A couple of decades ago, the music business was pretty straightforward. Musicians (or their labels) would earn money through CD sales, ticket sales and merchandise sales mainly. With the radical overhaul of the way in which we consume music, this model is now outdated and a new, more abstract form of monetization has taken its place. So, in 2022, How do musicians make money?
The answer is streaming. According to the Verge,
Paid subscriptions made up 57.2 percent of revenue measured by the RIAA in 2021 at $8.6 billion, while ad-supported streams brought in $1.8 billion. Meanwhile, CD and vinyl album sales combined made up less than 11 percent of revenue.The Verge
How Artists Make Money From Streaming
The paid subscription model is the main way artists can earn music directly from releasing their music. Instead of being paid every time a physical copy is sold, artists are now paid on a per play / per stream basis. Nowadays, according to my own Spotify data, to net $10,000 independently you would need to receive around 3.8 million streams. That’s right, in today’s music economy, getting 4 million streams would pay the same as selling roughly 1500 CDs. If an album has 15 songs, this album would need to be played in its entirety 267,000 times. In old money, that’s like assuming each person who buys your CD listens to it about 178 times.
This numbers game has significantly changed the way many musicians release music, in some ways better, and some worse. Spotify pays out on songs which are over a minute in length, and if more than 30 seconds of the song is played. This discourages artists from producing well thought out, short albums with long song lengths. From a revenue perspective, artists are now being encouraged to be more prolific, with rappers now releasing mixtapes and albums with more than 20 songs, all of 2 minutes or less.
If you want to learn more about how artists make money from streaming, check out our articles on music royalties here.
Average Song Lengths are Shortening to Make More Money
As shown in research by Statista, the mean average song length has decreased from the 90s. There are likely numerous factors playing a part in this, such as the idea that people’s attention spans are becoming shorter and shorter, but I have no doubt that the more songs = more money model has played a large role in this. How do musicians make money in 2022? It’s about making more songs, and making those songs shorter.
Of course many artists who are extremely dedicated to their art will not be swayed so significantly by streaming as to change their music for it, but it certainly isn’t a stretch. With CD sales nearing all time lows and a reduction in live ticket sales post pandemic, many musicians are struggling to make ends meet from music as a full time income.
Touring And Live Performances
One of the more lucrative yet taxing ways musicians make money is through live performances and gigs. The figures musicians can expect to earn vary hugely depending on demand, which still leaves smaller artists struggling to do more than break even after covering their expenses associated with the performance.
For the exceptions who break through from the underground, live performances are extremely lucrative, more so than almost any other avenue musicians are likely to explore. According to Business Insider,
U2 was the highest-paid musical act in 2017 earning $54.4 million according to Billboard’s annual Money Makers report. About 95% of the group’s total earnings came from touring.Business Insider
Other Business Ventures
A time tested, proven strategy for savvy musicians is to take the original earnings from one’s music, be it signing a record deal or receiving some independent success, and then using this income to start businesses and invest elsewhere. Diversification is key when it comes to many of the top earning musicians of 2021. Just look at Jay Z. According to Rolling Stone,
[Jay Z] just clocked the highest annual earnings total of his career. Last February, he sold half of his Armand de Brignac champagne to luxury giant LVMH for $300 million. A few months later, he and his Tidal co-owners offloaded 80 percent of the streaming service — originally purchased for $56 million — to Square for $302 million. His portfolio also includes partnerships with Puma and Tiffany & Co.Rolling Stone
Notice something? Most of Jay’s income no longer is dependent on his musical efforts. He used his meteoric success as one of the greatest rappers of all time as leverage to make some very lucrative business deals.
If you really want to make it, get in, get big and get out.
Many of the other biggest earners of 2021 reached 9 figure sums from selling their masters. Cashing out on your career’s work for tens, hundreds of millions of dollars may seem completely unattainable but there are a handful of sites which allow artists to sell their share of royalties in music they have worked on.
Sites like Royalty Exchange offer both a buying and selling platform for music royalties.
Another avenue many artists opt for is selling merchandise. Dedicated fans will be willing to support you whilst also acting as a form of promotion! Merchandise in some ways can be a pretty heavy undertaking though, and many musicians prefer not to deal with the manufacturing and shipping of physical goods. Although lucrative, it can be a hassle if it isn’t a passion of yours.
If you’re one of a lucky few, getting a placement on a big TV show or video game can be a fantastic form of revenue. This is a tricky one to handle independently for most, which is actually one of the potential benefits of signing to a record label. AC/DC’s Thunderstruck costs $500,000 to use in media. And people have paid this! A really great avenue for many lucky musicians is to get their music used in TV advertisements. The numbers vary greatly, but do a quick google search. It’s pretty phenomenal.
The main ways musicians make money is simply diversification. The more avenues the better, as for smaller musicians it’s unlikely that any single form of income will pay enough to make a decent living. In summary, streaming, live performances, merchandise, placements and investing are the main big opportunities.