Music Business Strategy Step #2 – Look Before You Leap

Last time, we discussed the necessity and importance of musicians and songwriters developing a business plan.  As I researched that offering, I was intrigued by the insights of Peter Spellman of Berklee College.  He is as passionate about business as he is about music. “I like to think of one's business plan as a ‘vision/mission,’" he says in a recent post to his blog, Music Business Solutions.  “It starts with vision. Before your first gig you envisioned yourself playing it. Remember? Vision precedes mission and fuels it with the necessary energy to go the distance. Mission implements vision and provides the vehicle that moves you towards your goal. Together they're unstoppable!”

Photo courtesy of: Emyscollection.com

Well it turns out that Mr. Spellman is right in step with the new direction that successful corporate leaders are taking.  Fortune 500 companies have embraced both Vision and Mission Statements as the inspirational words chosen by successful leaders to clearly convey the direction of their organizations. Both allow a person to powerfully communicate his intentions and motivate others to share a common vision. 

As a music entrepreneur, having the necessary tools to convey your vision for your music, and proclaim the mission of your musical enterprise is essential to the success of both.   And as Mr. Spellman, so aptly put it, a business plan is the most efficient tool for the job.  And why is that?  Because the process of developing a business plan forces you to think creatively, pinpoint the strengths and weaknesses of your strategies and ideas, identify any problems, find opportunities you may have missed, evaluate and set your priorities, get realistic about your budget and make necessary changes in your game plan before making critical mistakes that can derail the whole project.

Ultimately, slowing down to create a definitive business plan will only accelerate your success by making you look at things with a more discerning eye, while creating a document that will make potential investors look at you with similar discernment. 

On a personal note, I realized that I needed to practice what I’ve been preaching, so I have been developing my own business plan for my burgeoning music enterprise.  And as Mr. Spellman predicted, I discovered holes in my budget, forcing me to find those opportunities that I had overlooked and create a more realistic financial strategy. 

Bottom line, a business plan forces you to look before you leap.

A Business Plan - Step #1 In A Successful Music Business Strategy

As more musicians, artists and songwriters are navigating the music industry landscape as “independents,” it has become important for them to think of themselves not simply as artists, but as entrepreneurs and industry professionals. To be successful as independents, they have to think like the “majors” and institute strategic action plans to ensure that their creative endeavors will become successful ones.

Music entrepreneurs need to think smarter to achieve their goals.  They will need to research the industry, learn its nuances and strategize how they will be able to rise above the thousands of other music entrepreneurs seeking that same slot on Billboard, that same placement in “Grey’s Anatomy” or a monetized featured spot on YouTube.    

Image: www.musiclessonsresource.com

One approach to initiating that strategy is to formulate a business plan. According to Peter Spellman, Director of Career Development at Berklee College of Music, a business plan is “a map to the fulfillment of your goals. Whether you're a band, soloist, production house or some other business, a plan can turn foggy notions into operational strategies, hunches into actions, dreams into reality.”

Mr. Spellman, who is a musician himself and drummer for the band Friend Planet, is familiar with the struggles of the besieged musician, and is dedicated to helping musicians get a handle on the business side of the music business.  He has written a number of books, including “The Musician's Internet: Online Strategies for Success in the Music Industry,” “The Self-Promoting Musician: Strategies for Independent Music Success” and a number of other music business develop journals.

Image: www.berkleepress.com

His blog, Music Business Solutions, outlines techniques for writing business plans that meet the needs of music business professionals.   He emphasizes the need “to have a grasp of … record company structures, music publishing, recording contracts, distribution and music media, and how all of these work together to bring music to people.” In other words, do your research and learn all aspects of your business.   Next, he suggests that you find your “niche.” What sets you, your music or your company apart from the competition?  Why would an investor, sponsor or benefactor choose you and not the other guy?  According to Spellman, “The answers to these questions will help you ‘position’ yourself to most effectively promote what you're selling.”

Noor Shawwa, who taught business strategy at Concordia University in Montreal before creating a program for aspiring entrepreneurs at Bayt.com in Dubai, tries to simplify his approach in his blog, Expert Enough.

“A business plan has three essential building blocks,” he says. “There is the analysis (market, industry, competition), action plan (people, operations, sales & marketing), and projections (traction & financials). You and your investors will want to have a balanced coverage of all these parts to ensure that your business does well.”

He agrees with Spellman on the importance of research. “The more you understand your customers, business, and competitors, the better your success chances are,” he says. “Make it super clear who your target customers are… know how your industry works… and know how you stack up against your competitors in the eyes of the customer - differentiate yourself.”

Financial projections are a key component in any business plan, and both experts emphasize an honest and realistic assessment of financial projections, although Shawwa adds “make smart projections. Whatever you do, don’t make top-down projections.  Instead, find out how many potential customers out there are relevant to you, and then incorporate customer build-up into your plan.”

Kevin English of Music Think Tank added an item particularly noteworthy when discussing the music business – marketing.  He advises, “Take your time on this section, because these programs will make or break your release. Marketing is the act of raising awareness. If no one is aware, no one will buy. That being said, the majority of your total budget should be spent on a variety of marketing tactics that make you more visible to radio, press, live venues, retail outlets and on the internet.”

Take a moment to learn more about business plans, and how to utilize them in your ultimate business strategy.

Resources:

http://www.mbsolutions.com/articles/writing_music_business_plan.html

 


http://expertenough.com/2915/business-plan-tips

http://www.musicthinktank.com/mtt-open/2009/7/8/how-to-write-a-music-business-plan.html

http://www.growthink.com/businessplan/help-center/music-industry-business-plan#

http://www.bplans.com/music_recording_producer_business_plan/executive_summary_fc.php

Music Licensing and Music Licenses

This blog references the term, music licensing, quite a bit.  Generally, when we talk about licensing, we are referring to licensing music for film and television, or “synch” licenses.  However, in nearly every aspect of music use, there is a license involved.  Licenses are required to sell, broadcast and play live music.  Confusion arises when songwriters, artists, broadcasters and even club owners don’t know if they are properly licensed in their area of music involvement.

Here are some of the most basic licenses needed:

Mechanical Licenses

Performance Licenses

Digital Licenses

Synchronization Licenses

Master Use Licenses

Mechanical Licenses are required when a song is recorded and sold, either digitally or physically.  These ensure that the songwriters and publishers are paid when a recording is sold. The Harry Fox Agency (HFA) is the largest administrator of mechanical rights in the U.S, handling over 15.2 million licenses for nearly 36,000 publishers.

Mechanical fees shared between songwriters and publishers are paid at a rate of 9.1¢ per song and 24¢ for ringtones.  Fees for streamed uses are still negotiated individually with each service. Without mechanical licenses in place, it is illegal to release a CD or digital recording.

Performance Licenses grant the rights to publicly perform a musical composition. These licenses include live performances and broadcast via a sound system radio or TV.  These rights administered via performing rights organizations, such as BMI (Broadcast Music, Inc), ASCAP (American Society of Composers, Authors and Publishers), or SESAC.

People incorrectly assume that it is the responsibility of musicians and entertainers to obtain performance licenses.  However, it is the business owner who must obtain the license. Just like insurance and other business licenses, paying music license fees is simply another cost of doing business. Not properly licensing an establishment could be quite costly as damages can range from a minimum of $750 to a maximum of $150,000 per song played!

Fortunately, the licensing fee is determined by the size of the establishment, and the manner in which the music is performed, i.e., live, jukebox, videofeed, etc. Concert rates are based on the seating capacity, college and university rates are based upon the number of full time students and retail store rates depend upon square footage, etc.

Radio stations and television networks usually apply for blanket licenses that allow them to publically perform any song that the PRO’s administrate.  The fees they pay are based on the station's listener numbers and ad rates.

Digital Licenses are for Internet websites, and mobile applications. Companies that stream recorded music digitally—such as Internet radio services and webcasters must have licenses to digitally transmit music to listeners. SoundExchange administers these types of licenses for artists and labels. The PRO’s have special digital rates for publishers and songwriters.  The rates are much lower than the terrestrial broadcast rates. BMI has even created special “Live365” blanket licenses for “microcasters” and “minicasters.” Additionally, HFA licenses interactive streams for one cent (.01¢) per stream via Songfile.

Synchronization or Synch Licenses allow a song to be synchronized with pictures, and is the type of license required to use a song in a film or on television.  A Master Use license is required to use a recording in a film. These two licenses are required when a record is used, the Synch license to allow the use of the copyright and the Master use license to use the actual recording.  

Even though each of these documents is called a license, each has a specific purpose. Only the correct license can give you the protection you need, and grant the permissions you seek.  These licenses also make sure that each entity involved in a piece of music, i.e., songwriter, artist, publisher or label, receives compensation for the work that they assisted in creating.

Music Submission Sites

I recently read a very long LinkedIn group thread about the pros and cons of music submission sites.  Most of the posts were against the sites.  Some posters cited glowing testimonials, to be forcefully rebutted by someone with a completely different experience.  So, should musicians use these sites, or avoid them like the plague? 

I think that answer is different for each artist, songwriter and musician.  Additionally, many of these music submission sites have valuable access to placement opportunities, so to determine if it is the right choice for you, I’d recommend that you ask a few questions and base your decision on how the answer affects you and your objectives.

Do they charge a membership fee?

Do they charge a submission fee?

Do they allow you to submit your songs in answer to an existing opportunity, or require that you submit blindly and promise to find an opportunity?

Are they specific about music needed, or simply ask that you submit?

Do they promise to critique the submitted music? 

Do they give you a time frame to receive a response?

Do you know anyone who has used the service?

Were they satisfied with the experience?

I have a personal aversion to paying for opportunities, so that would be a major factor in my choice of which submission site to use.  I don’t mind sharing a percentage of earnings from an actual placement, so a service that utilized this type of collection arrangement would get a second look from me.  I have subscribed to lead sheets, and a site that charges a fee for access to those leads is similar.  However, it feels like double-dipping to me, if after paying a membership fee, I still have to pay a submission fee to send music to one of those leads I have already paid for! 

As someone who has received an unending parade of submissions, when I sat on that side of the desk, I know what happens to blind submissions – nothing.  A song has a much better chance of being used if it is received in response to a request.  So I would rather submit a song for a specific use, than submit blindly and hope. So this would be another factor that would determine which site I would work with.

Many of these services promise to critique the music. Critique services are valuable because music supervisors don’t want to sift through a sea of low quality submissions to find something usable, so a site may critique submissions to assure that what is actually passed forward is usable.  There are sites that no longer exist because supervisors and producers could no longer rely on the quality of the submissions.  I look at critiquing as a completely separate service, and one that is valuable to someone new to submitting for television and film.  There are standards, which may be quite different from those required by radio or A&R departments.  But professional songwriters and musicians, just looking to expand their opportunities may not need a critiquing service, so why pay for one?  Just something else to consider when choosing a submission site.

What's “the buzz” on the service?  If the bulk of comments about a site are negative, there may be a good reason for the “bad buzz.”  I’d stay away.

Let’s look at a few:

Music Submit

Music Submits promises to promote to radio stations, blogs, podcasts, music webzines, social media and other outlets.  They charge monthly for their submission services, starting at $9.95 each month.  I do have a problem with the promo pictured below, telling site visitors to create a free account.  You can register for free, but have to be a paid member to utilize any of the site's benefits.  That feels like bait and switch to me.

photo: https://www.musicsubmit.com/genres.cfm

Music X-ray

Music X-ray works like an aggregator, a middleman for companies offering various opportunities and setting their own prices for submissions.  I know a number of the “industry professionals” who use the site to enlist talent.  There are many really cool opportunities to be found on this site, but the professionals are not vetted, so do your homework before spending your money on an opportunity here – know who you’re dealing with!

Crucial Music

Crucial Music is a placement service.  I read their “deal” and it is very similar to the agreement that I have with my artists.  They do not charge for services and take a percentage of the earnings from music placed.

Magnatune

I’m not very familiar with Magnatune, but their tagline is “We are Not Evil” and their submissions page states that ‘we don't do business with labels and we will not send money to a lawyer or manager.’

Is this a red flag?

Photo: http://magnatune.com

They charge $15 per month for their services.

Film Music Network

Film Music Network probably has the best film and television leads, but the site charges $11.95 a month to join and 1.99 for each submission.  Non-members pay 5.99 to submit a track.  (I have not used the site – you know how I feel about double dippers!)

Taxi

Taxi is the most expensive and unfortunately, the service that has garnered the most complaints.  I have not used them, but they are double dippers in a big way, $300 to join and $5.00 for each submission.

Music Dealers

photo: http://www.musicdealers.com/

I know I shouldn’t play favorites, but I do have a favorite music submission site.

Music Dealers meets all of my criteria.  The site is free to use, they allow you to submit for specific opportunities and they take a percentage of actual placements.  They are easy to deal with, communicate with artists on a regular basis and let you know when there is an opportunity that may work for your music. 

So that’s my two cents.