Tech Tip:Potential Revenue Streams: Live Performance and Touring
by Bobby Borg
Touring is one of the most basic ways for artists to introduce their music to the marketplace. By hitting the road and performing live, interviewing with radio stations and the press, visiting record stores, and connecting with the fans, a new group can build a grass roots following that will loyally support them for years to come.
What few people understand is that TOURING IS A VERY SERIOUS AND EXPENSIVE BUSINESS. Every year we read stories about artists who sell thousands of tickets to their live performances at costs above $50 a pop (and more). It's no wonder most people think there are millions of dollars to be made from hitting the road. Though major artists have earned substantial sums of money through touring, DO NOT BE DECEIVED! The truth is that it usually takes a long time before a group can expect to turn a profit from performing live—if it ever happens at all!
Whether you're in a band that's playing local clubs, you're part of a new group that's just been signed to a record contract, or you dream of one day making it all the way to the big leagues of touring, what you're about to read may surprise you.
Your Local Club Scene
"A journey of a thousand miles begins with a single step." —Lau-Tze
Before discussing touring, it's important to take a moment to briefly discuss performances at the local club level, since this is where almost all bands begin. You start out booking your own gigs and playing coffee houses, small bars, or clubs in the early part of the week for free, and may even have to buy your own tickets and sell them to your friends and family just to make your money back (a concept known as "paying to play" in Los Angeles). As your following of fans begins to build, you move up to playing weekend gigs and may even get a guaranteed fee for your performance. Fees may range anywhere from a case of beer to $50 to $250. In some cases, you may even earn a straight percentage of the door from the people that come to see you. For instance, a club owner may pay you 100 percent of the door admissions and expect to make his profit from selling alcohol. At this level of live performing, though, practically any arrangement can exist. And until you have a record pressed and a record company (or other investor willing to promote you), you're probably going to be playing your local market and surrounding areas for a long time before it ever makes sense to hit the road. Why? You'll find out in a minute. Just remember one thing: playing your local clubs is a necessary part of developing your career, from finding your target demographic audience, to establishing your identity or "brand," to building a buzz around your group. In fact, the more your band can develop before getting that coveted record deal, and the greater a fan base you can build in your hometown or surrounding area, the bigger and better a deal you're going to get. You'll simply be less of a financial risk to record companies. So hang in there.
The Early Stages of Touring
"A record release is the flag ship on which a tour is launched." —Richard Bishop, manager of the Henry Rollins Group.
The first time many bands hit the road is after they have a record company (or some other backer) willing to promote them. With a record in hand, a band can simultaneously establish its name in the press, on the radio, on the Internet, and in retail stores across the country, which will lead to more and more fans attending your live performances. But this is not as easy as it sounds, and without the marketing expertise as well as the financial support of someone like a record label to set up such promotional events, hitting the road may otherwise make no sense. Why? Momentum is everything; everything has to hit at once, or like a shark, if it stops swimming it dies. A new band will only last on the road so long before it simply can't afford to tour any longer. New groups with a record deal can only command fees in the range of $250 to $1,200 per club performance. This may sound like a lot compared to what you're used to getting paid for performing locally, but after budgeting in tour expenses, this equation simply does not add up to a profit.
Minimizing tour expenses will help. Traveling in a van with one crew member, sleeping five to a hotel room, and allowing for salaries that are just enough for everyone to eat at fast food restaurants are all sacrifices your band can make to save money (and to go insane!). But even then, a new group signed to a major label can easily return home from a tour owing money. Expenses may initially be paid by the record company in the form of tour support (an additional advance to help subsidize a tour), but these monies must eventually be paid back. Tour support is one hundred percent recoupable from the band's future record sales. You heard right! Tour support is basically a loan in exchange for the opportunity to go out and promote your band and record. So, your time on the road must be spent wisely. In the words of manager Tom Atencio, who has worked with artists such as No Doubt and Perry Farrell, "It's not enough for artists to play and look cool. They also have to work their asses off. If a band is not collecting names for their web sites [email lists] or signing autographs, they're not working."
"Watch the pennies and the dollars take care of themselves." —Danny Goldberg, music industry executive
Once a group reaches the level where its record is starting to sell well, it's single is getting played on the radio, and the number of fans attending its concerts is increasing, the fees it can receive for a live performance will be much higher. Let's call this stage in your career "mid-level touring." Mid-level bands may receive guaranteed fees in the range of $5,000 to $15,000 for headlining larger clubs or small theaters. In some cases, a group may even earn a percentage of income based on the total number of tickets sold. Yet despite these increases in fees, a band may only break even by the end of a tour or, if careful with handling finances, earn a small profit at best. This is due to the inevitable increase in expenses at this level of touring. Additional tour expenses may include the following:
- A tour bus and trailer (with a bus driver) for a more comfortable and sane means of travel
- A larger crew and sound engineer to help replicate the nuances of the band's studio recording
- A tour manager to ensure that day-to-day business matters are run smoothly, to collect the money at the end of the night, to make sure the artists get on and off stage on time, and to coordinate press interviews
- Additional hotel accommodations for the bus driver, crew, and tour manager
- A business manager to help put together the tour budget and insure that all finances are in order and everyone is paid
- A talent agent to coordinate tour dates, determine the pricing of tickets, negotiate performance fees, and collect deposits from the concert promoter in advance of the show (typically 50 percent)
The Big Leagues of Touring
"It's hard to make money by touring. Managers make money, the people in the service organizations make money, the crews make money, but there are so many times when a band spends six or seven months on the road and ends up with very little to show for it, even when a tour is grossing millions of dollars. —Bud Prager, Manager for Foreigner
If a group can work hard, overcome incredible odds, and make it to the level where it's headlining larger venues, the guarantees it can earn are now much greater. Bands whose records are selling upwards into the hundreds and thousands of units may earn guarantees in the range of $50,000 and more for playing amphitheaters, and often as much as $250,000 and more when progressing to playing large stadiums (The Backstreet Boys were reported to have earned guarantees of $1 million for stadium dates in 2001). An additional percentage of ticket sales is also typically offered to the band at this level of touring. For example, the group may receive a guaranteed fee plus a percentage of net ticket sales. Nevertheless, while it may appear as though a group can now earn substantial profits on the road, it must still be very careful with its expenses. Additional expenses may include the following:
- Massive stage set designs, special effects, and pyrotechnics, such as the huge television screens U2 set up behind them on the Zooropa tour, or the gigantic wall Pink Floyd had erected on stage on the The Wall tour
- Sound and lighting systems, which groups rent at this level of touring
- Trucks, drivers, loaders to haul the sound, lights, and staging
- Lighting directors and their crew who ensure the artistic quality of the light show
- Monitor engineers to ensure the best quality sound on stage and to assist the sound engineer
- Elaborate stage costumes in order to look outrageous or glamorous
- Dancers to enhance the presentation of the live performances
- Wardrobe personnel to take care of the elaborate costumes
As if the expenses listed above weren't enough, when factoring in five-star-hotel accommodations for the band, rented limousines, and perhaps even Lear jets as an extravagant means of transportation for the band, tour costs can reach into the millions of dollars.
As one way to minimize expenses, some major artists choose to play smaller venues (such as theaters) for two or three consecutive performances in one city rather than performing in a larger venue such as a stadium for a single night. Not only does this create excitement, since tickets are more likely to sell out quickly, but a band can save money by keeping the equipment set up. The costs for tearing down equipment, traveling to the next city, and setting it up again can be very expensive. Playing consecutive nights in one venue also spreads out the band's exposure in a particular market and increases its availability for press and promotion.
Corporate Sponsored Touring
"With public opinion on its side, nothing can fail." —Abraham Lincoln
If a group is able to reach the level at which corporate sponsors are willing to exclusively underwrite world tours, its profit potential is considerably greater. In fact, the potential is huge. Corporations have paid fees as high as $15 million for the rights to advertise their products in conjunction with an artist's tour. For example, Pepsi Cola worked with Michael Jackson, Sears sponsored Phil Collins, Jovan worked with the Rolling Stones, and Trojan worked with Ozzie Osbourne. Keep in mind, though, that an artist must decide whether he or she wants to be branded with a specific product. What will the effects be in the long run? It may be, for instance, damaging to a band's career to be sponsored by cigarette or alcohol companies, regardless of the amount of money offered.
Full Circle: Back to Where We Started
"The distance isn't important; it is only the first step that is difficult." —Marquise Du Deffand
Before getting too excited about headlining stadiums, receiving guarantees into the hundreds of thousands of dollars, and attracting corporate sponsorships worth millions, you should also know that only a few groups ever make it to this level of touring. In fact, to zap you back to reality, if the record company for whom you're signed refuses to contribute funds in the form of tour support (which they often do), new bands may not get the chance to tour at all. The band may not be deemed a priority, which inevitably leads to it getting dropped. It happens all the time!
So the next time you see that shiny tour bus cruising down the road and you think of touring as a non-stop party, you'll now understand one very important fact. Touring requires hard work, a lot of sacrifices, and a great deal of tenacity. Although it may appear that you're making substantial profits, remember that every expense on the road comes out of your pocket. If you're conservative with finances, and can use your valuable time on the road to build the legitimacy of your band as a business and to help sell records, the rest, as they say, is gravy.
Bobby Borg is the author of "The Musician's Handbook: A Practical Guide To Understanding The Music Business," published by Billboard Books. For more information:www.bobbyborg.comor firstname.lastname@example.org.