The Independent Venues Hopping on the Merch Cut Reversal may Fuel a Live Music Renaissance

Margins are incredibly thin for independent artists, and that’s assuming that an artist is even in the black at all. Studio time is expensive, so why not make your music at home? Home equipment and software are expensive, as is taking the time to learn how to use them and produce to the quality that a modern ear knows. Getting paid off of music consumption requires a seemingly insurmountable peak of streams. Touring is a razor thin balancing act of the checkbook, ups for artist fees and back down again for traveling, lodging, eating, drinking, and experiencing just what it is that being on tour is actually supposed to mean for an artist - yet alone one that is wholly independent of a contract. So, why not sell merch on the road? Time-consuming to design, expensive to produce, and yet just when an artist thought they may have actually found some wiggle room to make a little profit with it, and make someone’s day with a tote bag, the venue takes a cut of that, too. But, there is light.

The venue cut of artist merchandising is indeed a niche issue, but it’s one that has all but eliminated the profit margins of so many artists on tour, who are simply trying to spread their music and fight for a wider geographic following in the process. In the wake of Covid, however, that has become even more challenging, not only for artists and their teams, but for venues, their employees, and the overarching infrastructure that frames the whole thing. But, along with LiveNation - who in partnership with Willie Nelson, launched their ‘On The Road Again’ initiative to simultaneously strip steep and unwarranted merchandising fees from artists at certain venues, along with financially supporting venue employees, touring artists, and their teams — local venues like Cervantes Masterpiece Ballroom — itself independent, and a stalwart of the wide-ranging live music scene in Denver — are making progressive headway, eliminating what is otherwise a staple thorn in the side of touring artists, and supplementing the live music industry with tremendous influence.

Let’s start with the basics. Since, in 2020, only 2% of all artists on Spotify made at least $1,000 in annual streaming royalties, they have to make their money through different methods. Even for an established artist, the average single stream on Spotify nets a musician $0.0004, so even those who have made it into a more mainstream circuit are supplementing their streams with other, much more lucrative streams of income. Touring can close the gap between expenses and income for independents, where artists take home their pay from a venue. But it’s been divided up between all of the teams involved, and pumped into the unpredictable economy of life on the road. Some venues will grant a bonus structure for drinks sold at a given show, incentivizing a larger crowd, but even so, margins remain thin. So, showing up with tour merchandise and setting up a table to sell it has always been a method to net even the most emergent artists working the smallest venues a pretty penny.

Let’s say an artist headlines a venue that caps at less than 500 people, which conglomerators like LiveNation have long called ‘Club Venues.’ The average artist fee for such a show is $2,100, which per the average is the equivalent of 545,000 streams on Spotify. The average merch tee shirt is $35, and to make it easy, let’s assume that the production of those tees cost $15 each. The profit margin on one tee shirt is $20. 105 tees sold - at the venue or otherwise — is the equivalent to booking and performing an entire club show. If an artist is on tour, they’ll likely have a dozen or more opportunities to unload their merch, and merch frankl, tends to be a sunk cost to artists and their teams — something they paid for and paid off long before they even start touring. Most of the time then, it’s a $35 profit, and therefore the sale of 62 tees is the equivalent of an entire club show. There is simply money to be made here with margins much better than other income streams provide. At the very least, it’s extraordinarily supplemental.