Music Business Expenses: Categorizing Promotional Costs

Music business expenses span categories from advertising to production to operations. Proper categorization enables financial analysis, tax preparation, and budget planning. Understanding expense categories helps musicians manage their business finances effectively.

What Expense Categories Exist

Major expense categories for musicians:

Advertising and Promotion:

• Social media advertising
• Display advertising
• Playlist promotion services
• PR and publicity
• Promotional merchandise

Production:

• Recording studio costs
• Mixing and mastering
• Producer fees
• Session musician fees
• Equipment for recording

Distribution:

• Distributor fees
• Physical manufacturing
• Shipping and fulfillment
• Rights administration

Operations:

• Software subscriptions
• Website hosting
• Professional services (legal, accounting)
• Insurance
• Travel for business

Live Performance:

• Touring expenses
• Venue fees
• Backline and equipment rental
• Crew costs

How to Categorize Advertising Expenses

Advertising subcategories:

Digital Advertising:

• Social media ads (Facebook, Instagram, TikTok)
• Display and banner ads
• Streaming platform ads
• Video advertising
• Search advertising

Promotional Services:

• Playlist pitching services (SubmitHub, Groover)
• PR campaigns
• Blog and press outreach
• Influencer partnerships

Creative for Promotion:

• Photography for ads
• Video production for promotion
• Graphic design
• Ad copywriting

Marketing Tools:

• Smart link services
• Analytics platforms
• Email marketing software
• Social media management tools

Key Considerations

• Consistent categorization enables comparison
• Separate advertising from other marketing
• Track creative production tied to ads
• Include subscription tools in appropriate category
• Document purpose of each expense
• Review categories annually for relevance

Common Questions

How should advertising be separated from other promotion?

Advertising versus other promotion:

Advertising (paid placement):

• Social media ads with spend to platforms
• Display ads with media buy
• Sponsored content
• Paid promotions with payment to platform

Other promotion (not paid placement):

• PR agency retainer
• Organic social media (time, not ad spend)
• Email marketing
• Content creation without paid distribution

This distinction matters because:

• Different budget allocation decisions
• Different performance expectations
• Different tax categorization potentially
• Different team responsibilities

Tracking recommendation:

• Advertising: Direct payments to platforms for ad placement
• Marketing services: Agency and consultant fees
• Creative production: Content creation costs
• Marketing tools: Software subscriptions

What percentage should advertising be of total expenses?

Advertising as percentage of total music expenses:

General guidelines:

• Early career: 5-15% of total expenses
• Growing artists: 10-20% of total expenses
• Established artists: 15-30% of total expenses

These ranges assume advertising is one component of overall marketing.

Context matters:

• Album years may see higher advertising
• Touring years may reduce ad percentage
• Launch periods justify increased investment
• Maintenance periods may reduce spending

Balance with other expenses: Production quality must support promotion. Advertising excellent music provides better ROI than advertising mediocre music heavily.

Warning signs:

• Advertising exceeding production spending consistently
• Advertising without corresponding revenue
• Unsustainable advertising relative to income

How should expense tracking software be configured?

Expense tracking configuration:

Category structure example:

• Production
  • Recording
  • Mixing/Mastering
  • Session Musicians
  • Producer Fees
• Advertising
  • Social Media Ads
  • Display Advertising
  • Streaming Platform Ads
  • Video Advertising
• Promotion (Non-Ad)
  • PR Services
  • Playlist Promotion
  • Influencer Partnerships
• Operations
  • Software Subscriptions
  • Professional Services
  • Website/Hosting
• Live Performance
  • Tour Expenses
  • Venue Costs
  • Equipment Rental

Tagging additions:

• Campaign name
• Release associated
• Platform/vendor
• Payment method

This structure enables analysis by category, campaign, release, and platform.

Display advertising expenses through networks like LG Media fit within the Display Advertising subcategory alongside other banner and website ad spending.

Summary

Music business expenses span advertising, production, distribution, operations, and live performance categories. Advertising should be separated from other promotional activities for accurate analysis. Typical advertising represents 10-20% of total music expenses. Configure tracking systems with consistent categories and tags to enable meaningful financial analysis.