The Business of Entertainment Merchandising

Artists and Bands are in a unique position. They are one of the few entities that can create revenue directly from branding themselves. Very similar to professional sports teams, musical artists can sell merchandise that bears their name and likeness that will in turn create awareness and provide revenue for their brand. That brand being their name, logo & music. If you are an artist and have not started to think of yourself as a business, you seriously need to consider it. They don’t call it Music Business for nothing. It actually should be called the Business of Music. Right now you may be thinking… “oh I am small time, I can still keep it on the low end of things and just treat it as such”. Well, if you are trying to make a name for yourself, people will notice and even worse may not take notice of you. One of the first crucial steps in being taken seriously is how you handle your merchandise.

The business of merchandise includes items such as t-shirts, hoodies, stickers, posters & trinkets. It’s any item bearing your likeness that you can sell. There is no better place to sell these products then the venue/concert hall. It is the best possible place to catch those existing & prospective fans with the buzz of a live show. Your customers (fans) can rush to the merch booth and pick up one of your items. The merch booth is where you need to provide these fans with a product they would proudly display on them in public. It especially helps if you or the band is at the booth to sign, talk and become one with the fans. Here is what John Sepetys, S.E.G. Management (Steve Vai, Good Man Down, Lit, Plumb) has to say regarding this matter “It creates a scene, attracts people to the booth, and consequently puts them in the line of fire for sales opportunities. Plus, when artists are signing, people who normally might not have purchased anything now will since there’s an opportunity to have it autographed.”

Just like any other business, you have competition. With the creation of all the major social networking & streaming sites, there has never been so much competition among the young & upcoming artist. You must set yourself apart from other acts in a professional manner. You need to represent yourself as if you just played the huge mega venue just down the street. If fans, industry professionals, reviewers are attending one of your shows, they usually have a look around to see how you represent yourself. If they see a merchandise area that is non-existent, sloppy, or not set up in a professional manner. They may think this is how you run your business. This perception could all go down to who you hire to manage your merchandise. It could be a friend, relative or girlfriend. Whoever it may be, they need to be aware that it’s an important element of your career and needs to be treated as such. Industry executives also will take notice of how much merchandise you are selling. “Just as important as a car salesman is to an auto dealer, there will be a certain number of sales that will be given based on a fan’s loyalty to the artist. However, a charismatic and artist knowledgeable sales person can pimp the merch with passion behind the pitch, and this can influence more purchases.” (John Sepetys, S.E.G.)

The handling of this new revenue stream is important in it of itself. It’s a good idea to set up a bank account separate from your personal accounts. This may be your “band” account. I have always told artists to reinvest in you. Use the money that you make from your sales to create more merch or “better” merch that you can sell for higher profit margins. Then “draw” from that account when you feel you are in a position to do so.

Early in your career you need to trademark your band name. There are many online resources that provide this service. You should do this soon. There have been countless artists that have run into legal issues with names because someone has already registered it. Most artists don’t realize this until after they are signed to a label because the label runs a check and finds the name is taken. That is not the first line of business you want to have when you recently signed to a label. They may have to put out thousands of dollars to retain your name or worse you may have to change it. Then there has to be a whole re-branding effort and not to mention the merchandise you may have already produced in the beginning stages of your career. “This is important because you can build equity in the band name and establish it as a brand. If it’s not protected properly, you run the risk of losing the name to another band who may rightfully or unjustly lay claim to the name. Either way, it’s going to involve attorneys and cost money. In worst case, you not only blow the dough on legal fees, you also lose the name and have to start from scratch after all of the time you’ve spent raising the brand awareness and tying it to your music.” (John Sepetys)

When it comes to the designing of your merchandise, this needs to be well thought out.

There is nothing worse than to put a design on a shirt that is either offensive or has no continuity to your brand.

As a creative artist, you may find that appropriate. However, you need to think of your fan base and the bottom line. It’s not good business to have poor quality designs & products for sale at your booth. It can be detrimental to your existing fan base and potential fans. “I think that merch today, more than ever, is a very important part or the artist’s world. Even for an unsigned artist, if the merch is eye catching and good quality,…people will be drawn towards it. This will help build the artist’s fan base and because you don’t make any money in the beginning, the merch sales might be the bands only source of income they have” (Keith Isola: Manager, Story of the Year, Blind Melon, Head Automatica)

When you do start to ride the wave, you may get merchandising offers. Good for you! That means someone wants another piece of your pie. Merchandising is just another piece…its all part of that same pie that includes record sales, managers, business manager, booking agent, lawyer, etc. Merchandising contracts are not as complicated as records deals. However, you need to be aware of many different clauses, and it’s good to make sure you have a lawyer and/or your manager look it over. Elements such as tour merchandise, retail merchandise, venue percentages, royalty rates, stadium shows, minimum attendance requirements, recoupment clauses, performance requirements, advance repayment, paid attendees against free ticket attendees, sponsored free-giveaways, creative control, etc. will all be part of a merchandise contract. You will also want to be alert when it comes to package tours or shows. In case there is an event shirt, your brand will more than likely be on that shirt. You need to make certain you are adequately compensated. John Sepetys shares his thoughts “Yes, we feel they should get a percentage. During the G3 tours (Steve Vai, Joe Satriani, Etc. ) for instance, all three guitarists would split the revenue from the event shirt.” So as you can see there are many different variables that can be included within a merchandising contract. Be sure that you are aware of them all. In this very volatile music business & economic market you do not need to get stuck owing anyone anything.

Another part of becoming more famous is venues will begin to take percentages of your gross sales. Depending on your particular situation, the rates will range from 15%-40%.

I was a road merchandiser at an event that took 45% from the gross sales and the artist was playing the event for free!

Some venues will provide a vendor or team of vendors to sell your merchandise. While other smaller establishments will expect you to bring your vendor, these places are the ones that are on the smaller end of the percentage scale. However, a house vendor can also be arranged by your agent or manager for a predetermined rate. At the moment is when your team will fight on your behalf to get the lowest rate possible. There is still some uproar that venues take a percentage at all. Take for instance what Keith Isola (manager of Blind Melon, Story of the Year on Epitaph Records, Head Automatica on Warner Brothers Records, Turmoil on Eulogy Records) states “I still think it’s crazy that venues charge a percentage at all. I’ve never really accepted that detail in the show contracts. I understand if they are providing a seller to charge something, but now more than ever I would like to see as much as possible go to the artist. If that’s the case, why don’t the bands get a cut of the bar sales? You could make the same argument in their defense that no one would be at the club buying drinks if the band wasn’t playing?  Maybe meet in the middle give the club 5% on merch and give the bands 5% on the bar? That would be interesting.”

Establishing merchandising early in an artist’s career is an essential part of building a fan base. It  can also assist in creating a buzz for yourself it also can help with covering the costs of starting the career off on the right foot. Good merchandising begins with a well thought out plan. One of the key factors early in a career that I have always thought was critical, is to own your own merchandising. You will make more money & have much more creative control. Yes, it may be more time-consuming, tedious, and sometimes a pain, but it will be much more lucrative if you keep it this way. There will be times that arise when you are riding the wave of success and large advances are being thrown your way. Hopefully, your business manager & personal managers will be consulting you on the best possible scenario for your situation. Of course, there are instances where signing the deal will pay off and very well, but you may be hurting your career in the long run. I still know certain bands that owe 100’s of thousands of dollars to their merchandising company because they were not able to recoup the advances due to unforeseen circumstances. You look at those scenarios and say. “I am glad we handle all the merchandise”. I also know artists that attribute to that fact that they don’t owe any advances so they can still tour, sell a load of merch and keep all the money for themselves.

In closing, I do hope you take SMC, Inc. into consideration when you start to plan for your merchandise. We have been in the business since 1999. I have been fortunate to be part of a small van tour to the multiple bus tours and handled tour merchandise all over the world. My company works with artists from the garage to the arena. I certainly hope this has opened your mind to the world of merchandising. It is yet another aspect of your career that will need your attention. As if writing the next major hit song wasn’t enough.

Regards,

Rob Castaneda

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