8 Income From Live Performance

Understanding and managing the sources of income for the artist are among the most important functions of the artist manager. Some artists will want to be active participants in overseeing these aspects of their careers, but developing artists especially will soon find out that the business side of their career is better handled by their manager. Until new artists become comfortable with someone else managing their earnings, it will be important that they participate in the accounting. When they are ready to place major reliance on the manager to oversee their business affairs, they will meet regularly to review reports and financial summaries that will be as general or detailed as the artist requires. The sooner the artist finds the level of comfort in having the manager oversee their business affairs, the sooner the artist can build a focus on creativity and artistry, which are the elements that create the true value and earnings potential in an artist’s career.

Knowing that disagreements over financial matters become the catalyst for the ending of relationships, it is important that the artist is as much a part of the financial accountability reporting as is necessary.

The primary income sources for the artist are royalties from songs they have written, the sale of their recordings and related products, and the sale of tickets and payment of admissions at performances. Other sources of income come from the sale of merchandise and the acquisition of sponsorships and product endorsements. Live performance is the income source that has the greatest number of elements that require the personal involvement of the artist manager.

Earning money from live performances is often the most immediate way that an artist can begin to support a career and it is for this reason that it is so important for the manager to understand it and to exploit it for the benefit of everyone who is part of the business support group. It is an important way for the artist to build a fan base, to develop professionally, and to sell recordings.

There are five principal job areas that support an artist who will be earning from live performances—booking engagements, managing the tour, promoting the tour, managing the administrative business functions, and generally managing the artist. Figure 8-1 shows the relationship of these functions in the live performance hierarchy.

Figure 8.1 Concert hierarchy

A manager of a small artist management firm often performs some or all these duties. In larger management companies they are divided into functional areas of an artist’s support team with individuals having these specific responsibilities.

Booking the performance

As we learned in chapter six, the agent is responsible for finding opportunities for paid live performances for the artist. There are agencies that specialize in booking performances in small clubs with one to two hundred seats, and weddings and corporate events. Often they book scores of artists and are especially good for new artists or for those who do not want to rely on music to support their lifestyle. For the manager of a new client who needs seasoning in a live performance setting, small agencies like these can provide access to a range of smaller venues and performance settings that allows the new artist to take some chances in environments that frequently overlook mistakes. Commissions to agencies that book small venues and performances can be 20% or higher because the value of the performance contracts is relatively small. As is pointed out elsewhere in this book, agents franchised through the musician’s union must handle bookings for larger performance opportunities for an artist, and their charges to book engagements for an artist can be as much as 10% of the value of the performance contract, though they might be negotiated lower.

When an offer from a promoter is accepted by the manager and the contract is signed, the agent will collect a deposit or “guarantee” from the promoter with specific instructions when additional payments must be made to the artist. For example, some performance contracts will require a deposit with the signed contract and an additional percentage payment of the agreed amount thirty days before the engagement.

Business management of live performances

Among the decisions the artist manager must make is to determine whether it is better to assign the business management of live performances to a business manager or to do it themselves. Either way it is handled, the artist manager must make a determination about whether an available paid performance or a series of tour performances will earn enough money for the artist to make the engagements worth accepting. The manager notes how much the performance will pay and subtracts all expenses associated with the engagement. The result, or the net, is the profit earned by the artist.

There are some performances that may have promotional value to the artist, and the manager and artist might agree that breaking even is a good result. Breaking even means that the payment received for the performance and the expenses associated with it are equal, and the artist makes nothing. An example of when a breakeven performance might be practical is one where an artist has the opportunity to open for a headliner, knowing that the appearance will be helpful promoting a recording, attracting the attention of radio, or building a fan base.

Budgeting for performances requires considerable planning by the business manager or the artist manager. A detailed listing of all costs of a live performance must be compiled. Overlooking one component of it could make the difference between making money or losing money, and the novice artist manager who does not have a strong background in bookkeeping or accounting should seek advice from an entertainment business manager. Anticipating expenses from live performances and budgeting for them is a skill that comes from the experience of doing it and living with the results. For performances that are booked with a promoter, it is typically the responsibility of the promoter to present a proposed budget to the artist manager through the booking agent before a contract is signed.

When creating a budget for performances that require tickets, it is important to consider what charges the ticket price includes in order to determine how much of the price actually goes toward paying the cost of the performance. In US dollars, Table 8.1 shows how a $25 ticket might actually be worth only $14 to the artist or the promoter before the bills are paid.

Table 8.1

So, when estimating the income from the sale of tickets, it is important to use the net amount from total ticket sales, not the gross. Additionally, the budget must take into account exchange rate differences between countries, and to remember that “dollars” in the US and Canada are not the same.

If the artist has a recording contract with a large record company it is possible to negotiate an amount of money in what is called tour support. This is money that is given to the artist to offset losses the artist will have while they are touring to promote an album for the company. When the budget is prepared, the manager presents it to the record company, noting how much money the artist will lose while on tour. The money the artist will lose is the basis for the amount of tour support money the label will advance to the artist. Tour support money may be offered by the record company in a range of $25,000 to $100,000, but in every case the artist must repay the money to the record company through recoupment. While advances to an artist are typically commissionable for the artist manager, this is an advance that is not one the manager can draw from. Record companies view tour support as a promotional expense rather than a payment for services, and do not permit managers to draw commissions from them. (Passman, 2003)

The current view of tour support by labels is that it is an investment with intended results in either the sale of recordings or getting the attention of radio. Tour support is no longer a standard commitment to an artist; rather, it is offered to artists when the label feels there is a potential for a “big payoff” and at times they will provide substantial sums to support touring. (Dungan, 2007) New artists who open for established acts effectively earn nothing from their performances, so tour support becomes important to them. Likewise, tours planned for foreign countries often require tour support because of the added expense of logistics.

A budget for performances and tours should also include any amounts committed to an artist by a sponsor. Where it is possible, the artist manager should urge sponsors to provide their financial support before the tour begins. The early receipt of this income is helpful in building the show and assembling the physical assets that are necessary to accompany the artist on the road.

Tour management

The artist manager or someone on the manager’s staff must handle the activities of managing a tour. As an artist becomes more active touring and the manager cannot be with the artist at every performance, it becomes necessary to hire a tour manager. This person is effectively an extension of the manager while the artist is on the road and it requires someone with patience, an orientation to details, and an understanding of human nature. The tour manager, sometimes referred to as a road manager, is the primary contact for everything while the artist is touring, and is totally responsible for getting the artist to a performance and assuring the performance is presented without any problems.

The tour manager takes primary direction from the artist manager, and then creates a detailed itinerary beginning with the departure from the home base for the first show on the first date. When the artist manager has approved the itinerary, the tour manager begins finalizing the travel schedule, chooses and confirms the mode of travel, and reserves overnight accommodations. To organize each stop, the tour manager will use a template similar to Table 8.2.

Table 8.2 Single performance itinerary

It becomes easy to see how an artist manager can quickly become overwhelmed by the necessary support for even a small tour. Each of the activities listed in the chart requires a number of telephone calls and emails, and follow-up is necessary to reconfirm them. This so-called “advancing” a performance becomes the guide for the person responsible for managing its success.

Among the other things the artist manager or tour manager does is to meet with the promoter, or the person who hired the artist for the performance, during the show or immediately afterward to receive payment on behalf of the artist. This is called the settlement meeting. If the performance is one that did not require a promoter, the payment terms are as they were specified in the contract which is usually cash or certified check. If a promoter hired the artist, the manager or tour manager must compare the approved budget for the performance with the actual expenses and count the tickets sold for the event. The manager and promoter together total up the amount money from the sale of tickets. Deducted from that total is either the approved promotional budget or the actual promotional budget, whichever one is the lesser amount. The result is the profit from the performance.

Promoting the performance

Unless a performance is in a small venue and is being used for developing stage presence or seasoning the artist as a performer, an artist’s performance or tour appearances require very active promotion. This is achieved through publicity, advertising, and an active presence on the Internet. However, it depends on the career status of the artist whether all of these promotional avenues will be available.

A new artist without a contract with a record company will not be able to afford much advertising to support a tour. Artists in this category and small independent labels have very limited financial resources, so there is heavy reliance on publicity to announce an artist’s performance and to have it covered by local media when the show dates arrive. The artist manager will work closely with the artist’s publicist to maximize potential local radio, television, and newspaper publicity. The webmaster for the artist must keep the artist’s website and social networking sites current with the most recent tour schedule, links to the venues, information about tickets or admission charges, and should be sending occasional emails to the artist’s database about additions to the tour schedule.

An artist that has an established fan base and has had several recordings released in the past will find it easier to get publicity to support a performance or a tour. Simply releasing a recording on an independent label will give the media something to write about and generate a new interest in the artist. The new recording, coupled with a tour and a unique story angle can create a series of stories for the media as we will see in .

For the artist signed to a label that has substantial resources, the promotional efforts that will directly impact the sale of tickets include radio airplay and video airplay, especially in markets that the artist plans a tour stop. Labels will also assign a publicist to advance the scheduled performances. To the label, this kind of promotion helps them sell recordings while it immensely helps the sale of performance tickets.

Strategically, the artist manager should consider using some of the label promotional tools in places where the record company does not have funding for or that they choose not to use. For example, some labels create videos of singles that have been released to radio, but they promote the use of the video only on major cable music channels. In the US there are hundreds of independently produced video programs on local cable systems that are easily convinced to show music videos. For less than $4,000 US a manager can hire a video promotion firm to promote the artist’s music video to these local video shows for twelve weeks or for the length of the time the single is on the chart. The artist manager who uses the already-produced video in this way will be able to promote the artist at video outlets that the label does not, and it will serve as a catalyst to sell tickets in smaller markets as the artist tours. This makes especially good sense considering that the artist paid for half, if not all, of the cost of producing the video through recoupment. With artist recording contracts now including required sharing of performance income with the record label, it may become easier to enlist the label’s participation in financing video promotion to smaller markets.

The promoter

As the artist becomes well known and builds a sizeable fan base, the artist’s booking agent will seek concert promoters who are willing to hire the artist for a performance in a particular market or for a series of performances on tour. The promoter is an entrepreneur. They pay all of the costs of producing and marketing a live performance, and as a result also take all of the financial risk.

For each performance the promoter creates a budget, leases the venue, contracts with performers, hires local labor, leases all necessary production equipment and expertise, purchases all permits, pays all taxes and fees, pays for all marketing expenses, and supervises all aspects of the event. The specifics of all of these activities have the prior approval of the artist manager, and the tour manager has the final say on behalf of the manager on the day of the show.

When the show is over the artist is paid the guarantee for the performance and the promoter is paid, for example, 15% of the net proceeds. This then becomes what is called the split point. It is the remainder of earnings from the performance and is the amount at which the promoter and artist have agreed that they begin sharing the excess earnings at some agreed upon ratio, such as 30% to the promoter and 70% to the artist. Agreements with promoters also include a net earning amount defined as overage, which is the amount at which the artist takes all of the remaining excess earnings. It is easy to see that established acts will require fewer services from a promoter because of the public awareness of the artist as a brand, but the inclusion of some sharing of excess earnings will help assure the promoter will meet the attendance expectations of the artist and the manager. However, the inclusion of a generous split point and overage with a new artist adds important incentives to the promoter. And, there are circumstances where an artist prefers to accept only a guarantee for their services, which may occur when the artist is dealing with an unfamiliar promoter or with one who had a history of high expenses.

When an artist manager considers contracting with a promoter, some care must be taken and the manager should look to the agent for advice if they have never used the promoter before. Some of the things the manager and agent will want to consider include the following:

Even for promoters with whom the manager has had some experience, occasionally revisiting some of these questions about them can prevent surprises that will have unpleasant consequences.

The performance contract

Live performance agreements contain basic information such as the name of the company or person hiring the artist, the date and time of the engagement, the specific location of the performance, the time and length of the performance, the services the artist will provide, and any riders to the contract. A rider is an attachment to the main portion of the contract that specifies standard production requirements for the artist performance as well as any personal needs the artist has prior to and during the performance. Riders include very technical specifications for production crews to follow when preparing the stage for the performance. Riders can also include things such as limousine service for the artist, elaborate food before the performance, expensive beverages, and luxurious dressing room accommodations. For major artists on tour, concessions of this type are often justified as a way to reduce the rigors of being on the road for lengthy periods of time. The new artist can expect small but reasonable personal concessions in a rider. However, all expenses associated with any rider are charged directly back to the artist as costs of the artist’s performance, and are deducted as an expense from the receipts from ticket sales. This is an important consideration for the artist manager or business manager as they create a budget for a performance or tour.

The performance contract, or agreement, will include the circumstances under which an engagement may be cancelled. Those reasons include the death of key personnel such as a band member, the tour manager, or production staff, and because of the health of the artist. If there is the possibility that the artist will be exposed to personal danger, for example because of threats, the performance may be cancelled. Under all of these circumstances, the artist manager must return any deposits that have been paid. For the promoter, individual, or company hiring the artist, however, there generally is no recovery of their losses resulting from the causes for cancellation provided for in the contract.

The artist manager will include provisions in the contract that gives him or her the right to approve advertising for the engagement and proof that the advertising was actually bought. The manager will also want approval of the distribution of all complimentary and promotional tickets to assure, for example, that all radio stations in the artist’s musical format in the market are treated equally.

If the artist is the headliner for the performance, the manager will include language in the agreement that gives the artist and the manager the approval for any other artists who may appear on stage as opening acts. Other sections of the contract are specific about details of the performance, how licenses and permits will be handled, and how settlement and payment will be handled.

Merchandise

Selling artist’s merchandise at performances and on the artist’s website is another way live performances can quickly begin generating income to support the artist’s career. If the decision is made to offer merchandise for sale at performances, the artist and the manager must make an early commitment to purchase only the highest quality they can afford for items offered for sale. Cheap merchandise makes a statement about the artist, so it is better to offer nothing for sale rather than something that is of poor quality.

It will be the manager who arranges for the production and manufacture of merchandise, and arranges for it to be sold at live performances. However, as a new manager will quickly learn, this income stream can become extremely time consuming. Among the steps in handling merchandise for the artist are:

Because of the amount of time merchandise management can consume, managers often see the value of licensing the image and marks of the artist to a reputable merchandise company and make it their responsibility to create and sell merchandise at artist’s performances. Merchandise companies pay licensing royalties ranging between 30% and 40% of the gross receipts, meaning the $25 t-shirt will generate over $8 to the artist for each one sold.

Bootleggers are those rogue merchandise sellers who appear near venues the day or evening of a performance and offer counterfeit merchandise for bargain prices. Since an artist has the right to their image in commerce through trademarking or service marking, the manager is responsible for alerting local authorities that people are selling illegal merchandise and press to have them arrested. Quite literally, this has been a problem that is difficult to police; however, many managers, promoters, and venue operators have had increasing success in stopping counterfeit sales with the assistance of local authorities.

Negotiating licensing contracts with merchandise companies can become somewhat complex and this is another area where the artist manager will want to be especially careful. The merchandise company will be expected to pay a royalty advance to the artist, and will want guarantees in the licensing contract of the minimum audience sizes at upcoming performances. For the merchandise company, they are interested only in the number of people who actually pay to be part of the audience, feeling that those who receive free tickets are not closely enough connected to the artist to want to buy merchandise. If the audience estimates are too high, the contract will require the repayment of money advanced to the artist, and the artist may lose all benefit of licensing to the company.

The manager may also want the merchandise company to provide fulfillment of orders made from the artist’s website. Fans who click on merchandise on the artist’s site will actually be redirected to an order form at the merchandise company. Here, the company collects the payment, packs, and ships the merchandise to the artist. The merchandise company provides these services to the artist for a fee, but for the manager who is not prepared to offer fulfillment services, this can be a real time saver. If merchandise is handled in this manner, it is important that the artist’s webmaster maintain high quality and current images of the items being offered for sale. These points are key determinants of the appeal of the merchandise to visitors to the artist’s site.

When preparing to offer a merchandise licensing agreement to a company, it is always advisable to seek the advice of an entertainment attorney who is experienced in this specialized kind of an agreement.

A final note about live performance is to make the artist manager aware of Pollstar magazine as a planning and information resource. Pollstar is the trade magazine of the concert and touring industry that supplies weekly information about artists, venues, promoters, audience sizes, ticket sales, and gross earnings of live performances for hundreds of acts. It can help the artist manager with budget estimates, the timing of a tour, and will help identify agents and promoters who are successful with artists similar to the manager’s clients. The free online version of Pollstar gives information that is more useful to fans than to management. The actual magazine and the online subscription service offer the depth of information a manager will need.

International touring

Plans for international touring are often created to build a following in other countries before launching a career domestically, or, are planned at the end of a tour supporting an album that has nearly reached the end of its prime life cycle. One of the most famous groups that used international tours to launch a career in the US is the Backstreet Boys. Manager Lou Pearlman put the group on international tours from 1994 to 1997 preparing them for the eventual acceptance by the fans of pop music in the US. (VH1, 2005) Successful international touring for established artists almost always requires a successful CD release at home, and labels will be reluctant to support an extended international tour until the domestic market has been served.

Touring in other countries has become more challenging since the September 11^th attacks in New York. Required paperwork can now include a passport, a visa, a work permit (in Canada), an international driver’s license, copies of signed contracts, a bond to assure customs officials that the artist will not sell any of their equipment while in the country, certification that travelers are healthy and have the necessary immunizations, a detailed equipment manifest, insurance policies and a carnet.

A carnet is essentially a passport for the equipment being transported to another country for use by the artist in their performances, and its use can expedite getting the equipment through customs in 75 countries. It also prevents tours from being required to pay import duties or taxes on equipment used for performances that will be leaving the country with the artist. (Barnet, 2006)

Managers of artists who travel internationally for touring or for pleasure should assure that they have a passport. It is the primary document required to permit individuals to enter into other countries, and to return to their home country. In January 2007, the US began to require all international air travelers to have a passport when landing—even when traveling from border friendly countries like Canada. And the US adopted January 1, 2008 as the date when US citizens are required to present a valid passport when returning to their home country. (US Department of State, 2006) The manager should plan ahead by at least six weeks from the time a passport is needed for their artist and touring personnel to travel to its delivery.

In this time of using online services to schedule travel, the services of a travel agent can be helpful when planning a tour. Some of the larger agencies that serve the music industry are aware of travel requirements to many destinations, and they can be extremely helpful with those occasional and onerous changes in itineraries. Other useful sources of information include the websites of embassies, offices of the American Federation of Musicians, the AAA, and online services from the US Department of State.

US tour promoters who have international stops will usually associate with promoters from the country into which the tour will go. Likewise, an artist’s agent in the US will likely have agents who handle international bookings for them, and they often have offices in the UK that assist in coordinating international tour stops. (Barnet, 2006)

Here is a final word of caution to the manager when planning international performances. Be aware of the income tax regulations in the countries visited. For example, a series of tour stops in Canada will require that the company or individual who pays for the artist’s services withhold 15% of the gross earnings for each performance. (Canada Revenue Agency, 2006) Likewise, international artists will be required to pay income tax for earnings in the US, with the largest international tours having an agent of the US Internal Revenue Service being assigned to track the earnings of the tour.

College tours

College touring can be valuable for a manager who is helping an artist with building a fan base comprised of this target market. Often engagements will barely pay for the costs of the appearance but they can add valuable experience for the newer artist who is trying to learn about themselves in a live performance environment.

The manager will quickly find that most campuses have committees that have a fixed budget for the school year and they plan appearances by artists based on available funds. It also means that there is a group of people making the booking decision rather than a single promoter or agent. Like most business that is conducted by committee, it is not quite as prompt as when there is one decision maker, so the manager should provide additional planning time knowing that contract offers will be slower to arrive.

Some colleges use what is called a middle agent, whose job is to negotiate with managers or agents on behalf of the college committee. These agents work for the college, and can be helpful to managers who do not want to deal directly with the college. (Ostrowski, 2005) Other useful information for the artist manager considering a college tour is through the National Association for Campus Activities. The organization conducts regional and national meetings and seminars that include opportunities for artists to showcase for college campus activity committees and middle agents.

References

Barnet, Richard, 2006, personal interview.

Dungan, Mike, 2007, President, Capitol Nashville, personal interview.

Canada Revenue Agency, 2006, www.cra-arc.gc.ca/tax/nonresidents/individuals.

Ostrowski, Dan, 2005, “Booking College Shows,” www.starpolish.com.

Passman, Donald S., 2003, All You Need to Know About the Music Business, Simon and Schuster, Inc., NY.

U.S. Department of State, 2006, http://travel.state.gov/travel.

Vasey, John, 1998, Concert Tour Production Management, Focal Press.

VH1, 2005, Behind the Music: Backstreet Boys.