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Four Considerations to Maximize Post-COVID Tour Profits

By Anthony Smalls, III, CPA, CGMA

Executive summary

  • Contract negotiations during the planning phase are essential to securing appropriate financial outcomes
  • Think carefully about production expenses, which can cut into potential profits
  • Plan your travel route efficiently to cut down on transportation overhead
  • Maximize the various opportunities to monetize content and merchandise

Our clients who are musical artists are excited to get back on the road now that COVID-19 event restrictions are largely lifted. Their passion for music, their connection with the fans, the irreplaceable energy of commanding a big stage in a packed arena are driving forces, but on the practical side, so is the revenue.

While music venues are open for business, the impact of COVID-19 can still be felt in conditions and requirements around events that can have a financial impact. In many instances, artists may be willing to jump at contract offers that could limit the financial benefits they could have otherwise realized.

As the Entertainment, Sports and Media Industry Leader, I have been on your side of the desk. I am not only a CPA, but for 15 years I was manager of a certified Diamond and 11-times Platinum, six-time Grammy Award winning hip-hop group. I have managed several other culture-defining artists, as well as partnered with artists, and their agents, managers, tour managers, lawyers, labels, crews, and families to help them secure favorable contracts for innumerable tours.

These are four things I most often advise our clients to keep in mind to maximize their profits when planning a tour.

#1 Be smart with your contract

Decide your rate per show ONLY after thinking through as many factors as you can. Without guidance, artists can get caught up in the excitement of tour planning, and get offered a certain amount per show that may not cover all of the overhead. We partner with artists and management, and layout typical hard costs and considerations, so you know what it will take to make the tour happen, and still get the kind of monetary return you are looking for. Factors such as set design, shipping and transportation, set construction, crew transportation, insurance, personnel, all of these elements need to be taken into account.

Knowledge is power in negotiations. Our process is to arm our clients with first-hand knowledge of the touring process and insights we have gained through the countless negotiations we’ve done on behalf of other artists.

#2 Think through your production expenses

The scope of the show and the set design has a direct impact on the profitability of your tour. The creative vision needs to be balanced with actual hard costs. The size of the set and the scale of the show will directly affect the equipment needed for set transport, the number of people needed to set up the stage, the number of dancers, tour managers, a band, audio engineers, lighting engineers, the required production staffing, security teams, the number of trucks, busses, etc. Additionally, for multi-city tours, budgets to transport and house the sets along the route also need to be allocated.

We work with our clients to provide an informed understanding of upfront planning so that you see all the factors and can identify areas to streamline. One of our best practice solutions is to hire multi-discipline specialists who can fulfill several jobs. This saves money on flights, hotels, per diems, and salaries.

Taxes and payroll are a factor to keep in mind, as are passports for all staff members if you are planning to include an international leg of your tour. There may additional fees that are crucial to budgeting, related to visas/passport fees and taxes and tariffs for each city, state, and country. We can provide Tour Accountant Services to manage the ins and outs of these details so you and your Tour Management Team can focus on what you do best.

#3 Map out your transportation

Managing tour transportation is critical for success and maximizing your profits. There are a lot of moving parts that require consideration. Before announcing tour dates and locations, focus on your tour route. For example, consider where you are located. If you’re on the east coast, it might make more sense to start there, work your way down, take a break, and then fly directly to the west coast, where it’ll be the most profitable. What about where your set is being built? If it is in Los Angeles, for instance, it will be far easier and cheaper to start there so you won’t have to pay to fly it all out initially. The size of your set and show will impact the number of trucks and busses, and/or air transportation elements that will need to be factored in.

Ultimately, you will need to determine the most cost-effective route for you. Start by locking in gig dates that you know are inflexible, like large music festivals, and work around them. Choosing an efficient route will not only ensure you’re seeing as many of your fans as you can, but you’ll also be doing so in a way that your tour will yield the best most profitable returns.

Transportation can have huge cost implications. Planned flights are much more efficient than last minute travel. Commercial flights are more affordable than private jets. Tour busses can be rented short term or leased long term and wrapped for marketing impact for a cohesive branding look. The more you plan ahead, the better you can manage your costs and the more profits you can retain from your tour.

#4 Your tour can have multiple lives

Every step of your tour: the struggles, the victories, the comic moments, the behind-the-scenes (BTS) life, your hopes, your thoughts on what it will mean to be back with your fans, and of course every on-stage performance ... all of it is content with monetary value.

The life you will be living on tour is one your fans only dream of and you can bring them into that space. From potential specials that can be sold to streaming services like Netflix, to exclusive BTS content that can be on your website or packaged as part of marketing partnerships with companies who could potentially offer footage as video-on-demand, mobile content, and social media content.

Simultaneous streaming of concerts either in select cities on a certain date, in movie theaters, in the metaverse (i.e., Decentraland) or via Pay Per View, are areas that can be leveraged for profit.

All of the footage can also be used in long and short form to build out your own band’s social media presence as well.

Onsite and online Merchandise sales are another revenue channel to recognize for potential profits. At $60-70 per sweatshirt, $30 a tee shirt and $20 a water bottle sold onsite or online, profits from these items can quickly add up.

With guidance from our team, you gain access to our broad eco-system of partners to help you realize these additional revenue streams while you get to focus on performing.

How we can help plan and manage a profitable tour

You’re sharing your passion on a global stage — going on tour should be exciting. Not to mention, touring is now one of the best ways you can bring in significant income, given you know how to properly plan ahead. Our Entertainment, Sports and Media team has extensive experience planning large-scale tours, managing expenses, optimizing revenue, and delivering the financial results you expect. Before going on the road again, reach out to our team for a consultation to avoid common issues that can undermine profitability.  

About the author 

Tony Smalls is the leader of our Entertainment, Sports, and Media (ESM) practice and helps culture-defining entertainers, athletes, and other high-net-worth individuals build and protect their wealth while maximizing growth opportunities in today’s fast-evolving media marketplace. He specializes in accounting, finance, tax strategy, financial planning, and analysis, financial reporting, and contract/deal negotiations, working heavily on prospective investments like live music tours.  

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