I like to look at trends and then focus on what works and abandon what doesn't.
A few years ago I helped a musician put together a business plan. She had more than three years of sales data for us to use for projections. Playing in a local/regional market with a mailing list of 3000 fans generated $150,000 annual gross for her. Of that, approximately $45,000 was from CD sales and most of the rest was from show income. Her performance income ranged from $150-$200 for a coffee house solo gig to as much as $3000-$5000 for a private party with her band. She played approximately 200 shows a year, so the average performance income per show was $500 (not including CD and merch sales).
We knew that rarely, if ever, did CD sales drop below 10% (in other words, for every 100 people in the audience, at least 10 CDs were sold). That was what we used for projected sales, although her CD sales were usually much higher (as much as 40 CDs sold to an audience of 100 people). Using a 10% sell-through meant that if she played in front of 30,000 people over the course of a year, she would predictably sell at least 3000 CDs. Play in front of 100,000 people and sell 10,000 CDs.
However, knowing that the days of CD sales were declining, we also developed an alternative plan based on spending per fan. It didn't matter if they bought CDs, or tickets, or merchandise. We had three spending categories: $10 annually for the casual fan, $20 for the more involved fan, and $100 for the hardcore fan who came to most of the shows.
Running the numbers a variety of ways, we were able to project a gross income of $1 million annually with a fanbase of about 30,000 to 40,000 fans across the country.
I'd love to be able to use the same business plan template for other bands, but there are two issues: (1) Most artists I have worked with don't have the same level of sell-through. (2) It's a different environment now. Fewer people are buying CDs, so you can't really count on those for income.
Let's look at a hypothetical band in today's market.
If a four-piece band wants to pay everyone $20,000 a year and have money left over to cover band expenses, then the band needs to gross at least $100,000 a year. Let's round that up to $120,000, which would work out to $10,000 a month.
What would a band today need to do to make at least $10,000 a month?
Let's start by eliminating money from CDs. While some bands can still sell CDs for as much as $15 each, so many bands are giving away free downloads or pricing CDs at cost that counting on income from music sales is risky. Limited edition vinyl sales are working for some bands, but probably won't work for every band.
Can a band make the $10,000 a month in performance revenue? There are a variety of scenarios to do this.
One option would be playing in front of 1000 people at $10 per person, a reasonable cover charge for a moderately successful band. Newer bands might get less, more established bands might get more. A band getting $10 per person probably isn't playing in clubs holding 1000 people, so doing one show a month is unlikely. Therefore we have to break it down into more frequent shows at smaller clubs. How about four 250-person shows per month (or about 50 shows a year)? A band that can consistently draw 250 people to a show has likely been playing for at least a few years and tours either regionally or nationally.
But perhaps the band doesn't have that big of a following in many locations. So it needs to play more shows to smaller audiences across a bigger area. How about 100 shows a year of 100 people per show? That's a full-time schedule, but might be necessary to achieve enough income. Some bands, even with current or past major label releases, are playing to audiences of 100 or less on their tour stops.
But maybe the band wants more exposure, so it goes on tour as an opener for a bigger act or does something like the Warped Tour and essentially is making no money in ticket sales.
Now, if we are no longer counting on income from either CD sales or ticket sales, that leaves merchandise sales, which is where a lot of bands find themselves. Here are two examples:
"Q: Did you guys really make $19,000 in one day's merch sales?
A: It's crazy, right? It was mostly T-shirts. But we sold out of merch that day. Thankfully we always have really strong merch sales, and because of that, we ended up making a decent amount of money on Warped, which is pretty unique because a lot of other bands are barely scraping by."
"Lines and T-shirts and beats, 3OH!3 my!" The Denver Post, 10/31/08.
"After each show, [Amanda] Palmer heads to the 'merch table' in the lobby to sell T-shirts, posters, CDs and — for $10 — black Dresden Dolls underwear. At bigger shows, the Dresden Dolls can take in more than $1,000 a night selling merchandise, which makes the 'merch table' a major source of income when they're on the road. Of course, venues try to take as big a cut of that as they can. Palmer says that leads to regular screaming matches between bands and venue managers."So if a band wants to make a decent living, it may come down to selling lots of T-shirts.
"Band Tries to Make It Big Without Going Broke," All Things Considered, 1/17/07
10,000 T-shirts @ $20 = $200,000.
Can your band move that many T-shirts a year?
Here's a resource for you: