Dave Patten's University of Entertainment

Manager's Corner: The Right Business Structure

One of the first things a musician needs to do, assuming he or she is serious about a career in the field, is to determine the best business structure for themselves.  Businesses become incorporated because this limits the liability to the individual owners.  Most people would think--what could happen if you just play or write music that would hurt me as an individual?  It's pretty easy to think of a lot of things:  an accident driving to a gig, a claim that you've taken someone's copyrighted music and subsequent lawsuit, an accident at a gig--the worst one was the fire at the club in Rhode Island.  So starting a company is a good thing, because if something bad happens, you're private investments like homes, savings, etc., won't be lost.  It's like a firewall between you as a person and you as a performer.

The options are partnerships, Limited Liability Companies (LLC), and corporations such as S-Corps and C-Corps.  The most popular today are LLCs.

Starting one is relatively cheap and easy--usually less than $1,000.  For an individual, this is a no brainer.  You have to keep separate records of your income and expenses, and you'll find a lot of expenses qualify as business expenses.  Trips on the road, buying new music, DVDs or video games--all are business expenses when you are in the music industry. 

For bands, it gets a little more complicated.  How do you split the income from the band?  Who owns how much of the company?  One suggestion is for each band member create an LLC and have them own parts of the band LLC.  It gets complicated, but so does life.  Imagine if your band created a company and the drummer dies for some reason.  Does the drummer's wife now become a part owner of the band?

Did you know that most movies are created as unique LLCs?  The partners are all the companies involved in its production.  You could do the same for a U.S. tour, pretty much anything. 

I guess the final message is don't procrastinate and develop a business strategy for your career.  An important part of that strategy is determining the best corporate structure for your music enterprise.  Ask as many people as you can for their advice and go for it!

Manager's Corner: I NEED A HIT!

It only takes a few visits to New York or L.A. and probably Nashville--into the bowels of the current record label system--to discover that today there is a total focus on hits.  CDs are morphing into 7 or 8 song relics and labels are searching for new hits for their legacy artists, like Britney Spears.  Because of the money problems of the labels due to the advent and ubiquity (readily and freely exchanged) of the MP3, labels now depend upon the single for the cash to keep paying their overhead, or top salaries and rent.  There's no cash for new artist development or experimental albums.  How many significant new artists have broken in the past year or two?  Not many.

And think about who makes the money from hits:  The record label that sells the single through iTunes; the songwriters or producers that wrote the song; the publishing company.  The performer gets nothing, other than what they can negotiate as part of a record deal--unless they own some songwriting rights.  Ever notice how many producers want to help you tweak your songs, so they can get a cut of the publishing?  And don't underestimate the value of the publishing--a hit song still earns hundreds of thousands of dollars in royalties payable to the publisher and the songwriters just from all the radio airplay.

A visit to any NYC label office will probably show a lot of empty office space.  Contacts in the web marketing department from just a couple of years ago are long gone.  Those that remain tend to be middle and upper management from a previous generation of the industry.  And they are dying for hits for their established stars!  This is low risk.

Of course, besides American Idol, it is very difficult to find an established star that is also new.  Yet fans want new music and new artists.  What's an independent musician to do to take advantage of this situation?

I would say there are two situations.  If your primary focus is as a performer or singer, you probably need to jump at any opportunity that comes your way.  There are too many performers in line behind you if you get too picky.  If you are a songwriter and a producer and a performer, yesterday's singer/songwriter type, the choices are different. 

It is becoming increasingly clear that you can't wait for that big record deal to make you a star.  It's going to take a lot of hard work and most of it will be your hard work.  Develop a significant internet presence.  Make fans one at a time anyway you can.  Work on your songwriting, your performance, your production.  Develop a team of people you can trust to help you with all the other tasks, like booking, video production, general management, publishing, and legal. I would say you're better off finding your own people even if they are less experienced.  Too many people in this industry just want to use you--look at all your industry contacts and work hard to understand their true motivation.  This will help you pick your team. 

Anything that looks like a shortcut probably isn't.  And watch out for the thousands of snake oil salespeople peddling "artist services."

As an optimist, I feel quality will eventually rise to the top.  If you can stay with it and keep control over your creativity and your businesses, the end result will probably be better music and more fulfillment for you.  Take the long cut, if you're up for it . . . !

Manager's Corner: The Jango Airplay Experiment

Dave discussed our Jango Airplay experiment about six weeks ago.  Jango.com is a website that streams music by popular artists and allows independent artists to pay to have their songs played with the popular songs.  Fans can create "radio stations" based on songs they like and can rate the new artists as well.  It is basically internet "pay for play."

Overall, the experiment was a positive one.  Dave picked up over 3,000 new fans and his music was exposed to many new listeners.  He posted seven songs on Jango.  Jango calculates what artists his fans also liked best, song by song.  For example, below is their report based on the song "Back."  It demonstrates that Dave's music is enjoyed by people with a wide range of popular artists spanning fifty years of work, from The Beatles to today.

   

(click to enlarge)

Jango also gives you fan gender and age stats.  Most of his songs look like this--I think the Jango listeners are younger and that there are more females than males, but that's just a guess based on these charts and six weeks of experience with Jango.

Jango allows the artist to select popular artists that might like his music.  We ran many experiments with different target artists to determine which yielded the highest number of new fans.  Here's our best performing list:

• Alicia Keys
• 3 Doors Down
• Coldplay
• Backstreet Boys
• Justin Timberlake
• Pink
• Jason Mraz
• The Black Eyed Pe…
• Green Day
• John Mayer
• Metallica
• Red Hot Chili Pep…
• Mariah Carey
• Britney Spears
• Rihanna
• Beyonce
• Madonna
• Carrie Underwood
• Taylor Swift
• Lady Gaga
• The Beatles
• Michael Jackson

Our new fan capture rate ran at around 4% during the campaign.  This seemed pretty good, because as Dave's music was favorited by new fans, his songs were included in their radio stations.  They listened to the songs but were not able to become new fans again.  So over time, you would expect the fan capture rate to drop.

Jango appears to be growing lately--the number of new artists seems to have increased significantly in the last couple of weeks and they increased their prices for plays by 20% this week.  At the end of the day, the Jango decision becomes a cost/benefit analysis.  Their top package is now $1000 for 40,000 plays per month.  It would be an easy decision if those 40,000 spins generated an additional $1000 of sales on iTunes, but I doubt that would happen often.  Part of the reason fans listen to Jango  is because it is free to them!

We're going to take some time off from Jango and see if Dave's music continues to get spins or just fades away.  Let us know your thoughts on the Jango experience, as both an artist and a fan!

Manager's Corner: Fans, One at a Time

The music business model is changing at warp speed.  In the old days, labels pushed their product out to stores and never bothered to find out who ultimately bought the albums.  Promotion for a concert tour went primarily through the local radio stations.  Today couldn't be any more different.

Think of the barriers that have fallen.  It used to be that there were very few studios to record music--the cost for the equipment was so expensive.  Gone.  Today, with computers and pro tools, high quality recording costs are small, especially for artists with production (i.e., play a few instruments, mixing, an attention to detail) talents.  Think Ryan Leslie, Moby, Dave Patten.

Distribution used to be important.  Getting into the record store chains, the independents, the book stores that sold music and the department stores.  Gone.  With the exception of a few outlets, it is hard to find a physical cd any more.  Distribution is digital, and with services like CDBaby or Tunecore, an independent artist can get product available globally in a matter of weeks.  

Music videos were all the rage in the 1980s during the MTV heyday.  They used to cost hundreds of thousands of dollars to produce.  Today, just like sound recordings, costs to produce them have plummeted.  While it is still hard to get on tv, there are instant internet outlets available like YouTube. 

Where does the major record label money still work?  They have deep pockets (not as deep as before), and they can spend on marketing and promotion when they feel it is justified.  They can get songs on the radio, and they can get video spins on tv (mainly cable tv now).  They just can't force bad product down the customers' throats like the old days, though.  There are too many ways for people to tune out of the message, and today the customer has to want what you have to sell.

So what is the secret for success for the independent artist?  It's hard, but the trick is to attract fans one at a time!  Keep track of them, nurture them, treat them as owners.  

A good source of this type of "permission marketing" is Seth Godin, author, blogger, and general expert on the new style of marketing.  In the old business model, industry "pushed" products (and music) to the people.   Today you have to convince people they want your product.

So, as Dave's manager, our team is working to find fans one by one.  If you let us, we put you into our database and keep you notified when important things are happening.  We give away MP3 collections, first peak at new video projects, and make you part of our team.  Thank you!

Hopefully, with your help, support will turn from a small wave in the middle of the big ocean into one of those giants from the north shore of Oahu!