June 17, 2013

Understanding Common Touring / Concert Promotion Contracts and Making a Profit

This post was featured in the ASCAP Daily News Brief

Photo created by Katie Reilly

A musician friend of mine was recently offered an opportunity to play at a local show, but something about the offer seemed a bit odd and he wasn't initially sure if it was a good opportunity. As we've discussed before in Avoiding Music Industry Scams, unfortunately the passion of musicians and the complexities of the music business make it ripe breeding ground for scams created by people looking to make money off of unwitting artists looking for a chance to be heard. The easiest way to avoid a scam when it comes to playing shows is by enlisting the help of an experienced and professional booking agent who is familiar with the industry and with venues, but not every artist will have the opportunity to work with one. So, one of the best ways to avoid becoming a victim of a scam - and to be sure that booking agent is the real deal- is to learn as much as possible about the industry so that you will understand when something is out of the ordinary. So, let's take a look at the most common types of contracts you will come across when it comes to getting paid to play your music live. Quick warning though, there's a bit of math involved. Turns out your algebra teacher was right when they said you'd need it someday. Who knew?


Flat Deal
Let's start with the easiest - and the least amount of math. This deal is just a flat-rate agreement that you will play a show in exchange for a set amount of money. This is most common with supporting slots and college shows.  For example, if you were offered $300 to play at a local bar. One advantage here is that it doesn't matter how many tickets are sold, you will still earn the same amount if only 1 person comes, and it can benefit you, the artist, if you are just starting to play shows or are playing a new market where you may not sell many tickets.

Residency
A residency means the artist will perform regularly at that venue throughout a certain time period. A common example is playing on a set night every week for a month, such as every Friday for the month of July. This is usually payed based on a percent of "door" (a.k.a ticket sales) and it can be split based on how many people actually come out to see you. This means the person at the door asks each guest who they came to see and keeps a tally in order to determine how much to pay each artist. Residencies are a good tool for developing artists to build a fan base because it gives them a chance to grow in that market by playing on a regular basis.

Plus
A plus deal is a set number plus an additional percentage once expenses are met.  For example, 30,000 plus 80% over 42,000. This means you will be paid a guarantee of $30,000 plus the potential to make an extra 80% once the promoter has covered their expenses - including the guarantee that they pay out to the artist before making a profit (this profit is called back end). The most common percentage is 85%, which means that after costs are covered, 85% of the profit goes to the artist and 15% goes the the concert promoter. This type of offer is good for the artist because they are guaranteed a set amount of money and have the potential to earn more if ticket sales are high. You can also use this information to set up an equation to determine the number of tickets you need to sell before you get extra money.

For example, if your band was offered $600 plus 85% over $1,600 and tickets cost $10 each, this means that you will be paid $600 regardless of ticket sales. This also tells us that the promoter's expenses for the show are $1,600. So ticket sales need to be more than that in order for you to get paid.
Let's go back to those 9th grade algebra lessons:

  • Say that the number of tickets sold is represented by the letter T. T must be greater than $1600.
  • T > $1600
  • Tickets cost $10 each so each time a ticket is told it will give us $10 x T. So, we can put it together as
  • $10T > $1600
  • T > 160

This means you would need to sell more than 160 tickets in order to make additional money off of this show. This is great information that you can use to help you negotiate in order to have the greatest chance of making money if you don't believe you will be able to sell that many tickets- perhaps by asking the promoter what costs could be reduced or considering increasing the price of tickets (keep in mind though that you want your fans to be able to afford a ticket!)

Versus 
In this deal, the artist will be given two options and paid based on whichever ends up being more money. It can be based on either the gross profit (before expenses are taken out) or the net profit, so keep that in mind when you are negotiating because it makes a difference. The best way to explain this is probably with some examples, so let's take a look.

Example: $2000 versus 60% of the gross door receipt. This means you will either be paid $2000 or 60% of the income, before expenses.

  • If ticket sales amount to $6000 then .60 x $6000= $3,600
  • In this case $3,600 is higher than $2000. So you would earn $3,6000.
  • If ticket sales amount to $3300 then .60 x $3300 = $1980.
  • In this case, $2000 is the higher option, so you would earn $2000.
  • Just like with the percent deal, you can calculate the ticket sales that would be needed in order to make the percentage a better deal.
  • In this case you want 60% of the ticket sales in dollar to be greater than $2000.
  • .60 x $10 x T > $2000
  • This can be simplified to $6T > $2000
  • T > 333.33

This tells you that you would need to sell 334 tickets in this scenario in order to earn more more than $2000.

Percentage
A percentage deal is similar to the plus deal except that it does not include a guarantee. This means it's the biggest risk for the band and the safest option for the promoter. The artist gets paid a percent based on either gross or net profit. 
Example: 80% over $5,000. This, like the plus deal is based on net profit and already accounts for expenses. It means that you will get 80% of the money earned beyond $5,000. In this circumstance, if the show earns $9,000 total, you will earn 80% of the extra $4,000 earned beyond the initial $5,000 requirement. So you would get .80 x $4,000 = $3,200. If the show only earns $4,000, you get paid $0 because the initial requirement of $5000 was not met and the show has not earned a profit. 

  • We can also do some math here to determine the ticket sales necessary for the artist to earn any money. Let's say tickets are $10 each again. 
  • $10T will give us the total revenue, but we need to subtract the expenses to determine the threshold. 
  • $10T - $5000
  • This equation gives us the total profit ($10T is the revenue - the expenses of $5000), but the artist will only earn 80% of that so:
  • .80($10T - $5000)
  • This will let us calculate how much the artist will earn but the goal is to earn more than $0 so we will set the entire equation to > $0
  • .80($10T - $5000) > $0
  • If you remember math from high school (honestly, I'm not sure how I do!), we can simplify that to 
  • $8T - $4000 > $0
  • $8T > $4000
  • T > 500
So, the artist must sell more than 500 tickets in order to earn any money from this deal. 

Hopefully, this cleared a few things up and can help you navigate the world of touring and booking more easily. Admittedly though, it's been a while since I've studied algebra so please feel free to correct any mistakes you find as well as share your experiences with booking shows and making money playing live. 
Related Posts Plugin for WordPress, Blogger...