Software Vault: The Sapphire Collection/Software Vault (Sapphire Collection) (Digital Impact).ISO/cdr14/musind.zip/MNY101.TXT

Text File | 1994-10-09 | 8KB | 152 lines

FINANCES 101


This is an excerpt from the commentary booklet provided with the
Entertainment Source Library Version 3.1 published by Cumberland
Music Group, Inc. Nashville TN.  It was written by Greg Forest,
Editor of the "ESL", and was compiled for the Music Arts Forum
by Mike Lawson.  (Used by permission)


    "IT TAKES MONEY TO MAKE MONEY." - OLD SAYING
    "IT TAKES MONEY TO LOSE MONEY." - NEW SAYING OF NERVOUS INVESTOR(S)

The one thing you can bet on in this industry is that IT DOES TAKE MONEY.
More money than most artists dream of is spent developing, recording,
manufacturing and promoting a new act's first release.  But not to worry;
if you're on a label, you will probably find out exactly how much it costs
when you begin getting your royalty statements from the company.

One of the most comic/tragic things to witness is a newly signed artist
whose head swells up six hat sizes because he just got a sizable advance
from a record label.  Somewhere in the artistic mind there seems to be
a block against the word "recoupable."  When a record company advances
you money, it is just that: an advance.  Look at it as a loan you will
have to repay.  They won't come get your car, but they will see to it
that they recoup every dime they invested in you before you see any
further royalties.  They, in effect, have a lien on your recording career.
So the next time you see Johnny Skunkhead bragging about the six-figure
advance he got for Suzi Dahling, ask him how he's going to repay it since
Suzi hasn't been sober or on time to a gig or session in years.  An act
has to sell a lot of records for a label to recoup a six figure advance.
A lot of records.  Keep in mind that the advance is usually a great deal
less money than the amount they will have to spend to get the records in
the stores and promoted.

So what do you do if you want to further your recording career and don't
have a six-figure offer from a record company?  You do the same thing
that every other industry does to raise capital:  you bring in investors.
You may get lucky and your Rich Uncle Bob loves your music and believes
that you can really be big if you just had a record out.  He is willing
to back you for an album.  Or you may just have a group of people who
really believe in what you're trying to do or say and just wants to help.
How do you compensate these people for their faith in you?

There are a few rules of thumb that should be followed when seeking out
investors in any entertainment project:

(1)  Make the investor realize that this is a very high risk investment.
Statistically there is little chance of realizing a profit.  Failure to
make your investor aware of the risk factor could constitute fraud.

(2)  The investor should realize that he/she may lose everything and
should never venture money that they cannot afford to lose entirely.  It
is very sad to see someone put their kid's college money down on the table
for a roll of the music-biz dice.  And when the economy takes a turn for
the worse, who is to blame for the investor's kid not getting the new
Maserati and having to go to public school? You.

(3)  Is it really a viable investment?  The bottom line judge of the
success of any recording project is the same judge for any other type of
industry.  Does the public need or want this product?  Are you playing
twenty dates a month?  Do the audiences at gigs ask you for tapes?  If
so, how often?  Can you sell 1,000 tapes off the bandstand in a year if they
don't fly in the record stores?  Try to keep in mind that most artists think
of themselves as the exception rather than the rule.  They have to believe
that they are going to make it no matter what.  It is very hard to believe
in your talents and abilities and still be objective about the marking of
your services.  Your girlfriend might also think you're great, but will she
buy the 1,000 CDs in your closet?

(4)  I know a number of unsigned bands that are doing quite well in
merchandising records, t-shirts and other memorabilia off the bandstand.
It makes up a major portion of their earnings.  One of the great mistakes
is to press up a bunch of records for distribution to radio stations, even
college or alternative radio.  You really just can't compete as an individual
on a national scale.  Many artists feel that their material is so strong that
the radio will pick up on it immediately and it is sure to be a Big Hit,
bringing record execs to their door.  The fact is that there are only so
many minutes in a broadcast hour, and radio programmers have to play what
their demographic target audience wants to hear.  Even on college or
alternative radio, what will the listener request: R.E.M. or Someone They've
Never Heard Of?

(5)  Examples of successful independent releases stuff my file cabinets but
only because these artists had both a demand for the product and a plan to
finance, manufacture and market it.  A good example is my ex-wife who sells
cassettes off the bandstand for $10 a pop.  She has an independently produced
master in the can from her earlier dances with record labels.  It is a
broadcast quality master.  The majors didn't pick up on it but the mix is
done and the artwork has been shot.  She has a friend who puts up the money
for each repressing of the master.  It usually cost about $2000 and takes
possession of the cassettes.  He advances them to her 50 at a time for
$5 each.  He has become the wholesaler.  In about four months, he has his
money back, and from there on he gets a buck a copy.  It works well for
everyone.  He gets his money back when 400 have been sold, and over the
next six months or so he will turn another $600.  He sits on the collateral.
My ex gets $2000 from the first 400 sold, and an additional $5400 on the
last 600.  On her friend's $2000 investment, he has gotten back $2600 in
less than a year and my ex takes in $7400.  This is a fairly reasonably-
secured business investment.  There is little overhead, except for the
manufacture of the tapes.  One thing to keep in mind though, is that my
ex wife is very talented, regionally well-known, and works over 200 nights
a year.  Then you have the big time.

(6)  To attain any kind of national recognition requires money and hard
effort.  If you must have your product out, this is some idea of a very
bottom-line way of looking at things:

ALBUM PRODUCTION

50 hours        24 track studio time @ $35 per hour     $1,750.00
4 reels         2" Ampex 456 @ $115 per reel               460.00
12              Reference cassettes, DATs,
                analog reels                               125.00
1               Color separation (one side only)           200.00
1000            Color cassettes                          1,500.00
1000            J-cards                                  3,500.00
1000            45's - 500 each for 2 radio
                promotions                               3,000.00

ALBUM PROMOTION

12 months       Radio regional promoters, per          $25,000.00
                release
                Printing, Logos, posters, etc.           1,500.00
                Postage, phone, miscellaneous            3,000.00


This is assuming that the band plays and sings all parts for no pay, that
your cousin is the producer, you don't pay taxes or unions, your brother
is an engineer, and your girlfriend is a graphic artist with a printer
who owes her a favor.  This is a very low budget.  Of course, it has been
done cheaper, but I don't see those releases topping the charts.  I got
my first album recorded, manufactured and promoted for under $1500.  It
sold well under a million copies in Texas alone, and I still fondly use them
as skeet targets.

There are different ways of collateralizing a deal like this.  Usually the
backer has all the rights in and to the master until he is paid out.  The
backer might also demand a part of the publishing rights.  It goes on and
on and on from there.  They can ask for a piece of personal appearances,
merchandising income, depreciation of capital assets (sound, lighting,
trucks, etc.).  They will go on like this until you say "No."  Where you
say no depends on how hungry and/or stupid you are.  I have been and seen
plenty of both, and have learned to regret it.