Extending Your Reach: Investing in the Music Business Part IV

Posted by Pinky on Jun 29, 2010 in Blog | 5 comments

Welcome back to another edition of Investing in the Music Business. This blog series is about building a new music business model (for fun and profit). It is inspired by my disdain for the “sky is falling” hysteria that has gripped the music industry since the invention of the MP3 format, and my passion for business, which has grown out of being an entrepreneur in and outside of entertainment circles since 1997. Click here for parts 1, 2 and 3.

Today I want to talk about the difference between being “discovered” and being a CEO.

As I mentioned in my last post, the music business has historically been run by record labels who discover, market and fund new artists. For the last 50 years, they have simply recorded a bunch of songs, sent them off to radio stations, hoped something hit, and sold a bunch of albums.

This approach, which breaks down if no one buys the albums, is custom-made for artists with the dream of being “discovered.” They fantasize about someone else doing all the heavy lifting while they write songs, play shows and have their every need attended-to. I have even heard some (very well-respected) managers say that their job is to handle all the business so the musicians can just be “artists.”

So cute. We coddle our poor, helpless musicians and tell them how creative and wonderful they are, right up until we stop making money on them (or decide to cut our losses), and then what do these sensitive little creatures do? They get day-jobs as painters and waiters and handymen. They complain about the “evil industry” and how everyone just wanted to suck their blood until the next flavor-of-the-month hit the scene. Poor babies.

And then there’s the other camp. The one that says the only way to make a living in this business is to “build your brand” and “be a business.” If you’re not thinking like a CEO, you’re destined to get ripped-off and run-over.

The truth lies somewhere in-between. If you’re going to make a living on your art, you obviously need to be an artist, and that takes room to breathe. But if you want to make a long-term career out of it, you need to wake up and accept the fact that work is required.

Be Like Buffett

I have a bit of a man-crush on Jimmy Buffett. He took his love for sailing and turned it into a career that earns him an estimated $100 million a year, 34 years after his first tour hit the road. He owns restaurants, casinos, hotels, clothing lines, spirits, beer, frozen foods and a full-line of tailgating accessories, and still has time to write and record new tunes and tour on an annual basis. He’s a smart dude, and he’s surrounded by a bunch of other smart dudes and dudettes. I want you to think about Buffett the next time you roll your eyes at the thought of “selling out” in order to become a commercial success. There is a very big difference between cramming yourself into a generic little package vs. making the most of your passion. You may not have any ambition to sell golf bags with your name and likeness, but I know you do like something, and I’ll bet dollars-for-doughnuts that some of your fans would like those things too.

Let’s start with T-shirts. I had an epiphany last year while working with one of my clients, Richards and Southern. They design, print and sell tour merchandise for the likes of Kenny Chesney, Taylor Swift, George Lopez and just about everything in between. My job is to help them sell more stuff online, so I began with the usual approach – holiday promotions, contests, setting up their social media profiles, featuring items on the official artist websites and so-on. Those are all very effective ways to sell more stuff, but our numbers would always drop when an artist stopped touring. It was frustrating for me because web-stores don’t stop being open for business. We were still making new product and these artists still had massive fan-bases. Why weren’t they buying when the artist was off-the-road?

And then it hit me.

We sell souvenirs!

I was mistaking tour T-shirts for fashion. I was assuming that our sales were driven by a fan’s desire to dress themselves in the artist’s image, when in fact most of them just wanted a momento from the show. They often buy those souvenirs just before or just after the event itself, but once they’ve gotten one, they’re back at the Gap to buy their *real* clothes.

One of the first things you can do as a developing artist is to talk to the local clothing stores in your area, especially the privately owned boutiques, about the possibility of them selling your stuff. They might even recommend other local designers that you can partner with to create a true fashion line. People buy their “every day” clothes in clothing stores, not at concerts or artist websites. Most importantly, your name will be seen by people who weren’t expecting to find it, and that’s branding at its finest. This could be the first step toward building a well-known brand of your own, whether or not you ever top the charts.

You can take or leave this particular suggestion, but the point is, we are going to build a BUSINESS, not a talent show for other companies to make all the money on. Lesson one is to look for opportunities to extend your revenue streams, especially those that may put you in front of new fans. For every piece of the business you build on your own, you have more leverage to negotiate with later, and that is the key to getting a fair price.

Check back tomorrow for a discussion about the artist manager’s role in this new world.

Amen.