Bankruptcy is Good Business
Posted on October 19, 2018 in music, Music Business, Opinions, Updates
Imagine for a moment that you are the owner of a lucrative retail business and you are hiring a new CFO to manage the financial accounting of your company for the next decade or beyond. You invite a new young gentleman into your office and sit him in front of your desk. You have heard hype about this new business climber from many of your gazillionaire colleagues. You hear he has great personality and he really knows how to dress right. You pull this new prospect’s resume’ and give it a glance. You notice that he credits himself with three Chapter Eleven Bankruptcies for past companies that he has managed. Do you look him in the eye and say to him, “Man, you must really know your stuff with all of these failures on your business record! And you certainly have the image we are looking for. When can you start? We would really like to give you a chance at taking our company to the next level!” Would you respond in that way?
Let’s look at another hypothetical scenario together. This time you are a bank loan manager, and you are sitting down with a new business owner who is looking to launch a new car into the automobile industry, and he needs your money to make his vision into reality. You analyze the car that he has designed, and it looks compelling with some original designs that might appeal to the contemporary buyer. You ask to see his business plan and his proposed budget. He presents a budget that looks something like this:
-Selling price of my new cool car $30,000
- $10,000 to design
- $5,000 to pay the bills
- $5,000 to promote the new car in auto ads
- $10,000 in parts & labor
- $5,000 to pay a driver to model the car for us at car shows
You are a good loan manager so you ask the obvious question, “How do you intend to build a successful business when you lose $35,000 to sell a car for $30,000? You will be losing $5,000 every time that you sell one!” The passionate new hungry business owner responds, “I know it seems crazy, but I just love this car so much that I am willing to lose everything on it just so people can see it and drive it! Even if I am homeless, my passion is so great that I’m willing have the business go bankrupt so people will see this car!” Do you loan him the money because his passion qualifies him as a good car producer?
You’re a smart person. I’m not trying to bamboozle you here. I realize these illustrations are ridiculous. I don’t know if you are a participant in the music business, or simply a listener of music. If you are a music fan, and your livelihood does not depend on music, then you recognize that these illustrations are comically absurd. If you are in the music business as a career and know anything about the world that you are involved with, then you are comically entertained by the REALITY of these illustrations in the music business. The longer I’m involved in the world of music, the more I recognize this strange phenomenon that exists in the music business machine…
The music business promotes and encourages bad business.
My examples above are theoretical imaginary scenarios. They are designed to demonstrate an emotional reaction to prove my point. But I can give you real examples that are not fantasy. So can anybody who has embarked on the process of writing songs, recording an album, and releasing it to the world with the hopes of discovery. These examples would fill up more pages then you are willing to read today, I have no doubt. But I was recently sitting at a local bar with a fellow songwriter and performer who is at the verge of breaking out into a larger audience in the regional Texas music scene. Like me, he is a bit older than some of the newcomers in the scene, and he has a wife and children. So, like me, he is not willing to live in his car and eat out of garbage cans in order to live the musician dream. He and I have both been around the block enough to know the rules of the game a bit. Incidentally, he has also been in Nashville hoping to score a publishing deal, so he knows even more than me outside of the Texas scene. Nonetheless, here is the situation I proposed. This time the numbers are not fantasy…
The music industry plays by certain rules. My friends often hear me call it the “Music Machine”. I call it that, because I’m actually not interested in placing blame or playing the victim of someone who simply didn’t think I was the most amazing thing he or she had ever heard. Let me explain. In a machine, every working part depends upon the other working parts to operate correctly. If one part decides to go against the mechanical flow of the entire machine, the machine breaks down. There is nothing wrong with being a part of the machine. Some machine parts make good money doing their job, and most are very good people. But it is very difficult to benefit from the machine when you don’t play by the machine’s rules. Here are the rules of the Music Machine as I have experienced them.
- Don’t record your material at home. Home recording is for demos. If you’re really serious about your music you should spend $10,000 on a professional studio production, minimum.
- You need to promote yourself heavily on social media. The Machine is not interested in you if you don’t have a huge social media following. It doesn’t matter that you have no clue who 95% of your followers are. Also, your social media time will not pay you a single penny of income. But who cares, you should do it anyways if you really care about being a musician. Oh ya, and it will take a lot of your time to manage your social media.
- You need to promote your music to radio. Sure, radio is dropping off the map of the new generation, but that doesn’t matter. You need to spend at least $5,000 “pushing” your new music to radio, even though nobody will hear it there. But it will prove to The Machine that you care about your song, and really believe in it.
- People still like hardcopies of music, so you should provide CD’s and/or vinyl of your album. Expect to spend $1,000 minimum to manufacture these.
- Sell merch. Everybody likes seeing beautiful people in their new snazzy t-shirt. Spend $1,000 on t-shirt, hoodie, and baseball hat merchandise.
- Tour. Go hit the road as much as possible. Gas money will work itself out. Play everywhere, even if you lose money because the venue doesn’t pay as much as the cost of your musicians and your travel. Prove to the venues that you believe in yourself so much that you are willing to take the loss. Real artists are willing to go broke for their craft! Are real venue owners willing to go broke? I wonder.
- You must brand yourself. Get a good logo and a cool website. Spend $1,000.
These are just a few of the rules of the Music Machine. If you are earning $50,000 per year as a professional musician, and trust me, that is on the high-end for any of us who don’t have widespread success, then you are easily expected to spend $20,000-$30,000 annually right off the top to invest in your music by the rules. That leaves you with the remaining amount to support your family, pay for your house, put some groceries in the fridge for your wife, keep the car running, etc. Most of us are not making 50k per year. If you are making 25k per year, a much more realistic income number for a working musician, then the investment expected from you literally makes you homeless. It’s not dramatic. It’s a mathematical certainty. I speculate that one reason why the music industry is dominated by young, right out of college musical acts, is because they are practically the only ones who can justify the huge financial losses it takes to prove yourself to the Music Machine. A young single musician can sleep on couches, drive junker cars, and call Mom & Dad to throw some cash at them when things get tight, and somehow manage to feel cool about it.
I was recently in conversation with a well-known highly-active radio promotion company that is on the front lines of the regional Texas music scene. If we were to go into business together, this company would be consuming thousands of dollars of my hard-earned income to do the dirty work of getting my songs played on numerous Texas Country radio stations, with almost guaranteed chart success on the Texas radio charts. In the midst of that conversation, I received a small lecture chastising my lack of involvement on social medial. Why? What do they care? They still get my money, and lots of it! My question is not redundant, I’m seriously asking, why do they care? From what I can tell, the rules are the rules.
Another popular local Texas music website posts some really interesting articles and podcasts on the Texas music business. I enjoy them. They offer some good food-for-thought on business strategies in the regional scene. Plus, they often interview people who have walked the journey, so you can gain some insight into the road ahead. However, I offer some perspective of my own to their approach. The site itself often brags about the Texas music scene as a mainstream industry anomaly that exists while breaking the traditional rules of the Nashville business protocol. All the while, being a DIY resource blog, it encourages its listeners to play by most of the rules that I outlined above. It also, from what I can tell, exists in a business to business relationship with promoters, talent hunters, and artist management companies. They all play by the rules also. As a whole, they create a machine. Admittedly I have experienced frustration that my music has yet to catch their eye. I don’t fully know the reasons. But at the heart of it, whether intentional or circumstantial, I suspect it’s partly due to the fact that I don’t participate in the machine. I don’t go broke promoting my music to failing radio stations. I don’t spend 50% of my annual income on a recording project that I can do for a much smaller fraction and still achieve my goals. I choose not to waste my time on social media where I truly believe that the large number of followers bears no real correlation to a faithful fan-base.
An Instragram account with 65,000 followers means only one thing, that 65,000 people like your Instragram account. I wonder how many of them could even name three songs by the artist they are following. Really, I truly do wonder! If five artists on the top 10 regional Texas music charts were to cancel their social media accounts today, would their shows be empty two years from now? I would love to see stats to backup the claim if the answer is, yes. Does anyone really expect me to believe that in today’s age when an artist’s songs are available for instant free listening, that their success as a performer would diminish because people no longer see pictures of them eating at Buffalo Wild Wings? I’ve drifted off topic. I apologize. My favorite car to drive is the Soapbox.
I have many more thoughts on this topic. I even have what might be called “suggestions” for those who are interested in pursuing a path outside the Music Machine. Whatever wisdom I have, it is not because I’ve achieved fame. I have none. But I pay the bills on a monthly basis. I have kept my marriage. I turn a profit. I have recorded my music exactly the way that I have wanted it recorded without losing my home. I don’t obsess over stats on a computer for validation of my success. I write songs that I want to write with almost no knowledge of the trends. I love what I do. I connect with my audience. I go home from performances feeling fulfilled, energized, and grateful. Maybe some of you in this profession want that. I don’t know. Fame is a cool thing to want. I sometimes want it also. But I would bet a portion of my tiny annual income that at least 75% of the artists on the Texas Radio Charts will be completely unheard of in a decade or less, and working a job somewhere while barely getting their hands on a guitar. While pursuing the music business based on the rules of the Music Machine is a definite bad bet, I would gladly bet on my own little speculation any day.
More to come on this topic. And some exciting announcements about more REAL ways that I plan to connect with my fans other than the waste of time of social media.