The New Music Business Model

From USAToday: Summer tours help bands pay bills [pdf]

Summer touring season is the working musicians’ version of retail’s holiday shopping season: a chance to reap bigger dollars from more people in a compressed period, before students return to school.

A look at banjo master [Béla] Fleck and how he runs his business in the digital age shows how drastically the industry has changed. A new CD release gets attention, but with many young customers bypassing CD purchases for free pirated songs on the Internet, touring pays the bills. Fleck says concerts reflect 70% of the band’s income, records 20% and merchandising 10%.

Fleck will realize 40% of his yearly touring income crisscrossing the country to perform with his jazz/bluegrass/world music band at amphitheaters, auditoriums, amusement parks — even a farmer’s market in Kansas City.

[….] Even in flush times, the economics of the recording industry make it hard for most acts to make money from CDs.

Fleck says most of his CDs cost $100,000 to $200,000 to produce. The budget — fronted by the label — has to be recouped from CD sales before Fleck and the band see royalties.

Getting royalties from albums can take years. Fleck says that even though his first album with Warner Bros. Records sold well, “We didn’t see money from that deal until eight records down the line.”

Fleck manager David Bendett says the band switched to Sony because the label offered a big advance — he won’t reveal the number — and a unique arrangement: three albums on Sony’s Columbia jazz label and two on Sony Classical.