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Friday, January 11, 2008
Sony BMG deal gives Amazon an advantage
Contact Box Generated from MyspaceMaster.NET
NEW YORK - Sony BMG Music Entertainment (SNE) said Thursday that it has agreed to sell digital downloads of its tunes without copy protections on Amazon.com, (AMZN) giving the online retailer a boost in its effort to overtake Apple's (AAPL) iTunes.
Later this month, when Amazon begins to sell Sony BMG tunes, it will be the only place consumers can buy songs from all four major music companies as MP3 files free of digital rights management (DRM) restrictions.
That gives Amazon a leg up on iTunes in reaching consumers who want songs that can be copied and will work on virtually any computer or portable player including, but not limited to, Apple's iPods. Amazon already had deals with Universal Music, Warner Music and EMI to offer their songs DRM-free. Only EMI music is available that way on iTunes.
It is Sony BMG's "newest element of our ongoing campaign to bring our music to fans wherever they happen to be," Thomas Hesse, president of global digital business and U.S. sales, said in a statement.
The deal adds up to 200,000 Sony BMG songs to Amazon's nearly 3.3 million inventory. Sony BMG hitmakers include Avril Lavigne, Jennifer Lopez, Bruce Springsteen, Carrie Underwood, Bob Dylan, Kenny Chesney, Daughtry, Britney Spears and Barry Manilow.
Bill Carr, Amazon vice president for digital music, says, "It'll be great for our customers who have already expressed great enthusiasm for our service. This will make it that much better for them."
Amazon says that it sells about half of its songs, including most of the 100 best sellers, for 89 cents each.
But while iTunes charges 99 cents for virtually all tunes, with or without DRM, Amazon lets companies put different prices on different recordings. Most tunes sell for 89 cents to 99 cents. Amazon's flexible pricing has attracted music companies, which have chafed at iTunes' rigidity.
Amazon and Sony BMG declined to discuss pricing for the new songs.
Sony BMG first demonstrated its willingness to sell digital downloads without DRM this week. It announced a plan to sell in stores cards, similar to gift cards, that let buyers download DRM-free albums.
That decision and the Amazon pact are a remarkable turnaround for the No. 2 music company.
Until recently, it tried to rally the music industry to fight online piracy by offering digital downloads only in formats that couldn't be easily or endlessly copied. Sony BMG angered many consumers in 2005 with a short-lived effort to add anti-copy software to its CDs.
Companies changed their tune as retailers continued to cut floor space for CDs and as piracy continued unabated. Sales of albums and their digital equivalents fell 9.5% in 2007, to 585 million, according to Nielsen SoundScan.
The rapid growth of digital downloads, up 45% last year to 844 million tracks, prompted Amazon to launch its online music service in September.
The next hurdle for Amazon is to cut deals with myriad independent companies that accounted for 14.8% of all digital tracks sold last year.
"The list of independent labels is very long," Carr says. "We already have tens of thousands of them. It's a rather involved process to add them. We've actually licensed more content than is available on our website."
Accountability for Records That Are Commercial Failures
Accountability for Records That Are Commercial Failures
As urban music professionals, each of us can probably name at least five albums that either should have been successful or were destined to be “instant frisbees” from the beginning. While one is quick to claim recognition stakes in hit records, fingers immediately start pointing in regards to the guilty parties involved in records that are commercial failures. Artists will blame the label for not getting behind the project. Labels will either blame the artist for being too hard to work with or not being creative enough, internally blame specific departments or designate either the overseeing A&R executive or product manager the scapegoat. When a project fails, who should be held accountable?
“The record business is an art and not a science. When something goes wrong, it could be any number of things. It could be the record wasn’t in the grooves, promotion team wasn’t up to the task, video didn’t match the strength of the music or outside circumstances such as other acts being out at that particular moment stealing the limelight. You can never be100 percent sure of what went wrong. The music business isn’t a math equation where you have an equation and only one answer,” remarked Larry Khan, Senior VP, R&B Promotion and Marketing, Jive Records. Music consumers are very fickle, which makes it increasingly important for labels to efficiently and effectively implement their marketing plans and respective budget allocations. By the same token, the most genius plan can only disguise the musical shortcomings for so long until the truth is revealed via word-of-mouth promotion and reviews in trade and consumer publications.
There are many controllable and uncontrollable variables involved in creating music that is qualitatively and quantitatively beneficial to the label, but if the business processes the label is built upon continue to produce erroneous results, simultaneously hindering the company’s success–examination.
Software giant Oracle (www.oracle.com) recently announced plans to unveil new applications targeting the media industry and intellectual property and rights management market. Within the Oracle E-Business Suite, the new applications will support the financial and legal aspects involved in the management of media assets and intellectual property, including marketing, selling, servicing, and billing customers as well as paying rights holders. “Over 50 percent of companies have to manage some type of intellectual property. The new functionality added to the Oracle E-Business Suite will allow companies to better control the entire lifecycle of their intellectual property,” said Mark Barrenechea, Senior VP, Applications Development, Oracle.
In addition to fostering better departmental communication within labels, the end result would cause department heads to automate their operations and encourage more-educated decisions across the executive ranks within the company. Department heads would be required to input their respective project summaries into the system, recapping the various successes and failures associated with the department’s activities. By doing so, when the time comes to setup the artist’s next project, a more accurate plan can be devised to ensure success, potentially decreasing costs and increasing profit margins.
As urban music professionals, each of us can probably name at least five albums that either should have been successful or were destined to be “instant frisbees” from the beginning. While one is quick to claim recognition stakes in hit records, fingers immediately start pointing in regards to the guilty parties involved in records that are commercial failures. Artists will blame the label for not getting behind the project. Labels will either blame the artist for being too hard to work with or not being creative enough, internally blame specific departments or designate either the overseeing A&R executive or product manager the scapegoat. When a project fails, who should be held accountable?
“The record business is an art and not a science. When something goes wrong, it could be any number of things. It could be the record wasn’t in the grooves, promotion team wasn’t up to the task, video didn’t match the strength of the music or outside circumstances such as other acts being out at that particular moment stealing the limelight. You can never be100 percent sure of what went wrong. The music business isn’t a math equation where you have an equation and only one answer,” remarked Larry Khan, Senior VP, R&B Promotion and Marketing, Jive Records. Music consumers are very fickle, which makes it increasingly important for labels to efficiently and effectively implement their marketing plans and respective budget allocations. By the same token, the most genius plan can only disguise the musical shortcomings for so long until the truth is revealed via word-of-mouth promotion and reviews in trade and consumer publications.
There are many controllable and uncontrollable variables involved in creating music that is qualitatively and quantitatively beneficial to the label, but if the business processes the label is built upon continue to produce erroneous results, simultaneously hindering the company’s success–examination.
Software giant Oracle (www.oracle.com) recently announced plans to unveil new applications targeting the media industry and intellectual property and rights management market. Within the Oracle E-Business Suite, the new applications will support the financial and legal aspects involved in the management of media assets and intellectual property, including marketing, selling, servicing, and billing customers as well as paying rights holders. “Over 50 percent of companies have to manage some type of intellectual property. The new functionality added to the Oracle E-Business Suite will allow companies to better control the entire lifecycle of their intellectual property,” said Mark Barrenechea, Senior VP, Applications Development, Oracle.
In addition to fostering better departmental communication within labels, the end result would cause department heads to automate their operations and encourage more-educated decisions across the executive ranks within the company. Department heads would be required to input their respective project summaries into the system, recapping the various successes and failures associated with the department’s activities. By doing so, when the time comes to setup the artist’s next project, a more accurate plan can be devised to ensure success, potentially decreasing costs and increasing profit margins.
Tips For Selecting An Entertainment Attorney
Tips For Selecting An Entertainment Attorney
(from Music Business Solutions)
This appeared originally in "Music Biz Insight #5"
Sooner or later you will need legal counsel as a musician, songwriter, label owner or industry careerist and it's important to know how to select the best counsel for you. Here are a few tips to help you with the screening process:
1. Get a Specialist.
The value of a music attorney is determined in large part by the quantity and quality of his or her contacts in the music/entertainment field.
Artists should be cautioned against the natural inclination to use a friend, relative ("My Cousin Vinny"), or family lawyer to fill their entertainment law needs. This is fine if they're qualified. However, the trend today is toward greater legal specialization than ever before because of the increased complexity of our commercial society.
Unless a lawyer regularly deals with management, recording, and music publishing contracts; copyright protection and administration; and licensing of intellectual and artistic property, chances are he or she won't sufficiently understand or appreciate the industry and its peculiar problems.
2. Get a Referral.
A referral from a satisfied client is a good start but...
3. Get References too.
Always ask the attorney for at least two client-references you can call. This is a perfectly reasonable request and any lawyer who has a problem with this should be your cue to exit.
Be sure the work the lawyer did for the client is similar to what you need and be sure also that the work was performed in the last 6 months to a year (this business changes too fast for sporadic legal excursions).
4. Get the Dirt
(if there is any). You can make two important phone calls to find out if there have been any complaints lodged in your city or state against this attorney. They're calls worth making:
A. Secretary of State's office (look for the phone number in the "Government" section of your phone book).
B.The Better Business Bureau Directory lists the addresses and phone numbers of Better Business Bureaus in the U.S. and Canada.
5. Have a Meeting.
Most attorneys will waive their usual hourly fee for the first consultation. At this consultation meeting you'll want to:
A. Ask the attorney about his/her basic philosophy of life. Why? Because this will help you understand his/her worldview, a significant relationship component. If your worldview turns out to be diametrically opposed to the attorney's, it probably means you're not a good match for each other.
B. Inquire about the extent and quality of the attorney's pertinent industry contacts.
C. Find out how the fee structure would work to avoid any misunderstandings.
A note on legal fees: Sometimes you'll need legal counsel for short-term projects like putting together the appropriate performance and partnership agreements, trademarking your business/band name, incorporating your business, and copyright registration. These kinds of projects are usually paid for as a "flat fee" based on the attorney's hourly rate.
Longer-term projects and legal representation to the music industry (to labels, publishers, merchandise companies, etc.). These are often paid in "points" (percentage points) of contract advances and/or future royalties.
D. Feel the vibe--Trust your instincts.
6. Do-(some of)-it-Yourself.
A lot of groundwork can be done by yourself when it comes to short-term legal needs. For example, modern communication technologies like the Internet, let you do a national trademark search from your desktop. For tips on this and other do-it-yourself legal resources contact Nolo Press or call (510) 549-1976 for their free self-help law books and software catalog. It's the best in the business.
7. Another first-stage option
For longer-term legal projects is the VLA (Volunteer Lawyers for the Arts). Founded in 1969, VLA was "the first legal aid organization in the U.S. dedicated to providing free or low-cost arts-related legal assistance to artists and arts organizations in all creative fields who cannot afford provate counsel." You must apply for assistance and there is an application fee. The main VLA office is in NY (212-977-9271; 1285 Avenue of the Americas, 3rd flr., New York, NY 10019) and they have satellite offices all over the country.
(from Music Business Solutions)
This appeared originally in "Music Biz Insight #5"
Sooner or later you will need legal counsel as a musician, songwriter, label owner or industry careerist and it's important to know how to select the best counsel for you. Here are a few tips to help you with the screening process:
1. Get a Specialist.
The value of a music attorney is determined in large part by the quantity and quality of his or her contacts in the music/entertainment field.
Artists should be cautioned against the natural inclination to use a friend, relative ("My Cousin Vinny"), or family lawyer to fill their entertainment law needs. This is fine if they're qualified. However, the trend today is toward greater legal specialization than ever before because of the increased complexity of our commercial society.
Unless a lawyer regularly deals with management, recording, and music publishing contracts; copyright protection and administration; and licensing of intellectual and artistic property, chances are he or she won't sufficiently understand or appreciate the industry and its peculiar problems.
2. Get a Referral.
A referral from a satisfied client is a good start but...
3. Get References too.
Always ask the attorney for at least two client-references you can call. This is a perfectly reasonable request and any lawyer who has a problem with this should be your cue to exit.
Be sure the work the lawyer did for the client is similar to what you need and be sure also that the work was performed in the last 6 months to a year (this business changes too fast for sporadic legal excursions).
4. Get the Dirt
(if there is any). You can make two important phone calls to find out if there have been any complaints lodged in your city or state against this attorney. They're calls worth making:
A. Secretary of State's office (look for the phone number in the "Government" section of your phone book).
B.The Better Business Bureau Directory lists the addresses and phone numbers of Better Business Bureaus in the U.S. and Canada.
5. Have a Meeting.
Most attorneys will waive their usual hourly fee for the first consultation. At this consultation meeting you'll want to:
A. Ask the attorney about his/her basic philosophy of life. Why? Because this will help you understand his/her worldview, a significant relationship component. If your worldview turns out to be diametrically opposed to the attorney's, it probably means you're not a good match for each other.
B. Inquire about the extent and quality of the attorney's pertinent industry contacts.
C. Find out how the fee structure would work to avoid any misunderstandings.
A note on legal fees: Sometimes you'll need legal counsel for short-term projects like putting together the appropriate performance and partnership agreements, trademarking your business/band name, incorporating your business, and copyright registration. These kinds of projects are usually paid for as a "flat fee" based on the attorney's hourly rate.
Longer-term projects and legal representation to the music industry (to labels, publishers, merchandise companies, etc.). These are often paid in "points" (percentage points) of contract advances and/or future royalties.
D. Feel the vibe--Trust your instincts.
6. Do-(some of)-it-Yourself.
A lot of groundwork can be done by yourself when it comes to short-term legal needs. For example, modern communication technologies like the Internet, let you do a national trademark search from your desktop. For tips on this and other do-it-yourself legal resources contact Nolo Press or call (510) 549-1976 for their free self-help law books and software catalog. It's the best in the business.
7. Another first-stage option
For longer-term legal projects is the VLA (Volunteer Lawyers for the Arts). Founded in 1969, VLA was "the first legal aid organization in the U.S. dedicated to providing free or low-cost arts-related legal assistance to artists and arts organizations in all creative fields who cannot afford provate counsel." You must apply for assistance and there is an application fee. The main VLA office is in NY (212-977-9271; 1285 Avenue of the Americas, 3rd flr., New York, NY 10019) and they have satellite offices all over the country.
How Do I Protect the Name of My Band?
How Do I Protect the Name of My Band?
The two key concepts involved in "protecting" the name of a band are "territory" and "priority". Territory means the area where you use the name, e.g., Chicago, Illinois, Mid-West, United States, world-wide, etc. Priority, as the word implies, involves who uses the name first. These two concepts work together to limit the scope of protection for a name.
If you started using your name first, you can prevent others from using it. However, the law allows you exclusive use of the name only in the area where you have used it. For example, if you started playing the Chicagoland area in 1989 and never played or distributed music outside the Chicagoland area, you could not prevent a band from using the name in Florida. However, they could not use the band name in Chicagoland since you were the first to use the band name there. You also may acquire the rights to your name for Chicago in 1989 and nation-wide in 1992 when you release your first record for a major. If someone started using your name in another part of the country in 1990, you could not prevent their use in their territory since they have priority in that area.
A famous case involved two bands both performing under the name, "Flash." The first was a small band in San Francisco who had never recorded a record and the second was an English band who had a major label deal. Since the San Francisco "Flash" was a prior user in that area, the English "Flash" was not allowed to sell albums in the Bay area.
Before investing money in the name of your band, you should investigate whether anyone else is already using the name. If someone is already using your name, as explained above, they have priority in their territory. A good place to start is BMI and ASCAP. Both of these organizations will do a search of their rosters for conflicting names. You may also check Phonolog which is a list of albums and can be found at many record stores. Also check out the annual Billboard International Talent & Touring Directory. There are also many resources at libraries in large metropolitan areas. The librarians will also assist you in doing a trademark search of state and federal trademarks. The final place you may consider searching is the Secretary of State of California and New York. Since these are the two largest "entertainment" states, they can be helpful as well. The Secretary of State can tell you if they have any businesses registered under the proposed name. You can never be guaranteed that no one is using your name somewhere, but these avenues are a good place to start.
After checking the availability of your name, you should take steps to protect that name. As stated above, priority of use in a specific territory is the key to protecting a name. Keep careful records of your public use of the name. Record where and when you played or sold records, and any publicity so as to prove what territory you have used the name in and for how long. As for legal protection, there are a few routes you can take.
You cannot copyright a band name. The correct legal protection is a trademark. Within trademark law there is a category called servicemarks. A trademark identifies a product while a servicemark identifies a service. Since a band is in the business of providing entertainment services, a servicemark is the proper tool to protect the name of a band.
The amount of protection you want for the band directly reflects the amount of money it will cost you. The least expensive route is a state trademark. Fees vary from state to state, but they are generally under $100. A state trademark gives you protection throughout the state you register. You can get the application by calling the Secretary of State. If you don't have a record contract or don't tour nationwide, I recommend a state trademark to start.
The next step is a federal trademark. A federal trademark gives you rights throughout the entire United States. The application fee for a federal trademark is presently $245. If your music is distributed throughout the United States or you do extensive touring, you may want to obtain a federal trademark. These forms can be obtained by calling (703) 557-4636.
Since the entertainment industry is now world-wide, there are 175 countries that allow the registration of trademarks and 60 which allow the registration of entertainment servicemarks. Even if you focus on the five or so most important jurisdictions, (Great Britain, Canada, Germany, Mexico and France), you are still talking a great deal of money for trademark protection on a worldwide basis.
Finally, the "®" symbol: what does it mean? Unlike the copyright symbol, "©" (which anyone can use whether their work is registered with the Copyright Office or not), the trademark symbol, "®", can only be used if you have a federally registered trademark. By using the "®" symbol, you put everyone on notice that you own the trademark and anyone using it would be a wilful infringer. There is also a "TM" symbol used occasionally. This has no legal definition or significance, but is generally used to claim ownership of an unregistered trademark.
In conclusion, when starting a band, you should: first, research the proposed name for conflicting uses; second, document the dates and territory where you use the band name; third, take steps to protect the name through servicemarks.
The two key concepts involved in "protecting" the name of a band are "territory" and "priority". Territory means the area where you use the name, e.g., Chicago, Illinois, Mid-West, United States, world-wide, etc. Priority, as the word implies, involves who uses the name first. These two concepts work together to limit the scope of protection for a name.
If you started using your name first, you can prevent others from using it. However, the law allows you exclusive use of the name only in the area where you have used it. For example, if you started playing the Chicagoland area in 1989 and never played or distributed music outside the Chicagoland area, you could not prevent a band from using the name in Florida. However, they could not use the band name in Chicagoland since you were the first to use the band name there. You also may acquire the rights to your name for Chicago in 1989 and nation-wide in 1992 when you release your first record for a major. If someone started using your name in another part of the country in 1990, you could not prevent their use in their territory since they have priority in that area.
A famous case involved two bands both performing under the name, "Flash." The first was a small band in San Francisco who had never recorded a record and the second was an English band who had a major label deal. Since the San Francisco "Flash" was a prior user in that area, the English "Flash" was not allowed to sell albums in the Bay area.
Before investing money in the name of your band, you should investigate whether anyone else is already using the name. If someone is already using your name, as explained above, they have priority in their territory. A good place to start is BMI and ASCAP. Both of these organizations will do a search of their rosters for conflicting names. You may also check Phonolog which is a list of albums and can be found at many record stores. Also check out the annual Billboard International Talent & Touring Directory. There are also many resources at libraries in large metropolitan areas. The librarians will also assist you in doing a trademark search of state and federal trademarks. The final place you may consider searching is the Secretary of State of California and New York. Since these are the two largest "entertainment" states, they can be helpful as well. The Secretary of State can tell you if they have any businesses registered under the proposed name. You can never be guaranteed that no one is using your name somewhere, but these avenues are a good place to start.
After checking the availability of your name, you should take steps to protect that name. As stated above, priority of use in a specific territory is the key to protecting a name. Keep careful records of your public use of the name. Record where and when you played or sold records, and any publicity so as to prove what territory you have used the name in and for how long. As for legal protection, there are a few routes you can take.
You cannot copyright a band name. The correct legal protection is a trademark. Within trademark law there is a category called servicemarks. A trademark identifies a product while a servicemark identifies a service. Since a band is in the business of providing entertainment services, a servicemark is the proper tool to protect the name of a band.
The amount of protection you want for the band directly reflects the amount of money it will cost you. The least expensive route is a state trademark. Fees vary from state to state, but they are generally under $100. A state trademark gives you protection throughout the state you register. You can get the application by calling the Secretary of State. If you don't have a record contract or don't tour nationwide, I recommend a state trademark to start.
The next step is a federal trademark. A federal trademark gives you rights throughout the entire United States. The application fee for a federal trademark is presently $245. If your music is distributed throughout the United States or you do extensive touring, you may want to obtain a federal trademark. These forms can be obtained by calling (703) 557-4636.
Since the entertainment industry is now world-wide, there are 175 countries that allow the registration of trademarks and 60 which allow the registration of entertainment servicemarks. Even if you focus on the five or so most important jurisdictions, (Great Britain, Canada, Germany, Mexico and France), you are still talking a great deal of money for trademark protection on a worldwide basis.
Finally, the "®" symbol: what does it mean? Unlike the copyright symbol, "©" (which anyone can use whether their work is registered with the Copyright Office or not), the trademark symbol, "®", can only be used if you have a federally registered trademark. By using the "®" symbol, you put everyone on notice that you own the trademark and anyone using it would be a wilful infringer. There is also a "TM" symbol used occasionally. This has no legal definition or significance, but is generally used to claim ownership of an unregistered trademark.
In conclusion, when starting a band, you should: first, research the proposed name for conflicting uses; second, document the dates and territory where you use the band name; third, take steps to protect the name through servicemarks.
A&R Administration
A&R Administration
What did it cost to record your latest release? Was it under, on, or over budget? Do you have the information readily available?
The process of budgeting and controlling recording costs is called A&R Administration. Insufficient care and attention to it can cause costs to balloon completely out of control.
But first, what is A&R?
Most of you know, but I recently received an email from a potential client wanting me to explain it! My answer was that it stands for "Artists and Repertoire" and is the heart and soul of any successful record label. It refers, in short, to the scouting for, signing, and recording of singers, musicians, etc.
I’ll make a few comments on A&R in general at this point, because I want to devote most of this message to discussing how to keep track of recording costs.
It’s my philosophy that you should not make a recording unless an artist has something unique and special. An artist should have a new sound, a new interpretation, or a new vision -- whether as a singer-songwriter, composer, or interpreter of others’ music.
More important from a business standpoint, not only should an artist be special and unique, but should also be one who is performing regularly -- not just in his home town, but throughout his region and his state, if not the entire country.
I also think the artist should have professional management. I've found that artists without representation place a tremendous amount of stress on a label's staff, because the label ends up having to manage their careers as well as get them gigs. This is a potential conflict of interest, and the artist should be represented by his own manager or agent.
Once you've signed an artist and have come to an agreement as to the nature of the recording you're going to make, it's necessary to put together a budget which can be agreed upon by all parties.
Recordings can sometimes cost as little as $1500 to $2500 -- particularly if an artist has his own in-home studio -- but can range to many hundreds of thousand of dollars in the case of a major artist at one of the big multi-national companies.
What's involved in establishing a budget? And what do you have to provide for?
First, of course, are fees to the artist, which may be an advance against royalties and will have been negotiated in the contract. There also may be an outside producer who may be getting either a straight fee or a fee plus royalty points. And, in the case of a larger-scale recording, there may be an arranger for whom you have to budget, as well as allowing for the cost of copying parts.
In addition are the costs of musicians. They may or may not be union members. Large labels, who are most likely signatories to the AFM (American Federation of Musicians) agreement, will be paying through the union. Smaller labels are generally not signatories, and will pay negotiated rates for musicians on a per session, or day, or project basis. You must estimate how many you will need per session, and multiply that number by what you've agreed to pay per session.
If the recording includes use of a piano, you will need to budget for a tuner who should tune prior to each session in which the instrument will be used.
Then there are all the other costs related to recording sessions, such as the rate for the studio, either by the hour or by the day, and perhaps an outside engineer in addition to whoever the studio may provide. Add the cost of tape (one or two inch) for multi-track recording, if applicable.
Any instruments or equipment that needs to be rented must also be put in the budget, as well as cartage costs.
You'll also need to allow for the cost of mixing, which includes the studio, the number of hours or days required, an additional engineer or equipment if necessary, and the cost of tape (quarter, half inch, or DAT -- although I don’t recommend DAT as your final master storage medium.)
Finally, you should include the cost of mastering -- not an insignificant amount unless this is done on a Macintosh or PC using a program such as Jam or ProTools.
Do the computation in a simple spreadsheet and you will get a good estimate of the cost of the project. If the resulting number is higher than you'd like, see where you might be able to cut back. But once the various parameters are agreed upon with all involved, the budget should be set and frozen.
Now is when the actual administration of the budget comes in.
Sometimes an artist will book the studio, sometimes the record label, but in all cases the cost should be controlled through the A&R administrator. This may be the head of the label, or it may be someone whose specific task this is. Larger labels have entire departments who handle A&R administration. But the person who is handling the project should give a purchase order (written or verbal) to the studio for the agreed upon rate, and the number of sessions or days. Many labels do it verbally, but the P.O. number should be written into the budget when it's been given out -- in new columns (alongside the budget column) by P.O. number, dollar amount, and date of authorization. The P.O. number should appear on the studio's or vendor's invoices when rendered.
Also note that, in the case of a new label, studios may wish to be paid a portion of the fee in advance, and they may not release the recorded tapes until after all bills have been paid. So be prepared to pay right after sessions have been completed.
After recording has started and invoices come through, the administrator should check off the appropriate column, making adjustments in an "actuals" column in the event the invoice is slightly lower or higher than estimated.
Most important -- your budget spreadsheet must be kept up to date on a frequent and regular basis.
Additionally, where studio musicians are involved, the administrator or the producer should be responsible for seeing that the musicians fill in the appropriate forms, which include W-4 tax forms so that your accounting department can withhold the appropriate deductions, as well as I-9s -- government-required forms that verify employment eligibility and which must be accompanied by appropriate identification.
When union musicians are used, as soon as sessions are completed, AFM session contracts have to be prepared showing the musicians' names, the location (studio name) and times of recording, the songs recorded, and the amounts due to the musicians, plus additional amounts for Health and Welfare, pension benefits, etc. Checks should then be drawn and sent to the union with the AFM contracts. The amounts of these checks also have to be entered into the "actuals" column of your budget.
In the case of most smaller labels whose musicians are not union members, a similar situation will apply, but at lower cost. Of course musicians will want to be paid, sometimes at the end of the session, so checks should be prepared and given to them as soon after recording as possible. The amounts of these checks should also be put into the "actuals" column of the budget.
At all times, the administrator needs to be aware of any significant difference between the actual and estimated costs, and if it appears that the actual may be exceeding the budgeted amount, senior management should immediately be advised.
Another useful tool for senior managers, in the early stages of deciding whether to record a new artist, is to make a spreadsheet and estimate what it would cost to make the record, add how much you think you'll need to spend on marketing, and add the cost of sales for the number of records you think you'll sell. Divide the total outlay by the average sales price to your distributor. The result is the quantity of units you'll need to sell to break even. This can help you make your signing decision.
What did it cost to record your latest release? Was it under, on, or over budget? Do you have the information readily available?
The process of budgeting and controlling recording costs is called A&R Administration. Insufficient care and attention to it can cause costs to balloon completely out of control.
But first, what is A&R?
Most of you know, but I recently received an email from a potential client wanting me to explain it! My answer was that it stands for "Artists and Repertoire" and is the heart and soul of any successful record label. It refers, in short, to the scouting for, signing, and recording of singers, musicians, etc.
I’ll make a few comments on A&R in general at this point, because I want to devote most of this message to discussing how to keep track of recording costs.
It’s my philosophy that you should not make a recording unless an artist has something unique and special. An artist should have a new sound, a new interpretation, or a new vision -- whether as a singer-songwriter, composer, or interpreter of others’ music.
More important from a business standpoint, not only should an artist be special and unique, but should also be one who is performing regularly -- not just in his home town, but throughout his region and his state, if not the entire country.
I also think the artist should have professional management. I've found that artists without representation place a tremendous amount of stress on a label's staff, because the label ends up having to manage their careers as well as get them gigs. This is a potential conflict of interest, and the artist should be represented by his own manager or agent.
Once you've signed an artist and have come to an agreement as to the nature of the recording you're going to make, it's necessary to put together a budget which can be agreed upon by all parties.
Recordings can sometimes cost as little as $1500 to $2500 -- particularly if an artist has his own in-home studio -- but can range to many hundreds of thousand of dollars in the case of a major artist at one of the big multi-national companies.
What's involved in establishing a budget? And what do you have to provide for?
First, of course, are fees to the artist, which may be an advance against royalties and will have been negotiated in the contract. There also may be an outside producer who may be getting either a straight fee or a fee plus royalty points. And, in the case of a larger-scale recording, there may be an arranger for whom you have to budget, as well as allowing for the cost of copying parts.
In addition are the costs of musicians. They may or may not be union members. Large labels, who are most likely signatories to the AFM (American Federation of Musicians) agreement, will be paying through the union. Smaller labels are generally not signatories, and will pay negotiated rates for musicians on a per session, or day, or project basis. You must estimate how many you will need per session, and multiply that number by what you've agreed to pay per session.
If the recording includes use of a piano, you will need to budget for a tuner who should tune prior to each session in which the instrument will be used.
Then there are all the other costs related to recording sessions, such as the rate for the studio, either by the hour or by the day, and perhaps an outside engineer in addition to whoever the studio may provide. Add the cost of tape (one or two inch) for multi-track recording, if applicable.
Any instruments or equipment that needs to be rented must also be put in the budget, as well as cartage costs.
You'll also need to allow for the cost of mixing, which includes the studio, the number of hours or days required, an additional engineer or equipment if necessary, and the cost of tape (quarter, half inch, or DAT -- although I don’t recommend DAT as your final master storage medium.)
Finally, you should include the cost of mastering -- not an insignificant amount unless this is done on a Macintosh or PC using a program such as Jam or ProTools.
Do the computation in a simple spreadsheet and you will get a good estimate of the cost of the project. If the resulting number is higher than you'd like, see where you might be able to cut back. But once the various parameters are agreed upon with all involved, the budget should be set and frozen.
Now is when the actual administration of the budget comes in.
Sometimes an artist will book the studio, sometimes the record label, but in all cases the cost should be controlled through the A&R administrator. This may be the head of the label, or it may be someone whose specific task this is. Larger labels have entire departments who handle A&R administration. But the person who is handling the project should give a purchase order (written or verbal) to the studio for the agreed upon rate, and the number of sessions or days. Many labels do it verbally, but the P.O. number should be written into the budget when it's been given out -- in new columns (alongside the budget column) by P.O. number, dollar amount, and date of authorization. The P.O. number should appear on the studio's or vendor's invoices when rendered.
Also note that, in the case of a new label, studios may wish to be paid a portion of the fee in advance, and they may not release the recorded tapes until after all bills have been paid. So be prepared to pay right after sessions have been completed.
After recording has started and invoices come through, the administrator should check off the appropriate column, making adjustments in an "actuals" column in the event the invoice is slightly lower or higher than estimated.
Most important -- your budget spreadsheet must be kept up to date on a frequent and regular basis.
Additionally, where studio musicians are involved, the administrator or the producer should be responsible for seeing that the musicians fill in the appropriate forms, which include W-4 tax forms so that your accounting department can withhold the appropriate deductions, as well as I-9s -- government-required forms that verify employment eligibility and which must be accompanied by appropriate identification.
When union musicians are used, as soon as sessions are completed, AFM session contracts have to be prepared showing the musicians' names, the location (studio name) and times of recording, the songs recorded, and the amounts due to the musicians, plus additional amounts for Health and Welfare, pension benefits, etc. Checks should then be drawn and sent to the union with the AFM contracts. The amounts of these checks also have to be entered into the "actuals" column of your budget.
In the case of most smaller labels whose musicians are not union members, a similar situation will apply, but at lower cost. Of course musicians will want to be paid, sometimes at the end of the session, so checks should be prepared and given to them as soon after recording as possible. The amounts of these checks should also be put into the "actuals" column of the budget.
At all times, the administrator needs to be aware of any significant difference between the actual and estimated costs, and if it appears that the actual may be exceeding the budgeted amount, senior management should immediately be advised.
Another useful tool for senior managers, in the early stages of deciding whether to record a new artist, is to make a spreadsheet and estimate what it would cost to make the record, add how much you think you'll need to spend on marketing, and add the cost of sales for the number of records you think you'll sell. Divide the total outlay by the average sales price to your distributor. The result is the quantity of units you'll need to sell to break even. This can help you make your signing decision.
35 Things To Consider When Starting Your Own Record Label
35 Things To Consider When Starting Your Own Record Label
1. Why are you starting your own label? (What is your motivation?)
2. Why would anyone want to buy your music anyway?
3. Is there currently a market for your kind of music? Prove it!
4. If you are not releasing your own music, have you ever read a recording contract? Are you aware of all the traditional clauses that are in such 75-100 page contracts?
5. Do you know anything about copyright law?
6. What is a Mechanical Royalty?
7. Have you ever heard of the Harry Fox Agency? What do they do?
8. What do you want to achieve by starting your own label?
9. What do you know about the day to day business of selling music?
10. Will your new company be a sole proprietorship, a partnership, or a corporation? (Do you know the pros and cons of each?)
11. Have you registered the name of your company to make sure you can use that name?
12. Will you need any recording equipment or office equipment and supplies to run your label?
13. Do you have a recording studio you can work with?
14. Do you know any record producers and/or engineers?
15. How much money do you think it will cost you to startup your label, and to finance the recordings and marketing of the recordings for the first year?
16. Where will the financing come from?
17. What local, state, and federal tax responsibilities will your label have?
18. How will you sell your records? (Live shows, Internet sales, mail order, catalog sales, Distributors, Stores?)
19. What specific distribution and retail sales plans have you arranged so fans of your music can easily buy your releases at record and other retail stores?
20. Do you have the money, time, and determination to compete in an industry that releases over 500 new records a week?
21. How much does it cost to manufacture CDs, Tapes, and/or vinyl?
22. What 'configurations' will you need to manufacture your music?
23. How many copies do you need to manufacture for each release?
24. What are 'package deals' offered by manufacturers, and are they right for you?
25. Will you need to make any posters, bin cards, or other promotional materials? If so, how many and how much will that cost?
26. What specific packaging choices are available and which is right for your releases?
27. How did you estimate the number of copies you needed?
28. Did you count into your estimation the number of free CDs you will have to give away for promotions of various kinds?
29. How will you go about finding new acts to sign to your label?
30. How important do you think the graphic element is in designing your label's logo, and specific cover artwork for your releases?
31. Do you know any graphic artists with record jacket design experience?
32. What specific information should go on the cover, back cover, spine, booklet, and on the CD itself?
33. Do you have your own Barcode? Why do you need one?
34. Do you know how to write a music marketing plan, a distributor one-sheet, and other promotional materials?
35. Who is your customer? If you think you know them, then describe them in very specific terms.
1. Why are you starting your own label? (What is your motivation?)
2. Why would anyone want to buy your music anyway?
3. Is there currently a market for your kind of music? Prove it!
4. If you are not releasing your own music, have you ever read a recording contract? Are you aware of all the traditional clauses that are in such 75-100 page contracts?
5. Do you know anything about copyright law?
6. What is a Mechanical Royalty?
7. Have you ever heard of the Harry Fox Agency? What do they do?
8. What do you want to achieve by starting your own label?
9. What do you know about the day to day business of selling music?
10. Will your new company be a sole proprietorship, a partnership, or a corporation? (Do you know the pros and cons of each?)
11. Have you registered the name of your company to make sure you can use that name?
12. Will you need any recording equipment or office equipment and supplies to run your label?
13. Do you have a recording studio you can work with?
14. Do you know any record producers and/or engineers?
15. How much money do you think it will cost you to startup your label, and to finance the recordings and marketing of the recordings for the first year?
16. Where will the financing come from?
17. What local, state, and federal tax responsibilities will your label have?
18. How will you sell your records? (Live shows, Internet sales, mail order, catalog sales, Distributors, Stores?)
19. What specific distribution and retail sales plans have you arranged so fans of your music can easily buy your releases at record and other retail stores?
20. Do you have the money, time, and determination to compete in an industry that releases over 500 new records a week?
21. How much does it cost to manufacture CDs, Tapes, and/or vinyl?
22. What 'configurations' will you need to manufacture your music?
23. How many copies do you need to manufacture for each release?
24. What are 'package deals' offered by manufacturers, and are they right for you?
25. Will you need to make any posters, bin cards, or other promotional materials? If so, how many and how much will that cost?
26. What specific packaging choices are available and which is right for your releases?
27. How did you estimate the number of copies you needed?
28. Did you count into your estimation the number of free CDs you will have to give away for promotions of various kinds?
29. How will you go about finding new acts to sign to your label?
30. How important do you think the graphic element is in designing your label's logo, and specific cover artwork for your releases?
31. Do you know any graphic artists with record jacket design experience?
32. What specific information should go on the cover, back cover, spine, booklet, and on the CD itself?
33. Do you have your own Barcode? Why do you need one?
34. Do you know how to write a music marketing plan, a distributor one-sheet, and other promotional materials?
35. Who is your customer? If you think you know them, then describe them in very specific terms.
10 EXCUSES FOR NOT HAVING YOUR OWN RECORD LABEL
10 EXCUSES FOR NOT HAVING YOUR OWN RECORD LABEL
Have you thought about having your own independent record label? Home recording studios, access to the Internet, and local distribution networks are making the independent route more successful. In addition, major labels are now using independent labels to break new acts. Once an independent label establishes a good reputation and carries successful local acts, major labels are more willing to negotiate fair deals with the artists because of their proven success. Listed below are some of the main reasons why artists do not try to establish their own labels. Hopefully, this article will encourage you to do so, and give you the tools to create a professional and successful product.
1. I don't have any money!
Maybe you don't, but you must know someone who does! Music may be a life force for you, but to almost everyone else, music is a business, so you will have to present your desire to have a professional recording in business terms. Your family, friends, etc. want you to succeed - so you can move out! If you're serious about your music, create a proposal, short, sweet, and to the point. Set out at least 5 different things you want to do with their money.
a. Pay for production costs.
b. Pay musicians.
c. Pay recording costs.
d. Pay for advertising.
e. Pay for distribution.
Do some research and figure out what these things will cost. Billboard magazine's classified section will give you an idea about costs for various services. These prices are nationally competitive, but don't forget your local business people! They may be able to provide you with more personalized service. Having a local service person also enables you to keep an eye on progress. It is hard to manage a production process across the country. You now have a basis for a budget. Your investors will love it!
2. I don't have enough material.
Start out with a single - 7", cassette, or 12". The DJs still play vinyl. You need a product, and this is still the most economical way to put out your product. There are not many companies that still work with vinyl. However, Disc Makers (1-800-468-9353 or www2.discmakers.com), Europadisk, Ltd. (212-266-4401), and Rainbo (310-829-3476 or www.rainbo.com), still do. Their prices are reasonable, and the results are professional.
3. I don't have a steady gig.
This is a tough one. But it is infinitely tougher to promote you and your band without a product. A professional looking recording speaks to potential employers. They realize that you are a serious business person, as well as a musician.
4. I don't have distribution.
Unless you have signed with a major label, you will have to use other methods to distribute your recording. Independently owned music stores may be willing to take your music on consignment. The independent record label for which I do legal work, Ritual, Ltd., has been lucky to have major record stores agree to carry its product. Ritual has been able to place its releases in several independently owned record stores, as well as HMV and Tower Records. You have to be willing to go out and make these connections, or have someone else do it for you. It is a lot of work, but once you have established the relationship, the next time you want them to carry your product, you know what to do.
I would recommend that you contact something like The Local Music Store (www.localmusicstore.com) to see if you want to be affiliated with an online catalog distribution organization. There is a nominal fee, but artists distributed through this medium have an important opportunity to become acquainted with the distribution side of the business.
You can also try to get your music distributed through other independent labels. The music publication, Pollstar, lists both major and independent labels. You may want to contact some of them about your music. If you decide to distribute under your own label, be sure to list your company with Pollstar.
5. I don't have an agent.
See the answer to question one. Get friends, family, etc. to front for you. Make sure, however, how you want to be known. If you are a writer, don't let your sister talk to potential employers about how you've always been good on the recorder. Specify the industry and area of musical expertise you want them to concentrate on. If you want commercial work, don't send someone out to promote you at clubs.
6. Don't have a manager.
If you have access to the Internet, make an inquiry. There are a lot of students willing to try their hand in the music business. Otherwise, put up some ads at local colleges and universities. Take your time when you finally make a decision to hire a manager. You have to be able to trust this person with a significant part of your career. Once you decide to hire a manager, make a contract with him or her for a percentage of the business, or a flat rate. Make this agreement very clear. If possible, have an attorney draw up a contract for you. If you can afford an expensive manager - go for it. If not, find someone who is enthusiastic about you and your music.
8. I don't have recording equipment
Home recording is becoming more an more popular, and equipment quality is more professional. If you can't afford to buy the latest equipment, or if there is a particular sound you want, try to get spec time in a studio. You may want to make arrangements to record during off hours. You can offer to sit in on a session for one of the studio owners' personal recordings. If you know the equipment, offer to barter your expertise for recording time.
9. My music is not copyrighted
If the music is original and fixed (that is, recorded, printed, etc.) on a tape, on a printed score, etc., then it will be covered by copyright laws, both in the United States and in most foreign countries. For the best protection, however, you should register the music with the U.S. Copyright office. Call 202-707-9100 and ask for Circular 56a (copyright registration of musical compositions and sound recordings), Circular 1 (copyright basics), and forms PA (to register register a song or other musical composition) and SR (to register a sound recording). It is much easier to prove that you created and own the work if the government has a copy of it, and you have a certificate of registration. As of this date, (October 17, 1997) it only costs $20.00 for each work.
10. I don't have an agreement with any music licensing organization.
If you want your music on the air and you want someone to collect publishing royalties, etc., you need to get together with ASCAP, BMI, or SESAC. Otherwise, you must be willing to negotiate separate licensing agreements with each and every radio station that plays your song. Again, copyright registration is a must for these organizations in order for them to track and verify ownership of your works. ASCAP only asks you to pay for membership as a musician, if they actually collect fees for you. If you publish on your own, they charge an annual fee.
--------------------------------------------------------------------------------
Wasn't that easy? When you take that first step, a whole new world opens up to you - it's quite an accomplishment to get a product off the ground - and no one can take that away from you.
--------------------------------------------------------------------------------
Resources:
1. Disc Makers publishes a free handbook called "Guide to Independent Music Publicity." Their number is 1-800-468-9353.
2. The CMJ New Music Monthly has a publication which features a compilation CD of up and coming artists. For a fee, you can request that your new recording be placed on an upcoming release. Each contribution goes through a screening process before they tell you whether or not the recording is suitable for their monthly compilation. Ken Park is the marketing director. He can be reached by e-mail (cmj@cmjmusic.com) or by regular mail (CMJ New Music Monthly, 11 Middle Neck Road, Suite 400, Great Neck, NY 11021-2301).
3. Want to put your music online? The Internet Underground Music Archive (IUMA) will put up a sound-bite, a description of your band, and a graphic display for about $150.00 per song. They can be reached at: http://www.iuma.com/IUMA/index.html. Jazz artists can put their music online through the Jazzline. Their website is http://www.jazzonln.com/Clients/JazzOnln. You can also send them e-mail at jazzonln@netcom.com.
4. Radio HK is a new satellite radio station which can be accessed through the WWW. If you have the necessary software, you can listen to music in real time on your computer. Their website is: http://www.hkweb.com/radio.
5. Licensing organization addresses:
ASCAP
www.ascap.com
1 Lincoln Plaza
New York, NY 10023
212-621-6000
BMI
www.bmi.com
320 W. 57th Street
New York, NY 10019
212-586-2000
SESAC
156 W. 56th Street
New York, NY 10019
212-586-3450
6. You can request copies of the Copyright forms listed above through the Internet in three ways: 1) telnet locis.loc gov, 2) gopher marvel.loc.gov, or 3) WWW http://lcweb.loc.govcopyright.
--------------------------------------------------------------------------------
If you want to copy this article, but don't want to pay a licensing fee, please ask permission.
Thanks.
--------------------------------------------------------------------------------
Have you thought about having your own independent record label? Home recording studios, access to the Internet, and local distribution networks are making the independent route more successful. In addition, major labels are now using independent labels to break new acts. Once an independent label establishes a good reputation and carries successful local acts, major labels are more willing to negotiate fair deals with the artists because of their proven success. Listed below are some of the main reasons why artists do not try to establish their own labels. Hopefully, this article will encourage you to do so, and give you the tools to create a professional and successful product.
1. I don't have any money!
Maybe you don't, but you must know someone who does! Music may be a life force for you, but to almost everyone else, music is a business, so you will have to present your desire to have a professional recording in business terms. Your family, friends, etc. want you to succeed - so you can move out! If you're serious about your music, create a proposal, short, sweet, and to the point. Set out at least 5 different things you want to do with their money.
a. Pay for production costs.
b. Pay musicians.
c. Pay recording costs.
d. Pay for advertising.
e. Pay for distribution.
Do some research and figure out what these things will cost. Billboard magazine's classified section will give you an idea about costs for various services. These prices are nationally competitive, but don't forget your local business people! They may be able to provide you with more personalized service. Having a local service person also enables you to keep an eye on progress. It is hard to manage a production process across the country. You now have a basis for a budget. Your investors will love it!
2. I don't have enough material.
Start out with a single - 7", cassette, or 12". The DJs still play vinyl. You need a product, and this is still the most economical way to put out your product. There are not many companies that still work with vinyl. However, Disc Makers (1-800-468-9353 or www2.discmakers.com), Europadisk, Ltd. (212-266-4401), and Rainbo (310-829-3476 or www.rainbo.com), still do. Their prices are reasonable, and the results are professional.
3. I don't have a steady gig.
This is a tough one. But it is infinitely tougher to promote you and your band without a product. A professional looking recording speaks to potential employers. They realize that you are a serious business person, as well as a musician.
4. I don't have distribution.
Unless you have signed with a major label, you will have to use other methods to distribute your recording. Independently owned music stores may be willing to take your music on consignment. The independent record label for which I do legal work, Ritual, Ltd., has been lucky to have major record stores agree to carry its product. Ritual has been able to place its releases in several independently owned record stores, as well as HMV and Tower Records. You have to be willing to go out and make these connections, or have someone else do it for you. It is a lot of work, but once you have established the relationship, the next time you want them to carry your product, you know what to do.
I would recommend that you contact something like The Local Music Store (www.localmusicstore.com) to see if you want to be affiliated with an online catalog distribution organization. There is a nominal fee, but artists distributed through this medium have an important opportunity to become acquainted with the distribution side of the business.
You can also try to get your music distributed through other independent labels. The music publication, Pollstar, lists both major and independent labels. You may want to contact some of them about your music. If you decide to distribute under your own label, be sure to list your company with Pollstar.
5. I don't have an agent.
See the answer to question one. Get friends, family, etc. to front for you. Make sure, however, how you want to be known. If you are a writer, don't let your sister talk to potential employers about how you've always been good on the recorder. Specify the industry and area of musical expertise you want them to concentrate on. If you want commercial work, don't send someone out to promote you at clubs.
6. Don't have a manager.
If you have access to the Internet, make an inquiry. There are a lot of students willing to try their hand in the music business. Otherwise, put up some ads at local colleges and universities. Take your time when you finally make a decision to hire a manager. You have to be able to trust this person with a significant part of your career. Once you decide to hire a manager, make a contract with him or her for a percentage of the business, or a flat rate. Make this agreement very clear. If possible, have an attorney draw up a contract for you. If you can afford an expensive manager - go for it. If not, find someone who is enthusiastic about you and your music.
8. I don't have recording equipment
Home recording is becoming more an more popular, and equipment quality is more professional. If you can't afford to buy the latest equipment, or if there is a particular sound you want, try to get spec time in a studio. You may want to make arrangements to record during off hours. You can offer to sit in on a session for one of the studio owners' personal recordings. If you know the equipment, offer to barter your expertise for recording time.
9. My music is not copyrighted
If the music is original and fixed (that is, recorded, printed, etc.) on a tape, on a printed score, etc., then it will be covered by copyright laws, both in the United States and in most foreign countries. For the best protection, however, you should register the music with the U.S. Copyright office. Call 202-707-9100 and ask for Circular 56a (copyright registration of musical compositions and sound recordings), Circular 1 (copyright basics), and forms PA (to register register a song or other musical composition) and SR (to register a sound recording). It is much easier to prove that you created and own the work if the government has a copy of it, and you have a certificate of registration. As of this date, (October 17, 1997) it only costs $20.00 for each work.
10. I don't have an agreement with any music licensing organization.
If you want your music on the air and you want someone to collect publishing royalties, etc., you need to get together with ASCAP, BMI, or SESAC. Otherwise, you must be willing to negotiate separate licensing agreements with each and every radio station that plays your song. Again, copyright registration is a must for these organizations in order for them to track and verify ownership of your works. ASCAP only asks you to pay for membership as a musician, if they actually collect fees for you. If you publish on your own, they charge an annual fee.
--------------------------------------------------------------------------------
Wasn't that easy? When you take that first step, a whole new world opens up to you - it's quite an accomplishment to get a product off the ground - and no one can take that away from you.
--------------------------------------------------------------------------------
Resources:
1. Disc Makers publishes a free handbook called "Guide to Independent Music Publicity." Their number is 1-800-468-9353.
2. The CMJ New Music Monthly has a publication which features a compilation CD of up and coming artists. For a fee, you can request that your new recording be placed on an upcoming release. Each contribution goes through a screening process before they tell you whether or not the recording is suitable for their monthly compilation. Ken Park is the marketing director. He can be reached by e-mail (cmj@cmjmusic.com) or by regular mail (CMJ New Music Monthly, 11 Middle Neck Road, Suite 400, Great Neck, NY 11021-2301).
3. Want to put your music online? The Internet Underground Music Archive (IUMA) will put up a sound-bite, a description of your band, and a graphic display for about $150.00 per song. They can be reached at: http://www.iuma.com/IUMA/index.html. Jazz artists can put their music online through the Jazzline. Their website is http://www.jazzonln.com/Clients/JazzOnln. You can also send them e-mail at jazzonln@netcom.com.
4. Radio HK is a new satellite radio station which can be accessed through the WWW. If you have the necessary software, you can listen to music in real time on your computer. Their website is: http://www.hkweb.com/radio.
5. Licensing organization addresses:
ASCAP
www.ascap.com
1 Lincoln Plaza
New York, NY 10023
212-621-6000
BMI
www.bmi.com
320 W. 57th Street
New York, NY 10019
212-586-2000
SESAC
156 W. 56th Street
New York, NY 10019
212-586-3450
6. You can request copies of the Copyright forms listed above through the Internet in three ways: 1) telnet locis.loc gov, 2) gopher marvel.loc.gov, or 3) WWW http://lcweb.loc.govcopyright.
--------------------------------------------------------------------------------
If you want to copy this article, but don't want to pay a licensing fee, please ask permission.
Thanks.
--------------------------------------------------------------------------------
Business Start Up Checklist
Business Start Up Checklist
The list below is meant to remind you of the tasks you may have to perform to start your business.
Not every business will have to complete each step. For instance, you may decide not to register your trademark with state or federal officials. Or, you may not be required to publish a notice of intent to do business.
Since laws vary by state and by type of business, be sure to check with local authorities to determine if there are any additional legal steps you need to take.
Choose a business based on your skills and interests
Research the business idea
- What will you sell
- Is it legal
- Who will buy it and how often
- Are you willing to do what it takes to sell the product
- What will it cost to produce, advertise, sell & deliver
- With what laws will you have to comply
- Can you make a profit
- How long will it take to make a profit
Write a business plan and marketing plan
Choose a business name
Verify right to use the name
See if the business name is available as a domain name
Register the business name and get a business certificate
Register the domain name even if you aren't ready to use it yet
Choose a location for the business or make space in the house for it
Check zoning laws
File partnership or corporate papers
Get any required business licenses or permits
Reserve your corporate name if you will be incorporating
Register or reserve state or federal trademark
Register copyrights
Apply for patent if you will be marketing an invention
Order any required notices (advertisements you have to place) of your intent to do business in the community
Have business phone or extra residential phone lines installed
Check into business insurance needs
Find out about health insurance if you will not have coverage under a spouse
Get adequate business insurance or a business rider to a homeowner's policy Send out publicity releases
Apply for sales tax number if needed
Get tax information such as record keeping requirements, information on withholding taxes if you will have employees, information on hiring independent contractors, facts about estimating taxes, forms of organization, etc.
Call Department of Labor to determine labor laws if you have employees.
Apply for employee identification number if you will have employees
Find out about workers' compensation if you will have employees
Open a bank account for the business
Have business cards and stationery printed
Purchase equipment or supplies
Order inventory
Order signage
Order fixtures
Get an email address
Find a web hosting company
Get your web site set up
Have sales literature prepared
Call for information about Yellow Pages advertising.
Place advertising in newspapers or other media if yours is the type of business that will benefit from paid advertising
Call everyone you know and let them know you are in business
Other _______________________
The list below is meant to remind you of the tasks you may have to perform to start your business.
Not every business will have to complete each step. For instance, you may decide not to register your trademark with state or federal officials. Or, you may not be required to publish a notice of intent to do business.
Since laws vary by state and by type of business, be sure to check with local authorities to determine if there are any additional legal steps you need to take.
Choose a business based on your skills and interests
Research the business idea
- What will you sell
- Is it legal
- Who will buy it and how often
- Are you willing to do what it takes to sell the product
- What will it cost to produce, advertise, sell & deliver
- With what laws will you have to comply
- Can you make a profit
- How long will it take to make a profit
Write a business plan and marketing plan
Choose a business name
Verify right to use the name
See if the business name is available as a domain name
Register the business name and get a business certificate
Register the domain name even if you aren't ready to use it yet
Choose a location for the business or make space in the house for it
Check zoning laws
File partnership or corporate papers
Get any required business licenses or permits
Reserve your corporate name if you will be incorporating
Register or reserve state or federal trademark
Register copyrights
Apply for patent if you will be marketing an invention
Order any required notices (advertisements you have to place) of your intent to do business in the community
Have business phone or extra residential phone lines installed
Check into business insurance needs
Find out about health insurance if you will not have coverage under a spouse
Get adequate business insurance or a business rider to a homeowner's policy Send out publicity releases
Apply for sales tax number if needed
Get tax information such as record keeping requirements, information on withholding taxes if you will have employees, information on hiring independent contractors, facts about estimating taxes, forms of organization, etc.
Call Department of Labor to determine labor laws if you have employees.
Apply for employee identification number if you will have employees
Find out about workers' compensation if you will have employees
Open a bank account for the business
Have business cards and stationery printed
Purchase equipment or supplies
Order inventory
Order signage
Order fixtures
Get an email address
Find a web hosting company
Get your web site set up
Have sales literature prepared
Call for information about Yellow Pages advertising.
Place advertising in newspapers or other media if yours is the type of business that will benefit from paid advertising
Call everyone you know and let them know you are in business
Other _______________________
THINKING LONG TERM
THINKING LONG TERM
Let's face it, sometimes thinking about what you want to do next month is hard, not to mention what you might do next year or in five years. But the graveyard of the music business is chock full of cadavers (representing bands and musicians) who couldn't think beyond the next six to twelve months of their careers. The odds of doing anything significant in the music business are long from the start, but artists who can't think beyond the short term have it thousands of times harder. Let's look at the differences between thinking only of today versus thinking about tomorrow, and why it is in your best interests to plan, fantasize, scheme, dream, contrive, plot and imagine what you'll be doing in the music business five to ten years from now.
The best way to illustrate these concepts is by looking at some actual examples of short and long term thinking.
SHORT TERM: I want to release my first CD this year.
LONG TERM: This year, I want to release the first of eight CDs I plan to record over the next ten years.
SHORT TERM: I want to sell most or all of my initial CD pressing before I even consider doing another album.
LONG TERM: I want to distribute my first album by any means necessary, because the fans introduced to the first record are more likely to buy (or recommend to others) the second record, which in turn will feed a larger fan base into the third record, etc.
SHORT TERM: I need to sell a significant number of CDs from my new web site in the next year in order to justify the time and money spent on it.
LONG TERM: The benefits of having a web site will be small in the first several years, but as more and more fans learn that they can count on my site being there and staying current, the payoff in four to five years will be significant.
SHORT TERM: How will I get distribution for my CD?
LONG TERM: I recognize that traditional distribution won't touch a one-artist, one-release label's product. What creative ways can I find to distribute my record until such time as my label expands to the point that distributors will be able to help me?
SHORT TERM: The kind of music I want to record is not in style now. Maybe I should record some trendier material to get airplay.
LONG TERM: Music styles tend to rise and fall in popularity over time. If I record compositions that take advantage of my strengths and the music reflects what is in my heart, over time my integrity and perseverance will be rewarded.
SHORT TERM: I'll postpone recording until I can either buy the best quality recording equipment or afford the best-equipped studio in the city.
LONG TERM: Postponing recording due to a focus on the equipment means I won't get the additional benefits of: learning about sound, improving my production skills, and using the gear I have in the most creative way possible. There's a good chance I'll stop writing too, if I don't have a recording project in the works. I'd better go ahead and get started with what I have.
SHORT TERM: I'll wait until a record label of some kind gives me a break -- and a recording budget I can work with.
LONG TERM: I'll go ahead and plan to release four or five CDs on my own, since I'll increase the possibility that a label can see my potential. I know that if nothing else, I'll have examples of my work available in finished form and gain a whole new audience who can't possibly experience me live. I'll probably have a great time and get really good at making records.
SHORT TERM: I know too many musicians who have released a CD and then couldn't do anything with it.
LONG TERM: Musicians who have released five or six CDs almost always have found their own niche or audience in the music industry. Their perseverance has been documented by their periodic releases and they command a certain respect from the music business for that alone. Those guys are my role models.
SHORT TERM: I don't have enough money to record, press, promote, publicize, distribute, advertise and sell one CD, let alone five or six.
LONG TERM: If I make every decision based upon money, I'll never get started. If I plan to be doing this for the next ten to fifteen years, I have to trust that when the time comes, the money will be there.
I think you get the idea. You can see from the above examples how thinking in the present tends to automatically limit what you can accomplish. A good example from outside the music world is buying a car or home. If you looked in your wallet or bank account you'd find it impossible to imagine how you could own such expensive things. After all, you had about the same amount of money last month, and you'll probably have about the same amount of money next month. Yet, when you are told how you can own something expensive by paying a little every month so that you'll own that car in four years or that house in thirty years, you begin to see that it's less important how much is in your wallet today.
Building a career in the music business is much different from buying a house because the goal cannot be accomplished by following someone's advice, or by reading a book, or by emulating a superstar, or by following the 'tried-and-true' advice that 'everybody knows you must follow'. You've got to apply creative thinking to just about every problem you encounter and every decision you're faced with. You need time (a lot of time!) to try dozens of approaches because most of your ideas won't work. If you set artificial deadlines of one or two years to 'make it' or arbitrary sales goals of 1000 or 2000 CDs, you are putting way too much pressure on yourself to fit to a schedule of success. Success may come, but it may not come on schedule or when you expect it to happen (or even in the way you expect). If you give up too soon, guess what? You are making absolutely sure your goals can never be met.
Likewise if you over-emphasize your first or second attempt at making a record, you are shortening your vision to a couple of years. To short term thinkers, once the first CD has been recorded and duplicated -- they've tried it. If it doesn't sell well, then the heck with it. But can you be sure it was your best effort? It probably was at the time but, Can you really be sure that you cannot do better if you try again? Is it really impossible for you to improve a little, or even a lot? When you think of all the variables in recording your music and you think about all the life experience that goes into your compositions and your performances, istn't it almost guaranteed that you'll do better if you give yourself another opportunity? And if that is true with the second CD, wouldn't it follow that it would be true also for the third and fourth and fifth CD? Can you imagine how much better your fifth CD should be compared with your first CD?
Right now is the time you should be mentally preparing yourself for the long haul.
Right now is when you should be less concerned about what happens in the next month, and more concerned with doing things that will increase your chances of long term success.
Right now is when you should be planning that next CD, and even the one after that (you don't have to make financial plans; fantasize about it -- imagine yourself showing four or five of your CDs to everyone you meet, while talking even yet about your next project).
Right now is when you should dedicate yourself to the idea of constant improvement and a constructive stubbornness. Everything you've done today and everything you're working on can be improved, from your recording skills to your technique to your press kit to your web site to your physical appearance to your knowledge of the business to your contacts...and on and on.
Don't let yourself fall into the short term thinker's trap of waiting for things to happen. Don't wait for a review. Don't wait around for label to get back to you. Don't wait for a new guitar. Don't wait for sales to 'kick in'. Do something, anything, but keep yourself and your career moving forward. If it's important to you, then you will come up with ways to keep pushing forward and you'll fight to eventually realize those long term dreams and aspirations of yours.
If you have the guts, decide right now that you won't give up, and I'll see you in ten...
Let's face it, sometimes thinking about what you want to do next month is hard, not to mention what you might do next year or in five years. But the graveyard of the music business is chock full of cadavers (representing bands and musicians) who couldn't think beyond the next six to twelve months of their careers. The odds of doing anything significant in the music business are long from the start, but artists who can't think beyond the short term have it thousands of times harder. Let's look at the differences between thinking only of today versus thinking about tomorrow, and why it is in your best interests to plan, fantasize, scheme, dream, contrive, plot and imagine what you'll be doing in the music business five to ten years from now.
The best way to illustrate these concepts is by looking at some actual examples of short and long term thinking.
SHORT TERM: I want to release my first CD this year.
LONG TERM: This year, I want to release the first of eight CDs I plan to record over the next ten years.
SHORT TERM: I want to sell most or all of my initial CD pressing before I even consider doing another album.
LONG TERM: I want to distribute my first album by any means necessary, because the fans introduced to the first record are more likely to buy (or recommend to others) the second record, which in turn will feed a larger fan base into the third record, etc.
SHORT TERM: I need to sell a significant number of CDs from my new web site in the next year in order to justify the time and money spent on it.
LONG TERM: The benefits of having a web site will be small in the first several years, but as more and more fans learn that they can count on my site being there and staying current, the payoff in four to five years will be significant.
SHORT TERM: How will I get distribution for my CD?
LONG TERM: I recognize that traditional distribution won't touch a one-artist, one-release label's product. What creative ways can I find to distribute my record until such time as my label expands to the point that distributors will be able to help me?
SHORT TERM: The kind of music I want to record is not in style now. Maybe I should record some trendier material to get airplay.
LONG TERM: Music styles tend to rise and fall in popularity over time. If I record compositions that take advantage of my strengths and the music reflects what is in my heart, over time my integrity and perseverance will be rewarded.
SHORT TERM: I'll postpone recording until I can either buy the best quality recording equipment or afford the best-equipped studio in the city.
LONG TERM: Postponing recording due to a focus on the equipment means I won't get the additional benefits of: learning about sound, improving my production skills, and using the gear I have in the most creative way possible. There's a good chance I'll stop writing too, if I don't have a recording project in the works. I'd better go ahead and get started with what I have.
SHORT TERM: I'll wait until a record label of some kind gives me a break -- and a recording budget I can work with.
LONG TERM: I'll go ahead and plan to release four or five CDs on my own, since I'll increase the possibility that a label can see my potential. I know that if nothing else, I'll have examples of my work available in finished form and gain a whole new audience who can't possibly experience me live. I'll probably have a great time and get really good at making records.
SHORT TERM: I know too many musicians who have released a CD and then couldn't do anything with it.
LONG TERM: Musicians who have released five or six CDs almost always have found their own niche or audience in the music industry. Their perseverance has been documented by their periodic releases and they command a certain respect from the music business for that alone. Those guys are my role models.
SHORT TERM: I don't have enough money to record, press, promote, publicize, distribute, advertise and sell one CD, let alone five or six.
LONG TERM: If I make every decision based upon money, I'll never get started. If I plan to be doing this for the next ten to fifteen years, I have to trust that when the time comes, the money will be there.
I think you get the idea. You can see from the above examples how thinking in the present tends to automatically limit what you can accomplish. A good example from outside the music world is buying a car or home. If you looked in your wallet or bank account you'd find it impossible to imagine how you could own such expensive things. After all, you had about the same amount of money last month, and you'll probably have about the same amount of money next month. Yet, when you are told how you can own something expensive by paying a little every month so that you'll own that car in four years or that house in thirty years, you begin to see that it's less important how much is in your wallet today.
Building a career in the music business is much different from buying a house because the goal cannot be accomplished by following someone's advice, or by reading a book, or by emulating a superstar, or by following the 'tried-and-true' advice that 'everybody knows you must follow'. You've got to apply creative thinking to just about every problem you encounter and every decision you're faced with. You need time (a lot of time!) to try dozens of approaches because most of your ideas won't work. If you set artificial deadlines of one or two years to 'make it' or arbitrary sales goals of 1000 or 2000 CDs, you are putting way too much pressure on yourself to fit to a schedule of success. Success may come, but it may not come on schedule or when you expect it to happen (or even in the way you expect). If you give up too soon, guess what? You are making absolutely sure your goals can never be met.
Likewise if you over-emphasize your first or second attempt at making a record, you are shortening your vision to a couple of years. To short term thinkers, once the first CD has been recorded and duplicated -- they've tried it. If it doesn't sell well, then the heck with it. But can you be sure it was your best effort? It probably was at the time but, Can you really be sure that you cannot do better if you try again? Is it really impossible for you to improve a little, or even a lot? When you think of all the variables in recording your music and you think about all the life experience that goes into your compositions and your performances, istn't it almost guaranteed that you'll do better if you give yourself another opportunity? And if that is true with the second CD, wouldn't it follow that it would be true also for the third and fourth and fifth CD? Can you imagine how much better your fifth CD should be compared with your first CD?
Right now is the time you should be mentally preparing yourself for the long haul.
Right now is when you should be less concerned about what happens in the next month, and more concerned with doing things that will increase your chances of long term success.
Right now is when you should be planning that next CD, and even the one after that (you don't have to make financial plans; fantasize about it -- imagine yourself showing four or five of your CDs to everyone you meet, while talking even yet about your next project).
Right now is when you should dedicate yourself to the idea of constant improvement and a constructive stubbornness. Everything you've done today and everything you're working on can be improved, from your recording skills to your technique to your press kit to your web site to your physical appearance to your knowledge of the business to your contacts...and on and on.
Don't let yourself fall into the short term thinker's trap of waiting for things to happen. Don't wait for a review. Don't wait around for label to get back to you. Don't wait for a new guitar. Don't wait for sales to 'kick in'. Do something, anything, but keep yourself and your career moving forward. If it's important to you, then you will come up with ways to keep pushing forward and you'll fight to eventually realize those long term dreams and aspirations of yours.
If you have the guts, decide right now that you won't give up, and I'll see you in ten...
IT'S ALL ABOUT WHO YOU KNOW
IT'S ALL ABOUT WHO YOU KNOW
How to cultivate relationships and propel your music career forward –
"Stop and think for a moment what your reputation is. How do you think others perceive you? "
When I first started to think about writing this article, I shied away from the whole idea. After all, it didn't seem totally related to marketing music. But then I started thinking, this is actually THE topic to write about, not only because I have personally run into many memorable circumstances, but because developing personal relationships is now more important than ever. One reason perhaps is that, getting signed has become somewhat of an elitist endeavor, and a career path that is not always preferred by artists anyway. Furthermore, without the aid of managers, attorneys and professional people around us, we have to cultivate these relationships alone.
I am talking about social skills, in its basic form. It never ceases to amaze me but I run into many people, musicians especially, who seem to suffer in this department. It's possible that we have all spent way too much time in the woodshed, alone with our instruments. However, I think this is the romantic view. Personally I think most do not realize that they offend, or make others feel uncomfortable.
What I am really getting at here is the ability to make others feel important. This is the crux of the matter. The music business is littered with over inflated egos and insecure artists, who seem to think that the world somehow revolves around them. They relate to others in a purely self centered way and do not have the ability or interest to compliment others, only to spend time putting themselves on a pedestal.
Let me illustrate. I was at a party recently and ran into someone I hardly know, who proceeded to yap about how many albums he had played on, who he had been touring with and who he was about to tour with. I actually didn't need to be there at all, I could have been a brick wall. But he was trying to impress me by dropping names and telling me how good he was. I couldn't have been less interested because his only M.O. was to sell himself to me, or to anyone listening for that matter. He didn't know how to include anyone else in the conversation, he was fueling his own ego by holding court. This guy left absolutely no mystery about himself. He also made a grave error in my book, as do many artists who take this stance; He didn't make me feel important. Now don't get me wrong, I am not looking for others to sing my praises, not at all. Actually I can get a little uncomfortable with that. I think it would have been nice if he appeared a little less in love with himself and made an effort to at least try to be interested in one or two other people he was talking at.
I can remember many times throughout my very early career where I went out of my way to introduce myself to someone established in the music business, only to be given the "short" treatment (inferring, "I don't have time for you!") or totally ignored. I have never forgotten those people to this day and I always made a point of trying my hardest not to be like them. Conversely, I also remember moving to Los Angeles several years ago and introducing myself to quite famous artists who were just wonderful and went out of their way to be incredibly helpful. I have never forgotten those people also. Why? because they made me feel important and valid, just by simply giving me their time. Just because I couldn't do anything for them, gave them no reason not to acknowledge me. I think this is a wonderful human quality.
The music business is a tough business. We all know that. We also know that it can be ruthless and cold. However, everyone needs a little help now and then. You may be that person who might need help. You also might be a person who is regarded as established and in a position to offer advice or inspiration to others. All I can say is, BE COOL! Cultivating relationships is more important than it has ever been. Who knows who you will meet next that can elevate your career.
People love to gossip, it's human instinct. That means that if you are a cool person who is likable, personable and talented, your reputation will go before you. On the other hand, if you are narcissistic, highly egocentric and appear not to give a damn about anyone else, that reputation will also go before you.
Stop and think for a moment what your reputation is. How do you think others perceive you?
There is a myth amongst musicians, that if you don't hype yourself nobody will hype you. Well, I do think you need to network to get on in your career. I also absolutely know that if you talk to anyone and make THEM feel important, you will make their day and they will never forget you. Don't forget, people want to do business with those they like and respect. One of the reasons they like and respect someone is because they are clear in their minds that they are liked and respected back.
If I honestly thought about what the best advice I could give an independent artist to propel his or her music career forward, it would be this;
"Be cool to everyone you meet, but more importantly, make them feel important".
How to cultivate relationships and propel your music career forward –
"Stop and think for a moment what your reputation is. How do you think others perceive you? "
When I first started to think about writing this article, I shied away from the whole idea. After all, it didn't seem totally related to marketing music. But then I started thinking, this is actually THE topic to write about, not only because I have personally run into many memorable circumstances, but because developing personal relationships is now more important than ever. One reason perhaps is that, getting signed has become somewhat of an elitist endeavor, and a career path that is not always preferred by artists anyway. Furthermore, without the aid of managers, attorneys and professional people around us, we have to cultivate these relationships alone.
I am talking about social skills, in its basic form. It never ceases to amaze me but I run into many people, musicians especially, who seem to suffer in this department. It's possible that we have all spent way too much time in the woodshed, alone with our instruments. However, I think this is the romantic view. Personally I think most do not realize that they offend, or make others feel uncomfortable.
What I am really getting at here is the ability to make others feel important. This is the crux of the matter. The music business is littered with over inflated egos and insecure artists, who seem to think that the world somehow revolves around them. They relate to others in a purely self centered way and do not have the ability or interest to compliment others, only to spend time putting themselves on a pedestal.
Let me illustrate. I was at a party recently and ran into someone I hardly know, who proceeded to yap about how many albums he had played on, who he had been touring with and who he was about to tour with. I actually didn't need to be there at all, I could have been a brick wall. But he was trying to impress me by dropping names and telling me how good he was. I couldn't have been less interested because his only M.O. was to sell himself to me, or to anyone listening for that matter. He didn't know how to include anyone else in the conversation, he was fueling his own ego by holding court. This guy left absolutely no mystery about himself. He also made a grave error in my book, as do many artists who take this stance; He didn't make me feel important. Now don't get me wrong, I am not looking for others to sing my praises, not at all. Actually I can get a little uncomfortable with that. I think it would have been nice if he appeared a little less in love with himself and made an effort to at least try to be interested in one or two other people he was talking at.
I can remember many times throughout my very early career where I went out of my way to introduce myself to someone established in the music business, only to be given the "short" treatment (inferring, "I don't have time for you!") or totally ignored. I have never forgotten those people to this day and I always made a point of trying my hardest not to be like them. Conversely, I also remember moving to Los Angeles several years ago and introducing myself to quite famous artists who were just wonderful and went out of their way to be incredibly helpful. I have never forgotten those people also. Why? because they made me feel important and valid, just by simply giving me their time. Just because I couldn't do anything for them, gave them no reason not to acknowledge me. I think this is a wonderful human quality.
The music business is a tough business. We all know that. We also know that it can be ruthless and cold. However, everyone needs a little help now and then. You may be that person who might need help. You also might be a person who is regarded as established and in a position to offer advice or inspiration to others. All I can say is, BE COOL! Cultivating relationships is more important than it has ever been. Who knows who you will meet next that can elevate your career.
People love to gossip, it's human instinct. That means that if you are a cool person who is likable, personable and talented, your reputation will go before you. On the other hand, if you are narcissistic, highly egocentric and appear not to give a damn about anyone else, that reputation will also go before you.
Stop and think for a moment what your reputation is. How do you think others perceive you?
There is a myth amongst musicians, that if you don't hype yourself nobody will hype you. Well, I do think you need to network to get on in your career. I also absolutely know that if you talk to anyone and make THEM feel important, you will make their day and they will never forget you. Don't forget, people want to do business with those they like and respect. One of the reasons they like and respect someone is because they are clear in their minds that they are liked and respected back.
If I honestly thought about what the best advice I could give an independent artist to propel his or her music career forward, it would be this;
"Be cool to everyone you meet, but more importantly, make them feel important".
DO YOU HAVE A JOB OR A BUSINESS?
In terms of wealth building, there are two kinds of businesses. One is a real business, and the other is what I call "employing yourself." Knowing the difference between the two can make a big difference in your net worth.
DO YOU HAVE A JOB OR A BUSINESS? THE ANSWER CAN MEAN MILLIONS OF DOLLARS TO YOU
"I can't remember the last year I made less than 700 grand," he told me. "But you know what? Besides money set aside for the kids' education, I haven't saved a lot," my friend EP shared with me. "You've lived a good life," I reminded him. "But I made a mistake," he said. "I focused my energies on making a high income. I never thought about equity."
EP is right. When he stops doing what he's doing now (building and selling homes), his "business" will probably stop with him. Although he earns a lot of money every year selling luxury homes, he won't have any way of making money from his business when he stops working.
In other words, his business has no equity.
Knowing the difference between income and equity is critical to your wealth-building goals. It's important to have a good income -- and many businesses can give you that. But unless the business itself becomes more valuable over time -- unless it becomes something that can go on without you (or that you can sell) -- you will miss out on the most effective way to retire wealthy.
It's interesting how many high-income professionals miss this critical point:
*doctors
*lawyers
*architects
*actors
* athletes
Just to name a few. Yes, these jobs can pay great if you make it to the top of the industry, but unless you find a way to convert them into real businesses, they will never offer you the big pot of gold at the end of the rainbow that can be yours by planning smart.
Let's look at this issue with a simple example -- a job that I like very much: copywriting.
You can easily make a six-figure income as a freelance copywriter. But if copywriting is all you do, what you are really doing is simply hiring yourself out to other businesses. PH and DM were both earning more than $200,000 a year as copywriters after studying with me for several years. But if that's all they ever did, neither of them would be wealthy today.
PH got married and had kids. He bought a nice house in the country, a couple of new cars, and started sending his kids to private school. He was living very well, but taxes and expenses were eating up most of his income. He wasn't saving enough to retire on -- and he knew it.
The same was true for DM. He worked long hours and made tons of money, but all kinds of personal requirements -- including a costly divorce -- left him with a lot less in savings than he had counted on. If he had nothing but his job as a freelance copywriter to count on, he could live a good life. But when the time came to retire, he would have to cut back his lifestyle -- probably more than he'd want to.
BS and KH are running an advertising agency. Right now, they represent about two dozen clients. This is enough to give them both of them a decent living. If they keep doing what they are doing, the business will probably stay about the same size as it is now and they'll be able to continue paying themselves decent salaries.
But if they decide to treat their business as a business and force it to grow at a greater rate than would be "normal" -- if, for example, they grow their base of talent and clients by tenfold -- they will then have a business that will not only give them bigger yearly incomes but will also be worth many millions of dollars if and when they are ready to sell it. Or, if they don't want to sell it, they can stop working, or work less, and still take out some very good money every year in profit sharing.
Let's say you are a copywriter now and you realize that you don't have a business, just an income. What can you do? One thing you can do is hire other, younger copywriters to work for you. You can pay them salaries, teach them the ropes, and spend more and more of your time finding new clients.
You can build your client base from just a handful of companies to a dozen … and then from a dozen to 50 … and then from 50 to 100 or more.
If you do that over a 20-year period, for example, and increase your client base by, say, 10% a year, you could easily have 500 clients spending $50,000 with you every year. At a very reasonable 10% profit margin, and if we assume that such a business would be worth about 12 times earnings (modest for that industry), you would have created a business with revenues of $25 million, profits of $2.5 million, and a saleable value of $30 million.
Those are achievable numbers. That is the power of developing a business with equity. That -- equity -- is the difference between a high-paying job and a good business. Income is good, but equity is where it's at.
If you are an employee, you know you have a job and not a business. By the same token, if you are self-employed and your business income is your billings, you have a job, not a business. If you have all the accoutrements of a business but can't see how it can grow and develop by itself, without you, you too probably have a job and not a business.
If it's not already crystal-clear, I'm saying that having a business is -- at least from the perspective of wealth building -- infinitely better than having a job.
Think about your own situation. Make plans if necessary.
HOW TO TURN YOUR JOB INTO A BUSINESS:
Step 1. Put aside as much cash as you can to bankroll Step 2.
Step 2. Hire someone to replace you.
Step 3. Teach that person everything you know. Then, let him loose to learn more. Make sure his total compensation (including intangibles) is enough to keep him.
Step 4. Hire someone to duplicate or replace your replacement.
Step 5. While you are doing all this hiring, training, and nurturing, keep everyone busy by spending the majority of your time selling.
Step 6. Repeat Steps 1 to 5 until the business is worth enough for you to retire on the price you'd get by selling it.
Step 7. Keep or discard your business at will.
DO YOU HAVE A JOB OR A BUSINESS? THE ANSWER CAN MEAN MILLIONS OF DOLLARS TO YOU
"I can't remember the last year I made less than 700 grand," he told me. "But you know what? Besides money set aside for the kids' education, I haven't saved a lot," my friend EP shared with me. "You've lived a good life," I reminded him. "But I made a mistake," he said. "I focused my energies on making a high income. I never thought about equity."
EP is right. When he stops doing what he's doing now (building and selling homes), his "business" will probably stop with him. Although he earns a lot of money every year selling luxury homes, he won't have any way of making money from his business when he stops working.
In other words, his business has no equity.
Knowing the difference between income and equity is critical to your wealth-building goals. It's important to have a good income -- and many businesses can give you that. But unless the business itself becomes more valuable over time -- unless it becomes something that can go on without you (or that you can sell) -- you will miss out on the most effective way to retire wealthy.
It's interesting how many high-income professionals miss this critical point:
*doctors
*lawyers
*architects
*actors
* athletes
Just to name a few. Yes, these jobs can pay great if you make it to the top of the industry, but unless you find a way to convert them into real businesses, they will never offer you the big pot of gold at the end of the rainbow that can be yours by planning smart.
Let's look at this issue with a simple example -- a job that I like very much: copywriting.
You can easily make a six-figure income as a freelance copywriter. But if copywriting is all you do, what you are really doing is simply hiring yourself out to other businesses. PH and DM were both earning more than $200,000 a year as copywriters after studying with me for several years. But if that's all they ever did, neither of them would be wealthy today.
PH got married and had kids. He bought a nice house in the country, a couple of new cars, and started sending his kids to private school. He was living very well, but taxes and expenses were eating up most of his income. He wasn't saving enough to retire on -- and he knew it.
The same was true for DM. He worked long hours and made tons of money, but all kinds of personal requirements -- including a costly divorce -- left him with a lot less in savings than he had counted on. If he had nothing but his job as a freelance copywriter to count on, he could live a good life. But when the time came to retire, he would have to cut back his lifestyle -- probably more than he'd want to.
BS and KH are running an advertising agency. Right now, they represent about two dozen clients. This is enough to give them both of them a decent living. If they keep doing what they are doing, the business will probably stay about the same size as it is now and they'll be able to continue paying themselves decent salaries.
But if they decide to treat their business as a business and force it to grow at a greater rate than would be "normal" -- if, for example, they grow their base of talent and clients by tenfold -- they will then have a business that will not only give them bigger yearly incomes but will also be worth many millions of dollars if and when they are ready to sell it. Or, if they don't want to sell it, they can stop working, or work less, and still take out some very good money every year in profit sharing.
Let's say you are a copywriter now and you realize that you don't have a business, just an income. What can you do? One thing you can do is hire other, younger copywriters to work for you. You can pay them salaries, teach them the ropes, and spend more and more of your time finding new clients.
You can build your client base from just a handful of companies to a dozen … and then from a dozen to 50 … and then from 50 to 100 or more.
If you do that over a 20-year period, for example, and increase your client base by, say, 10% a year, you could easily have 500 clients spending $50,000 with you every year. At a very reasonable 10% profit margin, and if we assume that such a business would be worth about 12 times earnings (modest for that industry), you would have created a business with revenues of $25 million, profits of $2.5 million, and a saleable value of $30 million.
Those are achievable numbers. That is the power of developing a business with equity. That -- equity -- is the difference between a high-paying job and a good business. Income is good, but equity is where it's at.
If you are an employee, you know you have a job and not a business. By the same token, if you are self-employed and your business income is your billings, you have a job, not a business. If you have all the accoutrements of a business but can't see how it can grow and develop by itself, without you, you too probably have a job and not a business.
If it's not already crystal-clear, I'm saying that having a business is -- at least from the perspective of wealth building -- infinitely better than having a job.
Think about your own situation. Make plans if necessary.
HOW TO TURN YOUR JOB INTO A BUSINESS:
Step 1. Put aside as much cash as you can to bankroll Step 2.
Step 2. Hire someone to replace you.
Step 3. Teach that person everything you know. Then, let him loose to learn more. Make sure his total compensation (including intangibles) is enough to keep him.
Step 4. Hire someone to duplicate or replace your replacement.
Step 5. While you are doing all this hiring, training, and nurturing, keep everyone busy by spending the majority of your time selling.
Step 6. Repeat Steps 1 to 5 until the business is worth enough for you to retire on the price you'd get by selling it.
Step 7. Keep or discard your business at will.
Think Like A Record Company
Think Like A Record Company
Instead of asking the question, "Are 3 points per album a fair royalty," approach a deal from the point of view of a record company. Put yourself in their shoes and try to think like them. It's a valuable way to evaluate whether you should release your music on your own artist-owned label, look for an indie or major record deal, or evaluate the fairness of a contract.
Start with these questions.
1. How many records will the artist sell in a year's time?
a. You can make some estimates about how many records you, the artist, can sell by totaling your best rough guesses of....
(1) sales to 10% of the total amount of people who will see you perform at gigs during a year;
(2) sales to 2% of the total number of people on your mailing list; and
(3) sales of 2-5 records a month per local record store. Most stores know (and will tell you) how many records a month are sold by like artists in your genre who regularly perform in your area. (For a recording that is $15.98 list price, a store will buy them from the record company for something near $7.50 each, depending on volume.)
b. Most indie labels count on artists to be among their best distributors, because they will sell recordings at gigs and mail order in the amounts estimated above, which is why it is valuable for you to make these estimates. Most indie labels, and some major labels, will sell artists CDs at a price close to what they sell them to distributors for-somewhere between $8.87-10.40 depending on quantity for a $15.98 recording. (My book provides ranges of costs for stores and distributors for vinyl, cassettes and CDs based on retail prices.)
Indie labels will ask you what you figure you can sell at gigs; and they will then add some guess on their part (based on the number of distributors they use, the stores they service, your draw and draw potential) about what they will sell to other distributors. They know that if you have consigned your records to some stores, that this will be valuable information to a distributor. Record companies who release more than 5 recordings a year know what the expected rates of sale are for a first time artist and will tell you what you can realistically expect.
c. Know up front that there are approximately 50 deals a year available from major labels for first-time artists. Perhaps 2 bands will recoup their costs, make a profit for themselves and their companies, and have a chance to make another record. The others will fail, go into debt with the record company, and become part of the notorious statistic that there is an 85-90% failure rate among first-time signed bands. That means a major label expects to lose money on a percentage of bands that they sign and only 'win' on a few.
They will choose to prioritize their 'bets,' and put their best efforts at sales and promotion for the lucky artists selected. And they will have a pretty good idea of how many records they will manufacture for that artist, what regions will be selected for primary exposure, and how many records are likely to be sold.
If you know this, then you (and your lawyer) will ask yourself and the major label who may be interested in you these questions:
(1) How many new bands (in my genre) did you sign within the last three years?
(2) How many of those new bands are making a profit for you? For themselves?
(3) What other bands will I be competing with on your label
(4) What can we do so that our band doesn't become part of the failure statistic.
(5) How many records can we realistically expect to sell if you get behind us the way you did (name of recent first-time artist that was a winner)?
2. Sales estimates help set the boundaries of a recording and promotional budget.
Every label does this, big or small. Here are some very rough figures to consider for CDs that are going to sell under 20,000 a year and are priced at $15.98 each. (There are lots of variables, but this will give you a starting place for your thinking like a record company.) (In another column, we'll talk about major label recordings.)
Example A. You put out the record yourself and manufacture 2500 copies. You plan to give away 500 for promotion; sell 1500 at gigs and mail order for a special price of $14.00 ($21,000); and sell 500 to stores for $7.50 ($3750). That gives you a total budget of $24,750 to work with. How are you (the record company) going to spend this money?
Here's one rough allocation:
Fixed costs: manufacturing and printing of CD and CD booklets/tray cards @ $1.25 unit ($3125). (Actual cost depends on volume and can vary widely, depending on manufacturer and services desired.)
Graphic design of CD cover and booklet; and graphic design and printing of all other promotional materials (logo, letterhead, press kit, photography, fliers): 15% of expected sales or $3712.50
Recording: 25% of expected sales) or $6187.50
Annual sales and on going promotional costs: (postage, phone calls, travel, office, photocopies, etc.):15% of expected sales or $3712.50 (around $300 month).
Total Expense $16,737.50
Expected profit: $8012.50
In this budget, 2/3 of estimated income have been budgeted for expenses, leaving l/3 for profits and hedge against unexpected expenses or emergencies). Good work, if you meet your expectations and stay within the budget. An investor would be happy to see the realism here, because it means that even if your projections are somewhat off, you probably will meet your expenses, and there is potential for profit.
Example B. Indie label figures it will sell 4500 copies to a distributor (one of which is you and your estimated sales of 1500 copies) at $9.00 each ($40,500) and use 500 for promotion. In this budget, however, the record company is going to reserve 1/3 of this amount ($13,500) up front as a hedge against failure, leaving approximately $27,000 to be realistically allocated between expenses and profit. How will $27,000 be allocated? Every company figures it differently depending on how many records they put out a year; their cash flow; distributor relationships, risk, etc.
Here's one projection. The record company will allocate 50% of that $27,000 for recording and manufacturing some of them recoupable from the artist.
Fixed manufacturing costs for 5000 CDs: $1.25 each or $6250. (The actual figure may be as little as $.90 for an indie company pressing 50,000 recordings a year (10-15 artists.) Manufacturing costs are not recoupable from the artist.
Recording $7250 (which will be charged to you as a loan and recouped from your royalties). Possible, depending on the type of music, readiness of band to be recorded, skill of the recording engineer and producer to stay within budget
Some percentage of budget remaining (with lots of variables in this arena) are reserved for sales and promotional costs, which are not recouped from an artist's royalties.
Instead of asking the question, "Are 3 points per album a fair royalty," approach a deal from the point of view of a record company. Put yourself in their shoes and try to think like them. It's a valuable way to evaluate whether you should release your music on your own artist-owned label, look for an indie or major record deal, or evaluate the fairness of a contract.
Start with these questions.
1. How many records will the artist sell in a year's time?
a. You can make some estimates about how many records you, the artist, can sell by totaling your best rough guesses of....
(1) sales to 10% of the total amount of people who will see you perform at gigs during a year;
(2) sales to 2% of the total number of people on your mailing list; and
(3) sales of 2-5 records a month per local record store. Most stores know (and will tell you) how many records a month are sold by like artists in your genre who regularly perform in your area. (For a recording that is $15.98 list price, a store will buy them from the record company for something near $7.50 each, depending on volume.)
b. Most indie labels count on artists to be among their best distributors, because they will sell recordings at gigs and mail order in the amounts estimated above, which is why it is valuable for you to make these estimates. Most indie labels, and some major labels, will sell artists CDs at a price close to what they sell them to distributors for-somewhere between $8.87-10.40 depending on quantity for a $15.98 recording. (My book provides ranges of costs for stores and distributors for vinyl, cassettes and CDs based on retail prices.)
Indie labels will ask you what you figure you can sell at gigs; and they will then add some guess on their part (based on the number of distributors they use, the stores they service, your draw and draw potential) about what they will sell to other distributors. They know that if you have consigned your records to some stores, that this will be valuable information to a distributor. Record companies who release more than 5 recordings a year know what the expected rates of sale are for a first time artist and will tell you what you can realistically expect.
c. Know up front that there are approximately 50 deals a year available from major labels for first-time artists. Perhaps 2 bands will recoup their costs, make a profit for themselves and their companies, and have a chance to make another record. The others will fail, go into debt with the record company, and become part of the notorious statistic that there is an 85-90% failure rate among first-time signed bands. That means a major label expects to lose money on a percentage of bands that they sign and only 'win' on a few.
They will choose to prioritize their 'bets,' and put their best efforts at sales and promotion for the lucky artists selected. And they will have a pretty good idea of how many records they will manufacture for that artist, what regions will be selected for primary exposure, and how many records are likely to be sold.
If you know this, then you (and your lawyer) will ask yourself and the major label who may be interested in you these questions:
(1) How many new bands (in my genre) did you sign within the last three years?
(2) How many of those new bands are making a profit for you? For themselves?
(3) What other bands will I be competing with on your label
(4) What can we do so that our band doesn't become part of the failure statistic.
(5) How many records can we realistically expect to sell if you get behind us the way you did (name of recent first-time artist that was a winner)?
2. Sales estimates help set the boundaries of a recording and promotional budget.
Every label does this, big or small. Here are some very rough figures to consider for CDs that are going to sell under 20,000 a year and are priced at $15.98 each. (There are lots of variables, but this will give you a starting place for your thinking like a record company.) (In another column, we'll talk about major label recordings.)
Example A. You put out the record yourself and manufacture 2500 copies. You plan to give away 500 for promotion; sell 1500 at gigs and mail order for a special price of $14.00 ($21,000); and sell 500 to stores for $7.50 ($3750). That gives you a total budget of $24,750 to work with. How are you (the record company) going to spend this money?
Here's one rough allocation:
Fixed costs: manufacturing and printing of CD and CD booklets/tray cards @ $1.25 unit ($3125). (Actual cost depends on volume and can vary widely, depending on manufacturer and services desired.)
Graphic design of CD cover and booklet; and graphic design and printing of all other promotional materials (logo, letterhead, press kit, photography, fliers): 15% of expected sales or $3712.50
Recording: 25% of expected sales) or $6187.50
Annual sales and on going promotional costs: (postage, phone calls, travel, office, photocopies, etc.):15% of expected sales or $3712.50 (around $300 month).
Total Expense $16,737.50
Expected profit: $8012.50
In this budget, 2/3 of estimated income have been budgeted for expenses, leaving l/3 for profits and hedge against unexpected expenses or emergencies). Good work, if you meet your expectations and stay within the budget. An investor would be happy to see the realism here, because it means that even if your projections are somewhat off, you probably will meet your expenses, and there is potential for profit.
Example B. Indie label figures it will sell 4500 copies to a distributor (one of which is you and your estimated sales of 1500 copies) at $9.00 each ($40,500) and use 500 for promotion. In this budget, however, the record company is going to reserve 1/3 of this amount ($13,500) up front as a hedge against failure, leaving approximately $27,000 to be realistically allocated between expenses and profit. How will $27,000 be allocated? Every company figures it differently depending on how many records they put out a year; their cash flow; distributor relationships, risk, etc.
Here's one projection. The record company will allocate 50% of that $27,000 for recording and manufacturing some of them recoupable from the artist.
Fixed manufacturing costs for 5000 CDs: $1.25 each or $6250. (The actual figure may be as little as $.90 for an indie company pressing 50,000 recordings a year (10-15 artists.) Manufacturing costs are not recoupable from the artist.
Recording $7250 (which will be charged to you as a loan and recouped from your royalties). Possible, depending on the type of music, readiness of band to be recorded, skill of the recording engineer and producer to stay within budget
Some percentage of budget remaining (with lots of variables in this arena) are reserved for sales and promotional costs, which are not recouped from an artist's royalties.
Writing a Music Business Plan
Writing a Music Business Plan
One thing I would never do is invite friends to Boston without first sending them a map. More than most cities, Boston (for the out-of-towner) is an urban tangle with few rivals. I remember my first visit to the city back in '77. It was a psychological and emotional roller coaster to say the least. And I had a map!
Maps - they lay out the land and point us in the right direction. A good music business plan is a lot like a map, though the "land" you'll be dealing with here - the music industry - is both more tangled than the city of Boston and can end up pointing you in any variety of "right" directions at the same time.
A good music business plan is the map to the fulfillment of your goals. Whether you're a band, soloist, production house or some other business, a plan can turn foggy notions into operational strategies, hunches into actions, dreams into reality.
Dreams. This is where it all begins isn't it? For this reason I like to think of one's business plan as a "vision/mission." It starts with vision. Before your first gig you envisioned yourself playing it. Remember? Vision precedes mission and fuels it with the necessary energy to go the distance. Mission implements vision and provides the vehicle that moves you towards your goal. Together they're unstoppable!
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Why Write A Music Business Plan?
There are a number of specific benefits to writing a music business plan.
A well-thought out business plan will:
Clear the way for creative thinking
Pinpoint strengths and weaknesses
Identify obstacles and problems
Expose hidden opportunities
Set proper priorities
Coordinate your marketing program
Take the guesswork out of budgeting
Allow for meaningful review and revision
Your business plan should never be viewed as a one-time draft written in stone but instead as a provisional guideline to help you take strategic and effective steps toward the achievement of your goals. It is never really complete because it parallels and reflects the dynamics of your own growth and development.
Besides the benefit of self-revelation, there is another important reason to draw up a business plan:
To attract investors and secure loans. No one needs to tell you how much it costs to launch a successful music career in the 90's. Between equipment, insurance, taxes, travel, recording, mixing, manufacturing, promotion, advertising and various fees and commissions, today's musicians and bands are left with little else to call their own. Enter investors.
Investors are willing to put up a certain amount of dollars to launch your music project with the hope and expectation of a return on their investment. The most important thing they'll need in order to decide to invest in you or not is a well-thought out business plan. The same goes for seeking bank loans. A plan reflects professional responsibility to the lending institution and greatly increases your chances of securing a loan.
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How to Structure A Music Business Plan
A music business plan will have six main components.
They are:
I. A summary page
II. A description of your business
Ill. A marketing plan
IV. An operations statement
V. A project time-line
VI. Financial projections
We will look at each in turn. You may want to make a rough outline for your own plan as you read this article. Don't be surprised, however, if your complete plan ends up being forty pages long! This should be expected.
Would you like some free help drafting your plan? Then contact your local SBDC (Small Business Development Center). This is a federal program that is part of the SBA (Small Business Administration) designed to provide small business owners with counsel and resources. Your tax dollars pay this so use it! The SBA has a Small Business Answering Desk (800-827-5722). which can answer many general business questions including the location of the SBDC office nearest you.
While you may not find them to be experts on the music industry, they are experts in creating and developing small businesses, and you are one. Let's first get an overall sense of where we're going by displaying a complete outline of a business plan:
I. Summary statement
II. Description of your business or project.
A. History and background
B. Management description
C. Business structure
III. The market for your product or service
A. Market description
1. General market information
2. Specific market information
3. Competition profile
B. Marketing plan
1. Positioning
2. Marketing mix
3. Pricing philosophy
4. Method of sales/distribution
5. Customer service policy
IV. Operations
A. Facilities and equipment
B. Plans for growth and expansion
C. Risks
V. Project time-line
VI. Financial information
A. Financing required
B. Current financial statements
C. Financial projections
I. Summary Statement.
Here you want to answer the following questions as succinctly as possible: Who are you? What will you do? (goals). Why will the business be successful? How will it be financed? - and When do you think it will turn a profit? (Remember, a 'profit' is not how much money you make, but how much you keep). Be ruthlessly realistic!
It is also in the summary statement that you list the products or services being offered (e.g. CDs, tapes, performances, etc.) as well as the names and positions of all personnel involved. The summary should close with mention of anything that is unique about your project.
II.Description of your business or project
This secton begins to flesh out the summarization above.
A. Begin first with the history and background of your project. This provides the overall context in which to view your current work. List all data that pertains to the various facets of your present business. Don't pad it with your whole life story, just the pertinent highlights that have brought you to the present moment.
B. A management description should follow next. How is your business project organized? What does the leadership look like? (it's style and command chain.) How are decisions made and facillitated? What kind of ongoing business meeting schedule will be followed to insure smooth operation?
C. Decide on the business structure you will use (i.e. sole proprietorship, partnership, corporation, etc.). This is one of the first questions the start-up business person should ask. The answer to this question has many legal and tax implications, varies greatly from state to state and from time to time. Again, seek the advice of your small business advisor at your local SBDC office.
III. The Market for your Product and/or Service Now we are getting into the essence of what you're uniquely about. Marketing means selling and it is an absolute truth that unless a start-up business can sell its offering it will not survive. Getting orders - selling your recordings or performances to paying customers - is of crucial importance to a new business.
To compete successfully in the music business, then, you must follow the same strategy that every successful business person uses. You must:
* Develop a product- in this case, your music.
* Locate clients for your product - do market research.
* Bring your product to the marketplace - use sales technique to convince potential clients to buy your music.
Does this mean you're "selling out"? NO! Or I should say, it all depends on your attitude. If you have a killer recording or a hot performance to sell and you market it accordingly, then you're not selling out. You're simply bringing a desirable product to a ready audience.
If, on the other hand, you would sacrifice your mother for a chance to claw your way to the top, then yes, you're probably selling out. Again, it's attitude. And you have to determine this for yourself. O.K., now that we've cleared that up let's look at some of the various facets of your marketing plan.
A.Description of the market for your product/service. The first thing you need is information about your market in order to correctly position your product and find your own unique niche within it. This is called market research and, like all of your planning, should be viewed as an ongoing process. You will need both general and specific information about your market.
1.General Market Information. The general market for musicians is the music industry. Without a general understanding about this larger market context you will have a difficult time trying to find your way within it. It is crucial, therefore, for today's musician to have a grasp of such things as record company structures, music publishing, recording contracts, distribution and music media, and how all of these work together to bring music to people. You can learn about the industry by talking with industry people, taking courses and reading books and trade magazines (see free resource list offer at end of article).
2. Specific Market Information. Here you will want to ask: What part of this larger market do I fit into? In other words, who are my customers? What is their general age, their sex, professions, lifestyle and interests? This information will prove crucial to the development of your marketing strategy.
In addition to your customers you'll also want to describe your competition. Be as specific as possible. Gather information on three or four successful competitors, assess the relative strengths and weaknesses of each, and compare your product or service with similar ones in terms of price, promotion, distribution and customer satisfaction.
B. Marketing Plan
Now that you've gathered information on both your general and specific market share, you're now ready to develop your marketing plan or strategy. This too can be broken down into several component parts.
1. Positioning - This is related to finding your market "niche." No matter what products or services you provide, you can carve out a niche for them based on your experience, skills, and interests and then build up that niche as you work to serve it. Ask yourself questions like: What do I do best? Who needs that the most? Where can I provide that product orservice that will give me a chance to expand what I do to utilize my other interests? What do I have to offer that is special or unique? The answers to these questions will help you "position" yourself to most effectively promote what you're selling.
2. Marketing Mix - The particular combination of marketing methods you choose for your marketing campaign is referred to as your "marketing mix." Methods can include news releases, sponsorships, networking, publicity flyers, contests and giveaways, classified ads, trade shows, radio spots, charitable donations and literally hundreds more.
When making your selection, keep in mind this fundamental rule of successful marketing: The measure of a successful marketing campaign is the extent to which it reaches at the lowest possible cost the greatest number of people who can and will buy your product or service. Generally speaking, the more of your time a marketing activity requires, the less money it costs you, and vice-versa. For example, networking costs almost nothing in money but plenty in time. On the other hand, advertising in a city newspaper costs a bundle while requiring little in time.
3. Pricing Philosophy - How much you charge for your product or service will depend on many variables. Here is where your research about your competitors comes in especially handy. Undercutting your competition is one common way to gain market share. But there is another approach. Research has shown that buyers, when making a purchase decision, select what they consider to be the best value - all things considered. And this suggests that value is equal to the benefits they perceive divided by the price. Price, therefore, is only one part of the purchase decision process. If you want to increase your customers' perceived value of your product, you can do so by either increasing the benefits or decreasing the price. It is almost always preferable to work on the benefits, both tangible and intangible, both rational and emotional, both large and small, that will make it possible to sell at a higher price.
4. Method of Sales/Distribution - This is related to your marketing mix and details the methods you will employ in implementing the various parts of your mix. For a musician, one method might be the use of a booking agent. Another might be a record distributor or, perhaps, mail order.
5. Customer Service Policy : When considering customer service it is always useful to ask yourself why you continue to frequent certain businesses. More than price more than product quality, you will often return again and again to these businesses because you feel taken care of. The people of those businesses go the all important extra mile to make you feel special. They anticipate your needs and provide for them in the various ways they deal with you.
See if you can translate elements of this customer service policy into your own. Write down your philosophy and then list all applications you can imagine related to your business. How can you go the extra mile with your clients? Find ways of distinguishing yourself from your competitors in this area and you will insure a faithful clientele for years to come.
IV. Operations -
This has to do with the overall physical and logistical manufacturing of your product or service. It typically has three parts to it:
A. Facilities and Equipment will encompass such things as your rehearsal space, office space, studio, manufacturers you use, your instruments, sound and light equipment and vehicles you use to haul it all around. A brief note on equipment insurance should also be included here. Investors like to see the founders of a company have a cash investment in the buisness in addition to "sweat equity".
B. Plans for Growth or Expansion - Here is where you project your more general goals three to five years into the future, What will you need when you progress from local to regional success? Regional to national? National to international? Perhaps you'll want to develop sub companies within your primary company. Maybe a publishing wing, or a video branch, or perhaps a recording studio. Think it through as clearly and completely as possible.
C. Risks - This is another very important part of the plan. Not only does it show you're being open and honest with your financing source, but it forces you to consider and assess alternative strategies in the event your original assumptions do not materialize.
V. Project Time Line -
Here you want to articulate the schedule for your goal achievement, both short-range (e.g., obtaining radio airplay, booking high-profile gigs, procuring management, etc.) and long-range (e.g., signing a recording contract, having your song performed by a mega-star, etc.). Think through the essential steps needed for the attainment of each goal.
VI. Financial Information -
No matter how wonderful your plan is it isn't going anywhere without capital investment, whether it's yours or someone elses. This final section of your plan should be broken down into three sub-sections:. The financing required, current financial statements, and a three-year financial forecast. Needless to say, this is the part of the plan potential investors and lenders will concentrate on the most. So the following is written primarily with seeking investors in mind.
A. Financing Required - While your first thought may be to ask for cash exclusively, there may be other resources that would help you even more. Perhaps what you really need is some people power assistance, or a touring van, or a new computer. These can sometimes be provided more easily than cash.
Whatever you decide you need, make sure it's based on a hard-headed and realistic assessment of the true costs of achieving your goals. A basic rule of thumb in estimating costs is to add 15% onto whatever figure you come up with. This covers all those additional "hidden" and unexpected expenses which inevitably accrue.
B. Current Financial Projection: Financial projections are a key part of a businessplan. They provide the reader with an idea of where you think the business is going. Perhaps more importantly, they tell a lot about your instrinsic good sense an d understanding of the difficulties your company faces.
Often, financial projections are optimistic to an outlandish extent. They are usually prefaced with words like, "Our conservative forecast is..." Do not use the word "conservative" when describing your forecast. Be careful also not to use the "hockey stick" approach to forecasting, that is, little growth in sales and earnings for the first couple of years followed by a sudden rapid upward surge in sales and totally unrealistic profit margins. Excessively optmistic projections ruin your credibility as a responsible business person.
Include monthly cash flow projections, and quarterly or annual order projections (e.g. for studio time, CO manufacturing, etc.) profit and loss projections, and capital expenditure projections (see your accountant for explanations of the above terms). In making financial projections it is usually a good idea to include "best guess," "high side," and "low side" numbers. Sensible investors want to know what returns they can expect and especially how they will achieve liquidity. Tell them. Again, include alternative strategies.
Don't worry if you feel a bit overwhelmed by the avalanche of detail your business plan requires. Who wouldn't? Give yourself time. It's helpful to set yourself a goal for completing the first draft of your plan - say three months from now.
Begin with one section at a time and meet periodically with your small business advisor to review your plan's development. He or she will be able to discern blind spots as well as affirm the plan's overall direction. If you're thinking of foregoing the effort altogether and just "winging" it, just remember that no planning inevitably leads to wasted time, money and energy - all three in short supply.
Remember too that the musicians you currently respect rose to their success with strategic planning and a keen sense of what "doing business" really means. Furthermore, today we are seeing the smarter bands being brought home because they know the inner workings of the music business and how to best organize their limited resources in order to penetrate it. How about you? Are you planning for success?
--------------------------------------------------------------------------------
Peter Spellman is Director of Music Business Solutions, a provider of music business info products, training and consulting, and Career Development Coordinator at Berklee College of Music in Boston. He is author of the book, Music Biz Know-How: Do-it-Yourself Strategies for Independent Music Success (Bootstrap Press Intl.) and percussionist for Friend Planet, a multimedia world music ensemble.
One thing I would never do is invite friends to Boston without first sending them a map. More than most cities, Boston (for the out-of-towner) is an urban tangle with few rivals. I remember my first visit to the city back in '77. It was a psychological and emotional roller coaster to say the least. And I had a map!
Maps - they lay out the land and point us in the right direction. A good music business plan is a lot like a map, though the "land" you'll be dealing with here - the music industry - is both more tangled than the city of Boston and can end up pointing you in any variety of "right" directions at the same time.
A good music business plan is the map to the fulfillment of your goals. Whether you're a band, soloist, production house or some other business, a plan can turn foggy notions into operational strategies, hunches into actions, dreams into reality.
Dreams. This is where it all begins isn't it? For this reason I like to think of one's business plan as a "vision/mission." It starts with vision. Before your first gig you envisioned yourself playing it. Remember? Vision precedes mission and fuels it with the necessary energy to go the distance. Mission implements vision and provides the vehicle that moves you towards your goal. Together they're unstoppable!
--------------------------------------------------------------------------------
Why Write A Music Business Plan?
There are a number of specific benefits to writing a music business plan.
A well-thought out business plan will:
Clear the way for creative thinking
Pinpoint strengths and weaknesses
Identify obstacles and problems
Expose hidden opportunities
Set proper priorities
Coordinate your marketing program
Take the guesswork out of budgeting
Allow for meaningful review and revision
Your business plan should never be viewed as a one-time draft written in stone but instead as a provisional guideline to help you take strategic and effective steps toward the achievement of your goals. It is never really complete because it parallels and reflects the dynamics of your own growth and development.
Besides the benefit of self-revelation, there is another important reason to draw up a business plan:
To attract investors and secure loans. No one needs to tell you how much it costs to launch a successful music career in the 90's. Between equipment, insurance, taxes, travel, recording, mixing, manufacturing, promotion, advertising and various fees and commissions, today's musicians and bands are left with little else to call their own. Enter investors.
Investors are willing to put up a certain amount of dollars to launch your music project with the hope and expectation of a return on their investment. The most important thing they'll need in order to decide to invest in you or not is a well-thought out business plan. The same goes for seeking bank loans. A plan reflects professional responsibility to the lending institution and greatly increases your chances of securing a loan.
--------------------------------------------------------------------------------
How to Structure A Music Business Plan
A music business plan will have six main components.
They are:
I. A summary page
II. A description of your business
Ill. A marketing plan
IV. An operations statement
V. A project time-line
VI. Financial projections
We will look at each in turn. You may want to make a rough outline for your own plan as you read this article. Don't be surprised, however, if your complete plan ends up being forty pages long! This should be expected.
Would you like some free help drafting your plan? Then contact your local SBDC (Small Business Development Center). This is a federal program that is part of the SBA (Small Business Administration) designed to provide small business owners with counsel and resources. Your tax dollars pay this so use it! The SBA has a Small Business Answering Desk (800-827-5722). which can answer many general business questions including the location of the SBDC office nearest you.
While you may not find them to be experts on the music industry, they are experts in creating and developing small businesses, and you are one. Let's first get an overall sense of where we're going by displaying a complete outline of a business plan:
I. Summary statement
II. Description of your business or project.
A. History and background
B. Management description
C. Business structure
III. The market for your product or service
A. Market description
1. General market information
2. Specific market information
3. Competition profile
B. Marketing plan
1. Positioning
2. Marketing mix
3. Pricing philosophy
4. Method of sales/distribution
5. Customer service policy
IV. Operations
A. Facilities and equipment
B. Plans for growth and expansion
C. Risks
V. Project time-line
VI. Financial information
A. Financing required
B. Current financial statements
C. Financial projections
I. Summary Statement.
Here you want to answer the following questions as succinctly as possible: Who are you? What will you do? (goals). Why will the business be successful? How will it be financed? - and When do you think it will turn a profit? (Remember, a 'profit' is not how much money you make, but how much you keep). Be ruthlessly realistic!
It is also in the summary statement that you list the products or services being offered (e.g. CDs, tapes, performances, etc.) as well as the names and positions of all personnel involved. The summary should close with mention of anything that is unique about your project.
II.Description of your business or project
This secton begins to flesh out the summarization above.
A. Begin first with the history and background of your project. This provides the overall context in which to view your current work. List all data that pertains to the various facets of your present business. Don't pad it with your whole life story, just the pertinent highlights that have brought you to the present moment.
B. A management description should follow next. How is your business project organized? What does the leadership look like? (it's style and command chain.) How are decisions made and facillitated? What kind of ongoing business meeting schedule will be followed to insure smooth operation?
C. Decide on the business structure you will use (i.e. sole proprietorship, partnership, corporation, etc.). This is one of the first questions the start-up business person should ask. The answer to this question has many legal and tax implications, varies greatly from state to state and from time to time. Again, seek the advice of your small business advisor at your local SBDC office.
III. The Market for your Product and/or Service Now we are getting into the essence of what you're uniquely about. Marketing means selling and it is an absolute truth that unless a start-up business can sell its offering it will not survive. Getting orders - selling your recordings or performances to paying customers - is of crucial importance to a new business.
To compete successfully in the music business, then, you must follow the same strategy that every successful business person uses. You must:
* Develop a product- in this case, your music.
* Locate clients for your product - do market research.
* Bring your product to the marketplace - use sales technique to convince potential clients to buy your music.
Does this mean you're "selling out"? NO! Or I should say, it all depends on your attitude. If you have a killer recording or a hot performance to sell and you market it accordingly, then you're not selling out. You're simply bringing a desirable product to a ready audience.
If, on the other hand, you would sacrifice your mother for a chance to claw your way to the top, then yes, you're probably selling out. Again, it's attitude. And you have to determine this for yourself. O.K., now that we've cleared that up let's look at some of the various facets of your marketing plan.
A.Description of the market for your product/service. The first thing you need is information about your market in order to correctly position your product and find your own unique niche within it. This is called market research and, like all of your planning, should be viewed as an ongoing process. You will need both general and specific information about your market.
1.General Market Information. The general market for musicians is the music industry. Without a general understanding about this larger market context you will have a difficult time trying to find your way within it. It is crucial, therefore, for today's musician to have a grasp of such things as record company structures, music publishing, recording contracts, distribution and music media, and how all of these work together to bring music to people. You can learn about the industry by talking with industry people, taking courses and reading books and trade magazines (see free resource list offer at end of article).
2. Specific Market Information. Here you will want to ask: What part of this larger market do I fit into? In other words, who are my customers? What is their general age, their sex, professions, lifestyle and interests? This information will prove crucial to the development of your marketing strategy.
In addition to your customers you'll also want to describe your competition. Be as specific as possible. Gather information on three or four successful competitors, assess the relative strengths and weaknesses of each, and compare your product or service with similar ones in terms of price, promotion, distribution and customer satisfaction.
B. Marketing Plan
Now that you've gathered information on both your general and specific market share, you're now ready to develop your marketing plan or strategy. This too can be broken down into several component parts.
1. Positioning - This is related to finding your market "niche." No matter what products or services you provide, you can carve out a niche for them based on your experience, skills, and interests and then build up that niche as you work to serve it. Ask yourself questions like: What do I do best? Who needs that the most? Where can I provide that product orservice that will give me a chance to expand what I do to utilize my other interests? What do I have to offer that is special or unique? The answers to these questions will help you "position" yourself to most effectively promote what you're selling.
2. Marketing Mix - The particular combination of marketing methods you choose for your marketing campaign is referred to as your "marketing mix." Methods can include news releases, sponsorships, networking, publicity flyers, contests and giveaways, classified ads, trade shows, radio spots, charitable donations and literally hundreds more.
When making your selection, keep in mind this fundamental rule of successful marketing: The measure of a successful marketing campaign is the extent to which it reaches at the lowest possible cost the greatest number of people who can and will buy your product or service. Generally speaking, the more of your time a marketing activity requires, the less money it costs you, and vice-versa. For example, networking costs almost nothing in money but plenty in time. On the other hand, advertising in a city newspaper costs a bundle while requiring little in time.
3. Pricing Philosophy - How much you charge for your product or service will depend on many variables. Here is where your research about your competitors comes in especially handy. Undercutting your competition is one common way to gain market share. But there is another approach. Research has shown that buyers, when making a purchase decision, select what they consider to be the best value - all things considered. And this suggests that value is equal to the benefits they perceive divided by the price. Price, therefore, is only one part of the purchase decision process. If you want to increase your customers' perceived value of your product, you can do so by either increasing the benefits or decreasing the price. It is almost always preferable to work on the benefits, both tangible and intangible, both rational and emotional, both large and small, that will make it possible to sell at a higher price.
4. Method of Sales/Distribution - This is related to your marketing mix and details the methods you will employ in implementing the various parts of your mix. For a musician, one method might be the use of a booking agent. Another might be a record distributor or, perhaps, mail order.
5. Customer Service Policy : When considering customer service it is always useful to ask yourself why you continue to frequent certain businesses. More than price more than product quality, you will often return again and again to these businesses because you feel taken care of. The people of those businesses go the all important extra mile to make you feel special. They anticipate your needs and provide for them in the various ways they deal with you.
See if you can translate elements of this customer service policy into your own. Write down your philosophy and then list all applications you can imagine related to your business. How can you go the extra mile with your clients? Find ways of distinguishing yourself from your competitors in this area and you will insure a faithful clientele for years to come.
IV. Operations -
This has to do with the overall physical and logistical manufacturing of your product or service. It typically has three parts to it:
A. Facilities and Equipment will encompass such things as your rehearsal space, office space, studio, manufacturers you use, your instruments, sound and light equipment and vehicles you use to haul it all around. A brief note on equipment insurance should also be included here. Investors like to see the founders of a company have a cash investment in the buisness in addition to "sweat equity".
B. Plans for Growth or Expansion - Here is where you project your more general goals three to five years into the future, What will you need when you progress from local to regional success? Regional to national? National to international? Perhaps you'll want to develop sub companies within your primary company. Maybe a publishing wing, or a video branch, or perhaps a recording studio. Think it through as clearly and completely as possible.
C. Risks - This is another very important part of the plan. Not only does it show you're being open and honest with your financing source, but it forces you to consider and assess alternative strategies in the event your original assumptions do not materialize.
V. Project Time Line -
Here you want to articulate the schedule for your goal achievement, both short-range (e.g., obtaining radio airplay, booking high-profile gigs, procuring management, etc.) and long-range (e.g., signing a recording contract, having your song performed by a mega-star, etc.). Think through the essential steps needed for the attainment of each goal.
VI. Financial Information -
No matter how wonderful your plan is it isn't going anywhere without capital investment, whether it's yours or someone elses. This final section of your plan should be broken down into three sub-sections:. The financing required, current financial statements, and a three-year financial forecast. Needless to say, this is the part of the plan potential investors and lenders will concentrate on the most. So the following is written primarily with seeking investors in mind.
A. Financing Required - While your first thought may be to ask for cash exclusively, there may be other resources that would help you even more. Perhaps what you really need is some people power assistance, or a touring van, or a new computer. These can sometimes be provided more easily than cash.
Whatever you decide you need, make sure it's based on a hard-headed and realistic assessment of the true costs of achieving your goals. A basic rule of thumb in estimating costs is to add 15% onto whatever figure you come up with. This covers all those additional "hidden" and unexpected expenses which inevitably accrue.
B. Current Financial Projection: Financial projections are a key part of a businessplan. They provide the reader with an idea of where you think the business is going. Perhaps more importantly, they tell a lot about your instrinsic good sense an d understanding of the difficulties your company faces.
Often, financial projections are optimistic to an outlandish extent. They are usually prefaced with words like, "Our conservative forecast is..." Do not use the word "conservative" when describing your forecast. Be careful also not to use the "hockey stick" approach to forecasting, that is, little growth in sales and earnings for the first couple of years followed by a sudden rapid upward surge in sales and totally unrealistic profit margins. Excessively optmistic projections ruin your credibility as a responsible business person.
Include monthly cash flow projections, and quarterly or annual order projections (e.g. for studio time, CO manufacturing, etc.) profit and loss projections, and capital expenditure projections (see your accountant for explanations of the above terms). In making financial projections it is usually a good idea to include "best guess," "high side," and "low side" numbers. Sensible investors want to know what returns they can expect and especially how they will achieve liquidity. Tell them. Again, include alternative strategies.
Don't worry if you feel a bit overwhelmed by the avalanche of detail your business plan requires. Who wouldn't? Give yourself time. It's helpful to set yourself a goal for completing the first draft of your plan - say three months from now.
Begin with one section at a time and meet periodically with your small business advisor to review your plan's development. He or she will be able to discern blind spots as well as affirm the plan's overall direction. If you're thinking of foregoing the effort altogether and just "winging" it, just remember that no planning inevitably leads to wasted time, money and energy - all three in short supply.
Remember too that the musicians you currently respect rose to their success with strategic planning and a keen sense of what "doing business" really means. Furthermore, today we are seeing the smarter bands being brought home because they know the inner workings of the music business and how to best organize their limited resources in order to penetrate it. How about you? Are you planning for success?
--------------------------------------------------------------------------------
Peter Spellman is Director of Music Business Solutions, a provider of music business info products, training and consulting, and Career Development Coordinator at Berklee College of Music in Boston. He is author of the book, Music Biz Know-How: Do-it-Yourself Strategies for Independent Music Success (Bootstrap Press Intl.) and percussionist for Friend Planet, a multimedia world music ensemble.
Starting an Indie Record Label
Starting an Indie Record Label
A Guide to the Basics for Musicians & Producers
What's Required?
Lots of musicians and producers have dreams of forming their own record company and taking on the music biz the indie way. However, much confusion exists as to what is actually required to start a label. This guide gives the basics you'll need to start your own record company. Disclaimer - we aren't lawyers, we're musicians.
What form of business is your label?
This is where you decide what form of business you will use for accounting and taxes. Each method has its plusses and minuses. For the single person who wants to form a label to release music (their own and others'), a sole proprietorship is easy and simple to form. You simply "decide" you're a label, name yourself, and then obtain the required business licenses in your town. Anyone can form a label as a sole proprietor. Other times, partnerships and more complex business entities may be necessary to bring a number of people together legally
Here is a short basic description of business types:
· Sole Proprietor - sole owner of a business. All profit and loss from the label is filed on the individual's personal income tax return.
· Partnership - these are legal agreements between two or more people, and can take many forms. The profits and losses from the company are divided proportionally between the partners' personal income tax returns.
· Corporation - a legal entity that is formed by individuals to do business. Different forms of corporations exist, and though the scope is beyond this article, in general a corporation has its own tax returns and liabilities, and money is not taxed through the officers' personal tax returns.
In this article, we are going to deal with the sole proprietor option the most, though much of the advice will also be useful to partnerships or corporations. If you do plan to form a partnership or corporation, make an appointment with a lawyer. Legal advice will help you decide the best option for your business form, plus make sure everything is done properly in the eyes of the law and government.
Familiarize yourself with the new tax forms and laws which you will be subjected to once you begin your business. Hire an accountant to help you if you can afford one, and go to the IRS website to learn as much as possible. The IRS has printed, web, and telephone help for almost all tax topics, and it's free.
What is the Name of your Label?
Figure this out beforehand, and do some research. If you are planning to grow into a large label, it's going to be important to have your label name trademarked. Don't neglect to check this! The last thing you want to find out after you release your first record is that ANOTHER label called New Original Records has issued a "cease and desist" order to you - requiring you to stop using the name, since they have trademarked it.
To begin, you can check out our trademark links for helpful info. Eventually, you will need a lawyer to handle your trademark process, and it can cost between $500-$5000 to complete. You need not pay this all at once in the beginning, but do keep it in mind for the future.
What does your label do?
Duh! Releases records, right? But consider some of the finer points -
· Will you also publish songs? (You need to have a publishing company branch)
· Will you be paying for the recording, the manufacturing, both, or neither?
· Will you be responsible for promotion as well as distribution?
· Will you have artists other than yourself?
· What kind of contract will you sign your artists' to?
· Will you be releasing compilations?
You should have a basic idea of these things if you plan on releasing other artists' work. Things are simpler if you only want to release your own music on your label. You don't have to worry about all the contractual stuff in the beginning. But it's important to have an idea of which direction you're going in. You're going to be learning a LOT of new things to run a successful label, so make sure you maximize your time.
What to Do First?
Once you know your label's name, call your local and county offices, and ask if you will need any business licenses to operate. Try calling your county clerk first. This office can usually inform you which licenses are required, or direct you to the office that can help. You can usually find the number in the yellow pages near the water company, hospital, police station, and fire department phone numbers in your town or county.
Licensing requirements vary in each community. Most cities require you to obtain a "Retail Merchant" License. This allows you to buy and sell goods, and also to collect and pay sales tax to the state.
Many towns also require you to file a "Fictitious Name Certificate", which allows you to do business under a name other than your personal name. Some towns even require you to publish the "DBA" (doing business as) name in a local publication as a public notice.
Don't neglect this step of calling your local authorities. Make sure your legal ducks are all in a row. It's not that hard, and is absolutely essential to getting started right.
Then What??
Several things -
1. Order some letterhead, envelopes, and business cards for your label. (Or make them on your computer.) You will need to communicate in writing, and will be meeting many people to trade business cards with, so design something cool and stock up!
2. Look over some sample music business contracts. See our downloadable contract forms to start. Begin thinking about what kind of deals and contracts you want to have with your artists. Most traditional record contracts are not artist friendly, so a lot of indie labels come up with new contracts that are more equitable to both artist and label. Some grassroots labels operate successfully with contracts written on brown paper bags, and some operate without ANY contracts (not recommended, but it is being done.)
3. Jump in and learn as much as you can about the music business. One unique thing about this business is that you usually need to get your hands dirty and get a street education. Here are some of the things you're going to need to know about:
· Distribution - the success of any label depends on the distributor relationships they have set up
· Rights and Royalties - mechanical rights, publishing, sales royalties - all of these are important in operating a label.
· Production and Manufacturing - you'll need to know about great studios, mastering, graphics, and CD manufacturing.
· Promotions - radio and print promotions, appearances, and other chances to get the label's bands in front of the public.
· Accounting - you'll need to keep good records, so get started early. Consider buying an accounting software like QuikBooks. It is the label's responsibility to keep track of record sales and pay the artist royalties, so keep your records squeaky clean.
4. Consider getting a UPC Barcode - these cost $500 now (See http://www.uc-council.org/), but you can release up to 10,000 different records with one number. If you only have one artist, the barcode may not be an absolute necessity, but with two or more, it will be worth it to have your own UPC code. Barcodes are a way of tracking your label's sales electronically, so if you use a "rented" barcode from your CD manufacturing company, there is more effort involved in getting your sales credited to your label. (See "Do You Need A Barcode?")
5. Set up a separate bank account for your business. Depending on the type of business, you may even be able to use a low cost personal account to do this. It will be MUCH easier to keep records for your business with separate accounts.
6. Get a website for the label and setup online sales ability. It is the cheapest way to distribute. You will probably want to accept credit cards. For that, you need a Merchant Account. Try calling your bank first, as they usually have better deals for credit card processing. Some banks, though, won't give merchant accounts to home-based businesses. There are many new options online to accept credit cards that are more friendly to small business.
Obviously, this is far from all you'll need to know to start your new label. But it does map out the first things you'll have to do. So start basic now, and learn as you go. Part of the beauty of this business is that ANYONE can learn, and anyone can start a label. It just requires a lot of creativity and dedication, along with a healthy love of the music.
A Guide to the Basics for Musicians & Producers
What's Required?
Lots of musicians and producers have dreams of forming their own record company and taking on the music biz the indie way. However, much confusion exists as to what is actually required to start a label. This guide gives the basics you'll need to start your own record company. Disclaimer - we aren't lawyers, we're musicians.
What form of business is your label?
This is where you decide what form of business you will use for accounting and taxes. Each method has its plusses and minuses. For the single person who wants to form a label to release music (their own and others'), a sole proprietorship is easy and simple to form. You simply "decide" you're a label, name yourself, and then obtain the required business licenses in your town. Anyone can form a label as a sole proprietor. Other times, partnerships and more complex business entities may be necessary to bring a number of people together legally
Here is a short basic description of business types:
· Sole Proprietor - sole owner of a business. All profit and loss from the label is filed on the individual's personal income tax return.
· Partnership - these are legal agreements between two or more people, and can take many forms. The profits and losses from the company are divided proportionally between the partners' personal income tax returns.
· Corporation - a legal entity that is formed by individuals to do business. Different forms of corporations exist, and though the scope is beyond this article, in general a corporation has its own tax returns and liabilities, and money is not taxed through the officers' personal tax returns.
In this article, we are going to deal with the sole proprietor option the most, though much of the advice will also be useful to partnerships or corporations. If you do plan to form a partnership or corporation, make an appointment with a lawyer. Legal advice will help you decide the best option for your business form, plus make sure everything is done properly in the eyes of the law and government.
Familiarize yourself with the new tax forms and laws which you will be subjected to once you begin your business. Hire an accountant to help you if you can afford one, and go to the IRS website
What is the Name of your Label?
Figure this out beforehand, and do some research. If you are planning to grow into a large label, it's going to be important to have your label name trademarked. Don't neglect to check this! The last thing you want to find out after you release your first record is that ANOTHER label called New Original Records has issued a "cease and desist" order to you - requiring you to stop using the name, since they have trademarked it.
To begin, you can check out our trademark links for helpful info. Eventually, you will need a lawyer to handle your trademark process, and it can cost between $500-$5000 to complete. You need not pay this all at once in the beginning, but do keep it in mind for the future.
What does your label do?
Duh! Releases records, right? But consider some of the finer points -
· Will you also publish songs? (You need to have a publishing company branch)
· Will you be paying for the recording, the manufacturing, both, or neither?
· Will you be responsible for promotion as well as distribution?
· Will you have artists other than yourself?
· What kind of contract will you sign your artists' to?
· Will you be releasing compilations?
You should have a basic idea of these things if you plan on releasing other artists' work. Things are simpler if you only want to release your own music on your label. You don't have to worry about all the contractual stuff in the beginning. But it's important to have an idea of which direction you're going in. You're going to be learning a LOT of new things to run a successful label, so make sure you maximize your time.
What to Do First?
Once you know your label's name, call your local and county offices, and ask if you will need any business licenses to operate. Try calling your county clerk first. This office can usually inform you which licenses are required, or direct you to the office that can help. You can usually find the number in the yellow pages near the water company, hospital, police station, and fire department phone numbers in your town or county.
Licensing requirements vary in each community. Most cities require you to obtain a "Retail Merchant" License. This allows you to buy and sell goods, and also to collect and pay sales tax to the state.
Many towns also require you to file a "Fictitious Name Certificate", which allows you to do business under a name other than your personal name. Some towns even require you to publish the "DBA" (doing business as) name in a local publication as a public notice.
Don't neglect this step of calling your local authorities. Make sure your legal ducks are all in a row. It's not that hard, and is absolutely essential to getting started right.
Then What??
Several things -
1. Order some letterhead, envelopes, and business cards for your label. (Or make them on your computer.) You will need to communicate in writing, and will be meeting many people to trade business cards with, so design something cool and stock up!
2. Look over some sample music business contracts. See our downloadable contract forms to start. Begin thinking about what kind of deals and contracts you want to have with your artists. Most traditional record contracts are not artist friendly, so a lot of indie labels come up with new contracts that are more equitable to both artist and label. Some grassroots labels operate successfully with contracts written on brown paper bags, and some operate without ANY contracts (not recommended, but it is being done.)
3. Jump in and learn as much as you can about the music business. One unique thing about this business is that you usually need to get your hands dirty and get a street education. Here are some of the things you're going to need to know about:
· Distribution - the success of any label depends on the distributor relationships they have set up
· Rights and Royalties - mechanical rights, publishing, sales royalties - all of these are important in operating a label.
· Production and Manufacturing - you'll need to know about great studios, mastering, graphics, and CD manufacturing.
· Promotions - radio and print promotions, appearances, and other chances to get the label's bands in front of the public.
· Accounting - you'll need to keep good records, so get started early. Consider buying an accounting software like QuikBooks. It is the label's responsibility to keep track of record sales and pay the artist royalties, so keep your records squeaky clean.
4. Consider getting a UPC Barcode - these cost $500 now (See http://www.uc-council.org/), but you can release up to 10,000 different records with one number. If you only have one artist, the barcode may not be an absolute necessity, but with two or more, it will be worth it to have your own UPC code. Barcodes are a way of tracking your label's sales electronically, so if you use a "rented" barcode from your CD manufacturing company, there is more effort involved in getting your sales credited to your label. (See "Do You Need A Barcode?")
5. Set up a separate bank account for your business. Depending on the type of business, you may even be able to use a low cost personal account to do this. It will be MUCH easier to keep records for your business with separate accounts.
6. Get a website for the label and setup online sales ability. It is the cheapest way to distribute. You will probably want to accept credit cards. For that, you need a Merchant Account. Try calling your bank first, as they usually have better deals for credit card processing. Some banks, though, won't give merchant accounts to home-based businesses. There are many new options online to accept credit cards that are more friendly to small business.
Obviously, this is far from all you'll need to know to start your new label. But it does map out the first things you'll have to do. So start basic now, and learn as you go. Part of the beauty of this business is that ANYONE can learn, and anyone can start a label. It just requires a lot of creativity and dedication, along with a healthy love of the music.
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When the passion of music is real
