The Truth About Making Money From Your Music
What would you say to someone who tells you that making money as a songwriter, singer, or musician is probably one of the easiest ways to actually generate a profit? To keep the language clean – and the tone of this article nice – let's skip over your answers to this question.
Here is the thing, though, if you look at it from a pure ROI (return on investment) standpoint, the above statement isn't far-fetched. I know, this doesn't fit the narrative of most musicians and songwriters these days. The common themes are:
“There is no money in music.”
“Only the big stars make money, leaving nothing for little independent artists.”
“Without contacts in the industry, you can't make a living from music.”
And, of course,
“Streaming services like Spotify and Apple Music ruined the music industry.”
If you're close-minded and hell-bent on believing any of these narratives, you should stop reading here. However, if you are ready to change the narrative, and want to learn how to make money as a singer or songwriter, let's get started.
As some of you might know, I have a keen interest in finance and come from a sales background. I look at a lot of opportunities and calculate their ROI. So, let's look at music.
If you are a songwriter, you have probably thought you could make a whole lot of money by placing your song with a well-known artist or in a famous movie. That is possible, but chances are slim for that to happen. As a performing artist, your main goal has probably been to sign with a major label and perform in sold-out arenas (or drive-in concerts – apparently, that's a thing now) thinking this will finally get you a big payday. It certainly has the potential to pay you handsomely. But again, this is likely not going to happen.
Yet, here I am, still claiming that you can make money and be profitable from your music. I am still saying that your music is probably your best investment from an ROI point of view. Here's how...
Producing a quality song will cost you about $400 to $500. Let's meet in the middle and say the average price of a professionally produced song is $450. Well, at least that's what Tunedly charges for a Full Band production with five instruments. Based on that figure, you have to earn at least $451 with your song in order to record (no pun intended) a profit. How do you get there? Let's ignore physical sales or merchandise and only focus on the low hanging fruits, namely downloads and music streams.
If you own all the rights of your song, every download, on average, will net you right around $0.80. This means you would need 563 downloads in order to break even. That's it! Anything over 563 downloads is profit.
Generally speaking, if you buy or start a business, you can look to make your money back within about three to five years. Again, let's settle for the middle and say you want to break even with your song in four years. That means, you would have to sell 141 downloads per year, which breaks down to about 12 per month. 12 downloads per month!
Let me repeat, you must sell a $0.99 item (that's what your download will cost on average) to 12 people per month. I have personally sold items costing $1,000 to more people in a month in the various sales roles I held prior to me entering the music industry. You don't need a large fan base or name recognition to sell such a small number of downloads. You probably know enough people in your personal network from school, work, country club, or the various organizations you may happen to be a part of (the average American knows about 600 people).
I can't imagine many (if any) of the people you will pitch your song to claiming that they don't have $0.99 to pay for the download (not having the $$$ is the number 1 objection in sales – which makes sense if you try selling something for $1,000 – but not so much if you are selling an item for $0.99).
Okay, so within four years, you will break even on your song – you eliminated the risk, which was your initial expense to produce a worthy song. But what is your potential profit? Let's assume you keep the pace of making 12 sales per month for a total of 10 years. Obviously, by now you would have burned through your personal network. But once you're at that point, it's really not that hard to find avenues that will allow you to meet an additional 12 people who will download your song.
That means, after ten years, you would have sold 1,440 downloads, with an average net return of $0.80, so your earnings would be $1,152. After subtracting your music production costs, your profit would be $702! That represents a whopping 156% return on your investment. If you look at it from an annualized ROI perspective, you would have generated a return of 9.9% p.a. for ten years. What other investment available to you can generate a 9.9% p.a. return?
Keep in mind, by utilizing your personal network (plus anyone you meet along the way) and simply asking them to download your song, you don't even spend a dime on marketing your song! This is obviously a very simplified calculation. You need to get a little more creative if you plan to release more than just one song per year. But even that can be achieved without much (or any – depending on how much legwork you want to put in) marketing spend, if you make use of your network like a salesperson would.
With streaming, the numbers look much higher for obvious reasons, but it's just as easy to make the same amount of money (or more) from streaming royalties. Here is a quick rundown of the numbers:
You need about 100,000 streams across the various streaming platforms to make $450 and break even on your expenses. Let's assume you know 600 people (like the average American does as mentioned above). Most of them will probably be subscribed to Spotify, Apple Music or Amazon Music, but not all of them. So let's say 450 of them are subscribers (about 80% of Americans are subscribed to a streaming platform). The average American listens to about five hours of music per day. If each of the 450 people you know personally plays your song on a streaming platform once a day, for one year, you will accumulate 164,250 plays in total. As you can see, you would break even in under a year, and it wouldn't have cost your friends and acquaintances a single penny, and with minimal effort to do so.
The key to all of this is having a decently produced song. You don't want to be trying to pitch your basement recordings, because that will burn your bridges for subsequent songs you want people to listen to, and they will just politely ignore you.
In the near future, I will write a guide about how to ask your network to play your song, download your song, or even add it to their Spotify playlist. It will also explain how to expand your network or have your network help you get into their network as well. For now, just know that it is possible to make money as a songwriter or singer, and it's surprisingly easy!
Chris Erhardt is the co-founder & CEO of Tunedly – the site you're on right now. ;) Tunedly connects songwriters and music creators to some of the world’s most talented session musicians, to create professional-sounding music, as well as helping you gain exposure through music publishing opportunities. He is a songwriter and producer, as well as a speaker at music events and tech conferences.
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