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| CHAPTER |
Turning music into a business | 1 |
The question I am asked more than any other about working in the music industry is, āhow do I start?ā However, I think they often mean, āhow can I short-cut the years youāve put into learning your craft, so that I can do it all myself right now?ā A-ha, wouldnāt that be great! However, to be good at anything in life you have to put the effort in. Knowledge is a great bedfellow, it will enable you to make balanced decisions in your life ā so keep reading and talking, and donāt ever think that you can stop learning.
The fact that you now have a copy of this book already speaks volumes about who you are and your aspirations. There is no easy fix to your dilemma, so start by taking a brief look at an overview of the industry. Itās a bit like a route map to help you understand the direction you need to go in at any one time. The route map fundamentals stay fairly constant, but the economic and strategic pressures bearing down on a business and its strategy for development are constantly being reviewed. Change is occurring so rapidly in the music industry that it certainly keeps learning fun. Of course, if it were as simple as learning to go from A to B, we would have all cracked the industry a long time ago. It is a combination of learning the operational elements that affect each step and then how to create a sustainable business. I will endeavor to share as much with you as possible.
In the Introduction, I referred to Mike Collier. He was a man unfazed by change as he knew the fundamentals: a great song lights up the world and with a good business head youāll find out how to maximize its income stream irrespective of the technological changes in delivery systems or consumer buying behavior.
Figure 1.1 is provided courtesy of the performing right society PRS for Music and provides a really great snapshot of the key companies involved in collecting and creating money for rights owners (those who own the music and the recording). The rights owners are at the core of the industry: songwriters, composers, music publishers, artists and labels. The entire industry revolves around the management of these rights.
Many organizations can assist you in your quest for knowledge, helping you to gain a better understanding of the industry and giving you access to its network. These organizations will be introduced as we go through the book. Here are two that you should consider joining sooner rather than later:
ā¢ The Music Publishers Association ā (MPA) www.mpaonline.org.uk (in the USA: www.mpa.org). The MPA offers training and assistance by way of seminars, website information and networking sessions for music publishers. Donāt worry if youāre not in the UK; each territory has its equivalent association, so ask your own royalty collection society and they will point you in the right direction.
FIGURE 1.1
The music universe in 2010.
(Courtesy of PRS for Music.)
ā¢ The Music Managers Forum ā (MMF) www.themmf.net (in the USA: www.mmfus.com). The MMF offers training and assistance in the UK. They cover all aspects that an artist manager will need to know. Importantly, you will be able to network with managers who will be looking to build relationships with music publishers. Lawyers are regular attendees at networking sessions and building relationships with them will broaden your access to the industry in general. Again, every territory will have its equivalent forum.
To understand how best to explore the future, it is essential, especially in music publishing, to understand the operational elements of the industry as they are today. Although the focus of this book is on music publishing, I will elucidate upon the overall structure of the industry to explain some of the many and varied income streams. Outside the UK, currently Billboard Magazine gives an essential insight into the USA market and a brief overview of European and other markets. FMQB covers radio and music news in the USA.1
Music publishing can be confusing, but when broken down into bite-sized chunks it is a fascinating and very rewarding sector of the music industry. Consequently, there are many individual segments of music publishing that can lead to employment. In addition, you have the opportunity to build your own catalogue and to start up your own business.
WHAT IS MUSIC PUBLISHING?
Berklee Music would say that itās about āexploring the five functions of a music publisher ā acquisition, exploitation, administration, collection and protectionā.2
EMI Music would say: āMusic publishing is the business of acquiring, protecting, administering and exploiting the ārightsā in musical compositionsā.3
Both of the above are true, but to me it is more than that. Music publishing is not just a job of work, for me it is about hearing a song and seeing how it can live and breathe in many different ways. It is about taking care of your primary assets, which are the song and the songwriter, building a strong relationship with the songwriter and using your best professional endeavors to assist in their career development, whilst creating exciting income streams that allow for a strong company and a happy writer. Itās also about integrity!
Because music publishing has, for many companies, become more of a strategic banking operation it has lost much of what music publishers were great at doing, being innovative and passionate. I remember clearly when accountants and lawyers started to take key roles in the creative industries, to the exclusion of ācreativeā music publishing employees. Around 1990 we lost a huge number of great music publishers from within major publishing companies. Alan Jacobs at EMI was one such individual, leaving those who remained with the impossible task of managing burgeoning catalogues through mergers and acquisitions.
Itās interesting now, and my good friend Hawk Wolinski (Grammy-nominated writer, composer of āAināt Nobodyā, who in April 2010 received an award for song of the year, covered by Pit Bull using a sample of āStreet Playerā) agrees with me on this when he says, āItās all about money, greed can kill anything ā¦ but this is a new era for the independent, for creativity for passion and great businessā.
As a music publisher it is your duty to develop and grow both the skills of the writer (and they could be described as writer/artists, writer/producers, writer/DJs, lyricists) and your income streams, and in doing so build a viable, profitable business for yourself, or those for whom you work. In contract terms this is described simply as a publisher using their ābest endeavorsā, a phrase of no commitment. I remember the days when Famous Music would commit to a guaranteed number of film synchronizations a year. OK, so they were Paramount Filmās publishing division, but Alan Melina was passionate and committed to activating titles.
Creative exploitation (this is a positive phrase) is nothing new; it has always been the ethos of independent publishers. This is not to say that major publishers do not hold true to these values, but their focus is too often on the bottom line first (i.e. their profitability), and creative catalogue development comes second. I am not saying that the bottom line is not supremely important (I am a business owner, and of course it is), but being a creative music publisher will ensure strong and diverse income streams and ultimately a good bottom line will develop. For me, nothing would be worse than if my day were devoid of creativity.
By way of example, the recent purchase of EMI by Guy Hands (Terra Firma4) has resulted in a catastrophic number of creative managers leaving or losing their jobs. EMIās artists include, or have included, Joss Stone, Lily Allen, Coldplay, Robbie Williams and The Chemical Brothers.
At the point of purchase EMIās shares were worth 265 pence each. EMIās issued share capital stood at Ā£2.4 billion, and EMIās shares climbed by 3.8% to 263.75 pence in May 2007. The board of EMI agreed to be bought by Terra Firma on 21 May. EMI was one of the worldās big four record companies. In May 2007, it said that it had made a Ā£260 million loss in its latest financial year. This has got considerably worse; the record label lost a staggering Ā£1.56 billion in 2009, leaving it in desperate need of a cash injection to prevent Citigroup from taking control of the business.
EMI lost sight of music being about passion, commitment, fun and hard work and, yes, the bottom line. If you remove the passion from a creative business what do you have left? Your assets are the A&R staff, the songwriters, the artists, and the goodwill and commitment of your staff and their talent, and all those associated with them. If artists walk out or become difficult, or their key marketing or A&R link person is removed overnight it will unsettle them. The artists and A&R staff create the copyrights on which labels and music publishers build their business. Intellectual property (IP) management successfully markets and derives income from such rights for the benefit of the creators and the company.
How much of EMIās current turnover will have come from new signings and new income stream development, and how much from their existing asset base?
When Guy first bought EMI I made some notes as part of a lecture and wrote the following possible scenarios about how the company might progress.
ā¢ Should EMIās income start to decline, EMI may start to purchase catalogues (IP) with strong income streams to assist in developing their turnover and market share but at the same time cutting overheads (staff).
ā¢ EMI will make it a policy to strengthen the work that EMI Records and EMI Music do together.
ā¢ A strategic joint A&R team will be set up, tying EMI Records and EMI Music together to make such decisions.
ā¢ They may try to capture and develop talent at an earlier stage (as A&R used to be), costing less upfront and only going to market when a true fan base has been monetized.
ā¢ Or they may sign market-ready material: the downside is you have to pay more for it, but there is less risk as it will come with some proof of concept, something tangible, i.e. a fan base. Market-ready material may be considered in the form of established brand names or heritage acts, such as were signed to Sanctuary Music. Heritage acts have an existing fan base, lower risk but lower rewards, and potentially much higher synchronization income.
ā¢ If income fails to develop then further funding will be sought.
ā¢ EMI will be sold to the first available buyer once the economic recession is over and money is more readily available and a better price offered.
ā¢ They may build strategic relationships with the media industry to lead from the front and not to follow, as the industry has done to date.
ā¢ They may try to break into new markets, with India being high on the list.
ā¢ They will obtain greater income from their existing asset base (most likely from taking advantage of new strategic media relationships, as above).
ā¢ The record label may be sold or broken into smaller pieces to keep the publishing company.
ā¢ They may try to secure new funding and aggressively purchase music publishing catalogues. Everyone knows that publishing catalogues are bankable deals, whereas labels are a liability!
ā¢ Investment in creating new income streams may be achieved by hiring key creative staff in synchronization fields. They may generally be faster and more spontaneous in agreeing deals. Majors have a reputation for being too slow and therefore losing out on too many opportunities.
ā¢ Worse possible scenario ā they sell the publishing company to clear debts and prop up the label. On paper it might work but there would be little left.
Each possible scenario comes with a balance of risk and reward. This could be described as the upside and the downside to each decision. Scenario planning is all about āwhat ifā, a war-gaming strategy used by the military and an effective business tool to broaden and deepen oneās analysis of each strategic option.
Consider when you next need to ma...
