ROCK STARDOM IS MY 401K

Resident Rock ‘N Roller and FIRE Aethernaut, Mr. Fate shares the deeply guarded secrets on how to be successful in the music business and how rock stardom is his 401K.

I was 15 years old the first time I ever held a guitar in my hand. It was a knock-off Fender Precision bass owned by my pal, John, who had been playing for a couple of years and was fairly competent. Like most self-respecting adolescents of that age, we were listening to music, in this case it was the seminal punk band, the Circle Jerks‘ “Coup D’etat.” I told him I wished I could play, so I could join a band as cool as the Jerks. He said it was easy, handed me the bass and taught me the song. I was in love after the first note and still am after a 25-year mad, passionate affair with music. Within a year I had a bass, a band, and relentless, burning ambition to be a success in the crazy, wild world of rock ‘n roll. Oddly enough, despite all the odds, I actually achieved my goal.

I’M A STREET WALKIN’ CHEETAH

First, a little about my musical background to establish a modicum of my street cred on the topic. While my bio here at Fates On Fire vaguely alludes to my music proclivities, I have been an active musician – writing, recording and performing songs with bands big and small for nearly 25 years in the Southern California music scene. I have worked, briefly, at major label and independent record companies. I have also been a writer for music magazines in the U.S. & UK and even co-wrote a book on 80s music trivia. In any event, I’ve been around music in most of it’s capacities for a bit and am eminently qualified to share with you the secrets of how to be a success in the music business. Ready?

THE BIGGEST FINANCIAL SECRET IN THE MUSIC BUSINESS

Generally, a smart writer would place this sort of “big reveal” at the end of the article as a way to get you to read it in its entirety. But it is important to share this up front because it provides the context and knowledge one requires to be successful in the music business and I was extremely fortunate to have learned it very early on.

I was in a punk band and while we weren’t quite as cool as the Circle Jerks, we had good songs and after playing every dive bar, veterans hall, and house party in So. Cal, we started to get a decent following. We somehow landed an awesome gig opening up for much larger, national bands at a big, well-known venue. After the show, I was approached by two kids who wanted to let me know how great we were and that they had come, by way of skateboard, over 25 miles to see us play. Suffice it to say I was floored.

The incredibly powerful lesson here is that, at its core, music all about the direct relationship with and intimacy to the listener. Period. With the exception of recorded music, everything that comes between that relationship is either unnecessary and/or a potential obstruction and ought to be carefully considered. Secondly, this notion also creates an obligation from the artist to the listener, specifically to both preserve and nurture that direct relationship.

Photo by Wendy Wei

Let’s examine this obligation from the perspective of traditional business. Simply put, a music artist is a vendor and the listener is a very scarce and, therefore, valued customer. As we all know, valued customers should be consistently given an exceptional, high-quality product with an equally high level of service based on an authentic relationship of integrity. Only by doing this, can you grow your business. This becomes more important in the music business where high-quality product abounds in a hyper-saturated market, thus making customers that more scarce. Failing to recognize and/or remember this means certain doom to any artist.

From that moment in my early 20s until today, this lesson has informed each and every decision I have made along the way. It is the reason why I have always gone on stage and given my absolute all whether I was in front of thousands of people or two. It is the reason why I have never missed, re-scheduled, or canceled a show. It is the reason why I have always performed even when I had a 103-degree fever or pneumonia. It’s the reason why I was always available after the show and at the merchandise booth. It’s why I still get infuriated whenever I see or hear about an artist giving a shit performance or canceling a show due to “illness” or poor ticket sales. Like Diamond Dave from Van Halen said, “when someone buys a ticket to your show, that’s a contract between you and them.”

Okay, now that you’ve got “The Biggest Financial Secret” down, you’re all set to light the world on fire and make some serious coin. So, let’s talk now about how to be successful in the music business.

SUCCESS IN THE MUSIC BUSINESS IS NOT ABOUT HOW MUCH YOU MAKE, BUT ABOUT HOW MUCH YOU DON’T LOSE.

Because music is about music, not money, most folks have a negligible understanding on the financial side of things. Frankly, that’s the way it should be in my opinion. Just enjoy the jams and that’s all that really need occur. However, over the course of 50+ years, the myth of the staggeringly wealthy rock or pop star has grown exponentially and continues to, erroneously, pervade our collective conscience. The result is the misapprehension that if you have a record out or are on the cover of Rolling Stone, you’re financially set for life (or at least enough for more gold teeth and tattoos). You know what? You couldn’t be further from the truth.

The reality is that pretty much every artist in the history of music, when it’s all said and done, has had a negative number on their final P&L statement. When you take into account the expense of the instruments, equipment, opportunity cost of all the time spent practicing, performing, writing, recording, etc., the numbers can get upside down over the long-term. So the reality here is that if you actually made nothing other than a penny (or a quarter-penny in the case of streaming), when you stop altogether, you’re a true success. In fact, you are a goddamned unicorn.

Don’t believe me? Let’s take a quick tour of how the financial side of the music business really works.

HOW TO GET RICH IN THE MUSIC BUSINESS

Since music business finance is intentionally complex and unnecessarily confusing, I’m only covering the two principal ways that artists make money and that we all know about. The most basic and easy to understand is performing. That being a person gives money to the artist to see them perform a song. There, of course, is a wide range from the busker on the street collecting coins in her guitar case to buying $1000 front row seats to see Ed Sheeran at the Enormodome. In any case, you are paying to see a live performance.

The second is for an artist to record a song(s) and then sell that recording. While this ought to be relatively simple, it is not. While this aspect has gotten infinitely easier since the maturation of the Internet, it’s still a bit bamboozling, specifically because it involves much more financial capital and specialty expertise than performing. To keep it simple, let’s talk about getting a record out (or a track uploaded).

Photo by Barthy Bonhomme

GOTTA GET A RECORD OUT!

Back in the not-too-distant day, the only way to record a song and get it distributed and, thus, out to the world was by way of a record label. Only they had the financial capital, human capital and mechanisms to record and distribute a record/physical product. To be fair, record labels are for-profit entities that consistently subject themselves to great financial risk since they have to spend real money upfront while having to rely only on an arcane, semi-sophisticated form of guesswork to estimate a number of sales that would a) recoup the initial investment and b) provide a return. From the start to today, over 90% of records, even those only released digitally, do not recoup their investment.

So, in a major label environment it’s pretty much a certainty that both the label and the artist will end up in debt on a per recording basis. This level of loss certainty is a tough way to have to run your business, so you do what you need to do hedge your bets, most of which surrounds getting legal ownership of the artist’s music, publishing, merchandising, tour sales, etc. It also means you want the sound to be as palatable as possible to as many people as possible. This gives you some explanation as to why when some bands sign to a major label there may be significant changes to their overall sound and are now sporting regrettable haircuts and ridiculous outfits.

LEVELING THE PLAYING FIELD

While the model above is still alive and healthy(ish), it has diminished appreciably in the recent past due to advances in recording technology, the Internet, and social media. In today’s world, it is possible for a singe artist or band to write, record, mix & master a song and then have it digitally available worldwide on all the major platforms like iTunes, Amazon, Spotify, Pandora, etc. from their home and in a fraction of the time it used to take. They can also promote and grow a worldwide fan base via social media platforms, YouTube, etc. All the while, still retaining the 100% of the rights to their music.

Independent record labels have also grown and evolved over the years and can also can work with artists to offer them much better artistic control and financial terms as a result of these advances in technology, while still providing crucial administrative services most bands need.

When you then consider crowd-funding/fan-support platforms like PledgeMusic, ArtistShare, Indiegogo and Kickstarter, the entire aspect of financial risk is obviated. The entirety of the project is funded in advance and can also allow for listener involvement, participation, rewards and exclusives. A great means to grow and develop the direct artist/listener relationship.

In any event, once the recording is released, either physically or digitally, outside of the direct sales revenue, residual income can be earned via royalties. Another complex aspect of the business but an important one since the owner of the copyrighted material is getting the lion’s share of the money. There are a few basic types that focus on the physical or digital reproduction of copyrighted material (mechanical), works being broadcast like on radio or streaming (public performance), and when it is used with film, video, TV, advertising (synchronization).

The big lesson here is that in order to maximize your overall income as an artist, you, ideally, want to own 100% of the copyright to your music (or as close as you can get) to maximize your royalties.

SWEET STREAMS AREN’T MADE OF THIS

Let’s examine this in the context of streaming royalties. Manatt has put together an awesome, fairly detailed chart on how all of this works, but let’s keep it simple. As you can see in below, for every $1 made on streaming revenue, most of the money is with the owner of the recording.

Copyright Manatt, Phelps & Philips, LLP

Basically, for the major label artist they are making about $0.18 of each dollar while the indie label artist and self-released artist are making $0.40 & $0.64 respectively. Now you can see the real economic benefit of attempting to retain full ownership of your music.

ON THE ROAD AGAIN

Artists will always need to record as it is important for them to be heard. That is the underlying purpose of making a recording – and how one cultivates an audience. That said, the reality is that nowadays, the majority of music consumption occurs via digital downloads & streaming rather than the purchase of CD or vinyl records which means much, much less income from recording. The bottom line is that if you’re just recording, particularly with digital-only formats, you’re going to get financially underwater very quickly.

Because artists are not really going to make anything selling recorded music, to sustain income, the artist is effectively forced to earn money via performing and merchandising. Since playing the same set in the same city every night is an untenable proposition, this means getting on the road and touring to earn income. In his book, “Get in the Van,” Henry Rollins, former singer of the legendary band, Black Flag, provides an unflinching, extremely brutal account of what the reality of a touring situation is for like for most young bands. Even the worst business travel you can imagine is nothing remotely close to this. The associated stress and horrific conditions make mincemeat of even the toughest rockers. But if you want to be a full-time, long-term music artist, this is the deal.

Okay, that was a lot, but hope it does a bit to give a general understanding of how the money flows in the music business and busts the common myth that music artists are getting rich, because they are, generally, going in quite the opposite direction.

BIG TIME!

My punk band ultimately fizzled. Shortly thereafter I got an opportunity, totally out of the blue, to audition for a “Big Band”. Well, let’s consider them a giant fish in a medium-sized pond. They were firmly established in the U.S and UK, had records out and even had a minor hit. Most importantly, I had been a long-time fan and loved the music. Fast forward and I got the gig. It was spectacular – until it wasn’t. My first show was in front of 4,000 people. Here I was bringing the rock with one of my all-time favorite bands. We played out frequently, were paid well, were on TV, and even toured via plane for out of state shows.

Then came the problems. Up until this point, I’d only played in “my” bands – meaning bands I had been a part of starting from scratch. I realized very quickly that being in “someone else’s” band was not to my liking, nor did I particularly end up liking the band leader. The phrase semi-benevolent dictatorship comes to mind. Lastly, we put out a recording on an independent label & distributed by a major label and, get ready for it… I never saw a dime. Shocking, I know.

MR. FATE – ROCK STAR!

Photo copyright JenniferAnneJoerer

At that point, me and the guitar player (who also had similar sentiments) decided to defect and start our own band, doing our own music. We recruited a singer and a drummer, both of whom we knew, liked and were in locally known bands with solid fan-bases. While not necessarily a “super-group,” we were all known by our former projects and had a “built in” audience of sorts who were now interested in what were were doing with the new project. And off we went. We quickly graduated from playing the proverbial darkened rooms to much larger venues to providing support to international and national acts on their theater tours. This was not only a blast, but as a business, it put us in front of a lot more people very quickly and our audience grew exponentially as a result.

During all of this, we staunchly maintained a do-it-yourself (DIY) approach and took advantage of all of the burgeoning technology. Like any smart, new business we invested all of the money we made playing in recording and merchandising which we did at a fraction of the cost since we had the skills ourselves or close friends who chose to help. We all had been around for bit and knew the most efficient way to go about getting things done. Essentially, we focused on leveraging our financial & human resources for a much larger return.

As a result of funding our recording this way, we retained total artistic control which was paramount since we were a bit of a sonic balancing act between several related, but distinct styles of music. Any outsider or “music producer” would, invariably, want to change things up so we worked with bright, capable engineers who were also recording musicians. That was the type of input we did seek out and welcome. We generally collaborated with the studio wizard on the general approach and the engineering and things came out better than allowing simply one party to handle all of the production.

THE REAL DEAL

When it came time to release our initial recording, we recognized we needed help getting the album into the physical and digital marketplace. We ended up going with a small indie label on a “production & distribution” deal where the label got 50% of the sales for manufacturing and distributing our music while we retained the other 50% as well as 100% ownership of the music. From a financial perspective, no member was out of pocket since we “pre-funded” recording from performance proceeds. The label knew if we did nothing but sell the physical product at our shows, they’d immediately recoup the investment. Overall, it was antithetical to the traditional recording model and guess what? It worked beautifully. We got our music out internationally, grew our audience, and made a nice return on our investment that went right into the next recording.

So it was, onward an upward over the course of 8 years. An awesome audience who supported us and our music, total artistic control and ownership, great shows at wonderful venues, sharing the stage with some of my favorite and respected bands and doing well financially on the performance, recording, and merchandising fronts. Overall: a total success. My dream had been realized and it still is.

ROCK STARDOM IS MY 401(K)

I stopped playing a few years back and while I certainly did make money with music and I still receive regular royalty income (though each payment is incrementally smaller), as I look at my own final P&L, considering all the expenses and tens of thousands of hours invested over 25 years, I probably came out a little ahead, but not much. That’s still unicorn status. However, as a long-term financial growth mechanism, not so much.

That said, a lifetime of music, life-long friendships, joy, crazy adventures, and living a life that so many just dream of. All of that – all of those collective memories are priceless; they transcend money. And like a great performing 401(K) or other investment vehicle, those memories appreciate in value each and every day of my life.

Making art is never about money. Just ask any artist. As Kurt Vonnegut said, “Practice any art no matter how well or badly not to get money or fame, but to experience becoming, to find out what’s inside you, to make your soul grow.”

To be on a stage bringing the rock with my friends as the lights blare down and the crowd cheers & goes wild – when you can literally feel the music pulse and vibrate through your entire body – that’s not your soul just growing; that is your soul bursting from it’s own incandescence. That is magic.

Whew, that was quite a bit, but hopefully it was insightful and enjoyable. If you’ve actually made it this far, in the immortal words of the inimitable Hedwig, “Thank you. Thank both of you.”

*Special dedication to @SimplisticSteph for having won the Twitter contest for this post. Sorry for the delay!