are making. For example, it’s widely assumed that “musicians make all of their money from touring”. Musicians that perform live are probably grossing the most from this role, but tours cost money, and these are non-scalable expenses; the more shows you play, the more expenses you incur. Indeed, gross numbers can be highly deceptive. Some of last year’s most lucrative tours (U2, Lady Gaga) also shouldered enormous production costs. Many artists struggle to just break even on tour, and the only musicians who make money from touring are the ones who can keep costs under control and stick to a budget.

If we really want to know whether musicians are making more or less money than in years past, we also need to examine costs. Understanding the relationship between income and expenses and calculating a net income over time is really difficult, unless you have access to the complete financial picture from musicians themselves.

Measuring change over time: benchmarking and replication

So, how do we measure whether musicians are making more or less money now than in the past?  We can’t look back, because we have no benchmarking numbers to reference (except in the case of jazz players, where we were able to compare our survey data against the 2003 NCAC report “Changing the Beat”. See report here.) If we want a broad and accurate measure of musicians’ income over time, we have to start the benchmarking process now, and then replicate the work in a few year .

The Artist Revenue Streams was designed to do that. This project collected information from a diverse set of US-based musicians about the ways that they are currently generating income from their compositions, performances, recordings or brand.

The fundamental research question was: what percentage of musicians’ income comes from each possible revenue source? What is the ratio among different sources, whether it be royalties, money from gigs, t-shirt sales, or any of the 42 other meaningful revenue streams that FMC has identified? Has the ratio changed over time and, if so, what are the factors that have conditioned these changes? Finally, are the revenue stream ratios different for artists working in different genres and at different stages of their careers?

Using three methods simultaneously – in-person interviews, financial case studies, and a widely-distributed online survey – we were able to gather specific income-related data from over 5,300 US-based musicians, composers and performers. We were also able to gather years of expense data through the financial audit process, and calculate net income numbers for our five case studies. Though this is just a snapshot of five individual artists, they each provide a rare glimpse into the relationship between income and expenses, and changes over time.

Artists Revenue Streams project was designed as a vital benchmarking effort. The data collected and published to date gives musicians, the media and the music community a comprehensive analysis of how musicians from many different genres are being compensated now.  But the real power is in replication. We hope to repeat this research project in two to five years, asking the same questions of the same broad US musician and composer community.  It is only through replication, and asking the same detailed questions about income and expenses, that we will truly be able to measure whether musicians are earning more or less over time.

We encourage you to learn more about the project and review the findings.


8 responses to “Are Musicians Making More or Less Money?”

  1. […] The question of the day/week/month/year: are musicians making more or less money than they used to […]

  2. […] Thompson, K, Are musicians making more or less money? […]

  3. […] Another article simply notes that there are no hard numbers to reference. Artists have expenses, and therefore there can be a significant discrepancy between gross and net profits. […]

  4. […] But are musicians earning less than before?  Even American based Future of Music’s own research is inconclusive (due to no benchmarks being available) although their case studies  and response to the question make for interesting reads. Their research identified 42 different strands of musicians income, the ultimate portfolio career perhaps! […]

  5. […] But are musicians earning less than before?  Even American based Future of Music’s own research is inconclusive (due to no benchmarks being available) although their case studies  and response to the question make for interesting reads. Their research identified 42 different strands of musicians income, the ultimate portfolio career perhaps! […]

  6. […] recordings and performances, accounts for roughly 80% of take-home pay.) The industry also has several niche growth areas, including startups, video games to music […]