Your bargaining power as an artist is in your ability to walk away!

Lavatory Records

The term bargaining power is a concept that was widely discussed by economist Michael Porter, when he conceptualised the “Five Forces Theory”. This framework as developed by Porter is a business industry analysis tool to measure a business’s performance in terms of profitability and strategic sustainability. Porter listed these five elements: Threats of New Entrants, Threats of Substitutes, Degree of Rivalry, Supplier Power and Buyer Power. The real reason any business would do an industry analysis is to gain a competitive advantage over other rival firms. Quick MBA gives an extended explanation of Porter’s five forces theory.

Michael Porter

Michael Porter

To be financially secure in the modern music economy, an artist should also be able to analyse industry dynamics and understand how to position themselves better than artists who fail to understand their industry forces. It has been lamented in the Music Economics series that a musician should see themselves as a music producer in the economic sense, due to the mere fact that producing music is the primary source of income for a musician. This is then governed by the willingness of the consumers to pay for the music in order to keep the artists in business and profitable. This is why of all the five forces identified by Porter, the one to concentrate on is Buyer Power; as the buyer purchases/ consumes the music, either digitally or physical copies. Promoters or venue owners who book artists to perform for a fee, can also fall into this category; as well as other income stemming from an artists’ commercial value (in the form of appearances, advertising revenue, etc.) because they all require negotiation to ascertain the realisation of monetary value.

Buyer Power simply means buyers have the ability and choice to decide which music to consume, and ultimately pay for. The consumers have a preference as to what they would like to pay for and how much they are willing to pay for a song/album before walking away. An artist as the primary producer can set the price of their music and ultimately determine their profit margins from each album/single sold, before knowing whether the buyer will purchase music from another artist or opt to acquire their music via cheaper alternatives. This can be difficult for the artist to accept that due to the internet allowing for music to be downloaded, it means they should then agree to either let go of their music for free (which allows reach to a wider audience); or hold on to their dear pennies. This depicts how technology as a factor has given the power to consumers as final buyers.


A dimension of measure of how much an artist should produce music, can be explain by the concept of price elasticity. According to Investopedia, price elasticity of demand is a measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. This phenomenon is also known as price sensitivity. Meaning, does the change in price the artists set for a song or an album, ultimately change his or her rate of production? The answer to this question depends on the lens an artist sees this from. If productivity does not change then the present music economy can take a new stance on price sensitivity, due to music being seen as an investment rather than a fast moving consumer product. This would thus mean that price is inelastic or not sensitive to change, because supplying musical content has a different objective if one has to adapt to change. Driving demand for his/her particular brand of music, as a competitive advantage based on quality is the end goal.

Lavatory Records

Once it’s been established that an artist has created a healthy demand from building their audience, it gives them a higher vantage point of bargaining power when dealing with other parties that may want to have access to and profit off of their audience. For example, a venue owner would want as many fans of an artists to come to an organised event, which will determine the booking fee. Here, the artist has a significant say in how much they get, and can ultimately turn away any booking fee that they feel doesn’t amount to their worth or is deemed uneconomical. This is an example of a power shift, due to the nature of the artist being a “rare commodity” that other agents or businesses want to integrate, because of the difficulty of finding artists who can fill venues or gigs. The buying power for promoters and concert organisers becomes greatly diminished; and hence the belief that money for an artist comes from tours and concerts.

In an over-saturated economy where many artists are looking for limited opportunities, this factor can ultimately cheapen your perceived worth financially. An artist must do what’s economical for them in order to know what to walk away from.  They can start to produce in mass or in excess till they hit the mark if they have the means and capacity to do so. The other approach of “less is more” can also be adopted, such as producing singles rather than full albums till it makes economic sense to do otherwise. Even in an industry that’s in the state of “oversupply”, artists should strategically find a way to increase their own demand. This boils down to long term commitment, adaptive thinking and staying the course. By gaining this tacit knowledge acquired through experiential learning and fortitude, developing the ability to endure will ultimately be the true measure of “power”. This will prove invaluable when learning to negotiate and knowing what deal to walk away from.



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