• The music industry has changed drastically, with artists now having more control over their careers and revenue streams beyond deals with record labels. 
• Artists today need to view themselves as enterprises with diverse income opportunities including live shows, merchandising, licensing deals, streaming royalties, content creation, and catalog sales. 
• To fully capitalize on these opportunities, artists must surround themselves with a team of expert advisors to help navigate all the financial, accounting, and business intricacies involved.

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The journey to success in the music industry is no longer a straight line. While the path to earning substantial revenue previously only had one route — through a major label — those days are gone. The digital age has ushered in a new era, where artists have many direct pathways to their fans and an array of new revenue opportunities. 

But with new opportunities comes new challenges. Today’s artists have to figure out how to navigate, manage, and optimize numerous complex revenue streams with little guidance. This is why having a trusted team of advisors is essential to ensure you are getting the most from your artistic output — both in terms of building your fan base and your financial future. 

Here’s how working with a top advisor can help you transform from artist to enterprise, adept at building diverse income streams and overcoming any associated financial hurdles.

1. Live Performances: Looking Beyond the Spotlight

Live performances and touring remain pivotal for musicians to generate income. However, the financial success of a tour is not just about what you’re getting paid; it’s also about what you’re spending. That’s why meticulous planning is essential. From production costs to transportation, a trusted advisor ensures every dollar is accounted for before signing any contracts. Artists can also leverage performances for additional revenue through avenues like live streaming, behind-the-scenes access, or even concert films (i.e., Taylor Swift’s Eras Tour film). Advisors can help structure those deals to optimize the highest take-home payout.

2. Merchandising: Capitalizing on Brand Appeal

Merchandising offers a lucrative avenue to capitalize on an artist’s brand and deepen fan connections. Advisors can guide artists through various merchandising paths — from direct sales to brand collaborations to affiliations — to help them determine the best financial option. While direct sales may seem the most appealing on paper (where you might see numbers like “90% profit”), the associated responsibilities, such as sales tax management and warehousing, shipping, and staffing considerations, need careful evaluation. A seasoned advisor helps strike the right balance between profit and practicality.

3. Licensing and Sponsorships: Negotiating the Right Deal

Licensing and sponsorships have become integral to the music industry, with brands using music to sell everything from cars and sneakers to movies and fast food. Advisors play a crucial role in evaluating and negotiating these deals — ensuring you are getting fairly compensated for your name and image, and the opportunity aligns with your brand and goals. The evolving licensing landscape—with artists now able to self-publish and go through Spotify, Apple, and other platforms—has made getting licensing deals done easier. One independent artist we work with got a six-figure deal when a network went to TuneCore looking for music to use in a TV show.

4. Streaming Revenue: Making the Most of Royalties

Music streaming platforms dominate the music consumption landscape today. While streaming royalties may be lower than what an artist receives from radio spins, terrestrial radio cannot touch the real-time data streaming provides (providing demographics of who is listening to your music, where they are listening, etc.). When it comes to managing streaming royalties, it pays to have a trusted advisor to track your royalties across all platforms — analyzing streaming data and royalty statements to ensure proper payment and identifying any discrepancies. Advisors also can strategize royalty planning, including estimated tax payments on royalties to avoid penalties, and help negotiate more favorable distribution deals with streaming platforms, exploring creative arrangements and exclusive partnerships.

5. Creator Content: Creating a Consistent Revenue Driver

In today’s creator economy, valued at over $100 billion, creating content is a powerful revenue stream. Many music artists are augmenting their income to the tune of six-to-nine figures a year by creating content for TikTok, YouTube, podcasts, NFTs, as well as a variety of other media and platforms. Advisors can guide you in navigating the challenges that arise from managing online content revenue — which often trickles, and then floods in, from multiple sources, and can quickly become unwieldy without a system in place to manage it. Proper financial management, including tax planning and budgeting, becomes crucial as content creation becomes a more prominent income source.

6. Catalogue Monetization: Structuring Your Ideal Sale

High-profile artists like Dr. Dre and Justin Bieber have recently sold their catalogue rights for large chunks of change. Catalogue monetization is the one time you are in complete control of your asset; you can carve out whatever deal you want (10-year, 20-year, 50%, 80%, etc.). Advisors guide artists in choosing the right partners, structuring deals, and determining the extent of the catalogue to sell. Your advisor will also help you weigh the tax considerations of collecting royalties versus selling all or some of your catalogue (royalties are taxed at 37%, while catalogue sales are taxed at 20%), and set up your sale in the most tax-efficient manner possible (for example, installment sale vs share sale). This one-time opportunity demands careful deliberation, and having the right team advising on nuances is paramount.

Building the Team Around Your Team

Moving from artist to enterprise means building a team to help you succeed. Your advisors are your team around your team. Much like a corporation brings in consultants, having seasoned business advisors available when you need them will help you make informed decisions to grow your brand and secure your financial future.  

How We Can Help:

Our Entertainment, Sports, and Media (ESM) practice helps music artists at all stages, from rising stars to legends, offering financial, tax, and business management services to help you build your brand and maximize opportunities. Contact our ESM team today to learn how we can help take your music career to the next level.

• Contract negotiations during the planning phase are essential to securing appropriate financial outcomes
• Think carefully about production expenses, which can cut into potential profits
• Plan your travel route efficiently to cut down on transportation overhead
• Maximize the various opportunities to monetize content and merchandise

Our clients who are musical artists are excited to get back on the road now that COVID-19 event restrictions are largely lifted. Their passion for music, their connection with the fans, the irreplaceable energy of commanding a big stage in a packed arena are driving forces, but on the practical side, so is the revenue.

While music venues are open for business, the impact of COVID-19 can still be felt in conditions and requirements around events that can have a financial impact. In many instances, artists may be willing to jump at contract offers that could limit the financial benefits they could have otherwise realized.

As the Entertainment, Sports and Media Industry Leader, I have been on your side of the desk. I am not only a CPA, but for 15 years I was manager of a certified Diamond and 11-times Platinum, six-time Grammy Award winning hip-hop group. I have managed several other culture-defining artists, as well as partnered with artists, and their agents, managers, tour managers, lawyers, labels, crews, and families to help them secure favorable contracts for innumerable tours.

These are four things I most often advise our clients to keep in mind to maximize their profits when planning a tour.

#1 Be smart with your contract

Decide your rate per show ONLY after thinking through as many factors as you can. Without guidance, artists can get caught up in the excitement of tour planning, and get offered a certain amount per show that may not cover all of the overhead. We partner with artists and management, and layout typical hard costs and considerations, so you know what it will take to make the tour happen, and still get the kind of monetary return you are looking for. Factors such as set design, shipping and transportation, set construction, crew transportation, insurance, personnel, all of these elements need to be taken into account.

Knowledge is power in negotiations. Our process is to arm our clients with first-hand knowledge of the touring process and insights we have gained through the countless negotiations we’ve done on behalf of other artists.

#2 Think through your production expenses

The scope of the show and the set design has a direct impact on the profitability of your tour. The creative vision needs to be balanced with actual hard costs. The size of the set and the scale of the show will directly affect the equipment needed for set transport, the number of people needed to set up the stage, the number of dancers, tour managers, a band, audio engineers, lighting engineers, the required production staffing, security teams, the number of trucks, busses, etc. Additionally, for multi-city tours, budgets to transport and house the sets along the route also need to be allocated.

We work with our clients to provide an informed understanding of upfront planning so that you see all the factors and can identify areas to streamline. One of our best practice solutions is to hire multi-discipline specialists who can fulfill several jobs. This saves money on flights, hotels, per diems, and salaries.

Taxes and payroll are a factor to keep in mind, as are passports for all staff members if you are planning to include an international leg of your tour. There may additional fees that are crucial to budgeting, related to visas/passport fees and taxes and tariffs for each city, state, and country. We can provide Tour Accountant Services to manage the ins and outs of these details so you and your Tour Management Team can focus on what you do best.

#3 Map out your transportation

Managing tour transportation is critical for success and maximizing your profits. There are a lot of moving parts that require consideration. Before announcing tour dates and locations, focus on your tour route. For example, consider where you are located. If you’re on the east coast, it might make more sense to start there, work your way down, take a break, and then fly directly to the west coast, where it’ll be the most profitable. What about where your set is being built? If it is in Los Angeles, for instance, it will be far easier and cheaper to start there so you won’t have to pay to fly it all out initially. The size of your set and show will impact the number of trucks and busses, and/or air transportation elements that will need to be factored in.

Ultimately, you will need to determine the most cost-effective route for you. Start by locking in gig dates that you know are inflexible, like large music festivals, and work around them. Choosing an efficient route will not only ensure you’re seeing as many of your fans as you can, but you’ll also be doing so in a way that your tour will yield the best most profitable returns.

Transportation can have huge cost implications. Planned flights are much more efficient than last minute travel. Commercial flights are more affordable than private jets. Tour busses can be rented short term or leased long term and wrapped for marketing impact for a cohesive branding look. The more you plan ahead, the better you can manage your costs and the more profits you can retain from your tour.

#4 Your tour can have multiple lives

Every step of your tour: the struggles, the victories, the comic moments, the behind-the-scenes (BTS) life, your hopes, your thoughts on what it will mean to be back with your fans, and of course every on-stage performance … all of it is content with monetary value.

The life you will be living on tour is one your fans only dream of and you can bring them into that space. From potential specials that can be sold to streaming services like Netflix, to exclusive BTS content that can be on your website or packaged as part of marketing partnerships with companies who could potentially offer footage as video-on-demand, mobile content, and social media content.

Simultaneous streaming of concerts either in select cities on a certain date, in movie theaters, in the metaverse (i.e., Decentraland) or via Pay Per View, are areas that can be leveraged for profit.

All of the footage can also be used in long and short form to build out your own band’s social media presence as well.

Onsite and online Merchandise sales are another revenue channel to recognize for potential profits. At $60-70 per sweatshirt, $30 a tee shirt and $20 a water bottle sold onsite or online, profits from these items can quickly add up.

With guidance from our team, you gain access to our broad eco-system of partners to help you realize these additional revenue streams while you get to focus on performing.

How we can help plan and manage a profitable tour

You’re sharing your passion on a global stage — going on tour should be exciting. Not to mention, touring is now one of the best ways you can bring in significant income, given you know how to properly plan ahead. Our Entertainment, Sports and Media team has extensive experience planning large-scale tours, managing expenses, optimizing revenue, and delivering the financial results you expect. Before going on the road again, reach out to our team for a consultation to avoid common issues that can undermine profitability.  

About the author 

Tony Smalls is the leader of our Entertainment, Sports, and Media (ESM) practice and helps culture-defining entertainers, athletes, and other high-net-worth individuals build and protect their wealth while maximizing growth opportunities in today’s fast-evolving media marketplace. He specializes in accounting, finance, tax strategy, financial planning, and analysis, financial reporting, and contract/deal negotiations, working heavily on prospective investments like live music tours.