Every musical artist dreams of reaching the heights of iconic bands like AC/DC, The Rolling Stones and The Beatles, but this can rarely be sustained on music alone.
In order to make money in the music industry, artists must diversify their income. The president of the International Music Business Research Association, Dr Guy Morrow said there are five key income stream groups for artists.
These revenue streams are recorded music, live performances, income, merchandise, song publishing and sponsorship. The key reason Morrow believes artists need to diversify their income for sustainability.
“Having a diverse way of looking at revenue across a music artist career will quite often change which of these income stream groups is really meaningful to them at a particular point in an artist's career,” he tells Azzet.
While the music industry has changed, Morrow says there is plenty to learn from the past and bring to the present.
What brings in the most revenue?
Morrow says revenue streams for artists have changed over time.
This is partially due to talent managers' changing role. Morrow says in the 90s through to the 2000s they tended to have a bigger hand in artists' deals but now artists gravitate towards more independent models.
“The artist and manager would leverage that investment into selling tickets and T-shirts, basically. So the lion's share of their revenue would come from touring and from selling merchandise at shows and the like,” he says.
“Nowadays, there is a trend towards independence, so artists being more independent and being able to do label services, deals [that] give them a more generous percentage of recorded revenue stemming from recorded music.”
However, a main staple in how artists make money is through live shows as artists make 80% of their profits through this stream according to Morrow.
This is not only through ticket sales but also through merchandise sales at the venue.
“After the performance, fans will purchase merchandise that symbolises this specialness in attempts to capture the sort of posterity and extraordinary, the extraordinary, ephemeral moment that they've just experienced,” Morrow said.
This can be seen in The Era’s Tour where Amanda White, an accounting PhD from UTS business school estimated Taylor Swift would receive A$22.3 million from Sydney alone in merchandise sales. It was estimated that Swift would make US$200 million from merchandise sales in the first year of the tour alone in 2023.
This surpasses the US$1 million Travis Scott made in 2022 from merchandise sales.
While tours can lead to massive merchandise sales, there are three other fundamental rights to merchandising, according to Morrow. These are retail, e-commerce and brand deals.
Morrow said today, only a few select artists gravitate towards retail success.
“There's a tiny percentage of music, music artists and bands who would sell into retail stores like Kmart,” he said.
This is due to a changing retail landscape, with merchandise sales moving online.
“Thirty years ago, consumers could walk into a local record store, listen to new music, flip through the vinyl racks, peruse the range of T-shirts and posters and buy a ticket at the counter,” he said.
However, he said the e-commerce market has made the connection between buying tickets, merchandise and streaming music more complicated.
“I challenge anybody to buy a ticket and T-shirt on Taylor Swift’s website and have a seamless experience, and that will funnel you into different websites,” he said.
“It's kind of really interesting in the sense that the E-commerce situation in the music business has replicated the fragmentation of licensing of music, and that that's actually a problem in terms of how much money is left on the table.”
The music merchandise industry is also expected to grow to US$16.3 billion by 2030, according to MIDiA research.
Branding is key
When it comes to selling merchandise, Morrow argues that branding is the reason for so many iconic bands' longevity.
He said people are drawn towards the branding of the Rolling Stones, Metallica or AC/DC regardless of whether they could name songs by the band.
“It's just this interesting brand to wear and that's what's really fascinating, the extent to which it has been able to have - all the Rolling Stones, lips logo - been able to transcend music and become a consumer brand,” Morrow said.
Morrow said Radiohead has taken this strategy in stride, maintaining a consistent image through working with artist Stanley Donwood.
“The band's brand is derivative of this amazing visual art that surrounds the music, and it's really consistent in terms of that visual identity,” Morrow said.
While there are bands like the Beatles who gained notoriety through constantly changing their image, from his experience as a band manager Morrow said this is difficult to emulate.
Licensing
Licensing can benefit both a brand and an artist, according to CEO and founder of It’s Friday, Pete Bosilkovski.
“It’s proven in advertising that music does work and can have an 8% boost in effectiveness and driving attention,” he said.
Licensing costs in brand deals often differ between how many people see the ad and how big the artist is.
For example, if an advertisement is geotagged to Australia, the amount of money an artist gets drops.
“We are a small audience, we only have around 27 million, so compared to if it was, you know, in Europe or the United States, it’s limited exposure,” he said.
A successful campaign Bosilkovski ran with an Australian artist was Vodafone ads with the Australian band The Jets.
“The use of their song and our advertising created a global campaign for Vodafone Live, and I think it catapulted their career and popularity,” Bosilkovski said.
