Chapter TWO

The Music Industry: Players and Cash Flow Streams

You, the individual artist or band, are the true center of the music business; you are the people who write and/or play the songs, and this music is intellectual property (IP). To become successful in terms of business profitability, you must you sell enough of your music (IP) to cover your expenses and this only happens if you are able to reach your fans. Artist-to-fan direct communications is the future of the MUSIC BUSINESS, and it may be the crucial factor that determines whether you are profitable and, hence, successful as a business.

Your music is sellable in four ways; it becomes recordings, which drives publishing, drives live appearances, and creates the possibility for merchandising image/logo-bearing products. Each of these cash flow streams can be charted, including all the players who take a cut before the artist sees anything. There are also other players whose help is required for an artist’s success, but they aren’t related directly to any particular cash flow stream as measured by profitability. This book assumes that you and your band are already up and running and doesn’t cover that because plenty of those books have already been written. What this book WILL do is help you become MORE profitable by identifying the paths the cash follows, the players associated with each path and how to measure and evaluate these cash flows to create profitability. Since music is a business, I’m going to teach you how to do business in the music industry. Here’s one of the important bits of information I hope you take away from this book: profitability can be increased in three ways: by increasing income/revenue, by cutting expenses/costs, or by implementing a combo of both. A combo approach is best.

The four major cash flow streams for an artist are: