The Music Investment : Artist Payouts 101

Ever wonder how your favorite artists obtain the funds to get noticed by their desired audience in the first place? For the select few, it's through being discovered in a one-in-a-million scenario like on The Voice, American Idol, or America's Got Talent. For another minute percentage, it's through being discovered through an uploaded YouTube video that went viral. But for most, it's through being signed to a label with an artist advancement, something 70% of unsigned artists wish to have. (Source: IFPI)

Last fall, the IFPI (That's the International Federation of the Phonographic Industry) released a study regarding the latest stats within the music industry, covering everything from streaming statistics to artist payouts. Among the major labels, among the minor labels, all around the world.

More specifically, this study focused on the break down of music artist funding payouts. For instance, it can cost between US$500,000 and $2,000,000 to launch an artist into the major label market (Source: IFPI). This is known as an "artist advance payout" and can be used for an array of things neccesary to launch an artist as they write, record in-studio, rehearse, and perform. It is understood that the label will recoup from paying out this advancement once the artist launches their career and gets off the ground, but sometimes this doesn't happen. This being said, it's a risk for any sort of label when they launch an artist should the artist not become successful. 

Luckily, the success of music steaming services and social media networks has assisted in giving new artists a "boost" to their road to success as they aim to make their mark in the music world. Since online streaming services like Spotify and Pandora began, labels and artists have seen their advance costs recouped within an average of 18 months upon signing on with their label. This period of time can also be elongated at times in certain situations of music streaming pending on the label that signed the artist and also pending if they are a major or minor record label. 

Typically, advances for a major record company can run between 50K (USD) and $350K (USD),  while independent labels advances are much less. This amount paid out is influenced by various favors such as the genre, geographical location, and the specific label signing the artist. 

For more information on artist payouts or to view specific stats from the IFPI, check out their published results here.