Future of The Music Industry

As a soon to be master’s degree graduate from Full Sail University, I have to say I feel extremely secure in my future career if only for two reasons. I understand digital marketing and the consumer's desire for free will.

The Internet has forever changed the music industry and it’s only going to change more. We see CD sales dropping more every year and ITunes sales going up. People are purchases singles and ignoring albums.

I would like to make a prediction. Within 5 short years CD’s will be no more common than Cassette tapes. There will just be no need for them.

With hard drives getting bigger, internet connections getting faster, and MP3 players getting cheaper it’s only a matter of time before the digital music stores offer downloads with CD sound quality. When that happens there will be no reason to spend the extra money and time to go to a physical store and purchase music that will only end up on your phone or IPod anyways.

Consumers have made it clear to the music industry time and time again that they want singles, not albums with a few good songs and a bunch of boring filler songs. The industry said no because printing CD’s was too expensive for the low price point of singles. Well now the option exists and consumers are eating it up.

Radio is going to have to change too. People want variety and yet radio still plays the same 5 songs over and over again for months before adding new songs to the playlist. The radio industry assumed their business model was better because satellite radio didn’t catch on as fast as predicted. But services like Pandora have proven that people do in fact want personalized variety.

Consumers want a say in what they get. You don’t see people lining up at grocery stores and saying, “give me whatever food you want me to eat”. No, people are far too selective for that. People love to exercise their free will. It’s the only real power anyone has. Radio is going to change or die and may be too late for them to choose. Thank you Pandora, radio’s sweet angel of death.

Financing

Some of you are probably thinking of starting your own label to carry your band. That’s all good and fine but make sure you seek the right resources before doing it. When you start your own label you should be treating it as a separate business. You need to keep an entrepreneurs mindset. Ask yourself, would anybody pay for this and if so who and how do I reach them?

With any new business comes cost. This is something most peole need assistance with. Check out the following resources.

http://www.opportunityfinance.net/

http://www.microenterpriseworks.org/

http://www.cdfi.org/

http://cfed.org/

http://www.cdvca.org/

http://www.ncif.org/

http://www.natfed.org/i4a/pages/index.cfm?pageid=1

http://www.eda.gov/

http://www.firstnations.org/default2.asp?id=69

http://www.oweesta.org/

My favorite of the group is opportunityfinance.net. This site provides a lot of resources for entrepreneur training as well as finance resources. Most of these sites though offer great financing options if you fall under the right type of business categories.  For example, firstnations.org and oweesta.org provide assistance to business on native american reservations and owned by native Americans. There are very specific guidelines that have to be met in order to receive assistance.

Microenterprisenetworks.org is another great site for entrepreneurial resources even outside of finance.

A lot of these sites such as cdvca.org and cfed.org provide assistance to businesses that help develop low income communities. Again, these types of assistance require that very specific guidelines to be met. However, if your business just so happens to meet the guidelines laid out, then these can be invaluable resources for you.

The important thing is that you do your research. Business financing isn’t all that different from seeking a college grant. They offer incentives and special assistance for some of the weirdest things that you’d never expect so get out there and see if anything about your particular situation qualifies you for any help.

Then you have to pitch pitch pitch. Make sure you’ve got your presentation rehearsed and polished. You don’t want all that research to be for nothing. 

Business Plans Part 2

Based on the research used in my previous post, it’s clear that investors want a clear focused source of income. This is not only important for attracting investment partners, it’s also important for success. Spreading yourself too thin and not clearly defining your goals is a recipe for failure. The business plan I am currently writing is for Archetype Studios. It was important from the beginning for me to define how I was going to make money. I had to ask myself what kind of products and or services I will be providing and what are realistic prices to charge. It was then important to figure out who my customer base would be as well as my competition. The status quo does not like new competitors entering the marketplace and taking profits away from them. Strong competitors will use deep pockets to put new threats out of business and it was important for me to find a way to combat their efforts.

The most important parts of a business plan are the financial planning sections. Not only do you need to have realistic financial plans set in place, it’s also important to remember that investors want to know above all things that they will get their money back as well as turn a profit. If you don’t have plan for how your going to accomplish that, not only will investors lose faith in your promises, you most likely won’t be able to make it happen in the first place anyways. Money is one of the world’s most valuable resources and we have and we must be cautious on how we invest it. How you spend is much more important than how much you spend.

You need to not only communicate how you will be spending your startup cost but also how much you expect to make. These figures need to be realistic so do you research. Nothing would be more embarrassing than going to an investor and saying “Oops I actually need more” or “I charge way above industry standard and nobody wants to work with me so the business is failing”.

Good luck to everyone else and remember plan, plan, and execute.

Business Plans

Whether you are an artist looking to distribute your music through your own label, an agent, a manager, or looking to start your own label, it’s important to have business plan. And just so everything is clear and communicable. You need to put it into writing. If you’ve ever seen a show called “Shark Tank”, then you have no doubt witnessed the brilliant and blunt attitudes of my favorite entrepreneurs Kevin O’Leary and Robert Herjavec.

Kevin O’Leary started with nothing and developed software that teaches reading skills to children. As the business grew, O’Leary eliminated the competition by buying them out. He later sold his company to Mattel for about 3.7 billion dollars.

Robert Herjavec made his money by building and selling tech companies. His first company, BRAK Systems, was sold to AT&T for $100.

Both investors look for the same things that all angel investors look for.

Focused Money Source

They want to know where the cash is coming from. It’s important to be specific. If you say your going to make money from “probably here, and sometimes there, and maybe somewhere else also”, then you aren’t going to have much luck attracting investors.

You need to clearly define a concentrated revenue source. The simpler you can keep it, the better. Unforeseen setbacks will complicate your business enough, don’t add to it by having a plan that isn’t well thought out and focused.

Numbers

Do your number make sense? If your claiming a $20,000 a year profit from a small side business, and your not paying yourself. What’s going to happen when it becomes your full time business and you begin paying yourself? Then you don’t have a profitable business.

Are you asking for a $100,000 investment for 25% equity in your company? That means your company is worth $400,000. If it’s not, then your request is unrealistic and you’re not likely to be taken up on that offer.

Your Market

Do you know your market? Do you haven any competitors? If so, do they have the ability to drive you out of business as soon as they begin seeing you as a threat? Did somebody else already have your idea and patent it?

These are all things you need to know BEFORE you try to get your business off the ground. If you haven’t thoroughly researched these ideas why would anybody feel confident investing your company or much less you as a leader?

Conclusion

These are all points both O’Leary and Herjavec bring up repeatedly on “Shark Tank” and it’s important to take the advice of those who have been there before and been successful.

Song Copyright

The copyright is the single most important asset in the music business. Without copyright law, anybody can record and sell the song you wrote without your permission and without paying you on top of it. You don’t want that. You want to eliminate all chances of having to compete with other artists recording the song you wrote in all your infinite creative wisdom. The two most important copyrightable works in the music business are songs and sound recordings.

Song copyrights belong to you if you wrote the song. But you need to register the song with the United States Copyright Office. This is important because it will hold up in court as evidence that you are the rightful owner of the copyright.

Technically once you’ve recorded the song, wither on paper or CD or whatever, you are the copyright owner. However, try using a piece of scribbled notebook paper in court as evidence. Can you prove when you recorded that song at home if somebody else releases it? No you can’t. So the best thing to do is just register your songs and get it over with.

Before you ask me about mailing yourself a sealed notarized copy of the written out music and lyrics or recording and never opening it, let me ask you something your should ask every person who spouts these kinds of theories. Do you really think that has a 100% chance of holding up in court? Not only is it unlikely to hold up, it’s actually more time consuming than registering the song.

In regards to contracts with labels and publishing companies, it’s ok to sign over exclusive rights to your songs for a certain period of time, and for a certain amount of money for that matter, but never ever ever sign over the full copyright. You will lose all future ability to profit off of that song. It’s standard for you to sign over a portion of what’s known as the publishers share, but never sign over any of the songwriters share. The songwriter’s share is 50% of the copyright and the publisher’s share is 50% as well.

In regards to sound recording copyrights, the label will own them. This is the rights to the “masters” you hear everyone talking about in movies about the business. Unless you’re a big artist with a lot of clout you will never own the rights to the master recordings. However, if you are the songwriter as well as the performer, you will be paid separate amounts for both in a traditional contract. In the newer “360 deals” your probably more likely to get a flat overall rate, especially if you sign with an indie label.

I hope this clears up some confusion about song copyrights and how they work into your career. We’ll touch on negotiating the royalties and copyright ownerships in a future post.

Feel free to email me if you have any questions.

Until next time.

Survey

Effective Use Of Social Media

In my meetings with artist’s I am seeing a huge disconnect when it comes to social media. It seems that that everybody knows the importance of social media and everybody thinks they are making the most of it. But very few artists are.

If you don’t read anything else I have to say at least read this.

SPAM is not effective social media marketing.

Don’t look at your Facebook and MySpace pages as a way to get new fans. Look at them as opportunities to build a unique identity for yourself and way to maintain an already existing fan base.

Your social media pages should exist so that you have something to show people when they come looking for you. Don’t use them as tools to track down random strangers by the thousands and attempt to add them as your friends. That tactic is annoying and most importantly it’s not conducive to building a professional image.

Also, don’t destroy good relationships with other artists by using their social media “walls” as a place to paste up your own announcements and images to attract audiences. It’s tacky and is no different than spraying a graffiti image of your band’s logo on another band’s billboard ad.

What you should do

Write an interesting blog

The key word here is interesting. Nobody cares what you had for breakfast until your as famous as Katy Perry. But right now, people do care what your songs are about. Describe what it’s like recording in a studio, going on tour, writing songs about your most personal experiences. Everybody wants to be a rock star so bring them along for the ride so to speak.

Post Self Taken Pictures

I wouldn’t recommend breaking the illusion and posting pictures of you lying around your house in your pajamas. But posting some backstage photos from a show, the studio, or anything else that makes your look like a certified pro is good for business.

That’s all for now. Remember, your building a reputation not destroying one. Keep it up.