Breaking into the music industry is hard. But here, The Mail on Sunday shows how despite the risk of failure, investing in musicians can be deeply rewarding – often in the most unexpected of ways.
Little Mix, big rewards: The band with their Brit award last year
PUT MUSIC AHEAD OF MONEY
The music industry is worth £10billion a year in sales – which sounds a lot until you realise it is a third of the revenue it raked in two decades ago.
A major reason for this is the internet. Despite websites opening up the opportunity for us to enjoy more music through streaming it has meant less money being spent on more profitable album sales.
Making a living out of becoming a rock star has therefore become increasingly difficult. For every success story, such as pop star Ed Sheeran worth £37million and girl band Little Mix, countless others fail. Even with that incredible talent, Sheeran spent a couple of years homeless – often catching his sleep on the London Underground – before eventually being discovered.
The cut-throat industry is now more about making profits from existing bands rather than discovering new groups. With most releases failing to cover their costs, investors must be realistic. Rob Town, musician and founder of agency Stampede Press, says: ‘The music industry is full of sharks keen to exploit artists who are often blinded by a dream of success.
‘The harsh reality is this is a tough old business and you rarely get to make a living out of it even if you are particularly talented.’
He adds: ‘As soon as a band starts talking about money you know it is the beginning of the end – you should always put your music before anything.’
Potential investors should therefore not be primarily motivated by money but instead on how they can support an artist wanting to make music.
The A-team: But Ed Sheeran – now worth £37million – struggled at first
TUNE IN TO NEW ARTISTS
Thanks to the internet, artists can share their music with many millions of new potential fans through websites, social media and streaming services.
The majority of music is now listened to through streaming where you often pay a monthly subscription to get access to millions of tunes – but the amount each service pays a band can vary.
Spotify is the most popular – but also one of the meanest – often handing out just 0.003p per tune played, according to research from the American business magazine Forbes. Deezer pays 0.004p a stream while Apple Music 0.005p. The most generous streaming services are Napster and Tidal, which pay out 0.01p and 0.008p respectively.
Subscription to Spotify and Deezer is free if willing to have occasional adverts played between the tracks – or £9.99 a month without ads. Apple Music and Tidal also charge from £9.99 a month.
Music technology student Joe Brooks hopes to make a living out of music and believes social media can help achieve his dream. The 20-year-old is drummer in band Stray Foxes and is a DJ called Brxy.
Joe, of Kingston upon Thames in South West London, says: ‘It is more about the number of new listeners rather than records sold these days – and if a band attracts enough fans it will then be in more demand for gigs where it can earn some money.’
Drum up fans: Joe Brooks hopes to make a living from music
He believes if you wish to support musicians further, consider visiting the music download website Bandcamp – where you can pay what you feel is appropriate to download music to give financial help to emerging acts. New bands such as Stray Foxes can also be enjoyed for free on websites such as SoundCloud.
Joe adds: ‘It is important to make the most of social media, such as Twitter, YouTube and Facebook, to ensure music and gig details are shared – and hopefully people who enjoy what they have heard pass the message to other fans.’
Buying music – either downloaded or through hard copy CDs and vinyl – makes bands far more money than streaming where it is just played online. Artists can expect to pocket perhaps between 6p and 20p per track of music bought online via a provider such as iTunes, depending on how the original deal was negotiated. A CD or vinyl album sale might see between 5 to 13 per cent of the price paid for the tunes ending up in a musician’s pocket.
INVEST AS A MUSIC MOGUL
Despite the high-risk nature of the industry there is nothing to stop you getting involved – just as long as you are aware you could lose all your money.
Such a gamble turned Richard Branson into a billionaire. In 1973 he invested in Mike Oldfield and Tubular Bells when no other record company would touch him. He also released best-selling album Never Mind The B*******, Here’s The Sex Pistols in 1977 after the punk band was fired by other record labels.
Perhaps the best way to get involved in the market is through a seed enterprise investment scheme, such as industry-focused Amplify Music.
Gamble: Richard Branson invested in Mike Oldfield and The Sex Pistols
For a minimum of £10,000 music fans pool funds with other investors until they get a £1.5million pot. Then five bands each get £300,000 to record and release albums. The cash is tied up for three-and-a-half years and you do not get a say which bands get help – that is left to experts, such as the music manager Brian Message, who has been involved in working with the band Radiohead.
The risks may be high but the tax breaks for seed enterprise investment schemes are generous. They include being able to offset half the total you have invested against your income tax bill. In addition, such schemes can avoid capital gains tax as well as inheritance tax.
Alex Davies is chief executive of Bristol-based financial adviser Wealth Club. Amplify Music is among the tax-efficient investments he offers. He says: ‘There is no guarantee you will make any money – this is not about finding a new mega star like Adele but helping promising artists.
‘Every time you hear their tune on the radio you can be proud and also know you own a bit of the music.’ He adds: ‘Revenue comes not only from music sales but also concerts, royalties and merchandise.’
The most recent Amplify Music seed enterprise investment scheme returned 60p in every £1 invested after three-and-a-half years when investors received some of their money back last September.
Despite this meaning a £10,000 investment only got them back £6,000 – if they reclaimed the £5,000 income tax relief they would not be out of pocket. To be considered a ‘seed’ the business has to have been around for fewer than two years – but this refers to the limited company that invests the money and not necessarily the band, which could have been around longer.
Recent band successes for Amplify Music include the London Community Gospel Choir and The Boxer Rebellion.
GO OUT TO GIGS
Musicians often still tour pubs and clubs to learn their craft and start to build a fan base – despite the internet revolution.
Joe Brooks, of the Stray Foxes, says: ‘A band might have to pay £100 just to be given the opportunity to share a stage in cities such as London – they are only able to make any money if they sell tickets off their own back which more than covers this initial outlay. Once established, pubs and clubs pay £150 or so if you bring in fans.’
It may be a long way from filling the Wembley Arena but it is worth remembering Oasis was only discovered by chance when record label boss Alan McGee was in Glasgow to visit his father in 1993.
He went to King Tut’s Wah Wah Hut club two hours early by mistake when the band played four tracks – and there were only a dozen people in the crowd.
Compared to spending sometimes more than £100 to see an established band with a seat miles from the action, consider enjoying the intimacy of watching relatively unknown bands close up. For ticket prices from £10 these can prove better value.
Details of where you might find such bands can be found at websites such as TicketWeb, See Tickets and the London-based Skiddle. It is also worth scanning local newspapers and music press. University colleges are great for live music.
You might also try out ‘battle of the bands’ style events where groups fight it out with other musicians to get through to another round – and depend on audiences loving them. Such events include SPH Band Contest, with tickets from £7.
When buying tickets for events try to purchase direct whenever possible to avoid being ripped off. Second-hand ticket sellers StubHub UK, Viagogo, Seatwave and GetMeIn! were ordered to clean up their act by the Advertising Standards Authority earlier this month.
They were criticised by the watchdog for not being totally clear about extra charges that can be added when booking for gigs. Viagogo was also slammed for using the slogan ‘official site’ when selling previously purchased tickets.
Ask the ‘in-crowd’ for help…
Crowdfunding – which uses the internet to help entrepreneurs reach potential funders – offers an ideal place for fledgling start-ups to raise money.
Music lovers can provide financial support to a favourite artist and in return enjoy unique rewards – from signed music and albums to VIP concerts, album credits and ‘free’ shows in the front room.
The money donated is used to support the band – paying for them to survive as musicians and helping fund tours and hopefully release albums.
In tune: Jerry Williams used PledgeMusic to raise money to perform in Texas
Crowdfunding websites include PledgeMusic, which helps 1,200 musicians a year raise funds. It charges 15 per cent commission to use the service.
Singer Jerry Williams recently used PledgeMusic to raise funds to perform at the South by South West concert in Texas earlier this month.
The musician sold items – everything from £15 signed posters to £2,000 concerts at your home – to help pay for the £6,000 band trip.
The 22-year-old says: ‘Music is my life and being invited to play at such a festival is a great honour and opportunity I did not wish to turn down.’ She adds: ‘The website provides a chance to raise much-needed funds to help musicians. If fans like what they hear their pledges can make a huge difference.
‘I write my own tunes and want to make a living out of music – and hope to release my first album soon. The support can help me achieve this.’
Jerry has already enjoyed success on the music streaming website Spotify – attracting seven million listeners and getting to the number one spot through its global playlist Moodbooster.
PledgeMusic is not just for new musicians but also established artists no longer signed up to a label and self-releasing. Recent examples using the service include Gary Numan, Marillion and The Libertines.
The amount of money artists raise varies enormously. Recording and releasing an album costs anything from just £500 to £50,000 or more.
Crowdfunding is unregulated. Once you invest you cannot ask for the money back if you do not like how it is spent. You are also unable to later sell your stake to another music fan.