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Digital Harmony Australia Pty Ltd
PO Box 789
Katoomba NSW 2780
Australia.

Phone: 0412 252588

Copyright © 2014 Digital Harmony. All rights reserved.

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Making Money in the Music Business

This is how to make money out of the Australian music business

HOW MUCH DO YOU NEED?

Where is the big money in the Australian Music Industry?  Many people have had success, got their gold record and sit there wondering – Why am I still broke?

The average wage for an adult in Australia is $70,000 per annum.  If you are in a 5 piece band with a manager and agent how much are you going to need just to meet wages?  Musicians are usually shocked when they find out just how much they need from a band to even pay an average wage to themselves, let alone get rich.

$70,000

per member per annum

$350,000

Annual wage bill for a 5 piece band

$70,000

for the Manager

$420,000

Annual wages bill for 5 piece band plus manager

$8,400

Weekly income required by band.

Once you add equipment expenses, rehearsal studios, transport costs and some recording costs you need to make about $10,000 per week or about $500,000 per annum just to pay each person the average wage.

The Rivers of Gold for Australian musicians:

Income from live performances

Income from an independent distribution deal for your CD and iTunes etc.

Income from having your song used by film, television and advertising.

Merchandise sales - T-shirts, caps, cup holders, mugs etc.

Corporate gigs

Endorsement and sponsorship deals.

The largest of these

income streams is usually the live performance income.

MONEY FROM TOURING

Who pays $15,000 to $60,000 per gig?

In Australia there are a lot of larger hotels, RSL & Leagues Clubs that have auditoriums that fit between 60 and 1,200 people.  Depending on your act, it is common to pay between $25 and $50 per ticket.  Multiply these together and you get a gross of between $15,000 and $60,000 per gig.

Now do a tour of clubs and larger hotels starting in north Queensland and work your way down the East Coast via Brisbane, Newcastle, Sydney, Wollongong, Canberra, Albury, Melbourne to Adelaide with several shows in Sydney and Melbourne.  It is possible to do 35 venues in a 3 month tour. 

If you average $35,000 per gig, for 35 shows that is a gross of $1,225,000.  About half of this will go in costs.  The agent will take 10% off the top, your manager will get about 20% after production costs, Lights and PA can be $1,000 per gig or more but many auditoriums have a good PA.  Your manager can sell the tickets via Moshtix, Ticketek, Ticketmaster or others at a cost per ticket.  Ticketek will also release the money to you on the first business day after the show but their service can be quite expensive with total charges that can be in the order of $11 per ticket.

Want more money?  Most bands have 2 or 3 core members.  These can be the partners with hired support musicians.  If you have $17,500 after costs per gig and split this 5 ways with partners then it is $3,500 each.  But if you have 2 partners supported by 3 good quality, paid session players at $600 per gig.  $17,500 less 3 times $600 is $15,700 split between 2 partners or $7,850 each. 

The thing about this last scenario is those paid session players are probably much better musicians than guys who were willing to start out with you playing small gigs for free.

Make sure your show has a full enough sound to scale into a room big enough for 600 to 1,200 people.  An intimate acoustic act may be completely lost in the room.  This is why rock bands can play stadium sized shows so successfully but it is certainly not the only style that can do it.

Who is doing this?  Just look in the street press for acts advertising a tour.  Your local street press will probably advertise the shows in your state.  Have a look at the band’s web site where they have advertised the full national tour.  You can work out from the street press: 

  • What venues large acts can play in,

  • What the acts can charge for tickets and

  • What acts are really making money.

I know people who think that touring RSL & Leagues Clubs is where old acts go to die.  This is so wrong, it is where established acts go to make real money year after year, sometimes for decades.

MONEY FROM CD SALES AND iTunes.

If you have a record deal with a major label record company don't expect to make much more than the original advance for making the record.  If you do get something more it is a bonus.  So why get a record deal?  They should fund a decent producer and studio to make a record that radio will consider playing.  They have access to people in radio and television that it is difficult for you to get access to.  This in turn will give you the fame to get large numbers of people to your gigs where you will make money.

>People like Sneaky Sounds System, John Butler and Gotye started an independent artists but once you pass a certain point the economies of scale of the corporate machine make it sensible to go in that direction.  Generally musicians should do musician things like writing great songs, recording and performing.  Leave the business things to the business people.  Have a good manager and lawyer to make sure you don't get ripped off.

If you have an independent distribution deal for physical product:

Sales of 35,000 CD’s in Australia will earn you a Gold Record.  There are about 100 of these issued per year with most going to foreign acts, mostly from the USA.  Have a look at the ARIA awards chards on their web site.  http://www.ariacharts.com.au/   An alarmingly small number go to emerging Australian acts, especially after you take out the releases from the various television talent quest shows.  Also, many styles of music are rarely represented in the Gold album awards eg. jazz, heavy metal etc.

In a typical distribution deal for a CD that retails for $24 there are Mechanicals of 8.8% or $1.35 which go to the songwriter plus $10.30 for the owner of the recording less the cost of manufacturing about $1 per CD in quantity.  Net return per CD sold:  $10.65.

So, if you can achieve what Sneaky Sound System did, and sell enough CD's for a Gold album they $10.65 x 35,000 CD's = $372,750 gross return for your band.

If you can sell enough CD's for a platinum record (70,000 CD's in Australia) then it is:  $10.65 x 70,000 CD's = $745,500.

iTunes.  If a single sells for A$1.69, Apple keeps 30% paying $1.18 to your digital distributor; they typically take 30% paying about 83c per single sold.  If you sell 35,000 singles for a gold record that gives you about $29,000.  It looks much better if you are selling albums.  With A$15 per album, Apple keeps 30% paying $10.70 to your digital distributor; they typically take 30% paying you about $7.35 per album sold.  If you sell 35,000 albums for a gold record that gives you about $257,250.

Having given you these numbers it is quite rare for an independent Australian act to sell this quantity of albums but it can be done with a great act and a great manager.

For a deal with a major label record company expect to make almost nothing from your CD sales and if you do get something it is a bonus.  The reason why you would go with a record company is for their marketing and reach to the media industry.

SALE OF MERCHANDISE

At your gigs you can sell T-shirts, caps, mugs, cup holders etc. with your band's logos photos, album artwork etc. on them.  People pay premium prices for these products.  AC/DC was selling T-shirts at $50 each at their Australian gigs.  Well known acts can license their artwork to manufactures to sell their T-shirts in shops independent of the gigs.

CORPORATE GIGS

I heard a story that Guy Sebastian, who won Australian Idol in 2003, made over a million dollars in following months doing corporate gigs.  These gigs consisted of:  Turn up at a high end function venue and have dinner with the business people, meet and greet staff, do a 20 minute performance to a backing track on a CD, sign autographs, have photographs taken with the staff and leave.  I am told he was paid $20,000 for the 4 hours work. 

Most of these corporate parties are organized by the executive team's assistants.  These are often unmarried, career women in their 30's and 40's who watch things like Australian Idol and many of them would have been fans of Guy Sebastian.  When the Executive Assistants rang an agent looking for acts and were told they could have Guy for $20,000 they would have gone to the executive team and got approval for it.  The company would have seen this as morale building and making a special night the employees would remember.  It was probably good value for them.

Who are the corporates?  They are not the local panel beaters or builders.  Mostly they are the head offices of the top 200 largest companies listed on the Australian Securities Exchange. 

I have know a number of specialty acts that are flown around the world to do performances at corporate events.  I can't give away too many details as to what they do without disclosing confidential information.  Find the right niche and a network of agents that handle this kind of business and you can make $10,000 a show plus travel and accommodation.

ENDORSEMENTS AND SPONSORSHIP DEALS.

Once you have achieved star level of success and you are a household name you can make hundreds of thousands or even millions of dollars out of sponsorship and endorsement deals.  Your management team should be talking to advertising agencies about these.

INCOME FROM FILM, TELEVISION AND ADVERTISING.

This can be very lucrative but the licensing arrangements are complex and beyond the scope of my experience.  The negotiations for this are usually outside the musician's world being done by your manager, publishing company and lawyers.

 

I value your feedback.  Please send me your comments to: 

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