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MUSIC BIZ INSIGHT #30 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 Written and published bimonthly by Peter Spellman, Director of MUSIC BUSINESS SOLUTIONS: Turning Music Business Data into Useful Knowledge. Career-building books, articles, training, consulting and more. P.O. Box 230266, Astor Station, Boston, MA 02123-0266, USA Phone: 888-655-8335 Email: success@mbsolutions.com Web site: http://www.mbsolutions.com © 1997 - 2003, Peter Spellman, MBS Business Media, www.mbsolutions.com Please feel free to redistribute with above credit and copyright notice.
Watch for the 14th issue of MUSIC CAREER JUICE, coming in May to all MUSIC BIZ INSIGHT subscribers! My new book, The Musician's Internet: Online Strategies for Success in the Music Industry is now available at www.mbsolutions.com. "The best how-to book I've ever read on how to get your music to the world...." - Derek Sivers, founder of CDBaby.com THE DINOSAURS BREATHE IN Most of you know by now that EMI is planning to lay off about 1800 people (600 in L.A. alone) and drop 400 music acts. The company's music division is hemorrhaging cash and profits are dropping. What I thought was most telling were the comments of Alain Levy, chief executive of EMI's record division. This is what he had to say, as reported by the LA Times: "The old industry system is doomed. It got too fat," Levy said in an interview from London. "Music companies have got to change the way they do business. This is not about guaranteed executive bonuses or first-class plane flights anymore. Nor should the focus simply be about market share or quarterly reports. It's about long-term artist development. It's about profits." Look at those last two sentences: "It's about long-term artist development. It's about profits." Have you ever seen a more stark oxymoron in your life? It gives the old saw, "talking out of both sides of your mouth" a whole new meaning. This is good ol'corporate-speak at its best. First of all, there's no way in hell that a corporate label can do "long term artist development" when the whole kit and kaboodle is controlled by shareholders (read, investment banks) antsy for quarterly profits. Quarterly; that's three months folks. That's about as "long-term" as it gets. The final sentence in the LA Times article sums it up: "Shares of EMI rose 2.9% in London trading Wednesday." Isn't that what it's really all about? McRADIO Clear Channel Communications, Inc., operators of some 1,200 U.S. radio stations, is using technology to mass-customize its brand, reports Anna Wilde Mathews in The Wall Street Journal. That brand is called KISS, as its chain of 47 stations are known in local markets across America. DJs digitize "local" KISS shows from remote studios, using demographically correct play lists created by brand managers and dropping in local references to create a hometown flavor. Clear Channel's CEO, Randy Michaels, offers the McDonald's metaphor: "You may in some parts of the country get chicken, but the big Mac is the Big Mac." The article seems to suggest that what Clear Channel is serving actually is perhaps a few fries short of a Happy Meal. For the most part, listeners in local markets apparently are not aware that the DJs are not local, and the confusion is actively encouraged -- or at least so it seems. DJ's reportedly talk about attending local events they didn't attend, for example. Hoss Grigg, who runs a KISS station in Boise, Idaho, went as far as setting up fake voicemail boxes for his virtual DJs. When that didn't work, he simply took the phone off the hook. Teens who showed up at a Dayton, Ohio station because it sounded like The Backstreet Boys were inside doing an interview "were politely told that the band wasn't available and given promotional items." That the band actually did the interview from L.A. apparently was not disclosed. Clear Channel also seems to have gotten into some trouble in Florida for allegedly "portraying national call-in contests to listeners as local." A fine was paid and the company has since tightened its promotional policies. And, ironically, not a single one of Clear Channel's KISS stations actually has the call letters KISS -- it belongs to rival Cox Radio's KISS-FM in San Antonio, which happens to be Clear Channel's corporate hometown(!). Clear Channel's Randy Michaels denies any deception: "I don't think it's at all wrong or deceptive to put together terrific programs that reflect local communities and sometimes use talent who may physically be somewhere else," he says, saying that change is "inevitable," adding "all we can do it exploit it." EPHEMERAL RADIO Believe it or not, some online radio stations are now drawing audiences as big as some "modest-size offline broadcasters," reports Bob Tedeschi in The New York Times. Richard Branson's RadioFreeVirgin.com "attracts about 20,000 listeners during peak times of the day and employs seven people," for instance. Kurt Hanson, a consultant, says Web radio "is at the stage where FM was in 1970." Could be big. Trouble is, the medium faces all kinds of obstacles that make making money really tough right now. For one, an online station "has pay for additional bandwidth, or network capacity, every time it streams music to another listener." Bandwidth costs are falling, "but they have to go down by leaps and bounds before this starts making commercial sense," says Peter Newman of King.org, the online sister of the Seattle classical station, KING-FM. For another -- until recently, anyway -- stations also had to pay a "300 percent premium to actors in radio commercials also played on the Internet." A new technology solved that problem. And now, Internet radio executives are waiting to learn how much they will have to pay to keep playing music on the Web. The US Copyright Office has recently proposed royalty rates for the webcasting of music and it don't look good. Royalties -- could be a make or break moment for Webcasters. Of course, ultimately, the issue is whether advertisers will buy Web time. At the moment, the audiences are just too small for the CPM crowd. However, a breakthrough, perhaps, for RadioFreeVirgin.com, which started running its first ads last week. General Manager Zack Zalon is bullish: "This is not the kind of business that requires $40 million in cash to make it work...You have to have some faith, and some patience, but it's going to work." (Mac compatibility would help, too). For ways you can help keep independent Internet radio alive, read the statement on webcasting at The Musicians Lobby (http://www.musicianslobby.com/webcasting.htm) COPYCAT CULTURE? "The non-renewable resource of cultural expression is being strip-mined, "says Robert Thompson of Syracuse University in a USA Today article by Anita Manning. The article observes: "Popular culture is rife with knockoffs of original music, television and art. The parade of 'reality' and quiz-show clones, movie sequels, retro-worship in everything from cars to fashion prompts a simple question: "Are there no original thoughts in America?" Thompson largely pegs America's "copycat culture" to the media explosion -- basically starting with the advent of cable and then accelerated with the rise of the Internet. He says America's era of "cultural cannibalism" began in the 80s, although he's careful to acknowledge that new ideas are still happening: "In some areas, anything to do with biotechnology and genetics for instance, we're increasing our information faster than ever, but it's also being absorbed by so many entities, the appetite becomes difficult to keep feeding." That's fine for biotechnology, but how about the entertainment business, for example? About that, Matthew Felling of the Center for Media and Public Affairs comments: "People are not trying new things; they're going for the safe, lucrative idea and putting muscle behind resuscitating dusty concepts rather than reaching out." However, he says, the resulting vacuum is indeed making room for "good, new ideas" via independent films and music. Concurs Thompson (more or less): "The inventory of new ideas in some areas is low, yet more and more people are making their living putting new ideas out there." Originate never imitate. Creativity ALWAYS stands out. GOT UNS0LD CDs LYING AROUND?... FREE TAX TRIMMER TOOLKIT CAN HELP Businesses can receive a free Tax Trimmer Toolkit that shows how to transform an everyday problem into a substantial tax deduction.Ê The problem is non moving inventory, everything from returns and discontinued models to canceled orders, buybacks, and slow sellers.Ê By donating that stagnant merchandise to charity, a business can earn a federal income tax deduction, which in some cases can be as much as twice cost.Ê This Tax Trimmer Toolkit guides a business from how to spot deductible inventory, to a step-by-step breakdown of the donation process.Ê One of the tools in the kit is a formula that can be used to project potential tax savings.Ê For a free kit, call the nonprofit National Association for the Exchange of Industrial Resources:Ê 1-800-562-0955 or e-mail donor@naeir.org. ILLUMINATING TRIVIA Did you know?... ...that from 1983-85 Neil Young deliberately withheld his hit material from Geffen Records until his contract ran out as retribution toward David Geffen for suing Young for not delivering "commercial" albums. ))) FEATURE: GETTING READY TO DO BUSINESS Excerpted from the book, The Self-Promoting Musician: Strategies for Independent Music Success by Peter Spellman (Berklee Press). Now available at www.mbsolutions.com Today's economy has little room for those who cannot read, write, compute, frame and solve problems, use technology, manage resources, work in teams, and continue to learn on the job. While it may be clear you need good business and management chops in the new music business, it's sometimes hard to know how to get them. Plus, business-related questions come fast and furious to the start-up: Do I trademark my band or business name now or wait? Do I need equipment insurance and, if so, where can I find some fair deals? What about taxes? Do I have to pay quarterly or yearly as a self-employed musician? Do I need a special license to perform the work of a booking agent or artist manager? These and other questions are part and parcel of "doing business." And a lot of business success lies in having the right and timely answers to those questions. Fortunately, it's a great climate for those needing business information. Today, career- and business-planning information is hyperabundant and readily available, if you know where to look. The "small office, home office" (SOHO) trend has hatched an entire industry focused on entrepreneurs and what they need. Books, magazines, software, websites cable tv and radio shows designed for micro-businesses are popping up everywhere But besides information you'll also need guidelines for the ever-growing variety of business demands that you will face: What's the best office set up for my needs?, How do I hire help and where do I find it?, What's the most effective use of my time? How much should I spend on promoting my music service or product? Where can I find the answers to these questions without having to enroll in a MBA program? Check out the Small Business Administration. GETTING TO KNOW THE SBA The Small Business Administration, or SBA, is one of those quiet government programs in which pearls lie hidden. This is about the best return on your taxes you'll ever get, so listen up. The United States Small Business Administration (SBA) was created by Congress in 1953 to encourage the formation of new enterprises and to nurture their growth. It exists to serve small businesses by providing information and financial backing and speaking on their behalf in the corridors of Capitol Hill. The SBA's mandate is very broad. The agency's definition of "small business" - service companies and retailers with annual revenues of $3.5 million or less, manufacturers with fewer than 500 employees, wholesalers employing fewer than 100 workers - embraces over 98 percent of the companies in the U.S. The SBA's staff is 4,000 nationwide, organized in 110 offices. So taking advantage of the SBA requires learning what it's equipped to offer, and then learning how to tap into its abundant resources. SBDCs (SMALL BUSINESS DEVELOPMENT CENTERS) When I was starting my consulting company (Music Business Solutions) seven years ago, I contacted an SBA program called the Small Business Development Center (SBDC) in Salem, Massachusetts. SBDCs operate out of about 650 colleges across the country providing management training and other start-up assistance to emerging businesses. I was matched with a small business adviser who reviewed my business plan, provided me with my first computer training and offered suggestions and ideas galore for making Music Business Solutions a success. Though untutored in the music business my adviser was very experienced in the ways of general business management and marketing. Together we forged a plan to launch and grow my business. In addition, he demystified the computer for me and introduced me to a whole new world of software resources I never knew existed. To find the SBDC nearest you contact your local SBA office. You can find their number in the U.S. Government section of your phone book. You can also find a list of all SBDCs in the U.S. at: http://www.sba.gov/gopher/Local-Information/Small-Business-Development-Centers/ S.C.O.R.E. (THE SERVICE CORPS OF RETIRED EXECUTIVES) Unfortunately, if you don't live near a college with an SBDC, you generally won't be able to take advantage of their services. That's where S.C.O.R.E comes in. S.C.O.R.E. stands for the Service Corps of Retired Executives and complements the work of SBDCs. In fact, many S.C.O.R.E. representatives work out of SBDCs. Some 12,400 volunteers are available to consult without charge on topics ranging from writing a business plan to exporting your product. "Their advice is geared to early-stage businesses," says Mark Quinn, acting district SBA director in San Francisco. "Lots of people seeking advice are individual proprietorships - very, very small." Studies show that "managerial deficiencies cause 9 out of 10 business failures." Through in-depth counseling, S.C.O.R.E. volunteers help business owners and managers identify basic management problems, determine the causes and become better managers. S.C.O.R.E. also offers "pre-business" workshops nationwide to current and prospective small business entrepreneurs, covering a vast range of pertinent topics. Almost any small independent business not dominant in its field can get help from S.C.O.R.E. The approach is confidential and personal. Clients don't even need to have a business. Consultation and counseling before a business start-up is an important part of the service too. Some will even provide training in computer programs and bookkeeping, as well as some much-needed hand-holding through the process of writing a formal business plan. For those serious about growing their business, this'll be the best return on your taxes you'll ever get. And you can now even get counseling via email. To locate the S.C.O.R.E. office nearest you call (202) 205-6762 or see the S.C.O.R.E. website at http://www.score.org/. SBIs (SMALL BUSINESS INSTITUTES) Another relatively unknown SBA program is the Small Business Institute (SBI) which gives small business owners an opportunity to receive intensive management counseling from qualified college-level business students working under expert faculty guidance. Students meet frequently over the course of the full university term (or more) with the small business owner to identify and solve specific management problems. Business clients get a detailed report on the steps they need to take to improve their operation. While this resource can end up being heavy on the theoretical and light on the practical, it's still free feedback from people who understand the logistics of doing business in the 90's. All small business owners/managers are eligible to participate. SBI often overlaps with both the SCORE and SBDC programs. For additional information about the nearest SBI services contact your local SBA office and ask for the business development officer. You can also obtain SBI information online at SBA PUBLICATIONS Small businesses can benefit from the SBA's numerous publications and video tapes, which are produced by local offices as well as through the Washington headquarters. Though they are sometimes elementary, the publications do cover a vast array of topics, from the ABCs of borrowing or leasing office equipment to selling by mail-order and computer security. Many of these pamphlets are free. Others carry charges ranging from 50 cents to a few dollars. Unfortunately, you often have to work to get the pamphlet mailed to you. D. LaVerne Parket, Vice President of Software Integration Services in New York City, says it has taken her as many as three attempts to secure a single SBA publication. The agency operates a toll-free Small Business Administration Answering Desk in Washington, D.C. (800) 827-5722, but dialing it can sometimes land you in a voice mail jungle. Calling the SBA office in your region is probably a better bet. Again check your phonebook under U.S. Government. What good are SBA programs? It depends on what you need, what you already know, and how hard you're willing to work. Some business people come expecting the SBA to help them out of a deep hole. But much of the SBA's best help is for people with little or no business experience. Musicians and music-related businesses requiring guidelines on starting and developing a successful enterprise should make the SBA their first step on the business trail. It won't necessarily provide you with music industry insights, but, insofar as you're a business it could help you immensely. Some Select SBA Publications
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"If the milk industry can make their product seem sexy and increase consumer demand, there must be hope for music." - Gary Arnold, Merchandising Manager/Best Buy ))) BIZ SMARTZ DETERMINING HOW MUCH TO CHARGE FOR A SONG When the call comes in from a TV producer, film director or music supervisor, and you are trying to decide how much to charge for the use of one song, you need to consider a number of factors, including: How the song is used (vocal performance by an actor on camera, instrumental background, vocal background, visual performance by a band in the background of a scene, theme, under the opening and/or closing credits).
These are the kinds of questions negotiators ask when the call comes in. No fees are "written in stone". The parties go back and forth in a sort of see-saw until an agreement is reached. Such song negotiations occur hundreds of times every day around the world. Hey, no one said this business was gonna be easy! If this is an area you plan on exploring, then be sure to join The Film Music Network for further guidance and opportunities. 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. About the PublisherPETER SPELLMAN is Director of MUSIC BUSINESS SOLUTIONS, a business and marketing consultancy to the music industry, and Director of Career Development at Berklee College of Music, Boston. He is the author of several books for music entrepreneurs and teaches music industry courses at Northeastern University (Boston) 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. BLOOM WHERE YOU'RE PLANTED! Quote of the Month-- "The Industrial Revolution put us to sleep in the name of the efficiencies of functional specialization. It forced us to master very narrow tasks and to blindly follow standard procedures. In many of us, it diminished the capacity to innovate. It's time to reclaim our most creative, most fulfilling, most human functions." -- Harry Dent, "Job Shock" Written and published bimonthly by Peter Spellman, Director of MUSIC BUSINESS SOLUTIONS: Turning Music Business Data into Useful Knowledge. Career-building books, articles, training, consulting and more. P.O. Box 230266, Astor Station, Boston, MA 02123-0266, USA Phone: 888-655-8335 Email: success@mbsolutions.com Web site: http://www.mbsolutions.com © 1997 - 2003, Peter Spellman, MBS Business Media, www.mbsolutions.com Please feel free to redistribute with above credit and copyright notice.
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