“All they need is a top Billboard hit and they’ve made it!” We’ve all heard that, right? Or maybe it’s “They’ve had hundreds of thousands of streams on Spotify, so they must be living the good life!” No. Not necessarily. So, where do musicians make most of their money?
Streaming music only helps in the promotion of a brand. The bulk of revenue made by musicians comes from touring, selling merchandise, side hustles & partnerships, as well as licensing their music for things like television, movies, or video games.
Sure, the number of listens or streams makes a difference. It proves that the music has a following and it gets that music on more and more curated playlists, to be streamed even more. It also makes fans.
And the more fans a musician or band has, the more merchandise and tickets they sell. Those are the money makers. Let’s look at where the money actually comes from, shall we?
Table of Contents
Royalties, Song Purchasing, & Streaming, Oh my!
First things first, radio didn’t even pay anyone other than songwriters and producers until 2012. Think about that. Quite a load to swallow, right?
In June 2012, iHeart Media announced that it would become the first U.S. radio group to partner with record labels to pay performance royalties directly to labels and musicians (in addition to songwriters and producers).
The royalties are paid via revenue-sharing for advertising across platforms (including digital), rather than a flat payment each time a song is played. Since they are the owners of most of the radio stations in the United States and Canada, this was significant.
This can be complicated even more when you consider that there is also a publisher share to each contract (usually 50% of the profit made by the songwriter) and that if the songwriter/musician is independent, they won’t even see that half of their earned royalties!
It’s so difficult to wrap your head around, isn’t it? And it’s not the topic of this article, so I’ll set that aside for another time. So let’s get into streaming.
“Many artists think that they will make more money when signed to a label, and I have to educate them that this is not necessarily the case and explain to them that they have to pay back all the costs the label expends on their behalf.”Erin M. Jacobson, a music industry lawyer based in Beverly Hills, whose work involves negotiating record contracts on behalf of artists ranging from up-and-coming artists to Grammy-winning musicians.
To even make money on radio or on streaming platforms, artists need to be sure their songs are registered with a PRO (Performance Rights Organization) like ASCAP, BMI, or SESAC that can collect money on their behalf whenever songs are placed on the radio or through streaming services.
And there are two separate types of copyright to keep in mind here. The sound recording copyright is split between artists and record labels, while the composition copyright is split between whatever songwriters and publishers are involved.
Most songs you hear on streaming services or on the radio have both of these streams of royalty income.
Let’s focus on streaming platforms. Why? Because most indie artists don’t get their songs on mainstream commercial radio. And even if they do, their income still comes mostly from other sources.
After all of that work, what do the musicians make when you stream their song? Well, that depends on whether the listeners have a premium account or how many advertisements happen and if you have a deal through a record label with the streaming service, or not… so … many… factors!
But let’s simplify it to just a normal average, shall we? Let’s take Spotify, for instance. Why? As of 2020, it holds about a third of the streaming market share. It’s doing good.
But the platform pays on average $0.004 per playback. Thus, it’s necessary to reach 250 listeners to earn at least a dollar. Royalty rates are even affected by whether a listener has paid for their Premium service or not. Only 25% of users are Premium payers.
Also, the money from fans streaming goes into a giant pool that’s paid out to artists based on their share of total streams. That model mostly benefits mega-stars. Think of it like this, FreeYourMusic.com explained it well –
“Of all the money Spotify receives, 70 percent goes to the right holders. That money also comes from your subscription. How does that work? All the money is split across all streams. But the system also concerns the share of one artist within all those streams. So let’s say Drake is responsible for five percent of all streams, then five percent of all money has to go to Drake. Of course, that’s okay if you enjoy listening to Drake. But what if you never do? Then it’s actually a bit weird since your money goes to Drake while you never listen to his music. That’s why some artists think that you should only pay for the artists you actually stream. And not that everything is lumped together and then distributed.”
Also, keep in mind that all the money does not go to the artists. They normally have to divide the money: bandmates, songwriters, producers, collaborators, and if you have them, a record label or a manager needs to earn some profits. So then there’s not much left.
Soundcloud changed this in April of 2021 with a concept they call Fan Powered Royalties. In a fan-based streaming model, you get paid based on your dedicated fans’ actual listening habits. The more fans listen on SoundCloud, and listen to your music, the more you get paid. You are actually getting your deserved royalties. Other artists do not get a cut.
Independent artists who monetize directly with SoundCloud through several of their specific subscription services are eligible for fan-powered royalties. Royalties are paid based on what portion of a fan’s time they listen to each artist, how many advertisements the fan has consumed, and whether the fan has a paying subscription to SoundCloud Go+.
So it’s not just cut and dry, either.
They’re more of a promotional tool but listeners can use it as a portal through which they can purchase downloads, merch, and physical music. Bandcamp also offers the availability to purchase music and add more money to the purchases as fans see fit. Almost like a “tipping” system.
However, Bandcamp keeps a 10% – 15% fee + a 4% – 6% processing fee from each transaction. This is how they stay in business. So, the artists make approximately 80% – 85% of the amount paid by the consumer on that site. They make nothing from just streaming, the fan has to make a purchase for the musicians to get paid.
“…copyright law is supposed to ensure that creators get paid for their work, which enables them to continue to create and disseminate that creativity – benefiting society as a whole. While the music industry and streaming services are being very well rewarded for their dissemination of music, copyright is failing artists and songwriters.”Hayleigh Bosher -Senior Lecturer in Intellectual Property Law, Brunel University London for The Conversation / December 2020
Only about 10% of all the money made through the streaming and playing of songs gets into the pockets of the average music artist. Why? Well, besides what I’ve stated above there are so many middlemen in the music industry that take a cut first. Why do you think so many of our Untapped Sound artists have decided to remain independent?
And don’t get me started on what the industry calls the “black box of royalties” in the streaming era. It’s that unpaid money that might never make its way to artists because of faulty metadata or bad communication between electronic services involved in reporting the proper numbers. According to Rolling Stone, the estimated worth that’s been lost this way is in the billions.
The point is, this is not the moneymaker that helps musical artists keep the bills paid.
The bulk of a musician’s money comes from live performances and touring. That’s why 2020 and the pandemic limitations have taken such a harsh toll on the income of most musicians.
I think I couldn’t put it better than Rolling Stone on this one –
“As listeners become inundated with cheap access to music provided by streaming services, dedicated music fans crave more intimate experiences with their favorite artists. That’s why tours are getting grander and music festivals are drawing ridiculous crowds even if their lineups are all the same. It’s also why concert and ticket companies like Live Nation are growing like crazy.”
Yes! A lot of the time, we fans crave something more. Not to mention, just the experience of going to a concert or a festival is something that stays in our memories for the long haul. Sure, we could listen to a perfect version of our favorite song on a streaming service, but we want to experience the love reflected.
At a concert, you can stand singing that song while moving in perfect rhythm to it live with thousands of other people who love the band just as much as you do. It’s the experience that drives sold-out venues and furthermore – the purchase of merchandise.
“U2, which made $54.4 million and was the highest-paid musical act of the year in 2017, according to Billboard’s annual Money Makers report. Of their total earnings, about 95%, or $52 million, came from touring, while less than 4% came from streaming and album sales. Garth Brooks (who came in second on the list), owed about 89% of his earnings to touring, while Metallica (ranked third) raked in 71% of their earnings in the same way.”Devon Delfino of Business Insider – 2018
So according to most of the research I did, touring and ticket sales made up for at least 25% – 28% of an artist’s income. Not only that, but from a marketing standpoint, it also boosts merchandise sales.
People love one-of-a-kind merchandise, and when you sell signed merchandise at an event or merchandise that mentions that particular tour, the fans love it all the more.
It’s not just me… but I am “fans”.
Musicians are also getting savvy with their merchandise. Those traditional merch tents at concerts and posters on a website are being joined by a plethora of branded merchandise in digital shops – including sheet music. Artists have their own brands and then partner with other companies to endorse one another.
Merchandise can be sold online through social media or through a website and not just at concerts. Merchandise can be crowdfunded or be given to fans that subscribe to specific specialty forums for the music artists. And that, I believe is my cue to slip into the next topic.
Let’s not forget that NFTs are now a thing and well-known artists are making a mint off of auctioning these off along with incentives such as VIP entry to concert venues.
Side Hustles & Partnerships
Almost all musicians have come out with their own merchandise over the years. That’s the biggest thing to have – your own brand. And of course, you need to sell it. If you do well, you may get lucky enough to partner with other companies to make your merchandise. Look at Beats by Dre.
Some have capitalized off of this even beyond music or fan-based merchandise. As an example, Rihanna’s makeup and lingerie lines were fashion partnerships that paid off in the best way for the singer. The artist just recently strode right into the billionaire club thanks to her SavageXFenty and Fenty Beauty lines along with her music. She actually hasn’t even released a new album or toured since 2016.
Just like athletes vying for sponsorships from large companies, singers can do the same. As a matter of fact, the partnerships made from business to performer can sometimes be extremely lucrative.
Billie Eilish went from wearing bootlegged Gucci and Louis Vitton to being sponsored by the brands. She also signed a contract with Next Models when she was only 16 years old – right when her music was going mainstream. Her unique style of clothing and piecing together styles has made her a young icon that companies want to have their name on.
And keep in mind, brand partnerships have been a thing for musicians all along. I remember radio and television ads from the 80s that featured country music singers and later on pop singers and rappers in them. The musicians endorse a brand and get access to an additional revenue stream while they’re at it.
Also, teaching and mentoring can wind up paying off. Even big names teach people on the side. During the pandemic, we saw a lot of new videos wherein performers taught people live or recorded “how-to” sessions to be played. These kinds of things can keep gig performers going in rough times.
If you have a big enough name, you can make cameo appearances or voice appearances for extra money. There’s even an app for that – Cameo.com. Peter Hollens, a YouTube famous cover and acapella artist charges around $1000 per cameo on the website. Ice Cube, the famous rapper, charges $750. Turnaround time varies, but this is just one more side-hustle for gig performers.
Musicians also like to partner up with one another – collaborations and features help to drive sales and streams and recognition in this industry. They may play as a producer for some other musicians, might be a session artist or a touring musician that helps with other performers.
These kinds of relationships help not only make money but also become a network for the musician. It’s part of that side-hustle world that most artists live in.
Social Media Blitz
Monetization on platforms such as YouTube, Twitch, TikTok, and now OnlyFans is another way that a musician can make ends meet. Not just Patreon, but Only Fans allows for custom channels of communication between music artists and their fans — outside of social media platforms.
Artists are also starting to ask for money from audiences directly — via crowdfunding. In the last year, I saw several artists do this, including Carsie Blanton – to great success.
More groups are releasing dedicated apps or subscription packages for their music or selling bespoke products like artist-curated festivals, signed or specialized vinyl, email subscriptions, as well as limited musical releases.
YouTube is especially lucrative since a lot of people go to the platform specifically to listen to new music and find artists and music videos. Most of our Untapped Sound artists come from a YouTube background. YouTube has an amazing search engine that makes it extremely user-friendly.
When monetized, videos share with the creator the profit from the ads that come tagged onto them. For example, Psy’s “Gangnam Style” reportedly made $2 million from 2 billion YouTube views. Right now, a lot of up artists are finding that they are making more money via YouTube than through streaming or they have YouTube to thank for driving people to purchase their music and stream it.
YouTube’s head of music Lyor Cohen wrote in a blog post that YouTube’s payout rate in the U.S. is as high as $3 per 1000 streams. They get less through YouTube Music streaming services than other streaming services, but their videos can bring in a lot more money if they hit big. The more views, the more ads happen, and the more revenue happens.
Also, if the music is featured in another place on YouTube, the original creator is due all of the income from its use. They can ask that other creators always use their links and there can be a trade out in promotion, or they can claim all earnings made by other creators who use their music. The more subscribers you get on YouTube as an artist, the higher your income gains. And unlike Twitch, a subscription is free.
What does licensing mean? It means that in exchange for the right to use an artist’s music in a project, people and companies give them money. It’s what producers and artists like Tommee Profitt, Sam Tinnesz, Ruelle, and Fleurie have learned a while back. Licensing music to television, movies, and video games is a sure win.
If you go to Sam Tinnesz’s website and click on the TV/FILM listing in the top menu, you will find links to where several of his songs were used.
You’ll find his music in movies, shows, and trailers for such entertainment as The Walking Dead, Spiderman: Homecoming, Allegiant, The Good Doctor, The Hunger Games: Mocking Jay, Bad Samaritan, Riverdale, Quantico, Second Chance, The Rookie, Running Wild with Bear Grylls, The Crossing, Bad Samaritan, All American, a World of Dance, and more.
His music has been heard in pro sports broadcasting like NFL, NBA, NHL, MLB, and UFC, and in national ads for companies such as Toyota, Samsung, Jeep, and Target, and many more. He made good money from each and every licensed use.
“Putting music in film and television and commercials, a.k.a. “synchronization,” involves a license negotiated between content producers and publishers/songwriters. A fee is paid up-front, and royalties are also paid once the particular film or television show has been distributed and broadcast. Sync licenses can be lucrative and, because most filmmakers generally choose music based on their own whims rather than what’s at the top of the charts, also serve as a decent discovery platform for under-the-radar acts.”Amy X. Wang – Rolling Stone 2018
A lot of independent musicians choose this form of income (or they should) because when the licensing for their music is sold in this way, they make more money. They simply need to get their music into a production music library – platforms that curate music with licensing opportunities in mind.
They make your tracks available for licensing to potential customers like ad agencies, YouTubers that need music for their video, videographers, indie filmmakers, music supervisors on TV shows, etc.
I’ve stumbled upon another branch of music that artists have dunked their toes into – especially with the advent of streaming services such as YouTube, Twitch, and TikTok. These creators need background music for some of their video making and therefore search for music they can use. The licensing for this is also had through places like production music libraries.
If you want to know more about this or production libraries, look at my source links below!
As you can see, being a musician rarely means that 100% of the income that you live off of comes from making music. There is a lot of work and effort going into being a creative person of any sort, little on a musician.
There’s an entire article written by Larry Fitzmaurice in 2019 from The Vulture that highlights the fact that most indie artists also have another job while making their music. If you’re interested, take a look.
I really am hoping that there comes a change in the way music streaming profit is paid out. The system as it stands dampens creativity or takes advantage of it. Neither is good.
If there could be a new methodology wherein artists get a better percentage of royalties for every time that their music gets played – without all of the caveats – perhaps they wouldn’t be so reliant on the other forms of income. And if we had another situation in which they absolutely could not tour, they wouldn’t end up turning into actual starving artists.
If you want a deeper dive into Copyright in the UK – Ger Hayleigh Bosher’s book: https://www.e-elgar.com/shop/gbp/copyright-in-the-music-industry-9781839101281.html
Also thanks to Mad Lass Music, who provided the information for this article: https://copywritingcourse.com/how-to-make-money-with-music-licensing/