Rock's New Economy: Making Money When CDs Don't Sell

One of the savviest labels is Fueled by Ramen, which boasts Fall Out Boy, Panic at the Disco, Paramore and Cute Is What We Aim For. "A lot of people hear about 360 deals and think it's a land grab, but when you own the content, there are so many interesting things you can do," says John Janick, who started the label in 1996 while going to college in Gainesville, Florida.

Unlike conventional labels, Fueled by Ramen, which has a partnership with Atlantic Records, does everything in-house: from building Websites that sell merchandise and recordings to producing the T-shirts it sells at chains like Hot Topic. In fact, Fueled by Ramen uses T-shirts to introduce fans to new music — both Panic at the Disco and Paramore placed tags on shirts with PIN codes that enabled buyers to download advance singles at home. "We're creating a culture for each artist," Janick says. "Obviously everyone is still looking for new ways to monetize recordings, but our company is growing into many other areas, and that's great."

Few bands have been as successful at taking control of their careers by combining touring and online merchandising as Gov't Mule. The heavy-touring jam band offers recordings of every live show on its Mule Tracks site. Generally selling sets for $13 per concert, the band has sold nearly 1.5 million songs — grossing more than $600,000 from the site since it launched in 2004. "We definitely make more money from downloads than record sales," says Stefani Scamardo, the band's manager. "It's not a record company we're depending on — it's our site that we're in control of."

Of Montreal have appeared in a commercial for T-Mobile, composed music for Subway and licensed their tunes for Outback Steakhouse and Nasdaq ads. "When I first started Of Montreal, I probably would have been hesitant to do a commercial for Outback," says the band's songwriter, Kevin Barnes. "In the indie world, there's a holdover from the punk movement that any commercial endeavor will taint your art. But if you care about the band, you won't begrudge us a living."

TV and film licensing fees have begun to come down as music supervisors use hungry unsigned bands from sources like MySpace. Insiders say $2,000 to $2,500 is a common fee for baby bands. Even the soundtrack to Juno offered fees in that range. (Contributors saw a payday only because the album has sold so well.) "Over the years, everyone has gotten smarter," says Lyle Hysen, who runs Bank Robber Music, which represents artists and labels for film and TV licensing, recently matching artists like Tortoise and the Come Ons with ads for Vaseline and Hardee's. "Music supervisors know that if you turn down $10,000 for a car commercial, some other band is going to take it."

Video games can also offer a lot of exposure — Steve Schnur, executive for music and marketing at Electronic Arts, estimates that inclusion in best-selling games like Madden NFL and FIFA can translate into a billion plays for a song. "When I started working here seven years ago," Schnur says, "I had to convince music publishers and labels to let us license music, but I never had to convince the artists because so many of them are gamers." These days, EA receives up to 5,000 submissions for the 30 or so spots on its Madden games. Fees are comparable to those paid for TV and film, but the exposure, which Schnur says has been valuable to bands like Franz Ferdinand and Avenged Sevenfold, can lead to new fans.

Cliff Burnstein, co-owner of the management firm QPrime — which represents Metallica and the Red Hot Chili Peppers, as well as smaller acts like Silversun Pickups — says the old major-label model is fading fast. "That's definitely over," he says, noting that Silversun Pickups, on the indie label Dangerbird, have licensed several songs for TV and do well on the road. "Silversun Pickups make a decent living," he says, but adds that he wonders whether most musicians can put the time and energy into negotiating the changing landscape — or if they even should. "It's hard enough to write a decent song," Burnstein says. "That's still the talent I'm looking for."

Additional reporting by Eric Magnuson

[From Issue 1053 — May 29, 2008]