How a Musician Can Make Money in 2016

Nelly needs $2,412,283. The Internal Revenue Service imposed a massive tax lien on the St. Louis rapper in August, which is a fancy way of saying Uncle Sam can cop Nelly’s custom-painted ’69 Cutlass, his four tanks of African cichlids, and his Ms. Pac-Man machine if he doesn’t pay up.

Because Nelly is low-key one of the most popular music artists of his generation, a lot of his fans decided they wanted to help him through his financial hardship. Using the hashtag #SaveNelly, reformed music pirates the world over began furiously streaming “Hot in Herre” on Spotify and other music platforms in order to raise funds for the rapper. Within two days they had quintupled the song’s daily stream count to 269,000. But to pay off that bill, they’d still have to stream the song something like 280 million more times (an extremely conservative estimate). Trying to directly support an artist financially by streaming their songs on Spotify is kind of like turning off the light in your bathroom and assuming you’ve done your part to curb global warming — it’s gonna take a lot more than that to save planet Earth and Cornell Haynes Jr.

Since the diamond-certified Country Grammar debuted in 2000, revenue generated by recorded music has been nearly slashed in half thanks to piracy and the fall of the album as the primary unit of music consumption. This sea change has forced artists to double down on old ways of making money, like touring — and flock to entirely new ones as well, like crowdfunding. So what’s the best way for a fan to enjoy an artist’s work in 2016 while helping ensure they can eat (and pay their taxes)?

I decided that best way to figure that out was to lean into this Nelly situation, with a few hypotheticals added to the mix. I analyzed seven different ways artists are making money in 2016, applied them to Nelly, and calculated how many fans would have to participate in the scheme in order to make the rapper financially solvent.

Some ground rules:

• Nelly’s goal is to make $2,412,283 that goes to him directly — not record labels, retailers, managers, band members, etc.
• Nelly’s options are listed from the one that requires the fewest fans to buy in to the one that requires the most.
• Many of these scenarios work within the typical financial constraints of a contract with a major record label; an independent artist could collect significantly more money from some of these revenue sources.
• These figures reflect royalties paid to performing artists; songwriters are generally paid under different royalty arrangements, so Nelly could earn more money from songs he wrote himself.

Go on a World Tour

The Plan: Realizing that an era when even Murphy Lee could go gold is now more than a decade past, Nelly decides that a world tour is a better path to making money than a new album.

The Math: Artists’ revenue shares from concert ticket sales vary, but in most cases they’re getting a lot more money from touring than from recorded music. Smaller acts might split ticket sales with the venue where they perform but keep the lion’s share of the revenue, while bigger acts are likely to earn a booking fee that they get paid no matter how many tickets are sold. In fact, this fee for major artists is often more than the face value of all the tickets available for a show, former Ticketmaster CEO Nathan Hubbard wrote in a Ringer piece earlier this year. In either case, an artist’s longevity will play a role in how much money they actually pocket. Newer acts on major labels are now often subject to “360 deals,” in which the record company earns a percentage on nearly all aspects of an artist’s revenue sources, including sales from touring and merchandise.

We’ll assume a veteran like Nelly doesn’t have such a deal and that he has enough clout to earn advanced booking fees equal to the value of ticket sales. Most of the tickets to a pair of upcoming concerts he’s doing with a live orchestra cost between $45 and $100 — we’ll ballpark and say the average ticket price is $75.

Fans Required: 32,164 (If all his shows sell out; they don’t necessarily have to if he has a flat booking fee.)

Crowdfund ‘Return to Nellyville’

The Plan: Nelly launches a Kickstarter for the long-awaited sequel to 2002’s Nellyville. He promises a genre-spanning field of his former collaborators, including Jermaine Dupri, Tim McGraw, Paul Wall, and JC Chasez (Justin Timberlake was too expensive). Among other rewards, project backers receive a signed copy of the album for pledging $50, a 10-minute joyride in the Cadillac Coupe de Ville from the “Pimp Juice” video for pledging $500, and official membership into the St. Lunatics, confirmed via blood pact, for pledging $5,000.

The Math: Kickstarter’s greatest selling point is that it helps connect fans directly to artists. When you pledge a dollar to a project on the crowdfunding platform, at least 90 percent of that money goes directly to the project creator (Kickstarter takes a 5 percent fee and payment processing fees can be as high as 5 percent). For the artist, though, the extra money brings more responsibilities that would typically be fulfilled by a record label, such as paying for studio time, producers, cowriters, supporting performers, and marketing. The total cost of making an album varies wildly from project to project, but when De La Soul used Kickstarter to fund their latest LP, they set a funding goal of $110,000. If Nelly spent the same amount on Return to Nellyville, he’d need to earn a total of $2,522,283 to pay for both the album and his tax bill. And if his Kickstarter performed like past music projects, he’d earn an average of $70 per pledge from his fans.

Fans Required: 39,636 (For reference, the most popular Kickstarter music project ever, by singer Amanda Palmer, had 24,883 backers.)

Release a Country Album to Sell at Wal-Mart

The Plan: The group of people who like Nelly and the group of people who buy country music CDs at Wal-Mart inch closer to convergence every time “Cruise” blares from a pickup truck. Aware of his growing crossover appeal, Nelly announces that Return to Nellyville will be an all-out country LP (this was a persistent rumor last year). Like his pal Taylor, he keeps the album off streaming services to shore up album sales at big-box retailers and on iTunes.

The Math: Album prices have been declining for decades and, as of 2014, stand at about $12 (averaging the price of CDs, digital downloads, and vinyl). Under a traditional record label contract, an artist gets between 12 percent and 20 percent of album sales, according to Rolling Stone, so we’ll assume Nelly gets 16 percent. For every album sold, Nelly will be $1.92 closer to paying off his taxes.

Fans Required: 1,259,546 (Nelly’s last album sold 15,000 in its first week.)

Embrace the #SaveNelly Streaming Movement

The Plan: Realizing that a new LP will never be able to match the resonance of his earlier work, Nelly doubles down on the strength of his catalog and asks his fans to stream one of his songs for an hour straight every day for a month on Spotify. A grassroots movement emerges to declare “Shake Ya Tailfeather” Day a national holiday.

The Math: Every time a music industry insider even considers fully explaining how streaming royalties work, an assassin pops out of a large nearby vase and shoots them in the neck with a poisoned blow dart — in other words, we still know almost nothing about what Spotify and Apple do with the $10 we pay them every month. The royalty payout structure is extremely complex, but Spotify has claimed that on average it pays rights holders between 0.6 cents and 0.84 cents per stream (this combines paying subscribers, who contribute more money per stream to artists, and free listeners of the ad-supported service). Let’s assume Nelly’s songs earn 0.72 cents on average.

That fraction of a cent has to be split among everyone involved with the creation of the song, including Nelly, his record label, and additional songwriters. To simplify things we’ll accept the Berklee College of Music’s estimate that artists get between 10 percent and 50 percent of the money from streaming royalties. We’ll assume Nelly gets 30 percent. That equals 0.22 cents per stream. During a user’s hour of Nelly celebration per day, they could play about 15 tracks.

Fans Required: 2,481,773 (Nelly currently has 5.2 million monthly listeners on Spotify.)

Release a Sequel to “Dilemma” As a Digital Download

The Plan: Since no one buys albums anymore, Nelly puts all his efforts into a single smash-hit song that can increase his fortunes. He partners with Kelly Rowland for a follow-up to 2002’s “Dilemma.” In the new song, we find that the once-happy couple is growing emotionally distant as their 10th wedding anniversary approaches. In the accompanying music video, Nelly catches Kelly using Microsoft Excel to text another man.

The Math: Using the same 16 percent royalty cut from the physical-album scenario, Nelly would earn about 21 cents for every $1.29 iTunes download.

Fans Required: 11,487,062 (“Uptown Funk,” 2015’s biggest digital single, sold 5.5 million copies.)

Stage a Music Video Marathon on YouTube

The Plan: Much like the Spotify plan, Nelly asks his fans to stream a single music video of his for an hour per day for a month. The “Tip Drill” video is conspicuously absent from the schedule.

The Math: Again, precise royalty rates are hard to come by, but multiple sources report that YouTube’s pay-per-stream is falling and currently sits between 0.08 cents and 0.1 cents. Let’s go with a rate of 0.09 cents and assume Nelly gets a 30 percent cut, which would leave him with 0.027 cents every time you tear up while watching the “Over and Over” video.

Fans Needed: 19,854,181

Take #SaveNelly to Pandora

The Plan: Pandora has 78 million users, a huge pool of potential Nelly fanatics. The rapper asks each of them to stream one hour of Nelly radio every day for a month.

The Math: I listened to a Nelly-themed Pandora station for an hour and heard four songs actually by Nelly. Every time a song is streamed on the free version of Pandora, the company is required by law to pay a performance royalty of 0.17 cents. The recording artist gets 45 percent of the money, or 0.077 cents per stream.

Fans Needed: 26,277,593

For fans, the lesson here is that opening your wallet to support the work of an artist you care about will do more for them than making “Hot in Herre” your morning iPhone alarm. If millions more people subscribe to Spotify or Apple Music, streaming could shore up some of the music industry dollars that were lost to Napster and its ilk — in fact, streaming is driving significant revenue gains for the industry overall this year. But for individual artists (especially those under major-label record contracts), all those plays still amount to a pittance right now. The best ways to support acts are to fork over cash in more direct ways, like buying a concert ticket or contributing to a crowdfunding project.

Overall, Nelly looks to be stuck between a physical-media rock and a digital hard place. Going platinum in today’s music world is nearly impossible — but so is persuading almost 2.5 million people who won’t actively pay for your music to devote hours of their time to the (admittedly great) “Ride Wit Me” melody. At the very least, though, the rapper fulfilled his major-label record deal and signed on with an independent outfit last year. Whatever money-making strategy he decides on, at least he’ll be keeping more of the cash.