Over the past decade-plus, the old-fashioned way of making money in the music business – selling recorded albums – has dropped off a cliff, splintered into a zillion pieces and been run over by that methylene train from Breaking Bad. Many top stars have switched their focus to selling concert tickets; while this is a prudent plan, generally speaking, it’s getting trickier now that everyone else is on the road with the same idea. But there’s still money out there. Pop stars just have to be creative. “Despite the fact that the traditional ways to make money are challenged – record sales and tickets in particular – there are ways for artists to exploit their talents that didn’t exist 10 years ago,” says Gary Stiffelman, a veteran music- business attorney who has worked with Justin Timberlake, Eminem and Lady Gaga. What ways is he talking about? Here are nine of the best alternate revenue sources for rock stars.
Merch has been a staple in touring artists’ revenue streams for decades, and it’s especially crucial for tween-focused pop stars like OneDirection – their fans’ parents pay for everything. It can also be a major earner for rock veterans from Iron Maiden to the Who. Those distinctive shirts and caps are always classic.
Potential payday: $225,000 per show
Downsides: Not every touring act can make the lofty $10-$15 per ticket-holder sales of a super-hot amphitheatre act such as OneD. But just about everybody tries.
Low CD sales have prevented artists from making as much money off publishing royalties as they used to – but licensing fees from movies, commercials and TV shows from The O.C. to Breaking Bad have picked up some of the slack. One top music-business source estimates that Green Day made hundreds of thousands of dollars by licensing “99 Revolutions,” from their upcoming album !Tre!, for the end-credits of the recent Will Ferrell-Zach Galifianakis political farce The Campaign.
Potential payday: $250,000-$600,000. About half usually goes to the performer, with the other half going to whoever owns the song’s publishing rights.
Downsides: This can sometimes be a tough decision for an artist: will we ultimately do better by breaking our new song in a movie, or doing it the old-fashioned way on the radio? But that’s a pretty good problem to have.
Fashion reporters have estimated the yearly grosses for Jessica Simpson’s namesake Collection, with its populist hats and jeggings, at anywhere from $750 million to a staggering $1 billion. Simpson is making slightly less, but the money’s still good: according to Forbes, she scored about $15 million in a licensing deal that gave the Camuto Group the right to market her name.
Potential payday: $15 million
Downsides: Going to fashion shows, sitting in meetings and evaluating new products is hard work – and not a sure thing, as stars from Madonna to Sarah Jessica Parker have discovered. “It’s time-consuming,” says a music-business source. “You’ve got to have a hit.”
Everyone wants to smell like the Biebs – which is why Justin Bieber’s women’s fragrance, Someday, netted $3 million in its first three weeks this summer. According to Jo Piazza’s book Celebrity Inc., A-listers can haul in between $3 million and $5 million up front, plus five to 10 percent of sales, by licensing their name to a fragrance. Beyonce, Britney Spears and Jennifer Lopez are among the other stars whose scents have raked in tens of millions in recent years.
Potential payday: $5 million or more for a hot star like Bieber
Downsides: Loss of cred. Before launching his 222 fragrance in May, Maroon 5‘s Adam Levine hemmed and hawed to People: “I know there’s a stigma attached to it, a stigma that I fully understand because I, too, hate the idea of a celebrity fragrance, absolutely, 100 per cent. [But] I kind of thought to myself, ‘Well, I’m interested in fashion and there’s a lot of things about it that could be really cool if done properly.’”
Bono has been backing Elevation Partners, a private-equity firm that specializes in funding tech companies, since 2004. Elevation has shoveled money to Facebook (good!), Yelp (pretty good!), Palm (not so good) and others; earlier this year, the company announced its intent to raise $1 billion for a new fund. Justin Timberlake is another artist who has turned his attention to Silicon Valley – last year, he joined Specific Media owner-brothers Tim and Chris Vanderhook in their $35 million investment into the once-mighty MySpace.
Potential payday: Varies wildly.
Downsides: Investments are always risky. “If they want cash, that sets my alarms off,” Stiffelman says. “Then I say, ‘Okay, who else is putting money in, what are they raising, what’s the model, who’s the investor?’ If they lose all this money, is this going to have a material impact on their solvency?”
Ex-Dresden Doll Amanda Palmer took to her favorite crowd-funding website in May, bringing in far more than she expected in pledged donations – and making her a poster child for DIY revenue. Palmer will use the cash to fund an album, art book and tour.
Potential payday: $1.2 million
Downsides: Not everyone can pull this off – beyond Palmer, the highest Kick starter fundraising rounds for musicians have been roughly $200,000 per project. It’s especially hard for artists who don’t already have a built-in fan base assembled the old-fashioned way, as Palmer did.
Karmin’s mega-viral covers of pop and hip-hop hits racked up 178 million YouTube views as of earlier this year, giving them enough juice to sign with a major record label and start actually selling music. Once they scored a hit of their own with “Brokenhearted,” the cycle began anew as other users started uploading covers and novelty versions of Karmin’s song. One music-business source estimates that acts can make $1,500 per 1 million streams on YouTube this way via advertising. Top stars can make even more by signing up sponsors.
Potential payday: Hundreds of thousands
Downsides: It takes a lot of views to make a little money. And when artists opt to run ads on their YouTube clips, the industry source says they have no input into what type of ads pop up.
Phish, Red Hot Chili Peppers, Pearl Jam, Umphrey’s McGee and the String Cheese Incident are some of the acts that sell their fans full recordings of the show they just heard. String Cheese, who charge $10 for MP3s or $15 for high-quality, loss less FLAC, sell about 500 to 1,000 downloads per gig.
Potential payday: $5,000 per show
Downsides: Overhead is high – the band has to hire a tech employee to travel to each show – and logistics can be tricky. (If the band spontaneously plays a cover song, it must get approval from the original publisher and pay royalties.) “It’s definitely a good supplemental revenue stream for bands,” says Kevin Morris, one of String Cheese’s managers. “I don’t think anybody’s getting rich off recorded music in any capacity these days.”
After more than a decade as one of the hardest-touring bands in the land, the Roots accepted Jimmy Fallon’s offer to join him on his new Late Night show in 2009. The gig forced them to start waking up at 5 a.m. every day – but it also allowed them to jam on national TV with stars from Bruce Springsteen to Carly Rae Jepsen, and exposed them to millions of new fans. “Financially, it’s a great ending,” drummer Ahmir “?uestlove” Thompson told us at the time. “We get to be our own island again.”
Potential payday: The exact number the Roots made is unknown, but it’s probably somewhat less than the $17 or $18 million Mariah Carey is reportedly getting to judge American Idol.
Downsides: Very few of these jobs exist. You’d have better luck playing Mega Millions.
(content courtesy of rollingstone.com/Knopper; image courtesy of beginnersinvest.about.com)