Sofar Sounds is an "uber for live music" startup that just closed a $25m round of investment for its product, which books house-shows — where musicians show up and play in your living room for you and your friends — at $1100-$1600/each.
House shows are a staple of indie musicians and a way for people in communities to show their support for bands getting their start, but they are a labor of love that generally lose money for all concerned. How could a company like this ever be profitable enough to warrant a $25m investment?
Simple: they keep nearly all the money you pay to book the house show, paying musicians only $100. You supply the venue, the refreshments, etc, and the musicians supply the entertainment — Sofar Sounds supplies a website and a tiny amount of administrative work.
JWZ — who owns the DNA Lounge, one of San Francisco's best live music venues — explains the exploitative economics of Sofar's business-model.
There are several common ways that live show contracts work. Sometimes it's just a flat fee. But for small shows with up-and-coming acts, a typical structure would be: $X guarantee (the bands get that no matter what), then if the door takes in more than $X, the house gets the rest up to $Y (to cover costs: rent, insurance, sound tech, light tech, security, cashier, manager, and oh yeah promoting the show) and anything above $Y, the bands and the house split 80/20. For a really small show, $X is probably 0. For a big show, it might be $20k. Then the bands split their take probably 60/30/10. So for the opener to have a guarantee of $100, that means X=1000, which suggests a high degree of confidence of 100+ paid on a $10 ticket. Now it's not so small a show any more.
This company is doing the typical "gig economy" trick of externalizing all of their costs onto the
contractors volunteersrubes. They have some small administration costs (shared across multiple cities and probably highly automated), but no room costs, no staff costs.
If I didn't have to pay the 5 to 30 people it takes to put on a show each night (not counting the artists!), and the room itself was free, those shows would be a lot more profitable. Oh yeah, and all of my friends would be unemployed.
"The Uber of Live Music" [JWZ]