This site is a blog for musicians and music industry people. It is a free educational resource and it is also the way I advertise my music consulting services. I am an entertainment professional with deep roots in the music industry. Throughout my music career I have been a major label A&R representative, a music supervisor, an artist manager, a reality show producer, a bass player and the head of a digital record label.
Posts Tagged ‘Music Business Plan’
Jonas Goldstein is a certified public accountant (CPA) and a business manager with over 20 years of experience in the music industry. A lifelong music fan, he got his start in the music business when he was a student at Syracuse University and was controller of the schools entertainment organization. When he graduated, he accepted a position with the entertainment-focused accounting firm Prager and Fenton as an assistant, eventually working his way up to tour accountant, then band and artist business manager. After 13 years with the company, he branched out on his own and launched JLG Business Management. During his career as a business manager, he has handled tours for bands and artists in all different genres, including The Bee Gees, Clint Black, Ben Folds, KISS and ACDC in North America, Japan, Australia and all over the world.
I had the opportunity to talk to Jonas about his experience in the music industry and the many important roles of a business manager. He also shared some tips on how bands just starting out can handle the fine points of their own business management prior to having the budget to hire a professional.
Thanks so much for taking some time to talk to me, Jonas. How did you get into the music business?
I’m a CPA and a business manager in the music industry, and I have over 20 years of experience. I got the music bug when I was in college at Syracuse University. I was in charge of the finances for the entertainment organization there.
When I graduated, I was pretty much looking for firms that specialized in entertainment. This company Prager and Fenton originally hired me, and I ended up being there for 13 years. I started out with them as an assistant, then worked my way up as a tour accountant and then a business manager with them. While I was there, I did five tours for ACDC and worked with KISS, Clint Black and The Bee Gees. As a business manager, I worked with Ben Folds and Kid Rock for a while. I managed people in rock, jazz and all different genres.
I’m very diverse in my musical taste, and I enjoy it when my clientele is all across the board. It makes everything more fun.
I remember meeting you probably 15 or 16 years ago. And you were introduced to me as a business manager, but I really didn’t know the difference between a regular manager and a business manager. I would imagine that’s a pretty common mistake. What exactly us the role of a business manager?
The business manager is an accountant and then some. I’m a CPA. There are a lot of business managers out there who are not licensed, but I really feel that a business manager should be. I started out with ACDC. In addition to filing tax returns and all the other basic things an accountant might do for a band, they also set up things related to tours. We evaluate the tours, make up budgets for them, set up insurance programs, cut deals with buses, trucks and sound and light companies. We also often do projections on touring budgets for record companies.
And these are all the nuts and bolts elements that are so important, without which the whole machine would break down. Yet a lot of bands wouldn’t even think about all this.
Yes. It’s a very all-encompassing job. It’s not just being an accountant; we’re the liaison for almost everything. We also have to manage costs between management and the business management, because the business manager actually works for the band exclusively. And, of course, the different tasks for which I am responsible can also vary significantly band to band.
And, you told me that you usually work for percentages or a monthly retainer, meaning you’re not likely to work with artists just starting out that have a very small budget, because they’re not bringing in a lot of income yet. What is your criteria for working with a band?
From my perspective, a lot of it is about passion. There are some bands I just love personally and want to see them succeed, even if they are baby bands. Sometimes they’ll experience restructuring or will be in political turmoil, and they will find themselves structuring. I need to feel passionate and really gung ho about all the bands I work with, so I’ll have the energy and will be able to fight for them as long as I can. I don’t cut deals with record companies personally, but I will often look at the contracts and give advice as they grow.
Obviously, your ideal client is someone you are passionate about. But what advice would you give these types of bands about how to make sure their books are in order and everything is in place from a business perspective before they are able to hire someone like you?
The start of it is to set up an LLC or a Sub S Corporation, depending on the situation of the band. Say the band lives in Atlanta. Then, we can set up the LLC in Georgia. If everyone lives there, all the income can flow through that point, and taxes can be filed in the same state. If you have a band that is scattered all over the place with someone in Nashville or Austin and another person in Seattle, they might want to look at other options. But the first thing they need to look at is where they are all located.
However, with bands that are located overseas, there’s another option for setting up an LLC or a Sub S Corporation: Delaware. Younger bands outside the U.S. can set up a U.S. entity as a Delaware Corporation. In general, however, as a business manager I always examine which type of company would best suit the band right from the get-go.
And why is Delaware such a go-to state for LLCs, etc.?
With Delaware, there are no personal taxes. What you do is pay a monthly fee rather than setting up a very complicated tax system. It comes out to about $250 per year as opposed to dealing with another state, where it could cost you much more.
And I’ve had some disagreements about this next point. But if you’re a multi-state band, you have a band that tours all over. Some states are more aggressive than others about getting your taxes. When you tour around, a lot of the places you play have very strict regulations. So, you need to closely follow budgets and file them to reduce your taxes. For example, in Wisconsin, they’re going to take six percent out of your wage. In Massachusetts, they take $450-$600. In California, they take seven percent. In Minnesota, they take two percent. Of course, the list of tax laws goes on and on.
I’ve definitely had discussions with other business managers who don’t believe you necessarily have to file in every state. For example, states like New York and New Jersey don’t take any money out for taxes on tours at all. Connecticut does. But you can file a budget to these people, and your rates will come down. I usually take the stance that as an artist or band, you should file whenever you appear in a certain state, just for your own protection.
Based on what you know about accounting, what kind of bookkeeping practices do you suggest bands just starting out follow to ensure they stay organized?
For example, I advise young bands to avoid filing an LLC in New York, because that state has very strict policies. It costs $2,000 – $2,500 up front to set up the LLC, and and then you have to advertise your LLC formation in a law journal for six weeks.
For New York-based young bands, what I usually do is file a Sub S election, which is a lot cheaper. When you’re running your own band and just starting out, $2,000 is a lot of money.
In terms of bookkeeping, I like to keep things really simple. You get a bank account, and then you manage everything on QuickBooks. It’s effective, user friendly and gives you a lot of tools like balance and budget sheets and ways to manage your daily transactions – which are all things you should be doing. You also need to bank reconcile every month to make sure your cash is where it should be.
There’s another package that other business managers use that is very intricate and shall remain nameless. They say the statements look better, but I think it’s too much work and aggravation without training. You can do pretty much anything you need to do as a young band on QuickBooks.
Given that most bands and startups are operating at a loss, is there advice you could give about tax write offs to minimize the impact?
If there’s a loss from your tour, you record a loss, and you don’t pay taxes. For example, let’s say you had a $2,000 loss on your tour that you did in 2011. In 2012, you might have a profit of $5,000. You can take your $2,000 loss and carry it forward, and you’ll end up with $3,000 and won’t have to pay money out the year after either.
Let’s say you have a day job. Can your career as an aspiring musician be a way to pay less taxes overall?
Recording the day job is just a quick W-2. Just be aware of what’s going on and make sure you’re using your business sense. In my experience, in most bands, there’s typically one guy who is a lot savvier when it comes to the business end of things and taxes. That’s the guy you want to put in charge of recording and managing finances. But, musicians beware: the IRS requires you to take a competency test to handle all this on your own if you’re not a CPA or an attorney.
But, some general advice: In the beginning, you want to save as much money as you can. And you want to consult with a business manager as a lawyer. Then, start to build your support team as you start to make more money and see what you can do. But as a musician, you don’t want to get into a situation where you suddenly realize you owe $2,000 in taxes and everything is a disaster.
I’m sure that you agree with me on this next point, Rick. The way to get your band signed and to flourish is to get out there, tour extensively, get a mailing list and then write a record. If you sell 50,000 or 60,000 units, the labels will find you. It’s like when I was working with both moe and Umprhey’s McGee. They were bands that didn’t sell a lot of records, but they toured and played all over. Both had started while they were in college and just expanded.
Of course, every band is different. A commercial success like Katy Perry or someone of that level is going to present a completely different business situation. You don’t really need to tour out, but you have to have somebody to stand by you and help market yourself.
I’m actually really surprised that labels aren’t literally opening up bands’ financial books and deciding whether to sign them or not based on the amount of income coming in and how solvent their company is. It’s definitely a changing eco system in terms of how people are getting acquired by labels, management and publishers.
Out of curiosity, in the work you do with marketing, in the last five years, have you seen a greater understanding by the labels of how technology has changed the music landscape?
Some get it more than others. It’s a different game. And this really goes back to what I was just saying about being surprised that more people at the top aren’t looking at bands’ financial records. In the past, people often complained about the lack of artist development at labels. And it seems like that same challenge still exists today, possibly to an even greater degree. Labels seem to still be looking at the number of albums a band is selling and whether or not the band has a manager, then project the risk they are willing to take, then sign the band. I can’t think of the last time I heard of someone just getting picked based purely on the music alone.
I think labels definitely have a lot more analytics for artists at their disposal now and are starting to actually analyze them. They don’t necessarily move quickly, but that’s typically because they are working within the machine of a much larger company.
And I’ve noticed that what they’re trying to do now – and I think all types of management want to get away from this – is do a 360 deal. They want to take a greater percentage of an artist’s record contract, touring, publishing, merchandising, etc.; they want everything.
And I’ve heard of them going back and trying to put 360 deals in place on existing contracts too.
I know labels are taking initiatives to transition, but I’m unsure as to how effective their efforts have been thus far. And I think ultimately in this technological climate, management is in many cases becoming a lot more powerful and beneficial to artists than labels.
My feeling is that what you should do as an artist if you want to attach yourself to a label is pretty simple: go out there and build a fan base. If it takes you two years, fine. They’ll find you if you start selling a lot of units of your music and sell out at bigger venues either regionally or across the company. It’s a lot of work, commitment and focus, but if bands keep showing they can build a lucrative business for themselves, they can hopefully stop labels from trying to push some of these deals that will ultimately be detrimental to the artist.
To learn more about Jonas Goldstein and the work he does within the music industry, you can visit JLG Business Management on Linkedin. You can also reach out to him directly at jgoldstein311(at)gmail.com.
On my 20-year journey in the music business, I have learned a lot of interesting things. One huge realization I had about the current music industry came to me as I was building this website (and continued as I started to get contacted by musicians that were visiting it). I couldn’t figure out why many people were glossing over all of the foundational work that is usually required to find great help. Why would people be so divorced from all the work that they have to do on their own, all the time they needed to devote to developing their sound and playing shows? Why would they not accept the real character-building shows, the “don’t forget to tip your bartenders and wai…oh you are the bartenders and waitresses” shows? And why would musicians think that an executive was likely to jump in and partner with them when what they had, at least on paper, was a hobby and not a real business?
For some, a light bulb turns on when they come to a realization. I experienced something a bit more substantial.
I was watching something on the Science channel about the planets, and an astronomer was talking about an asteroid hitting the earth. He said, “There has been more money spent on movies about asteroids hitting the earth than money spent on preventing asteroids from hitting the earth.”
Since then I have never looked at media – the field I’ve been in my whole life – in the same way.
Some of the effects the media has on us are well documented, but studies usually focus on questions like “Does violence in media have an impact on violent behavior in real life?” or “Does the media portrayal of rail-thin models and celebrities impact our feelings about our own body image and confidence?” The latter in particular is interesting and more applicable, because almost all studies on the subject point to the reality that people feel bad about themselves when comparing themselves to media ideals and have unrealistic expectations about what a “normal” person should look like. Essentially, people believe that they are supposed to resemble what they see in mass media.
When I thought about this concept, I wondered, could there also be a message in mass media about musicians and their success and does that affect us? It kept occurring to me that the media was minimizing the work that goes in to most musicians’ stories. I decided it was time to do some research myself.
To me, the definitive chronicle of a musician’s story is VH1’s Behind the Music. I decided since that was such a well known representation of how musicians became successful that it was a good idea to look at what was kind of info was being presented there.
I purchased several stop-watches and began to time out the percentages of the show that were devoted to different parts of an artist’s story (removing the commercials, etc). I watched a dozen episodes. It wasn’t hard to get the timing down because Behind the Music falls into a very familiar pattern:
1) Family background. The format is always, “Mom says her musician/superstar was different from other kids or recounts how hard it was growing up in the ‘hood, or how someone in the family was abused, and how these circumstances influenced their drive to be an artist, etc.”
2) Professional Struggle. This segment of the show highlights artists’ first taste of the business, the “struggle,” how they lived on $50 / week, how their choice to do something so unreasonable for a living upset family and friends alike. This phase covers making demos and meeting other musicians and executives. I even counted getting signed as getting part of the struggle, even though the momentum of the show clearly indicates that the record deal is a clear sign that success is around the corner.
3) Success. There is always a moment in Behind the Music where the album comes out, and the artist becomes a huge celebrity by creating a genre changing piece of work or a huge commercial success. And the documentary never looks back after that point. The term “big break” is also used a great deal. Sure, there are some issues, like drug habits, divorces, stress and inner turmoil, but the coverage from this point on is always the artist as a total success, even if there were hills and valleys in their popularity.
Would hearing partial truths affect our expectations and perception of what is fact? Simply put: Yes. Markus Appel and Tobias Richter’s study “Persuasive Effects of Fictional Narratives increase over time” even demonstrated that people believe many of the ancillary details presented in pure fiction, totally devoid of any fact.
For example, when you are watching the show Friends, you don’t believe that Rachel is a real person. You are aware that it’s Jennifer Aniston playing a role on TV, and that her character is named Rachel. But you might come to believe that peripheral information is true. For example, you might believe a waitress in Manhattan can afford a two-bedroom apartment near Central Park. Knowing that, if you are constantly reminded of the overnight success of musicians and never told about the work involved in their process, isn’t there a message here as well?
So, what does reality look like? My favorite example of someone who built their own business in music is the story of Sharon Jones and the Dap Kings, the band’s label Daptone Records and the founder of the band and the label, a guy named Gabe Roth.
Until her 40s, Sharon Jones was a guard at a correctional facility. And I played with Gabe in a band for a few years at NYU. Many years later, he agreed to be interviewed on this site. The words, “So, how does it feel to be this overnight success” started to come out of my mouth, but I caught myself midway through, and we laughed about it. Gabe hadn’t done anything different for 15 years; he just got better at what he did and surrounded himself with better people. And it was a breakthrough moment for me when I realized just how long he had been at it. He had worked at the same thing with a narrow focus for 15 years non-stop and was finally at a point where he was making a good living doing what he loved. Persistence and consistency had won out.
Why aren’t we exposed to stories like this? Simply put, because they aren’t popular news stories. “Man Works for 15 Years and Gets Great Business” is not as compelling as “Justin Bieber puts Video on Internet, Becomes Multi-Millionaire.”
A psychologist at the University of Pennsylvania named Angela Duckworth determined that “stick-to-it-ness” is called “grit,” which she defines as “the perseverance and passion for a long-term goal.” And she discovered that this grit is more important than intelligence or talent as a predictor of outstanding achievement. Individuals high in grit are able to maintain their determination and motivation over long periods of time, despite experiences with failure and adversity.
In his interview with me, “The Self Made Musician,” Gabe (a person I believe has real grit) said something that really stuck with me: “Instead of looking inward and local and trying to create something small that they can build from and concentrating on their craft, [musicians] are shooting for stars. It’s like playing the lottery. It’s fun, and if you win it’s amazing, but it’s not a business plan. You don’t say, ‘Okay, we want to start a business and want $500,000. The first thing we’re going to do is buy $4,000 worth of scratcher tickets.’”
A good business plan for your music is, first and foremost, specific. People always talk about the “next level,” and it drives me absolutely insane. I don’t begrudge people for wanting to advance their careers, but my frustration is when I hear the term “next level,” I know that 95% of the time the person saying it hasn’t clearly defined what they need let alone what they want. It sounds like they’re looking for a Nintendo cheat code.
Vague goals tend not to manifest. If you want to achieve your goals as a musician, you need to get really specific and write out a business plan. It doesn’t matter if you don’t know how to write a business plan or if you believe that it’s only for raising money or that it requires fancy number-crunching graphs. Truthfully, a business plan can start off as simply just visualizing where you want your music to take you in the next six months. Most people never do it. And 90% of the people reading this will probably not do it.
Do you really know what you want and what you need? Try this: Write down a six-month or one-year goal and then work backwards to the present moment. Be mindful that you will need longer-term goals as well, but they need not be as detailed.
Don’t do this because I say so. Do this because several studies, including a study conducted by Palo Alto Software in 2010 that was verified by the University of Oregon Department of Economics states that you are twice as likely to succeed if you finish a business plan.
I can’t write down a plan that will work for every artist, but I can offer a few guidelines if you are devoted to music for life (and not just looking at it as a fun hobby):
- Build a solid business foundation. Figure out how money is made in this industry and how publishing works. Register with ASCAP, BMI or SESAC and SoundExchange. Make sure you have a business entity established and trademark your name.
- Get your marketing materials in order. You’re going to need at least a 4-song recording (and one that requires no apologies), a well-written bio, a logo, a professional photo and a video of you performing live (for an actual crowd). You’ll also need vanity URLs on social networks, a website and to make sure all your digital real estate is interconnected.
- Set yourself up for the long haul. You need to engage in long-term planning if you want to work as a musician. Most “normal” businesses are not in the black for three, to five years, so why should a music business be any different? If you are truly in this for life, you should be investing in your business in a way that ensures you are set up to play and record music and get it to people at a moment’s notice over an extended period of time. This could mean building a home studio and getting a P.A. and a van. The point is, you’re going to have to plan multiple releases over a number of years and be prepared to play countless gigs. And you’re going to need to know how to accomplish this as cheaply and easily as possible. Don’t blow all your money on your first release, expecting it will propel you instantly to financial stability. Plan on truly playing and recording music on an on-going basis.
- Build a community and diversify. The music, the money and “the hang” (who you seek out as collaborators and the other musicians with whom you surround yourself on a regular basis) determines which gigs you should take, even if they divert you from your original work – sideman work, apprenticeships, etc. Remember, even Hendrix was a sideman.
- Think about B2C and B2B. It is also important to consider that everyone is talking about direct-to-fan in the digital age – an obvious, unfiltered Business to Consumer strategy (B2C). As they are building their communities, I’m of the opinion that many fledgling artists should also pursue Business to Business (B2B) relationships with like-minded artists. If you convince one band with a 50-person mailing list in another town that you are worth a damn, you can get your music in front of those people and start to break a new market if you’re willing to do the same promotion for them on a gig trade.
In summary, the confusion and frustration you may be feeling about your music career is just part of the process. It just so happens it’s not part of the process that people really talk about. The media is feeding you a steady stream of crap about who, what and where you should be in your career. Try to tune that out along with the hundreds of burnt-out naysayers you will meet along your journey who tried, failed and now want to talk you out of trying, too. Amputate the people in your life with this cancerous attitude, consume less celebrity media, or at least remember to take it with a grain of salt.
And remember grit and what I hear more than anything else about marketing strategies: “I tried that, and it didn’t work.” No musician succeeds without trying and failing. Try again.
Dick Wingate is a digital entertainment executive with over 30 years of experience in the music industry and also serves as the Principal in DEV Advisors, a consulting firm and affiliate of New York-based DEV (Digital Entertainment Ventures). He got his start in the music industry working at the college radio station and after graduation, went to work for an indie record label. Soon after, he became one of the youngest product managers ever hired by Columbia Records, where he worked with artists including Bruce Springsteen, Elvis Costello and Pink Floyd. His work with labels continued throughout the late ‘80s, as a senior executive at Arista, Polygram and Epic. Throughout his career, Dick has had a passion for technology and helped pioneer the digital music business, acting as Senior Vice President of Content Development at Liquid Audio, Inc., the company responsible for the first end-to-end digital music platform. He was also the President of Media Development and Chief Content Officer for Nellymoser, Inc., one of the earliest mobile app businesses. Most recently, he acted as General Manager of East Coast Business Development for TAG, Strategic, a digital entertainment consulting company that offers business development, content licensing, strategic partnership and distribution services. At DEV Advisors, he joins a deep roster of other media executives who help connect technology to the music industry and provide digital business strategy, content acquisition and licensing and connect key people to resources as they develop their products and businesses.
I talked to Dick about his vast experience in the music industry and how he has seen digital music evolve over the past three decades. He also discussed why artists need to be entrepreneurs to succeed in the current industry climate and delivered some advice for artists about the importance of innovation and building dynamic relationships with their fan base.
Thanks so much for taking some time to chat, Dick. How did you get into the music business?
I got into the music industry through college radio, as many people do. After college, I immediately went to work for an independent record label and about a year later, was approached by Columbia Records to become one of the youngest product managers they had ever hired. I spent the next three years there working with artists like Bruce Springsteen, Elvis Costello, Pink Floyd and many others. I became an A&R man for Epic Records in the early ‘80s. After discovering Aimee Mann and having a hit with “Voices Carry” and then also having a #1 hit with Eddie Grant’s “Electric Avenue,” I became the head of A&R at PolyGram Records in the late ‘80s.
In the early ‘90s, I became very interested in technology. There was no Internet yet, but interactive technology was starting to be used in retail stores. I got involved helping program and license all the music for an in-store previewing system called the iStation that was state of the art at the time. I had my first experience on an entrepreneurial level working with a startup, licensing music and obtaining the first-ever license that Billboard granted for interactive charts and touch-screen operated system for music stores.
In the mid ‘90s I was briefly head of marketing for Arista Records, then quickly switched over to BMG and got involved very deeply with their early Internet strategy. This was in about 1996, and I helped build some of the early websites for BMG artists, including their first online store, which was called Get Music. I also negotiated deals with AOL to put AOL software on various BMG artists’ CDs. During that time I also started consulting with other companies that had come to BMG and were looking for help with their Internet strategy. I met with a lot of the early streaming music companies, which included Audio Net, Real Networks and Liquid Audio.
I thought Liquid Audio was the most well-thought-out solution for the music industry at the time, so I started working for them in addition to working with BMG, eventually going full time with Liquid Audio in 1998. We ultimately became far and away the leading licensed digital music distributor. Most major labels and independent labels first complete catalog licenses were with Liquid Audio, including Universal. We had thousands of labels and hundreds of websites to which we distributed music, including Tower Records, CD Now, Barnes and Noble, Best Buy and even Amazon, though they weren’t yet doing commercial digital downloads.
In 2002, there was a change of ownership and control in the company after a failed merger, and most of the senior management left. The company was sold to Anderson, which is the company that provides all the music and merchandising for Wal-Mart. And Liquid Audio became the back end of Wal-Mart’s digital music store. And they never really promoted it, so the story had a sad ending. But, as Liquid Audio, we did lay the groundwork for the first commercial downloads in the United States from major labels. Our first downloads were from Duran Duran and became available 15 years ago. And we had a lot of the first digital music technology innovations that eventually became the standard.
Following the sale of Liquid Audio, I started consulting with a number of companies, one of which as putting on-demand music creation systems in McDonald’s in Germany: Digital Transaction Machines (DTM). We put systems in McDonald’s that allowed you to create a playlist and actually burn a CD in the restaurant. They were used in a number of places in Europe. It was quite an experience and really broadened my experience with European licensing and retailing.
I was also on the advisory board of an early leader in mobile streaming and application development: Nellymoser. The company created the first on-demand streaming music app in the U.S. called Warner Music Jukebox. It launched in about 2005 or 2006 and ran on Sprint as the first unlimited streaming subscription app. We also built apps for MTV, Comedy Central, ABC Television, AT&T and Virgin Mobile, before the release of the iPhone.
That was my deep dive into mobile technology and application development. Of course, once the iPhone came out, the entire paradigm was changed, because the carriers no longer had complete control over application distribution. And that exploded the market and enabled free applications, which did not exist prior to the iPhone. Previously, carriers wanted to get paid every month for applications.
Well, Apple has made a habit of bolstering their hardware through free IP.
Yes. Following my stint with Nellymoser – which is still one of my clients – I started consulting again. And I’ve been working with various digital entertainment companies – typically startups or early-stage companies – helping them with their business development, content licensing and distribution strategy, or helping them find strategic partners and financing.
Earlier this year, I moved my consulting business to a new company, Digital Entertainment Ventures, which was founded by Alan McGlade, the former CEO of MediaNet and of The Box TV Network. Alan and I created an advisory services company in association with the venture fund. So, there’s Digital Entertainment Ventures (DEV) and DEV Advisory Services, which I run. I wear two hats: I represent the fund; I run the Advisory Services group.
I always tell artists that they are their own companies. Building an early-stage startup is not that much different from building an artist’s career.
It couldn’t be more similar, actually.
As someone who is an investor, an advisor and has a background in both early-stage startups and in the music business, what do you look for when you’re kicking the tires on a prospective client or investment opportunity?
It’s funny that you said that, because I’ve made that same analogy between entrepreneurs and musicians recently in a couple other situations. Someone said to me, “You were an A&R guy who moved towards a role of entrepreneur and getting involved with other companies as an advisor. How did you make the transition?” And if you think about it, trying to identify entrepreneurs and young companies you think will be successful in the market is very similar to finding musical talent.
You can look at the lead singer as the CEO or Founder because that person is usually the most important. And you have to ask yourself, “Is this person someone I want to work with? Is this person the right person for the long run to run the company, or are they just the visionary that helps shape the product but shouldn’t run the company?”
Then, as an investor, you look at the “supporting cast”/the other company “Founders.” And in music, that’s the band. Is the band strong enough, or do some of the players have to be upgraded? It’s no different from an A&R guy trying to decide if the drummer or guitarist is good enough.
Then you ask, “What’s the product?” Presumably, you’re interested in the product. But the question is, “Is it done and good enough, or does it need a lot more development?” That’s like asking about the material as an A&R person: “Is there enough good material, or does it need to be developed more before it’s brought to market?” Does the band need to write more songs to bring this to fruition?
You have all these parallels between the entrepreneurial business world and the music world. And sometimes as an investor, you think, “It’s okay for now, but it’s not quite good enough to get them all the way.” One of the things I learned from working for Clive Davis was, when he was trying to decide whether or not to sign an artist, he would consistently ask his A&R staff, “Is this an artist that you can see headlining Madison Square Garden – not a club, not a theater, but Madison Square Garden? Is it that good?” You have to ask yourself a similar question when you’re looking at investing in new companies: “Is this product good … or is it game changing?”
I never thought of it until this very moment, but we are really in a situation similar to the one the music business was in in the ‘80s and ‘90s when we were flush with people repurchasing their catalogs on all the updated formats. There are a lot of startups out there whose whole business strategy is, “I’m going to do something that Google or Yahoo! wants to buy.” I’m seeing a lot of lazy tech companies whose entire strategy revolves around getting bought by Google.
Well, some of that is, no doubt, laziness. The goal used to be to go public, but that isn’t typically a goal anymore. A lot of companies are created to get purchased, and they do that by building an audience. Even though it’s not really monetizable, there is usually a company out there that will look for a specific feature or audience.
That’s the kind of thing that I’m constantly evaluating when I look at technology. I ask myself, “Is this a great feature, or is this going to be a great company?” Because, there are a lot of good features out there, but some of them lack a good monetization strategy.
I get excited when I see a new product and the monetization strategy has actually been thought out in advance; they haven’t just said, “We’ll build an audience and then figure out how to monetize it.” That’s the conundrum that Facebook, Twitter and FourSquare are in: These are all great products, but they weren’t initially designed with monetization in mind. The monetization has to be bolted on, and sometimes it works, sometimes it doesn’t. You have to think about whether what you have is a feature that would work well in someone else’s app or whether it can actually work successfully on its own as a standalone company.
One of the companies I was wrong about was Shazam. When I first saw it, I thought it was a great feature, but I didn’t think it could be effectively monetized. It seems like the company is doing great and actually get a significant amount of affiliate fees by driving sales to iTunes. But I wouldn’t have jumped on it in the beginning.
I think the unspoken lesson in here is, if you’re looking at running your music career as a company, clearly you have to have a product in mind. You have to have an audience and also something to sell to that audience.
I realize you’re doing more than just working with music-related technology. But since you do work with people in that space, which portions of it do you expect will grow and which do you think will become irrelevant in the future?
Clearly, streaming will continue to grow as a percentage of music consumption. There is less and less need to own a file, as long as you have access to it. The one piece that’s still up for grabs in that area is the automobile, though there is certainly plenty of competition. Once there is true Internet connectivity in the car, on an airplane or in the subway – once you have cached music – there will really not be a need for ownership anymore. I think we are moving towards a very streaming-centric music industry, if we’re not there already. The whole idea of managing thousands of music files and putting them on an iPod will slowly drift away.
The monetization piece is really problematic, because the rates that actually end up flowing through to an artist are fractions of a penny per song; streaming doesn’t make a whole lot of money for artists. And their download numbers are modest, so they have to make their living on the road and through merchandizing. That’s just the world we live in right now.
I think we need to get streaming subscription services to real mass market. And I don’t mean a few million people. Right now – and don’t hold me to these numbers – I think Spotify is claiming 20 million subscribers. But three-quarters of them are not paying a fee. And they claim a 20-25-percent conversion rate, but that is probably higher than they’re seeing in reality. But even if it’s really that high and you have four or five million, that’s still peanuts compared to what the music industry needs the revenue to be.
A situation where you have 50 or 100 million subscribers is what the industry needs to ramp up to. Paying $5 per month, or whatever amount it ends up settling at, should just be something consumers expect in order to have their music anywhere, anyhow, anytime. Bundling streaming services has become the easiest way to get people to pay for it. Apple is the one company that can establish subscription music in a very significant way, because they have so many credit cards on file. I think everyone in the industry needs Apple to go in that direction, but the company just hasn’t gone there yet. They will probably milk every bit of the download model they can with iTunes before they offer a subscription service.
I’m sure they have it in beta already. And whenever the transition is optimal, they’ll roll it out.
If you think about it, Apple’s whole model is to get you to iTunes as often as possible, even though iTunes is not really its main moneymaker. If Apple were to offer a subscription service, you’d have less reason to go to iTunes on a regular basis; on the music side, you wouldn’t be making any purchases other than the subscription fee once per month. At some point in their financial modeling, they will likely say, “If we can convert a certain percentage of our customers to a subscription, what’s the tipping point? How many of those subscriptions will we need to cover the loss of a la carte music?”
Where do you see mobile headed? In my experience, the smarter phones get, the worse they are as phone and email devices. Is mobile just going to go towards more streaming?
It already has. You can’t really even separate mobile from any other format at this point. If you include tablets and phones, we’re already at a very high adoption rate. And that’s only going to get higher, quickly. If, as rumored, Apple is going to come out with an iPad “mini” at a lower price point than the regular iPad, it will just explode the tablet market.
Do you have any more advice you can share for artists trying to thrive in the current climate?
I think this is the time for artists to be experimenting as much as possible with how their music is presented and how it’s released to the public. We’re at a point where it’s important to have music flowing regularly and to maintain a close relationship with your fan base.
And it’s also a time where using and developing mobile apps doesn’t have to be expensive. There are companies that enable a fairly cost effective way of getting an app out there, but having an app out there is only as good as how you use it. There has to be a regular flow of content and communication through the app, because, research shows that a huge majority of apps on people’s phones get abandoned quickly. Somebody coined the term “zombie apps”: They’re on your phone, but they’re never opened. We all have apps we hear about, download, use once or twice and then forget. If an artist app becomes a zombie app, it’s not useful.
There are also new technologies that are coming to bear. SonicNotify is very interesting company that DEV invested in and is actually being integrated into the Mobile Roadie platform, so you can wake up the app with an offer, notification or link to a new piece of music or video and do it in a geo-targeted way. So, it can be set to go off in a specific city venue or retail chain. It actually scales down to a three-foot radius. It’s an audio notification that’s inaudible to the human ear, but it wakes the app up when you’re in a specific location. It can even be as specific as the frozen food aisle at Whole Foods.
There are lots of these things out there that let artists get creative and communicate with their fans, whether to make offers or just to alert people to a new piece of media, a new tour date or anything else. For example, SonicNotify would be very useful for letting people know about a new tour date that has just been added and offering people with the app the first shot at the tickets.
That’s great. And with how personal artists are getting with their fans, it could be, “I’m going to a movie. The first four people to respond get to go with me.”
Yes. And I think if a band is going to embark on mobile apps, they have to be willing to keep them fresh. Otherwise, they just get forgotten. And they need to have some exclusive content only available through the app. Not everybody is going to be able to do what T-Pain did with Viddy. But that’s the gold standard for creating a separate experience on mobile and creating an app that became a hit just because of the experience of using it.
And then you have Bjork, who decided to release an app for every single song on her Biophilia album. That may be a bit of overkill, because people might not want 12 apps from one artist, but it did get her a lot of attention.
Bill Wilson is Vice President of Digital Strategy and Business Development for the National Association of Recording Merchandisers (NARM), the #1 trade association for professionals in the music industry. For almost 20 years, Bill ran Blackout Records in New York City, which originated as a label for hardcore bands and was responsible for putting out albums by bands including Guided by Voices and H2O. He has also worked at a variety of other independent labels and distributors, such as Relativity Records, Caroline Distribution and Earache Records and was an A&R consultant for MCA Records in the 1990s. In 2001, Bill started working with internet start-ups and throughout the 2000s has acted as Director of Business Development for several music marketing and research companies. He currently runs NARM’s Digital Think Tank, designed to address issues surrounding enterprise-level digital music commerce. He is an active member of many music industry organizations, such as the American Association of Independent Music (A2IM)’s New Media Committee and speaks regularly about the digital space at CMJ, South by Southwest, Bandwidth, New Music Seminar and many other industry events.
Recently, Bill shared 10 valuable insights about what it takes to launch a music-based business in the climate of the modern music industry:
- Know the Animal You’re Dealing With.As a mature business, the music industry can be terribly confusing, but it’s necessary to understand the players if you want to do business as an artist or a startup. Educate yourself on the industry food chain, and understand where your product or service fits in.
- “Two for One” = Two Clearances for Every Song.If you plan on using a pre-recorded song from a signed artist, make sure you have clearance from the two main rights-owners – usually the label and publisher, but sometimes the artist themselves.
- Yes, You Need to Track Them Down. In the age of the internet, there’s no excuse for not doing due diligence on who owns what, and there’s no indemnification for ignorance of copyright law.
- But There’s Help. Resources to find out publishing info/to see who owns the recordings include Rightsflow and the Harry Fox Agency and any retailer like Amazon or iTunes.
- “Fair Use” is Not Fail Safe. “Fair Use” is a list of potential defenses for copyright infringement, not a clearly-defined right. It’s a term that gets misused a lot and a grey area that must be adjudicated in the courts … and that is expensive. So if you want to go that route, be prepared for a long war of attrition with deep, deep pockets and a strong possibility of losing … or get the licenses.
- “It’s Cool” is Not A Business Model.When approaching a large content aggregator like a major label, understand they don’t care how cool you are. They need to take care of their needs and won’t disintermediate or undercut customers that drive their revenue.
- It Still Comes Down to “Sex, Drugs & Money.”These three things are key to obtaining a license. Well, not literally. It means: your app or product needs to have real sizzle and marketing oomph behind it (sex), it must be a “sticky” or addictive, repeat experience for the customer (drugs) and of course, it must provide a real, scalable revenue opportunity ($$$).
- Mind Your Ps and Qs … Literally.Metadata – the data around a particular track – is more important now than it ever has been. Names need to be spelled correctly and consistently, songs need to be titled properly, correct release dates and label information must be applied. Collecting and matching collateral contextual information such as liner notes, lyrics, photos and more are also becoming increasingly important to the products of the future, as well as information about how it was recorded: producer, studio, etc. It’s not just the music, it’s all the information that surrounds it – which you can curate yourself – that creates value.
- Context is King. Artist? Album name? Song title? Music isn’t just about those three things. There’s a story in who produced the album, side musicians, additional songwriters and other information. Artists in the studio need to keep track of these details because the products will be based on deeper and deeper levels of information. A picture isn’t just pretty; it’s a wealth of information that can be used to drive people to an artist. Who’s in that picture? What are they playing? What are they wearing? Amazing discovery experiences such as the 955 Dreams History Of Jazz App on the iPad use artist context to build immersive apps that lead to content purchase.
- Rome Was Not Built in A Day … But a Modular Home Can Be. If you’re looking for speed to market, you may want to look to see what APIs are in the marketplace that could apply to your business to get up and running quickly without additional licensing hassles. You need to weigh this against the benefits of having control of your own relationships with the providers of the music and related information.
To learn more about Bill Wilson and the work he does, visit the NARM website.
Music Marketing -
While we can be hired to do product management and ongoing music marketing services, most people are unable to afford an ongoing expense. If you are interested in those services, click here to contact us. If not and you would like a DIY solution continue reading.
Get A Music Marketing Plan
I can be hired to create custom music marketing / music business plans for your next music release, tour or just to expand your reach and exposure as an artist. I can guarantee that if the plan is followed your music will be exposed to more people than it is currently without a large monetary investment.
How it Works:
After a plan is purchased I send out a detailed marketing questionnaire so I can get as much background on you as possible. After I have reviewed your responses and thoroughly researched your online presence we connect by phone and go over your needs. After this conversation I take 1-2 weeks to turn around your plan. Once completed and delivered we schedule a follow up call to go over the plan and make adjustments if needed.
What does my plan include?
Your plan will include a diagnosis of your existing business and ways to make that business stronger and grow your fan base. Your plan will include strategies on how to best handle:
- Website Optimization (both in terms of search and conversion rate)
- Email Marketing
- Converting and Retaining fans
- Social Media and Overall Digital Strategy
- Online Video Promotion Techniques
- Music Placement
Please Contact Me for more information and Rates.
David Rose from Knowthemusicbiz.com was kind enough to let me republish the article below that I wrote for him a while back. If you haven’t already please check out his site. I will have more new interviews and articles starting up again next week.
I was once told a story about Bill Murray and Hunter S. Thompson. I can’t verify the specifics of the story but I suppose for the purposes of this article it doesn’t much matter. During the production of the 1980 Film “Where the Buffalo Roam”, in which Murray was to play a young Hunter Thompson, he met Hunter poolside so he could get a good idea of what the famously eccentric writer was really like. In response to the question “What is it like to be you?” Thompson tied Murray up to a deckchair and threw him in the pool.
Such is the position of most artists in the music business – floundering in the water and trying their damndest not to drown in spite of overwhelming circumstances.
I run a music business consultancy which is what this blog helps me promote – not that I don’t enjoy content creation. This business was something I put together after having been a musician on and off for twenty years and having done A&R at Major labels for almost a decade. As a result of actively promoting this business I get contacted by several strangers every day who are looking to make it in the music industry. It never ceases to amaze me that in this day and age with all of the tools now available to artists that people are still looking for that one person, that one opportunity or a chance encounter that is going to propel them to superstardom. That’s not to say that I mind being contacted – far from it! It’s just that the type of questions I get can be really disturbing. “Can you get me a record deal?” or “Hey – I just need a manager and I’m going to make millions! You need to introduce me to great managers.”
Really? Last I checked it was 2010.
Chances are if you are reading this – it doesn’t apply to you but from what I have seen this is still the prevailing mindset of many aspiring artists. I believe those with this mindset won’t make it – period.
In my opinion if you are going to make a living making music – let alone “making it”- you have to own the following:
· There is no help coming for you
· The age of the “big break” is all but over.
· The one person who will help your career more than anyone is you.
Harsh? Yes. Hopeless? Not at all.
Let this empower you. You no longer need to spend a great deal of time chasing management, booking agents or labels. I am not suggesting that any of these types of strategic partners aren’t helpful but I do find that many artists seek to engage partners far too early in the trajectory of their careers. Before you seek out someone to partner with you ask yourself the following questions:
· Have you played out locally on a regular basis for at least six months?
· Do you have a corporate entity and an intra-band agreement?
· Have you trademarked your name?
· Are you registered with a Performance Royalties Organization? (ASCAP, BMI, SEASAC)
· Do you have a professional looking website for your project and a presence on social networks?
· Have you made “no apology” recordings of your songs that you think are representative of your ability?
· Do you have a bio on your musical career that doesn’t peak when you were eight years old and taking piano lessons?
· Do you maintain an ongoing online and offline positive relationship with a large group of people you could call fans without feeling funny about it or including your parents and extended family?
If you answered no then your business is not yet off the ground. You don’t yet have a viable and fully formed product. In any business it is very difficult to get an investment for a blueprint concept or an idea. Getting funding for a start up business becomes much easier the more time and effort (and money) the entrepreneur puts into it. You have to remember that seeking out management, agents or labels is asking someone to invest in you. It might not be financial investment but the amount of time a partner like this would need to devote to developing an artist’s career is usually a full time job. What do you bring to the table other than your talent?
It’s true – people who interact with artists a great deal are often jaded (Yes, me too. Couldn’t you tell?) The failure rate in music and the arts in general is astounding. If you really want to get the attention of competent and experienced handlers you have to be the one to get your career moving on your own. If you make enough noise long enough people will find you. Overnight successes that are examined closely are very rarely (as in go by lotto tickets instead) a case of someone being struck by the thunderbolt of fame whilst daydreaming and smoking dope in the parent’s basement.
What’s the good news? There are now plenty of sites that provide information and insight and dozens of tools to help you get your music heard for low or no cost. This makes it harder to rise above all of the noise (because everyone with a mic can be a singer in this day and age) but it is still a viable way to start.
Go find other artists and build a community. Relationships with your peers when starting out are usually more valuable than industry relationships. If you are able to surround yourself with several developing artists who are in your situation and perhaps even endear yourself to people who have put in a bit more legwork than you this will help a great deal. Being able to market yourself to the fans of similar acts is almost the whole name of the game in the beginning so along those lines – go make friends!
Long story short (too late?) – before you spend time and effort chasing big league help, make sure you have maxed out your ability to do everything within your reach to convert strangers to friends, friends to fans and fans to fans who will actually purchase your products. If you do that long enough and well enough even in a small town – industry will find you.
Good luck out there…
David Garrison is the Chief Marketing officer at Indaba Music which is a…well, it’s sort of a …
What is Indaba Music?
DG: Indaba Music is the leading online collaboration tool for musicians. We make it possible for musicians in different places to find each other and then make studio quality music together all online. No download necessary. We have a variety of tools, so there’s a community side to the site, which is 300,000 members right now, 185 countries, growing double digits each month. That’s where you find people who you discuss things with. That community is pretty robust – it’s everybody from 13-year old garage bands who are just learning their first chords all the way up to Grammy Award winners. The common element of them all is that they’re all serious musicians and they are passionate about the music they’re making. The community piece is the lifeblood of Indaba that makes it work. On the flip side, there’s the technology piece, which is the suite of tools to enable a musician to manage their digital life online. And that’s primarily on the music creation side right now.
What is the feedback you’re getting from your community?
DG: We have success stories. For example, recently we ran a campaign with the Derek Trucks Band, which is a bunch of musicians’ musicians, an awesome group. Derek Trucks is an amazing guitarist. One of the people who entered the contest was a guy named Mike Gannon who just graduated from university, was a guitar player and had always loved Derek Trucks. He entered the contest and did a cover of the song. At the end of it, Derek and the band chose him. They thought it was a really awesome version of the song that they’d made, really different, unique, good sound and so they gave him the prize, which was to go up and meet the band backstage during a concert. So he went up to Boston, met the band and hung out with them for a while and they had a bunch of great talks, went backstage with them as they got ready. The band went out on stage and the sound check guy said, “So, Mike, did you bring your guitar?” And the sound check guy gave him Derek’s Les Paul ’59 and pushed him out on stage, and the band started playing in front of a large crowd. And this young guy that had just graduated from undergrad whose hero was onstage just started playing with the band. And everyone took a solo, and he ended up getting a solo in front of a big live audience and got a standing ovation.
There are a lot of good success stories like that?
DG: There are definitely success stories through the contest, but each campaign is different. When we dealt with Mariah Carey, she wanted to retain all the rights to the song so people when they submitted gave up their rights to the music. Other artists like Carmen and Camille — this little unknown duo from Canada – used a Creative Commons license that was basically just attribution. So you could actually go out and sell your remix of their song and make a profit off it as long as you just said it was their vocals. It runs the whole gamut. Depending on the artist, you give up some of your rights, but that’s the price you pay for participating in a really cool collaboration and getting a lot of exposure and getting noticed. There are lots of A&R people hanging around the site and paying attention to the contest.
Musician Coaching: Are there things that people are using the site for that are getting them exposure?
DG: Yes. There are things we intended for them to do with it. But what’s always surprising to us is how people take a platform we’ve created and use it in a way we hadn’t expected. The things we intended for people to do are to find someone to make a piece of music with, collaborate, promote it on the site, and people hear it and more people collaborate on it and it becomes this big thing. A good example of that is Peace Partners, which is a group of musicians who got together, founded by a guy in Quebec who wanted to donate music to the cause of peace and freedom. He got together what’s now a group of over 150 musicians from across the world who are donating songs to an album the proceeds from which will go towards organizations that have a demonstrable impact on peace in the world. Amnesty International Canada Francophone signed on. There are some interesting stories about how people use the idea of coming together to collaborate to do really interesting things.
Musician Coaching: So you’ve started to garner brand attention, and I’m guessing someone participating in a community has a better chance of getting the attention of a brand or a strategic partner and ultimately getting a shot on their own. Have you seen people use this community to procure strategic partners?
DG: That’s another way people have used it. For example, there’s a duo out of the UK called -Felsite-. -Felsite- is this pair of guys who had never met. They met on Indaba and created a song on Indaba and then created a whole album on Indaba and had never met. And then they were heard by a small UK label who really liked the sound and signed the album and the duo. They’re on their second album now. There are absolutely stories of people getting exposure that leads to commercial success through the site. The thing I like about that one is that it’s not like a major artist came out and said, “I’m going to use this site to do something really cool and get exposure for my stuff on it” when he already had a world of listeners. These are two people who had never met each other, didn’t know each other.
ARTISTS THAT HAVE USED THE SITE: Mariah Carey, Yo-Yo Ma, The Roots, N.A.S.A., Third Eye Blind, K-OS, John Legend, Rivers Quomo (Weezer), Marcy Playground, Kennedy, The Crystal Method, Erik Truffaz, Deerhoof, Alkaline Trio, The Derek Trucks Band, Coallesce.
Using Indaba as a marketing tool for them and getting extra exposure is leveraging a bunch of assets they already have. What I like about the -Felsite- example is that it’s creating a reputation from something that really didn’t exist before they met on Indaba. So it’s starting from scratch. That’s the stuff we imagined would happen. And then there are a lot of people using it for things we never would’ve thought of that make total sense. For example, a middle school music teacher in Seattle uses it as a practice mechanism for his choir to look at how the different parts go together, they can use it for homework because it’s taking a rehearsal session that they can record directly into Indaba and then review on their own time and you can comment on specific points in the wave form. It’s really useful as a pedagogical tool. Does it make sense? Of course it does. Would we have thought of that as an application immediately? Maybe not. I think there are a lot of cool things that happen because this exists and there’s a really strong community around it.
Musician Coaching: You’re an MBA, chief marketing officer and have been in the music space for quite a while. Do you have any parting advice for a musician pursuing a career?
DG: If you’re a musician – especially a rising musician – right now, you should be on Indaba, largely because it’s growing so fast, it’s an easy, untapped source of inspiration, exposure, tools to support your creative process. More broadly than that, I think one of the things a lot of musicians don’t recognize is the degree to which their fans want to be involved in their creative process, even at their infancy. There is immense appetite for understanding how music is made. We don’t just listen to recorded music because it’s a cool sound. We listen to recorded music because for us it represents insight into the recording process, in the same way that the live music industry is still big. People like to be around created music. What that means is that Indaba is a creative tool and a forum where you can talk about it and actually watch people create. I think with all the social media that artists have at their fingertips – Myspace, Facebook, Twitter – a lot of artists forget that what’s interesting to audiences about those is this constant insight into what you’re thinking about as an artist, into how you’re making the music, into your life as a musician – things that don’t necessarily occur to the artist. We were talking before about how few people actually do things on a regular basis. Someone said to me once that the thing that defines a blog that’s worth following and will be popular is that you may not know what topic they are going to talk about, but you know what stance they are going to take on it. That’s something that social media gives people the capability to do – just talk about a range of topics and then engage fans. Being in touch with people on a regular basis feeds itself. And it doesn’t have to be big, it doesn’t have to be hard to be involved, it doesn’t have to be a big deal, but I think a lot of these tools are built for, but not necessarily used for, this pinging.
My advice is, particularly for rising musicians, to create a relationship with your audience – no matter how big or small it is – by creating a persona so they know what your opinion is going to be. And give them a sense of when you’re going to talk to them – whether it’s once a week, once a month or once a day.
Please check out Indaba Music, it is a very cool collaboration tool.
I recently stumbled across the YouTube clip below. It is old footage of Frank Zappa discussing the music business of several years ago. Having a music career does seem to be different today then when this was recorded but there is still some great truth to his words.