How is Money Made in the Music Industry
Updated: Mar 30, 2022
Table of Contents
Touring
Live Performances
Royalties
Side Hustle
Introduction
There are a lot of speculations about how money is made in the music industry. Some believe it comes from streams on digital music platforms, Others believe it comes from selling songs and so on and so forth. But today we are going to clarify where the money in the music industry actually comes from. You might be quite surprised to know the actual source of money in the music industry.
Sources of Money
Touring - At spot number one there is touring. You must be shocked. Touring, you must be wondering how that’s possible? Well yes you need to believe it, cause it’s the truth. Touring brings in a lot of revenue for musicians.
Live Performance - At number 2 there are live performances. Shockingly, live performances make a lot of money for musicians. When people pay for tickets to attend a live concert the money gets split and the musician gets their share. The number of tickets sold all depends on the popularity of the musician. So the more popular an artist is the more people will come to their concert and the more money they will make.
Royalties - Honestly, royalties are kind of hard to explain, but I will try my best. In simple terms royalties is about giving people permission/license to use your music. There are 3 main types of royalties but we are not going to go into much detail about them, we are just gonna brush up on them a bit.
Streaming Royalties - The first and most popular type of royalty, especially in the digital age are streaming royalties. Streaming royalties works when artists/record labels license their music to digital streaming platforms such as Spotify. When they do this they can earn some money depending on how many streams the song gets.
Sync Licensing - Then we have sync licensing. Sync licensing is when artists license their music to other types of content such as movies, tv shows, games, ads etc. Whenever a song is licensed a fee is paid to the artist and record label.
Public Performance Royalties - Performance Royalties happens when Performing Rights Organizations pay musicians, songwriters and publishers for the broadcast of their music. Just to put it simply when you hear a song on Radio, on Tv or at a party the musician is being paid.
Side Hustles - Honestly, this is one of the ways a musician can make a lot of money if done right. Musicians can use their popularity to sign partnerships with brands. They could become ambassadors or models for brands for cash, the success of this is all up to their popularity and their influence. Musicians could also start their own business; most musicians start either a fashion business, beauty business or music business. A great example of this is Rihanna’s beauty business Fenty. Fenty was so successful that it made Rihanna a billionaire, and the richest female musician in the world.
You can read more about this here.
Who Does the money go to
Money in the music industry does not all go to one person, it is divided among all the parties involved in the music production, music promotion etc.
Artists - Artist represents anyone that is actively involved in the life cycle of a song or album. These include singers, songwriters, producers etc.
Labels - Labels are companies or brands that house musicians; they handle everything about a musician and in turn get a percentage of the money a musician makes from their music.
Middle Men - Middle men represent people that are mostly not known about but are key to the success of a song or album. These include promoters, tour managers etc.