Music Economics: Stay within and below your means!

Lavatory Records

Continuing in the series of establishing a music economy, we want to stress to all readers that you must remain economical and grow incrementally by staying within and below your means. The universally agreed way of making money in the music industry, is through live shows. Live shows on their own are a great way to explain the applicability of economics. The concepts of understanding the equilibrium and developing good habits in this regard, will ensure you stay within your means.

The hype and impetus that was charged to fill up the TicketPro Dome in Northgate by South African rapper Cassper Nyovest is a point of comparison to the notion we are reiterating. Cassper’s campaign stemmed from his beef with fellow local rapper AKA where he dared to say he could fill up the aforementioned arena. The inspirational underlying theme of Cassper in filling out The Dome was a positive thing in terms of setting goals. However it leaves a lot to be desired apart from that because it was “Fill Up The Dome or bust”, in literal terms.

Was the campaign a success? Yes without a doubt! Though at what price was The Dome filled up? It was a rather audacious situation and the hiring fee of around R4.5 million for the venue, had to be borrowed from sources away from Cassper’s estate. The self-admission in that he put himself “in debt” to pull off the show, has raised questions as to how the venue was actually packed in reality. However going into assumptions is not the purpose of this write up, we are merely looking at sound financial practices of putting on shows.

Lavatory Records

If you are a new band for example, your primary goal is to put on a good show. Also putting on a good show serves to use the time to get over or embrace the jitters of performance anxiety and play your way through it. The first instance, you will put on a show for free so that you can build your fan base. This show can take place at one of your band mate’s garage, where no hiring fee for the venue would occur and no extra expenses would occur. Due to the no overheads/expenses and no income generated in getting an opportunity of getting an audience, this will put you at a point of reaching an economic equilibrium at R0. Thus meaning no profit or loss incurred, in this extent.

In the event you move your band to a local diner, you would see the opportunity of attracting a new audience. In that regard you would negotiate with the diner to either hire out the venue or enter into an agreement for a value justification. The value justification in this regard, would be your audience that you had from the previous performance at your band mate’s garage, would now be able to take a trip to the diner to hear you again and now be treated for refreshments. The extra patronage at the restaurant and money spent on refreshments will offset the need for a hiring fee, putting the band at economic equilibrium again at R0.

The idea of this principle of being economical and staying within your means, entails that the more expenses you would occur, the more money you have to make to make money. Once you have built an audience, they become your power of negotiation which will start attracting more interest from other music fans. These fans will present bookings and opportunities for you to gain an even bigger audience through booking agencies. However, the very same agencies have to understand that you as an artist have costs to cover, such as travel, accommodation and anything you will need in order for you to have a successful performance. This way you will establish your value down the line and know what “opportunities” to walk away from, when you remain economical and within your means.

Lavatory Records

Once you’ve established your value, only then can you move further away from R0 mark and into the positive gain of R1 mark and beyond, of determining profit margins. This principle can also be applied to an artist producing an album, making sure he covers the expenses of duplicating the CD, distribution through travel etc. From there, your album must then generate a profit for you when you understand what your expenses are. It might be more cost effective to post the album rather than deliver it personally for example. It would be a little more complicated down the line with albums as there is risk involved from having too much stock of albums on hand. This would bring the concept of opportunities and risk, which is another discussion to be covered on another day.

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3 thoughts on “Music Economics: Stay within and below your means!

  1. Thanks for this blog post regarding “Music Economics”; I really enjoyed it and am definitely recommending this blog to my friends and family. I’m a 15 year old with a blog on finance and economics at shreysfinanceblog.com, and would really appreciate it if you could read and comment on some of my articles, and perhaps follow, reblog and share some of my posts on social media. Thanks again for this fantastic post.

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