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MUSIC BIZ INSIGHT #19 Power Reading for Busy Music Professionals Hope you're hungry! MUSIC BIZ INSIGHT is published for musicians, songwriters, managers, label reps, booking agents, entertainment attorneys, studio owners, music publishers, and all others involved in the music business. Its purpose is to help boost your business, find new markets, make the right connections, develop professionally, work smarter and improve your bottom line. "As a general rule, the most successful people in life are those who have the best information." Benjamin Disraeli Published bi-monthly by Peter Spellman, Director MUSIC BUSINESS SOLUTIONS: Turning Music Business Data into Useful Knowledge. Career and Business-building books, articles, consulting and more. P.O. Box 230266, Astor Station, Boston, MA 02123-0266, USA Phone: 978-887-8041 Email: success@mbsolutions.com Website: www.mbsolutions.com © 1997 - 2003, Peter Spellman, MBS Business Media, www.mbsolutions.com IN THIS ISSUE
Watch for the second issue of MUSIC CAREER JUICE, coming June 15 to all MUSIC BIZ INSIGHT subscribers. EDITORIAL EVERY BUSINESS IS A MUSIC BUSINESS Over the last two years or so I've noticed a peculiar trend: everyone is jumping on the music bandwagon. AT&T now has a music division. So does IBM. Home entertainment retailer Best Buy has started a record label and an "emerging artist" promotional service as well. What's going on? Every business is becoming a music business -- actually an entertainment business. Entertainment is a much-coveted value businesses are seeking to add to their image all over the world. This was highlighted last week when Sting announced that Compaq Computers would now serve as his marketing arm. Sting is an A&M recording artist and A&M was one of those labels folded into Interscope during the Polygram-Universal merger. Well, Sting and his manager Miles Copeland (Stewart's brother) began to see that they could not count on A&M to provide the marketing push they need for Sting's upcoming release. Soooo...Compaq was looking for a high-level artist to work with, Sting needed a new marketing partner, and voila! The traditional music industry is transforming folks. We need to think outside the box of the musical industrial complex and explore fresh possibilites. What businesses might want to partner with you? FEATURE GIVING YOURSELF THE MONEY HUNTING EDGE
Whether you're looking for a small, short-term loan or actively pitching venture capitalists, strong preparation and planning can improve your chances of finding financing. You need to put your small business in the best possible financial light to make a good impression on prospective sources. Take time up front to get yourself ready for this process. Here are 10 things you can do before you seek financing to help your chances of getting that loan or investment you need:
)Get your business plan in shape Review the latest version of your business plan to make sure it tells the story of your company accurately and efficiently. Is it easy for a potential investor to get a handle of your company by skimming the plan? How effectively have you demonstrated that you understand how to market your great product or service and turn a buck doing so? How strong is your executive summary? Do your financials show when and how you will obtain long-term profitability? How honest have you been in your assessments of the market and your competition? Do you have third-party corroboration to back up the key assumptions you're making in your plan? Put your paperwork in order A standard loan application requires specific documents and numbers. You should take some time before going through the loan process to get this information in order. It's always a good idea to schedule a meeting with your CPA or other financial advisor to do this. Among the documents you'll need are:
Be prepared to show how you'll use the money In addition to the previously discussed documents, you may want to include a pro forma that includes projected financial statements for the next 3-5 years. In your pro forma, give a clear description of how you'll use the proceeds and you intend to pay the money back. Be specific. Show how you'll use the money to open up new markets, introduce new products, or other definite business use that will positively impact your bottom line. Vague terms like "need working capital" don't work because they don't give lenders and investors the confidence that their money will be well spent. Try to tailor these presentations to the needs of the funding source. If you're looking for debt financing, you'll want to emphasize your ability to repay the loan. On the other hand, equity investors will want to see the potential for strong rate of return. Examine your ratios You might be tempted to provide optimistic projections in your pro forma financial statements, but that could be a big mistake. Bankers want to see business projections that are in line with industry averages, which they get from the operating ratios published in the Annual Statement Studies from Robert Morris Associates. Those that differ markedly raise an automatic redflag, and immediately put your loan application in jeopardy. Check your credit Many banks now use "credit scoring" to determine whether you qualify for a loan or not. Commonly used for consumer loans, credit scoring uses factors such as credit history to determine whether or not you're a good risk. Even if your bank doesn't rely solely on this method, it will no doubt look at your past payment records to determine your future credit worthiness. There's also a good chance that you will be asked to guarantee any loan personally, so your personal credit history is also important. Be sure to contact the major credit bureaus -- TRW/Experian, CBI Equifax, and Trans Union -- to get a copy of your credit reports to ensure their accuracy and correct any possible mistakes before you start looking for a loan. Incorporate You don't have to be incorporated to find financing, but it can help. Even though other structures are equally appropriate for many businesses, there is a certain cachet to corporate status for lenders and investors. They will likely feel more confident about your business. Incorporation will also make it easier for outside investors to acquire equity in your business in return for their money. Register with Dun & Bradstreet If your business does not yet have a DUNS number, get one. A DUNS number identifies your individual business, and makes it easier for potential investors to look up information about your company (in the form on Dun & Bradstreet credit or information reports). A DUNS number also connotes a level of professionalism and seriousness to lenders and investors. You can get a DUNS number for free by calling Dun & Bradstreet at 800-333-0505. Practice Many small business owners find it useful to conduct a mock interview before speaking with financing sources. This lets them prepare strong, effective answers for any possible questions that might come their way. Remember, you only have one shot at a potential investor, so you need to get it right the first time. Don't make these practice sessions casual. Get help from your CPA, a peer who has recently sought financing, or a banker acquaintance. Make sure they ask questions as tough as those you'll get from a bank. Make your applications impeccable Your financials are probably the most important criteria for helping you get financing, but neatness counts too. Don't forget about the little things that will help you impress money sources and reinforce your image of professionalism. Make forms neat and easy to read, since sloppy reports will do nothing but work against you. Dress in appropriate, conservative business attire for meetings. Do everything possible to demonstrate trustworthiness and show that you're highly capable. Be patient Finding financing, no matter what stage your business is at, is a time consuming and exhausting process. Many small business owners vastly underestimate the time it will take them to find the money they need, and it's not uncommon for businesses to run out of cash during the process. Be sure you factor in time for all the tasks you'll need to execute -- from refining your business plan to weeding through lists of banks, lending institutions, or outside investors.
Need some help putting your plan together? Some business plan templates can be found online at Pan Global and Venture Finance (requires a quick, painless registration; templates viewable in Microsoft Word). Once you've drafted a plan it helps to have someone familar with your industry look it over. This is one of the most helpful services MUSIC BUSINESS SOLUTIONS provides. I will review your business plan, marketing plan or proposal at whatever stage and provide expert feedback. Drop me a line: success@mbsolutions.com GENRE SPOTLIGHT C L A S S I C A L INTRODUCTION The term "classical music" covers a lot of ground, from high medieval plainchant to the most recent symphonic compositions. But from chanting monks to living composers, with music between as different as Bach fugues and Stravinsky ballets, the music has operated on the assumption that such things as beauty, order and some level of complexity are essential to expression. Classical music is in a peculiar place. While computer scientists are working to unleash the cyber future, real-life classical music is stuck forever in reverse, because it is definable only in terms of past values. Of all the "classical" music publicly performed, recorded and broadcast throughout the West, nearly 90 percent was composed before 1900. And some even go so far as to say classical music is "dead". That's nothing new: In the 1960s and '70s, the death of classical music referred to the inability of living symphonic and chamber-music composers to connect with an audience. Orchestras and chamber groups became museums of music written by the moldering dead. In the '80s and '90s, the phrase broadened to indicate the commercialization of classical music through marketing and "cross-over," especially as offered by English critic Norman Lebrecht in his celebrated book of that name. The author of "Who Killed Classical Music?" even goes so far as to offer up a specific crime scene for the murder: Rome. The defendants are Luciano Pavarotti, Jose Carreras and Placido Domingo - a.k.a. the Three Tenors - and the deed took place on that summer night during soccer's 1991 World Cup when they first joined forces under the baton of Zubin Mehta to sing their version of "Opera's Greatest Hits" to a worldwide television audience. Whether or not these richly rewarded tenors bludgeoned the last life out of the music that night is debatable, but if they did, they certainly were not short of accomplices to their crime. In a world where much of the money is still contributed by taxpayers, international music agents creamoff upwards of a US$250 million a year, trying to "fool us with overpaid fakes and under-age fiddlers." The big name agents have become power-brokers in their own right, even though many as much as admit that the only notes they are interested in are the ones that come in bankrolls. Elitism is a term thrown like mud at classical music. The populist right smirks at its high-and-mighty ways, while the multicultural left tut-tuts its White, Western origins. Music composed mostly by dead White males, played by people dressed in ancient formal wear on programs without the slightest regard for pop-culture sensibilities is something for a privileged, moneyed, elderly, all-Anglo few. How in the world can a music so removed from the current hegemony of pop culture - complex where pop is simple, emotionally centered where pop is angry and edgy - have the slightest meaning for everyday listeners? One of the reasons people think Classical music is elite is that, with pop, you don't have to listen very hard. You hear it in the car, in the elevator, and you don't have to listen with both ears. Classical music is elitist only in the sense that, unlike pop, it DOES require attention. THE CLASSICAL MUSIC MARKET Classical music exists in little packets in places like New York and Vienna, among communities of those who care for it the way others care for origami or chess. It's a passion for a few people and a pleasant alternative to pop music for some, while for most it is something heard on occasion on PBS. No matter what they may claim, classical recording companies are in big trouble. Since the early 1980s, they have produced so many compact discs of standard repertoire that few customers are buying any more - unless there's a musical twist. Orchestras have lost their recording contracts, a reality that ground the second half of the Cleveland Orchestra's Wagnerian ``Ring'' cycle to a halt. Only a handful of soloists are busy on major labels. To survive, companies have turned to well-known pop entertainers who can capitalize ``classically'' on their mass appeal, or classical artists who are willing to explore other types of music. Billboard's most recent list of 15 Top Classical Albums reflects the odd situation. In the No. 1 slot is Italian pop-singer-turned- tenor Andrea Bocelli, whose ``Aria - The Opera Album'' has been in this position for over 70 weeks. No. 2 is another Bocelli album, ``Viaggio Italiano,'' a mix of arias and Neapolitan songs. Down the list are recordings by ``various artists'' (orchestras, soloists, chamber ensembles); the three tenors (Carreras, Domingo and Pavarotti); Dutch violinist Andre Rieu, whose watered-down renditions of Viennese waltzes and romantic music must have the Strausses and company revolving beneath their tombstones; and, thank goodness, two adventurous and remarkable artists, cellist Yo-Yo Ma (playing baroque and tango music) and trumpeter Wynton Marsalis. BPI figures show that classics have lost one third of their marketshare in the present decade. Remove crossovers, compilations, cod-opera warblers and other substitutes and real classical sales are probably around a sixth of 1991 levels. To the regular record-buyer, the major labels are starting to look like a lost cause. The energy and ideas in classical recording come mostly from independent labels like Naxos, which has propelled a Bax symphony to the edge of the top 10 and a Walton symphony to the top 20. Owner-operated lables such as BIS in Sweden and Hyperion in Britain are producing epochal cycles of Sibelius and Schubert. Largo in Germany, Harmonium Mundi in France, and Albany Records in the U.S. are venturing where no record company has gone before. Another ray of light is the Internet. In a recent Billboard article ("Internet Offers Hope to Struggling Classical Music Labels, Sept. 18, 1999), it was stated that while classical and jazz account for only 5-6% of total music sales, these genres account for 20-30% of online music sales. Why? Two reasons: the availability of deep catalog and the similar demographics between classical/jazz lovers and Internet users (older, better-educated and higher income consumers). TOP CLASSICAL ARTISTS (based on albums charted in Billboard in 1999) Andrea Bocelli Don Campbell Yo-Yo Ma Placido Domingo Andre Rieu Luciano Pavarotti Cecilia Bartoli Wynton Marsalis (!) Jose Carreras Bryn Terfel TOP CHARTING CLASSICAL LABELS (1999) Universal Classics Sony Classical Atlantic Group Angel Records BMG Classics TOP CHARTING BUDGET CLASSICAL LABELS (U.S. 1999) Laserlight Reference Gold Intersound Direct Source Special products Essex Entertainment CLASSICAL MUSIC WEB HUBS The British & International Music Yearbook - an invaluable source of reference information concerning the Classical Music industry. Clasica: an attractive online guide to classical music performance & recordings. Classical Insites - Attractive revised site from Music Blvd. with many features (including the publication "Fanfare"). Classical Music Links - great jump site with links to historical periods as well. Classical Music on the Web - another great jump site. Classical Net - provides a point-of-entry into a wide array of informational files about classical music - over 4200 files at Classical Net and over 2500 links to other classical music web sites. Happy surfing! CultureFinder - "The online address for the performing arts." WWW Classical Music Resources - annotated links to hundreds of classical music resources - for performers, composers and those who simply enjoy listening. ))))) ILLUMINATING TRIVIA (((((
Did you know that... ...John Fogerty's "The Old Man Down the Road" sounded so much like his Creedence Clearwater Revival hit "Run Through the Jungle" that he was sued for copyright infringement of his own song by CCR's label, Fantasy Records? BIZ SMARTZ : MONEY-SAVING BUSINESS WISDOM
MARKET PLANNING TESTING, TESTING, WHATS YOUR MARKETING IQ? Get out your No. 2 pencils. Or rather, get out your mouse and get online---it's test time. If you ever wanted to measure your marketing know-how, check out the Marketing IQ test from Copernicus , a marketing strategy consulting and research firm in Newton, Massachusetts. If you're like most entrepreneurs who've taken this test, you're probably in the "typical marketer" range, which means you could stand to brush up on marketing basics. One important question: "Businesses today invest more money in finding new customers than in further developing current customers." True or False? True---but more important, why does that matter? "A loyal customer is worth five times more than a new customer," says Kathy Backus, a marketing and public relations consultant and owner of Backus CommuniKations in Mount Pleasant, Michigan. "A lot of companies work so hard at getting more people in the door they lose sight of their current customer base." Here's another: "Every company should strive to hold on to all its customers." True or False? False. "Not every customer is valuable," says Backus. "It can actually cost you more to retain some customers." There are plenty of other valuable nuggets in this test, so check it out for yourself. And act accordingly to step up your Marketing IQ. TO SUBSCRIBE to MUSIC BIZ INSIGHT: send email with the message in the body, "subscribe" to success@mbsolutions.com It's not an autoresponder so feel free to include any other comments, ideas, suggestions, etc. you may have. BLOOM WHERE YOU'RE PLANTED! Quote of the Month-- "Be the change you want to see in the world."
© 1997 - 2003, Peter Spellman, MBS Business Media, www.mbsolutions.com MUSIC BUSINESS SOLUTIONS www.mbsolutions.com 978-887-8041 (Massachusetts, USA) PETER SPELLMAN is founder of MUSIC BUSINESS SOLUTIONS, a business and marketing consultancy to the music industry, and Director of Career Development at Berklee College of Music, Boston. Author of several books for music entrpreneurs, Peter teaches music business courses at Northeastern University and the University of Massachusetts-Lowell. A musician since he was ten, Peter continues to spin riddims in the improvisational collective, Friend Planet and sing Cat Stevens' songs to his kids every night before bed. Rise up!
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