How Do Rock Stars Really Make Their Money?
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In recent years, rock music legends like Bruce Springsteen and Bob Dylan have made big news by selling their music catalogs for hundreds of millions of dollars. Obviously, these are huge sums of money paid to artists in exchange for “ownership” of their songwriting and performance of music.
Now, most believe recording artists and rock stars make their money by having a hit record and record sales. However, this is generally not the case and, instead, artists make their true money in different areas of their craft.
Record Sales
- When it comes to records, one may think artists make millions of dollars from sales but this is not always the case.
- A typical rock artist makes between 10% and 20% of the gross sales from albums and records.
- For new artists just signed to a record label, this amount is always at the lower end of the scale.
- As an example, after Van Halen’s first album, which sold 10 million copies, and accompanying world tour, they were shocked to find out they were in debt to Warner Brothers records to the tune of $1 million.
- When MC Hammer was offered a record deal, the company proposed paying him just over $1 for every record sold. Now, at the time albums sold for about $10 with MC Hammer selling his records out of the trunk of his car. Based upon this profit margin, MC Hammer turned down the record company’s offer knowing he could make more money selling 200,000 copies of his record out of his trunk, than one million with the record company’s help. A shocked record company quickly re-worked a new deal!
- Bottom line, record sales are not where most artists make their money!
Streaming is Worse!
- Rock stars and recording artists make even less money when it comes to online music streaming.
- Indeed, artists make roughly 1/3 of a penny per stream.
- So, on Spotify, for example, 1 million streams will pay an artist between $1,000 and $8,000, with an average of $4,000.
Touring
- Record deals and streaming are not the answer for artists wanting to make money from their craft.
- Instead, big money comes from touring.
- For example, in 2017 U2 earned just over $332 million. 95% of that came from their “Joshua Tree 2017” tour.
- On his last tour, Garth Brooks grossed $5.8 million per show. 89% of his income for that year came from touring.
- In 2019, Metallica earn $68.5 million from touring, representing 71% of their income for the year.
Publishing Rights
- Which brings us to the topic of publishing rights, where the biggest dollars are to be had.
- Earlier this year, Bruce Springsteen sold his entire back catalog – including songwriting and recordings – to Sony Music Group, for more than $500 million.
- In recent years, other artists have done the same:
- 2020, Bob Dylan – $400 million
- 2021, Shakira – $150 million
- 2022, Stevie Nicks – $100 million
- Of course one of the most famous publishing rights purchases came in 1985, when Michael Jackson bought the Beatles catalog for $47 million. Since that time the Jackson estate sold half of the catalog’s rights for $100 million in 1995, and the other half in 2016 for $750 million. Today, the Beatles catalog is valued at more than $1 billion. In 2018 Paul McCartney sued to get the rights to the Beatles music, settled for an undisclosed amount and now owns half the catalog. In 2026, he will be able to obtain ownership of even more.
Why Sell Publishing Rights?
- By acquiring music rights, entities purchasing them can reap the money from royalties, licensing, brand deals, and other revenue streams that would have gone to the artist.
- For the artist, it’s an opportunity to maximize the upfront payment they would otherwise receive over several years through royalties.
- According to Rolling Stone magazine, right now there are three reasons why artists are wanting to do this:
- Tax Reasons
- Joe Biden’s tax plans include altering U.S. capital gains tax, so it falls in line with income tax for any asset sale over $1 million.
- As a result, the tax rate on the sale of publishing rights will increase from 20% to 37%.
- So, for an artist like Bob Dylan who sold his publishing catalog for $400 million, the $80 million he paid to the government would have been more than $145 million.
- Personal Decision
- As noted, Shakira sold her catalog for $150 million in 2021.
- The money used to sell her catalog will more than cover the $16 million owed in back taxes to the Spanish government.
- Bob Dylan is 81 years old and has six children, so divvying up $400 million is much easier than having to deal with how to divide publishing rights.
- Market is hot
- According to an article in Rolling Stone magazine, company’s buying artist publishing rights are currently paying an average multiple of “14.76 times historic annual income.”
- That is, they are paying 14.76 years’ worth of predicted royalty profits for artist catalogs.
- And, the bigger the superstar, the bigger the multiple.
- It is believed Bob Dylan was paid a multiple in excess of 25 times what his song catalog makes on an annual basis.
So, if you’re interested in getting in the music business think about what your predecessors have said! Yes, “It’s Only Rock N’ Roll and We Like It” but if you want to “Rock ‘N Roll All Night and Party Every Day,” remember “It’s a Long Way to the Top if You Want to Rock N’ Roll!”