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Music Business


Prior to getting into what I do now (restaurants), I was fully involved in the music industry. I started out promoting concerts for touring artists and soon began managing artists. I learned a lot about the industry from stories and experience (not to mention the fact that my attorney is primarily an entertainment attorney). I learned the art of managing creative types and attempted to teach them the science of business and money. I have a few scars from my experience, but, overall, I loved it. Regardless of the couple of negative situations with artists and shows, there are numerous artists who I worked with that I still keep consistent contact with.

One of those artists is a band out of Dallas, Addison Road. These guys were, by far, my favorite to work with simply because they jumped on to the message of business I preached.

At any rate, sometimes Ryan sends me emails asking me business questions and we discuss things back and forth regarding management, booking, touring, finances, labels, etc.

Last Thursday night, I got an email from Ryan saying they were in town doing a show and had lost my number. Luckily I got the email and made it in time for their final song. But after the show I got to get fully caught up on their progress as a band and as a business. The point? Well, this blog entry is where I will brag about an example of a band that is becoming a great business in the process and some of the ups and downs of the industry as a whole.

Addison Road (aka InTheCityMusic, LLC), has everyone on salary, has everyone under contract, allows all band members to become partners in the company, has a band van and trailer for touring, has numerous equipment endorsements, offers full health and dental plans for band members, and tours regularly. Label? Who needs it?

Addison Road is an amazing example of why record labels everywhere are in big, big trouble if they don’t shape up. Big-time label mergers may work to satisfy the board of directors and Wall Street peeps on the short end, but they don’t fix the bigger problem at hand… artists don’t need labels the way they use to 10 years ago. Granted, file sharing is the issue getting the most press coverage. But in today’s society, technology and a little financial education can create a self-made label situation without having to give up all your rights! Record labels, in general, must restructure their entire model to survive.

Another bit of bad news for labels is that they primarily make money from album sales. And signing unknown, unproven artists just don’t pay the bills anymore, unless they’re coming from American Idol!

And as for artists, there seems to be a widening gap between those who are calling their own shots and those who are begging for a label deal. Bad news? Absolutely. Try this real-life (though un-named) example:

Let’s say that an artist signs a record deal after only one, moderately successful independent album (say, 2,000 units sold). And let’s say, for the sake of some easy math, that this artist is getting a 10% royalty on their deal and that the label is going to spend $250,000 to make and launch the album. Note: this $250,000 comes from the artist advance, everything to actually make the album like studio musicians, producer fees, studio time, packaging, printing, design, marketing, distribution, etc. and this figure is very small for the majors.

More bad news for the artist is that the label is only one of many people or groups involved in their “camp”. Enter, booking agency. Gotta have gigs! They get 20% of concert revenues. (Some venues and/or promoters often ask for and get merch fees). Management: 10-15% of overall revenues after booking agency. Business manager: fees vary. Lawyer (some of the not-so-smart artists skip this one). Road manager (unless the artist, their wife, or someone else does this for free).

Back to the example... More than likely, this artist will not recoup on their first album. In our example, this artist would have to sell roughly more than 25,000 units to start making money from their album. And the more money your label spends, the more you have to sell to make it up. In fact, it’s usually best not to count on album sales as income AT ALL. Artists make most of their money from touring and selling merchandise at shows. Unless they’re also songwriters, then they can make royalties by having other artists record their songs, but we’ll skip this and keep it simple!

Note: “Recoup” is when the label makes back what they’ve spent on an artists album. Artists don’t receive any royalties from album sales until the label recoups. In some cases, artists can go 2, 3, or even more albums without ever recouping for their label. Unrecouped amounts are tacked on to the next album.

But what if your booking agency isn’t giving you the attention you need? If you’re a new artist, you’re probably not on the A-list. Which means smaller venues, smaller audiences and smaller money. And what if your label isn’t spending marketing dollars the way they should? What if you’re on the bottom of the list with everyone? And why in the world do artists think that being on a label is the “made” situation??

What you have, then, is no momentum for your debut album. Which isn’t a big deal to the label, because on their end, they’re just playing the numbers and they can write you off as a bad investment. But for you? You’ve just been disappointed on what was supposed to be something great and exciting.

However, for today’s business-savvy artists, if they can book their own gigs or get on an agency who will take an indie, and they’re touring regularly and have merch and a decent album, then why would they ever need a label? They wouldn’t. And that’s when it’s smart to find a label. At some point, of course, labels become important. When you get too big for your current routing. This is when the artist hires the label and not the other way around. The artist, then, is in the drivers seat… for the most part. But, to be in that position, you first have to learn to treat your music career as a business.

And as for Addison Road? They’ve been approached by some labels, sure. But the great thing is if they didn’t sign, they’d be just fine without it.

August 30, 2004 | Permalink | Comments (5) | TrackBack

The New Breed

Travis McMenimon and Jeff Cornwall both have mentions this week on their blogs of an article entitled “College students increasingly become on-campus entrepreneurs”. Since the sudden surge of young entrepreneurs is a favorite topic of mine along with the fact that I find myself to be a part of this group, I thought I would expound on this article as well.

This issue, to me, is something that has been long coming for some time. It was inevitable that the number of college students, and, in particular, young people everywhere, were going to become more and more entrepreneurial than past generations.

The article mentioned above, discusses not only the increase in college students becoming entrepreneurs, but also the increasing number of academic curriculum that has been added to meet the growing demand. In fact, not to make myself sound old by this comment, but when I was in school, I took the only entrepreneurial class offered at my alma mater, Texas Tech University. And, ironically, this was one of my favorite classes I ever attended (I say that because some of them I simply didn’t attend).

So why the sudden surge in young go-getters? I can think of a few of the more obvious reasons…

Technology. In the book entitled “The Rise of The Creative Class,” Richard Florida points out how today’s workforce is becoming more and more mobile due to some amazing technological advances. Wi-Fi access is now in almost every coffee house you can find, most universities, and airports. PDAs can now do what computers couldn’t even do 10 years ago. Cell phones with no long distance fees and thousands of minutes available for less than $100/month. And everyone’s favorite, the Internet… giving everyone with a computer access to the world 24 hours a day.

This aspect of technology also makes it easy for young people to play “grown up”. Doing a majority of your “business” via email and a cell phone means the only things people have to judge you are your voice, your writing ability, and the words you use. The only way they’ll know you’re 20 years old is if you tell them. This was always my favorite, since even at 26, I look 22… sometimes it’s hard for people to take you seriously when you look so young.

Social changes. Being an entrepreneur these days doesn’t carry the same connotations it did a few years ago. It’s much more acceptable now and doesn’t always mean “out of work”. Because of this, we have also seen a sudden surge in entrepreneurial-encouraging books like the best-selling series Rich Dad Poor Dad.

Economy. Thanks to programs like the SBA and some generous amounts of venture capital (despite the all-too-sobering events that occurred via the dot-com boom and bust), there remains a strong growth of entrepreneurial activity, even despite less-than-expected job growth.

Upbringing. Perhaps people in Gen. X and Gen. Y have learned some valuable lessons from their parents and elders. Watching a generation dive head first into major debt and trapping themselves into jobs that just aren’t fun, is great motivation for someone to chose a different path. No one wants to be in a job they hate 20 years from now, so, you might as well create your own job, which brings me to…

Job Security. What is that? I think I’ve heard of that word before. Regardless of what state our country is in as far as war and terrorism, it doesn’t change the fact that the term “job security” simply doesn’t exist the way it use to… if at all. In the wake of Enron, WorldCom, and (fill in the blank with your choice of a corrupt company here), can you blame anyone for not wanting to hand over their future to a stranger? The only job security these days is a guarantee of not getting fired… and when you’re the boss, that’s an easy thing to negotiate.

Rewards. It’s no secret that quite a few of the Forbes’ 400 richest people in America are either college dropouts or simply high school grads. Bill Gates and Michael Dell are probably the two most well known examples of college dropout billionaires. And even if unlimited riches aren’t in the works, then at least each and every business starter has the option of selling their job, instead of working for years and leaving with nothing.

Fact of the matter is, whether the world is ready for us or not, there’s a new breed of entrepreneurs on the rise. And it’s not coming just from college campuses either. It’s great to have some company.

August 9, 2004 | Permalink | Comments (1) | TrackBack