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Music and Finance

In: Film and Music

Submitted By sarahseif15
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MUS 210 - Music Appreciation
Dr Lola Beyrouthy
Spring 2015

Concert Touring
How Music & a Major in Finance are Related

Sarah Seif
20113688
Table of Contents

1. Introduction 3 2. Overview of Concert Touring 4 3. Tour Budget 6 Revenue Streams 6 Tour Budget Categories and Subcategories 7 4. Ticketing Prices 9 5. Sponsorships, Endorsements and Promotion 11 6. Settling the Show 12 7. References 13

1. Introduction

Traditionally, artists used to keep businessmen away. But the cool, artsy guy needs some of the skill sets that the businessman has, and businessman could certainly learn fluidity, creativity and computer-marketing skills from the artist. The smart ones seek each other out. If someone isn't watching out for the business, there won’t be any art or music.
Since I'm majoring in business administration, with an emphasis in finance, I decided to write about concert touring financing.
First, we'll discuss in general, the steps of concert touring and we'll later focus on tour budget, ticket pricing, sponsorships and finally settlement after the show.

2. Overview of Concert Touring

In concert touring, there are several steps, that will be discussed briefly in this section, since our major focus in on the financial part of the process.
While studying this process, the touring artist should be considered first. Find out who he is, and what does touring mean for him. Then a study of the current touring industry should be conducted in order to know where do we stand today.
Afterwards, the management should be determined. Managers are the communication link with everyone else, while agents are the ones that will sell the artist's show to club owners, promoters or event organizers, or the buyers.
Then, a plan should be put together in order to determine the goals of the artist/band. And press kits, or an online music community that allows musicians and promoters access to each other’s materials and it includes some brief information about how the band is doing in a particular market.
After agreeing on the plan, offers, contracts and deals should be discussed. Managers and agents should weigh different types of deals and put them into context of the music industry. All of these are used in order to predict potential earnings.
Having agreed and signed the contract, the tour budget should be set. It's used to project potential expenses and predict possible savings and shortcomings.
Furthermore, ticket pricing is an important aspect of the financial part of concert touring. In the following sections, it sheds the light on how prices are determined and what are the new trends in the ticketing market.
Sponsorships and endorsements are very beneficial in concert touring and can be of a major support to the touring artist, financially and psychologically. Everyone needs to start somewhere.
Then, any manager should look beyond the deal and consider the riders (special needs and preferences of the artist), the stage-pilots and all technical riders. These include the contract riders, the technical riders, the venue rental agreement and itineraries or routing.
Furthermore, the tour personnel should be considered : who's in the crew. From the tour manager, to the tour accountant, the road manager, to the production manager, the roadies and the technicians.
Last, before least, the show day has come! From the load-in, to sound check, to the actual show, to the load-out.
Finally, comes the settlement day. We focus in this paper on who and what to expect at settlement, and how to calculate gross and net revenues and expenses.

3. Tour Budget

The budget for a tour is not supposed to prove that anything is a great idea. It's designed to let you know where the problem areas will be. There are many variables on a tour.
Revenue Streams
There are three kinds of revenue streams : 1. The basic selling of physical item for an amount of money. 2. The increasingly valuable stream of selling opportunities. 3. Reducing expenses.
In the traditional section, we have different possible physical items to be sold. First of all, we have the traditional concert ticket sale; where the capacity of the venue is multiplied by the ticket price in order to give you the gross potential. As venues get larger, they will start to charge for different things. A bar venue might have the capacity to host 100 persons, but the doorman might let the regulars come in for free, the artist's guests will come for free and the artist will end up with less than expected revenues. While a larger venue will charge for the sound system, the insurance, promoter's profit, etc… On another hand, the merchandise is included in the traditional revenue stream : t-shirts, work-shirts, hoodies, CDs and posters. Selling CDs at shows is a main point of purchase of physical product. However, with the rise of the Internet and the download of music, online, reduced the sales of CDs ; fans of artists are still interested of having a physical souvenir from the concert they attended. Posters are also important, both for promotions and increase in the revenue streams. In addition, posters require a low cost : it simply requires to take a photo and make a limited-edition screen-printed posters, have the artist autograph it and sell them.
Next, for the non-traditional revenue stream, we have the tour support and sponsorships. Sponsorships are a chance to save money rather than generating money. Sponsors may pay sine expenses as an incentive for bands to perform in their priority markets. Additionally, many labels do give cash as tour support while others give merchandise to sell.
Finally, spending less is as good as bringing in more money.

Tour Budget Categories and Subcategories

4. Ticketing Prices

Prices vary because seats are different, because seats are located in different places, because performances take place on different dates, because venues offer different complementary goods, or because the promoter bundles several tickets together in a season ticket package, etc.
How are the ticket prices determined?
The entertainment industries are vertically divided between performers, agents, promoters, venues, and ticket agencies. Typically, a promoter contracts an act from an agent who represents the performers. Then, the promoter searches for venues in which to perform the event. The venue imposes some constraints about the number and the type of seat categories that are available for each performance. Once a venue is selected, tickets are sold either at the venue booth or through ticket agencies.
Front seats usually cost more than those located further away. Industry professionals call ‘scaling the house’ the process of pricing the front rows at high prices and reducing prices all the way to the nosebleed section.
Promoters are responsible for setting the price for their own events and generally tailor prices to the demand of the particular events. For example, a performer on a tour may set different prices in different city stops to match the specific city demands.
Ticket markets differ from the standard spot market model in at least three ways. First of all, in ticket markets, firms typically do not sell homogeneous goods. They sell seats of different qualities offering different experiences. Second, because tickets must be sold before the event date, the pricing problems raised in ticket markets share a lot with the pricing problem of perishable products. Finally, firms often offer the same performance several times or offer different performances over a season.
Resale may occur for several reasons. First, promoters encourage arbitrage when they do not price tickets according to market forces. Another reason for which resale may occur is because tickets are typically sold ahead of time so that early buyers may not be those consumers who value the ticket the most at the consumption date. Under both these circumstances a ticket can be worth less to its owner than to some other consumer; if so, reselling will benefit both parties.
New trends in ticketing
Nowadays, there are new trends in the ticketing markets. A new innovation, the electronic sale of concert tickets has emerged on the market. And, unfortunately, this shed the light on more discrepancies in ticket prices.
Furthermore, there is the possibility to print the ticket yourself and this is to prevent loss in the mails or damage during delivery.

5. Sponsorships, Endorsements and Promotion

"When you are making music, standing on stage and, traveling around the country, you have something that large companies want : grooviness, vibe, and an way in with the hardest generation to crack - other kids like you".
Sponsorships and endorsements is about getting it and giving back : delivering everything that the sponsor wants when they want it in a non-threatening way.
Sponsors can not only provide a source of income, but also increased brand awareness, volunteers, and other valuable resources.
Nowadays, there are more and more companies getting involved in sponsor music : from liquor to all beverages, most of the beer companies, car companies, clothing companies and shoe companies…
In order to be a better sponsored band, you should : 1. Love and use the product/ company you have sponsorship from. 2. Know a little about the company and know exactly how their sponsorships work before contacting them. 3. Have a list of accomplishments when speaking to their representative and not a "currently recording the next record". 4. Have your website completely up-to-date. 5. If accepted for sponsorship, do everything to include this company in all band promotions.

6. Settling the Show

Settlement is an opportunity for a decompression/debrief between yourself and a promoter. Promoters are people that an artist should hope to be seeing more of in the future. The artist is going to have to be making someone an awful lot of money for them to continue to deal with him.
A bad show is an opportunity to man up. The artist might get some great advice from an industry professional who has probably seen an awful lot. The artist or the manager should walk around the venue and chat with everyone all day, while paying attention.
Let’s look at a settlement. Some will be much simpler, a record of tickets sold, expenses, and your percentage. Others will be much more complicated.
Promotional budget, ad rates, where the advertising budget is an important part of the overall deal. They might me overpriced, but it's impossible to lower these rates, however they could be used as a form of negotiation, to get a discount somewhere else. Catering is also settled at the end. Deposit is also part of the settlement; it's used to cement a deal and put everyone’s mind at rest. If there is a problem with a show, the deposit is non-refundable. It's also used to shift the weight of responsibility onto the promoter to promote the show, to make sure that it happens, and to make sure he gets his money back.

7. Conclusion
As a conclusion, yes, this topic isn't for start-up artists. A more convenient way to start up your own musical project, financially can be found below.
What follows is a list of 16 specific actions you can take right now to get the cash flow moving toward your musical project: 1. Make a commitment to yourself right now that you will find a way to raise the money. 2. Set up a Musical Project Fund bank account. 3. Set aside a percentage of your "day gig" salary. Self-financing takes a bit of discipline and sacrifice on your part, but it's well worth it. 4. Earn extra cash from other music-related activities. 5. Rent equipment you already own, to others. And then put that extra cash into your Musical Project Fund. 6. Sell off old equipment you don't use. 7. Credit cards. 8. Set aside money from paid band jobs. 9. Promote one or two live shows as fund-raising gigs for your next album 10. Sell your own CDs, cassettes and/or records. 11. Sell T-shirts, caps, posters, stickers and other merchandise. 12. Family members and friends. Many businesses have been started from these personal loans. 13. Personal credit. If you have a good relationship with a particular music store or production facility, they may extend a delayed payment plan to you. 14. Sponsorship. Instead of Coke, Pepsi or Budweiser sponsoring you, why not the local recording studio? 15. Build your own equipment. 16. Set weekly and monthly money-raising goals.

8. References

1. Tour Smart And Break the Band
Author: Atkins, Martin
Date: 2007

2. Money Raising Basics: 18 Ways to Finance Your Next Musical Project. Bob Baker. 2013. Retrieved from : http://www.taxi.com/music-business-faq/music- motivation/guerilla-financing.html

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