How To Negotiate With Venues (With a Breakdown of Your Options)

 
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In this article, we will discuss the various types of deals available to artists, promoters, and venues. The deal that an artist secures for a show will depend on name recognition, audience draw, and promotional reach. The following are some useful terms to give you a fuller understanding of these deals:

Gross Box Office Receipts or GBOR - The total amount of money collected from ticket sales before state sales tax is calculated.

Net Box Office Receipts or NBOR - The amount of money left after deducting state sales tax but before deducting any expenses or payment percentages.

Facility Fees - Charges included in a ticket for use of a venue that can either be the venue’s profits or charges related to the venue’s maintenance.

Percentage of Net Deal (Door Deal)

This is the most common type of deals for an up a newer artist performing at a venue that holds 100 to 500 people. In these types of deals, state sales tax comes off the top of ticket sales GBOR, and then the artist receives a percentage after the venue’s expenses. The promoter receives the remainder.

The venue’s expenses in this type of deal typically are for the audio engineer, security, and door person (box office). Usually these expenses range from $100 to $400, depending on the venue. For venues in the 100 to 500 capacity range, try to always avoid paying more than $400 for the venue. Usually expenses range $100-$150 for audio engineer, $50-$100 per security guard, and $50-$75 for door person.

In this example, the artist receives 85% of NBOR after $350.00 for expenses and local sales tax. If the sales tax is included in the ticket price, you must invert the sales tax with a divisor. Multiplying the ticket by the tax rate gives you the WRONG ANSWER.

Tax Example: If a sales tax is included in a $10 ticket (gross amount), the correct calculation to figure out the local sales tax (Philadelphia 8%) is to divide the ticket price by 1.08. Then 10 divided by 1.08 gives the net amount $9.26. Finally $10 - $9.26 = $0.74. The sales tax owed on the $10 ticket is $0.74.

Percentage of Net Deal Example:

200 Tickets Sold

100 at $15 (Advance tickets) = $1,500

100 at $20 (Door tickets) = $2,000

$1,500 + $2,000 = $3,500 GBOR

$3,500/1.08 (Local sales tax 8%) = $3,240.74 NBOR and $259.26 owed for sales tax

$3,240.74 - $350 (Venue expenses) = $2,890.74

$2,890.74 x 0.85 (Artist’s percentage 85%) = $2,4,57.13 Artist’s Payment

Remaining 15% = $433.61 Promoter’s Profit

Guarantee Plus Bonuses Deal

In this deal, the artist receives a guaranteed amount for payment plus ticket bonuses. These bonuses get paid at specific levels based on how many total tickets were sold, or can from time to time also be based on the GBOR. For example, the artist gets a guarantee plus bonuses at 500, 600, 700, and 800 tickets sold. Try to make sure that the last bonus always reflects a sell out of the venue. This is your sell-out bonus.

All risk in this deal falls on the promoter who is also responsible for local sales tax and venue expenses. This deal is the easiest most straightforward to calculate.

In this example, the artist receives a $5,000.00 guarantee + $500.00 bonuses at 500, 600, 700, and 800 tickets sold.

Guarantee Plus Bonuses Deal Example:

$5,000 Guaranteed for 1 to 499 tickets sold

$500 Bonus for 500 to 599 tickets sold

$500 Bonus for 600 to 699 tickets sold

$500 Bonus for 700 to 799 tickets sold

$1,500 Bonus for 800 tickets sold (Sell Out Bonus)

= $8,000 Artist’s Payment

Zero Guarantee Versus Percentage of Gross Deal (NBOR)

In this deal, the promoter and the artist are both taking a risk for the show. This type of deal is similar to partnerships in a traditional business. Both sides have their own expenses that they will cover out of their end of the deal.

Booking agents that represent artists will push the fact that the artists have expenses, however, promoters have expenses as well, and both parties must carry risk if they expect their businesses to grow.

In this example, the artist receives no guarantee of payment and is paid 65% of total NBOR after a $1 facility fee and local sales tax but before expenses.

Note: Facility Fees are calculated before the local sales tax and are considered an adjustment of the GBOR. Multiply the facility fee by the total number of tickets sold to find the full amount to deduct for facility fees.

Zero Guarantee Versus Percentage of Gross Deal Example:

200 Tickets Sold

100 at $15 (Advance tickets) = $1,500

100 at $20 (Door tickets) = $2,000

$1,500 + $2,000 = $3,500 GBOR

200 Tickets x $1 = $200 owed for facility fees

$3,500 - $200 = $3,300 Adjusted GBOR

$3,300/1.08 (local sales tax 8%) = $3,055.56 NBOR and $244.44 owed in sales tax

$3,055.56 x 0.65 (Artist’s percentage 65%) = $1,986.11 Artist’s Payment

Remaining 35% = $1,069.45 Promoter’s Profit

Guarantee Versus Percentage of Gross Deal (NBOR)

These are usually the best types of deals for artists. You get a guarantee and you get a percentage of the total NBOR prior to expenses being deducted. The only deductions here are state sales tax and any adjustments to the GBOR. Examples of adjustments include facility fees, charity fees, and Meet & Greets.

This type of deal can also be called a Greater Than Deal. The artist either receives the guarantee or the percentage of the NBOR, whichever is greater.

In this example, artist receives a $2,000.00 guarantee versus 65% of gross (NBOR) after a $2 facility fee and 8% Philadelphia sales tax.

Note: Deals can also include percentage bonuses. Example: Artist’s payment increases to 70% at 400 tickets sold, 75% at 500 tickets sold, etc.

Guarantee Versus Percentage of Gross Deal Example:

200 Tickets Sold

100 at $15 (Advance tickets) = $1,500

100 at $20 (Door tickets) = $2,000

$1,500 + $2,000 = $3,500 GBOR

200 Tickets x $2 = $400 owed for facility fees

$3,500 - $400 = $3,100

$3,100/1.08 (Local sales tax 8%) = $2,870.37 NBOR and $229.63 owed for sales tax

$2,870.37 x 0.65 (Artist percentage 65%) = $1,865.74 is less than $2,000 guarantee

$2,000 Artist’s Payment because the guarantee was greater than 65% gross

Remaining 35% = $1,004.63 Promoter’s Profit

The Promoter Profit Deal:

At the end of each show the artist settlement is usually the responsibility of the tour manager, tour accountant, artist manager, or, if no one else, the artist. The Promoter Profit Deal is the most common type of deal that’s used by major promoters. Below is a step by step guide on how to settle a promoter profit deal. In this video the terms are as follows:

The Promoter Profit Deal Example:

Artist receives a $5,000.00 guarantee + 85% of Net after expenses, 8% local sales tax, and $1.00 per ticket Facility Fee (FF).

1,000 Tickets Sold

500 advance tickets at $15.00

500 door tickets at $20.00

Promoter Profit Deal Step by Step Guide:

Step 1: Add up all the ticket sales to find Gross Box Office Receipts GBOR.

($15 x 500) + ($20 x 500) = $17,500

Step 2: Find the total facility fee. This is the total number of tickets sold multiplied by the total facility fee.

1,000 x $1 = $1,000 Total facility fee

Step 3: Subtract the Gross Facility Fee from the GBOR to find Adjusted Gross.

$17,500 - $1,000 = $16,500

Step 4: Deduct State Sales Tax to find Net Box Office Receipts (NBOR). Remember that state sales tax is already included, therefore we have to calculate the inverse and add one in front of the decimal point. Ex. 8% local sales tax = 1.08

$16,500/1.08 = $15,277.77 and $1,222.23 owed in sales tax

Note: If there is no adjustment, then use the GBOR

Step 5: Add up all your expenses. Remember that the guarantee is an expense.

$5,000 Guarantee

$1,500 Venue Expenses

$1,000 Production

$500 Security

$8,000 Total Expenses

Step 6: Calculate Promoter Profit Amount. Promoter Profit percentage is given in terms. (Usually around 15%) Total Expenses x Promoter Profit Percentage.

$8,000 x 0.15 (Promoter’s percentage) = $1,200 Promoter Profit

Step 7: Calculate the Split Point. This is the amount that needs to be reached for there to be a bonus for the artist. Split Point = Promoter Profit + Total Expenses

$8,000 + $1,200 = $10,200

Step 8: Calculate the share amount. This is the amount that’s left over after expenses and promoter profit that the artist and promoter share. The percentage the artist receives is the artist bonus, and is usually given in the terms. In this problem it’s 85%. Share Amount = NBOR - Split Point

$15,277.77 - $10,200 = $5,077.77

Step 9: Calculate the Artist Bonus Amount. Artist Bonus Amount = Share Amount x Artist Bonus Percentage

$5,077.77 x 0.85 (Artist’s percentage 85%) = $4,316.10

Step 10: Calculate the Total Artist Pay. Total Artist Pay = Guarantee + Bonus Amount

$5,000 + $4,316.10 = $9,316.10 Artist’s Payment