Why We Wrote This Guide

We composed this guide to provide you with essential information and knowledge regarding tour financing. Amidst the complicated music streaming economy, touring is a vital aspect of an artist’s financial success. A music tour, whether in-state or worldwide, has the potential to earn an artist substantial funds and publicity. For a tour to be a financially successful endeavor, an artist and their team must have an understanding of the investment and payout processes. Since the nature and magnitude of a music tour will vary drastically depending on the artist and their goals for the tour, this guide will explain the basic financials involved in every kind of tour.

Who Is This Guide For

  • New Music Artists who are seeking a basic understanding of touring financials
  • Experienced Music Artists who are planning or restructuring their touring financials
  • Personal/Business Managers handling touring deals, agent interaction, and the monetary success of an artist’s tours
  • Any other “team” member involved in the planning and execution of a music tour

Contents

Forecasting

You just released an album. Congratulations! Your songs are getting radio play and digital streams, but you want more. Time to hit the road! A tour will give you an opportunity to interact with your fans, promote your album, and sell those sick graphic tees you designed. But, before live shows and meet and greets, you’ll need a solid financial plan so your tour rocks to its fullest potential. The first step in planning a tour is forecasting its income and expenses, and projecting whether your tour will be profitable. Good news or bad news? Let’s start with the bad news: Tours are expensive. The dollar amount of the expenses incurred on a tour depends on the artist and the nature of the tour, but no matter what there are lots of “things” to pay for.

Expenses

Again, what a band or artists must pay for to put on a tour will vary, for example, a college band touring the state of North Carolina most likely won’t need an elaborate security detail, but Justin Biebercertainly does. To make this guide accessible and beneficial for artists and managers of varying statuses, we have created a list of basic expenses involved in every tour, to help you begin your financial planning.

  • Tour/Equipment Crew: Your tour crew is invaluable as they will most likely be the ones to handle everything that happens on your tour except for the music. Moreover, these are the people looking out for you on tour, they know you and what your concerts require to succeed, while local venue crews don’t. So, compensating your tour crew fairly is important. If you're a member of the tour crew and your job is the financials, be sure to remember yourself in the forecast! Here’s a list of basic tour crew members that will act as an expense on the balance sheet:
    • Tour Manager
    • Production Manager
    • Advance Person - Arrives at each tour location before the band and crew to help the road manager and make sure advance arrangements have been handled correctly.
    • Stage Manager
    • Sound Engineer
    • Monitor Engineer
    • Lighting Crew
    • Backline Crew
  • Transportation: Transportation expenses will vary depending on the size of your band and crew, the quantity of equipment, geography of your tour, longevity of your tour, etc. Transportation is expensive and essential. Whether you are in a van, tour bus, or jet, your transportation expenses must be forecasted.
  • Equipment/Production: Unfortunately, the equipment you use at home to create your music will mostly not get the job done in clubs and arenas. Live concerts require a laundry list of music and production equipment rentals. Of course, the equipment depends on you, the artist, but no matter what equipment is a substantial expense.
  • Insurance: Insurance can pertain to rented equipment, transportation, audience safety, theft, etc.
  • Equipment/Production: Unfortunately, the equipment you use at home to create your music will mostly not get the job done in clubs and arenas. Live concerts require a laundry list of music and production equipment rentals. Of course, the equipment depends on you, the artist, but no matter what equipment is a substantial expense.
  • Promotion/Marketing Efforts
  • Merch: Merchandise sales often account for a significant portion of a tour’s profitability, but merch requires upfront investments and must be forecasted.
  • Venue Payments
  • Musician Fees:If you are a solo act, but require a band around you, you will have to include hired musicians in your forecast
  • Rehearsals
  • Public Performance Licenses

Income

Ah! The good news! Though it may not seem like it, you will in fact get paid to play your music in live shows. How much of the paycheck you get to keep is another story, we’ll cover that in profitability. But for now, here’s a list of “things” that will bring in money on your next tour.

  • Fees: Fees are single show rates for smaller, local artists. Clubs and opening slots for the main act can typically range $250-$1500. Bands with larger, regional following sometimes earn anywhere from $5000-$10,000
  • Guarantee or Show Profit Split: Your guarantee is what a promoter will pay you or your band to “reserve” you for a concert. The dollar amount for your guarantee will vary depending on your tour expenses and clout. The alternative to a guarantee, as sometimes promoters aren’t confident your concert’s revenue will exceed the guarantee, is a percentage of your show’s profit. The basic formula for a show profit deal is a percentage of (Your ticket sales - The venue’s expenses). The typical percentage hovers around 80% of the venue’s profit from your concert. For more information on promoter splits read our guide on promoters.
  • Multi-show Deal
  • Merchandise: Merchandise is a massive source of cash flow for touring artists and is often a tour’s main source of income. Apparel, phone cases, stickers, posters, etc, can be sold at concert venues or through online mediums. Venues will often require a percentage of on-sight merchandise revenue.
  • VIP Packages: Selling VIP Packages at a higher price is one way to boost ticket sales. VIP packages can include backstage passes, band hangouts, meet and greets, music tutoring, exclusive seating, etc.
  • Sponsorship:If you or your band has a sizable following and clout, brands will often partner with you to promote their product at your shows. Sponsors can pay you on a show-to-show basis or as an advance investment into your tour.

Where do I Get the Money to Pay for my Tour?

Whether you're an independent artist or signed with a major label and publisher, funding a tour requires substantial investments. Where an artist raises the funds for a tour depends on the resources they have available to them. Financing a tour as an indie jam band with a local following will look very different than an artist with a long-term record deal. To make the various financing options easier to navigate, we have separated the options into general categories of different artists. The financing options within each category are not exclusive by any means and can often be utilized by each level of artist.

Independent/New Artists

As an independent or new artist with no record deal, tour support from a record label is not an option. But, there are a variety of other methods to acquire the funds necessary to finance your tour.

Find A Sponsor

As a new or independent artist, you most likely have a solid, local fanbase that is responsible for your current streams and popularity. Networking within your local fanbase to find small businesses or dedicated supporters willing to invest in a local tour is a great option. A sponsorship from a variety of local businesses provides you with the necessary cash flow to put on a small-scale tour and simultaneously promotes the products or services of your business investors. Most likely, small businesses won’t have the flexibility to fully finance a tour, but sponsorship is an accessible supplementary financing option for new and independent artists.

Grants

Music performance and tour grants are everywhere. Often,grants are awarded to acts that align with an organization’s goals, ventures, or niche characteristics. A grant is an optimal option for new artists and bands because they do not have to be paid back. Sounds awesome, right? They are, however receiving music grants typically involves intense application processes and in some cases nominations. So, if you are interested in applying for a grant be prepared to dedicate substantial time and effort to the application process. Here’s a list of US-based Music Grant organizations that offer grants for music project (touring is considered a “project”)

There are hundreds of grants available to you as a new artist offered from a variety of sources including non-profits, local government, universities, etc. Again, most grants will not single-handedly fund a tour, but they are a great option to get started.

Crowdfunding

Crowdfunding works just as it sounds: Funding your tour through donations from your fans. Crowdfunding requires substantial effort from the artist or band, but if done effectively can generate lots of capital. Crowdfunding is effective for artists with local, dedicated fans who are willing to invest in a tour prior to its initial stages of planning. Crowdfunding is rarely effective if all you are advertising is live performance. Creating a narrative or providing a reason for someone to fund your tour is the best way to secure donations. There are many crowdfunding strategies that encourage fans and non-fans to donate to your tour fund. Artists or bands can partner their tour with charitable organizations, so donors are funding a tour and promoting a charity. Also, artists and bands can offer free tickets or VIP experiences to those who donate to their tour fund. Crowdfunding can sometimes harm your financial efforts if your fund-raising strategies come across as insincere or unreasonable. Setting a reasonable funding goal, explaining the benefits of donating, and rewarding donors are essential components of a successful crowdfunding endeavor. There are a variety of crowdfunding tools, some are music-oriented and some are general. Here are some popular crowdfunding sites where musicians fund their projects and tours:

Small Show Savings

Another great way for newer and independent artists to eventually fund a tour is by putting on a series of small, low overhead shows. More specifically, dedicating the necessary amount of time before a full-blown tour to performing at house shows, college parties, bars, weddings, and corporate events. These smaller-scale shows require significantly less spending upfront for many reasons and in turn, increase your profit margins quite generously.

1. Tour crews, managers, and agents aren’t necessary for small gigs.

2. Home equipment is effective in small venues eliminating spending on rentals.

3. Transportation costs are reduced due to less personnel and equipment.

4. Insurance fees are significantly reduced or eliminated.

5. The artist or band can deposit a majority of the concert’s profits directly into a tour fund rather than paying their team or a promoter.

The list of small show benefits goes on, but overall, small shows are easier to put on and generate more profit percentage-wise compared to a concert in a tour cycle. Small-scale gigs simultaneously market your music and upcoming tour to diverse audiences. Not to mention, merch can still be sold at a bar or fraternity party. Whether or not the small show savings strategy works for you depends on how much revenue you expect to generate. It is important you are sure that the effort, money, and time spent on smaller gigs will make a substantial impact on your tour financing.

Midlevel/Artists with a Record Deal

Tour Support

If you are signed with a record label, the most common way to accrue funding for a tour is through “tour support.” Tour support is money guaranteed to you as an artist to make up for any losses you incurred during your tour. The dollar amount and terms of your tour support will vary depending on your label, deal, and tour. Most times, tour support is only offered to artists on their first tour as record labels hope it won’t be necessary after your first time around the block. In exchange for tour support, record labels will often expect some “active rights” involved in your tour such as free tickets. Tour support is recoupable, so the investment from your record label will be applied against your earned royalties.

Sponsorship

A major tour will often make deals with big-brand sponsors. Tour sponsorship for mega-artists can range from hundreds of thousands to millions. Oftentimes, sponsorship for a major tour will require commercials and additional product promotion rather than just marketing at live shows.

Loans

Loans are typically the last option an artist seeks for tour financing as loans must be paid back plus interest. Applying for a loan is risky as there is no guarantee your tour's revenue will recoup the loan plus its interest. Relying on a loan does not account for potential mishaps on your tour such as equipment repair, personnel issues, and weak turnouts. Also, interest payments increase with the size of the loan and the length of your tour. However, with thorough financial planning and confidence in your ticket sales, loans are a straightforward and reliable option for your financing. Oftentimes, investors prefer tours that are generating revenue from guarantees rather than promoter splits. But, guarantees are becoming more difficult to come by and can drastically limit the profitability of your shows. Artist Growth is an arts management company that offers tour loans based on guarantees.

Rights/Royalties Trading

Another way for an established artist to fund a tour in selling the rights of their work to investment companies and angel investors. Investors can provide artists with advances for tours in exchange for the rights to compositions and sound recordings. This process can be extremely complicated as rights to musical works are sometimes owned by the composer/recording artist or by a publisher/record label. But, royalty and rights trading can largely benefit both parties involved. Investors are able to trade tour advancements to take an equity position or purchase outright certain rights or royalties streams from an artist. For investors, royalties and rights can offer stable earnings, predictable payment dates, and acceptable yields. On the other hand, touring artists receive tour financing at lower risk compared to loans and your support. Why? Unlike a loan, advances to artists in exchange for royalty streams do not need to be paid back in the event of a tour failure. Instead, angel investors take a long-term view and understand the risks of trading the advance for the royalty stream. The primary disadvantage of utilizing angel investors and royalty trading is the loss of complete control over the rights and royalty streams associated with your works.

Payout

Hopefully, after your tour is completed you will have at least recouped your own investments or paid back your lender. To do so, you will utilize the cash flow from your tour’s main revenue generators which were most likely your ticket and merchandise sales. Unfortunately, even after your advance or loan is paid off, the revenue from merch and ticket sales is not entirely yours. If you entered into a split promoter deal, a portion of your concert ticket profits is owed to the promoter. Learn more about promoters and promoter deals here. Next, a portion of your merchandise revenue is owed to the concert venues where your merch was sold. Are we done? Nope. Next, with your remaining revenue, you must pay off any tour expenses not covered by your advance or loan. These expenses will vary depending on your investor or loaner but oftentimes include manager/agent commissions, musician fees, and any unforeseen expenses incurred on the tour. Now, once your advance/loan is settled, the promoters and venues have been paid, your expenses (including your tour crew’s salaries) are paid off, the remaining sum of money is your or your band’s profit. Woohoo!

You may be thinking, “After all that, there can’t be much left.” Well, that depends on your financial planning and the success of your ticket and merch sales. But, to maximize your tour’s profit there are a few expenses that often end up unnecessarily expensive. Donald Passman, an experienced music professional and author of All You Need to Know About the Music Business, suggests making sure these expenses are reasonable:

  • Salaries for your band and personnel:

    “you don’t always need to carry as many people as you think or pay them as much as they demand… it’s not just salaries, it’s also hotels, food, transportation, etc.”
  • Stage, Sound, and Lights:

    “these expenses can eat up a large chunk of your profits… larger staging means more trucks and crew. Remember your fans are there to see you perform”
  • Travel:

    “You can save a lot by traveling light… try to hub, that’s when you base yourself in one city and play venues within a short flight… you are doubling your mileage” As an artist that is signed with an indie label you are still able to have control over your publishing since labels typically ask for partial or complete ownership of your master copyright. This allows you as a singer-songwriter to retain ownership of your composition rights so you can keep 100% of the royalties earned from uses of your composition. Those royalties include sound recording performance royalties, a portion of sync royalties, and master-use royalties. If you choose to handle your own publishing you will have to register with the PRO of your choice (BMI, ASCAP, or SESAC), register with all three mechanical licensing agencies (Harry Fox Agency, Music Reports, and MLC), and work to promote your music. It’s important to note that you can only go this route as a singer-songwriter not as a recording artist because you must be the original owner of your composition copyright. Our “A Birds-Eye-View” guide can help you visualize the differences between how composition and sound recording rights are handled by labels and publishing companies.

Profitability

The royalty rates associated with streaming are making it difficult for smaller to mid-level artists to make a living off of album sales and online engagement. Tours are proving to be the most reliable and lucrative source of income for artists and bands in the age of digital music. So, thorough financial planning is as important as ever. With that said, even with accurate forecasting and successful fundraising, newer artists will often see small to zero profit from their early tours and sometimes even incur a loss. Unfortunately, low returns on touring for new, independent, and local artists are simply a reality. Smaller artist’s ticket and merch sales often struggle to offset the high expenses involved in touring. But, tours present a multitude of invaluable benefits that are not listed in your balance sheet. Touring itself is one of the best ways to market yourself and your music. Live performances allow you to intimately interact with fans and communities in ways that digital streaming and social media do not allow for. Moreover, a tour connects you with every facet of the music industry. You will meet and interact with other artists, promoters, agents, managers, A&R personnel, publishers, sponsors, and more. Though touring may seem like an ill-advised investment as a new artist, it is important to factor in the intangible profits that a tour generates.

Sources


Author: Will Donohue

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