entertainment business management Archives

Is Classical Music a Victim of a Red Ocean Strategy?

I like classical music, even some operas. I cried when I saw Paul Potts sing Nessum Dorma. That is why I was saddened when I read Why Classical Music is Imperiled–Sort of by Chris Farrell. Mr. Farrell cites several examples of operas, orchestras, and philharmonics who are either struggling or have failed financially. He claims:

“Classical music shares a problem afflicting all entertainment these days: fierce competition for eyes, seats, and dollars. The video-game industry has evolved in recent decades into a multibillion dollar industry far removed from its early Pac-Man days. On Sunday, Americans could choose to spend their evening at a concert, a book reading, a lecture, or watching the much-anticipated final episode of Breaking Bad (let alone Sunday Night Football.) By this light, the take-away is how healthy an historic art form is in the 21st century.”

Chris argues that classical music isn’t a dying industry, but caught up in the digital age where so many entertainment options are at our fingertips. He mentions a number of classical musicians who have ventured outside the genre.

To look at external factors for a business failure is not the cause of the failure itself. The failure is the lack of a strategic plan. Strategic plans are created with a vision that encompasses outside factors, like the changing digital industry. Instead, what business do in these situations is just change the inflight movie in a plane that is running out of gas. Sure, when businesses fail to strategize they create some “feel good” plan within their current strategy which ultimately postpones the inevitable.

The Blue Ocean Strategy by Kim and Mauborgne discuss a similar industry, the circus. The compare Cirque du Soleil and Ringling Brothers. Ringling Brothers took the traditional strategy, which was the traditional circus. Cirque, on the other hand, measured the value that they offered the public and eliminated some, while enhancing others. In creating their new strategy, and new show, Cirque emerged in an uncontested blue ocean, and left Ringing Brothers in a red ocean full of competing sharks who offered the same antiquated value to the customer. These sharks competed on price and values that the customer didn’t see relevant, like big names, animals, and three rings.

On the other hand, Cirque, designed a new show based on values that the audience appreciated, e.g., a new type of venue, themes, and music.

The ironic part is that Cirque not only took a major market share from the traditional circus, but absorb market share from other industries like; movies, plays, and yes classical live music performances. In other words, the pain that the operas and philharmonics are feeling is due in part to innovative companies like Cirque who have been successful crossed markets by realizing what the audience really wants. That is something that the classical industry must do if it is to survive.

The Strategy of the “Argo” Writer and Why You Should Take Notice

Do you use “vertical” logic to solve a problem? This classic method for problem solving works out a solutions using a step-by-step method until a person arrives at a conclusion. Engineers I’ve known, have used this approach.

Or do you address problems “horizontally”? That is, having a thousand ideas but being unconcerned with how to implement the strategy of arriving at your destination.

Many will look at these two approaches and say the first is more left brain, the second more right brain. However, the better approach is to use both sides of your brain and think more entrepreneurial.

This appears to be the thinking of Joshuah Bearman, the “Argo” writer according to a Los Angeles Times article. According to the article, “Argo” prompted Bearman, …to think about storytelling in a different way–and to go entrepreneurial with his latest project, a tale of San Diego drug smuggler called ‘Coronado High’.” According to the article, Bearman negotiated a trifecta revenue package with publishing with GQ magazine( print), Atavist (a digital e-book publisher), and Sony Pictures (movie). These avenues displayed different “colors” of the project serving different audiences.

This strategy pushes Bearman into his own “Blue Ocean” by distinguishing his project from other journalists, novelists, and screenwriters. Though these multiple platforms operate separately, they will complement each other making this project greater than the sum of its parts. Why? Because one person hearing the audio version may want to see the movie, for example.

Some say that other writers will not be able to duplicate Bearman’s strategy because of his “Argo” clout, but I disagree. In business, there is always an industry leader that tests the water. If Bearman is successful, these(and other) publishers will be looking for other authors to replicate the success.

Multimedia is hear to stay, but the industry leader will be the person who can change with it. Multimedia platforms are not stagnant and demand a dynamic entrepreneur to change with them.

Innovation:There is More to Emulating Than Playing Air-Guitar

When I started playing guitar in the early 1960s, nobody played “air guitar.” Those who didn’t want to play, didn’t, and those who wanted to play guitar copied Jimmy Hendricks, Chuck Berry, and many others in the entertainment industry.

Anita Campbell’s article Finding Innovation Through Emulation discusses innovation using this method in the business world. She recommends picking a company you admire, copying it, and reinventing it.

This approach is fine, but limited both inside and outside the entertainment industry. Ted Whetstone’s chapter in The Book of Business from A to Z (The 260 most important answers you need to know) takes a more holistic view. He discusses the many types of innovation:

Disruption innovation: New technology, process, etc. that gives your company an advantage.

Product innovation: The product development cycle of concept, prototype, testing, etc.

Process innovation: Changing the production or process of delivery method.

Marketing innovation: Positioning yourself and product differently in market segments.

These points are just a thumbnail sketch but could be a daunting task to a novice at strategic planning. So, the place for businesses and those in the entertainment industry to start is VISION. A business owner or an artist must establish a vision that sets them apart from the rest of the world. By vision, we are not discussing a five year plan. No, we are challenging the business owner and artist to look at the next twenty years and answer how they will change the way things are done in the world.

But why emulate other artists or companies when establishing a vision that will change the world?

Let’s take the Beatles for example:They were influenced by early Motown music. In fact, you may recall that one of their earlier albums covered three songs by Motown: Wait Mr. Postman, Money, and You’ve Really Got a Hold on Me. Sure, they performed their version of these songs, thus improving on them, but these songs did not limit their visions. Instead, they acted as stepping stones to a style that the Beatles were to be known for.

In strategizing, a business owner (and artist) must stay the course of their vision, though they are emulating others. This process infuses tactics in achieving the ultimate vision.

Internet Content Generation: Is Your Business More Exciting than Accounting? I Doubt It?

One day I was having lunch with one of my entertainment clients. As we spoke of relationships she said, “My biggest fear is marrying someone like an accountant.” She then realized who she was speaking to and partially retracted the statement. Too late.

I write about 1-2 articles every week. People ask, “What do your write about in accounting? It is so boring!”

Well, anything can be boring, but Ekaterina Walter’s article, Content Generation for Small Businesses gives some good pointers on how you can promote your business through submitting meaningful content. She interviewed Ricardo Bueno and Lisa Horn, experts in this area.

Content as Customer Education: She quotes Ricardo that you must educate your audience. That is true, but you must be careful of the level of education. In my case, to quote tax code sections will lose my audience, so I display my expertise in common terms and analogies. Your audience can grasp your message if it taps into an experience that are familiar with. As seen above, I displayed points with anecdotes, little stories that illustrate my point.
Don’t Sell: Your web page should display your products, and your blog should display your expertise. Don’t be afraid to offer some tips in your industry.
Engage, entertain, and build a community: I agree with her point, but many might find it hard to entertain. The first step is to not take yourself so seriously. Poke fun at yourself by writing about awkward experiences, if it supports your theme.
Be consistent, and feed the monster: This is my suggestion. You must be disciplined. Once you established yourself as a noteworthy source for information, your followers will desire you to write consistently.

Any industry can benefit from content. Any business can benefit from content. The real question is whether you have what it takes to compete on this level in the 21st century.

Music Royalties: Never Leave Money on the Table

I remember about six years ago when a relatively unknown organization, Soundexchange, contacted us (CPA entertainment business managers) about signing up one of our music artist clients. They said that our client was not collecting all music royalties through ASCAP, UMG, EMI, etc. Instead, there were an increasing amount of royalties being left on the table from certain digital transmissions like streaming.

I was skeptical. However, according to some industry opinions, the public’s method of listening is changing. This is confirmed in the most recent growth of digital music in the last 3-4 years. According to How Artists get Paid for Internet Radio: An interview with Mike Huppe, President of Sound Exchange by Chris Castle, “More and more people are accessing music through digital devices, mobile devices and through streaming content rather than downloading it. The article also informed me that “Soundexchange pays performers directly, regardless if they are recouped through their record deal.” (“Recoupment” is the method of recovering monies advanced to the artist before any royalties are paid out to them.)

So, what does this mean to you?

Make sure you have good representation in your contracts. You can lose a substantial amount of money because of a poorly-worded contract.
You don’t have to be a CPA entertainment business manager to know what you don’t know. Even though you are an artist, you should at least know the basics of your industry. There are a number of good reference books that speak of the music industry. After that, leave the rest to your attorney and CPA entertainment business manager.
If you receive substantial royalties payments, don’t be afraid to hire an auditor that specializes in music royalties. You must keep the payers honest.

Music artists and writers have the best copyright laws in our nation’s history. Don’t squander it by sticking your head in the sand.

Business and the Artist: The Butterflies of our Society

You’ve probably heard of the story about an old man and the cocoon. He watched the cocoon for days, and then it started to move. The butterfly struggled, so the old man slit the cocoon to let the butterfly out. The butterfly emerged underdeveloped with weak wings. The reason was that the butterfly needed to forcefully squeeze through a small whole to open circulation to its wings. The man deprived it of this process. The struggle for life gave it life.

I have worked as an entertainment business manager since 1985. For the last 15 years I have helped artists strategically position themselves in new business ventures. What I have found is those who do not start out with easy financing (parents for example), tend to have a better chance of success. From a CPA business manager prospective, the adage, “easy come, easy go” has somewhat predicted the ventures. Even though our firm works as consultants, I usually take an emotional stake in my projects because I want to see them succeed. Most entertainment CPA business managers don’t do what we do, but come in after the business is funded. We have found that entering after the initial planning stage is too late.

From an entertainment CPA business manager point of view, here are some steps I suggest you take before opening up your next venture:

Research your proposed industry thoroughly: You should start by speaking to people in the industry that you trust. Don’t be afraid to ask the difficult questions, and don’t bury your head in the sand. Try to find statistics or news of your competitors and the industry you are venturing in. Most important, speak to your target market. Find out what the industry is not providing to them, and what the industry is providing to them that is unnecessary.
Find people in areas you lack expertise: If you have areas that are outside your expertise, bring in people who can fill those weaknesses. They may sign on and be a major stakeholder for you once you get started.
Develop a strategic plan with a long range vision: Start 20 years or more from now and describe a vision that is more than making money. Are you out to change communication and entertainment by putting it in the palms of every person like Steve Jobs? Once your vision and horizon is set, work backwards and set milestones. You should end on your first day of business.
Consolidate a team: If there are others that will help you, line them up and get them on board. It will show your investors that this business is more than you.
Build a business plan: A business plan is not a strategy, but a management tool. It starts today and works forward for five years. It is essential that you include the cash flow of the first twelve months. This is when businesses struggle to stay afloat. Make sure your business plan milestones correspond to your strategic milestones. Insert your team bios along with your bio.
Present the package: Now you can go to your money people. Practice your dog and pony show. A video or slide show can help bring the message across.

Like moving from a worm to a butterfly, artists must go through the “pain” before the doors open. The more pain you endure, then better informed you will be when you meet your investors and launch the enterprise.

As CPA entertainments business managers, we have seen failed ventures that did not take these steps. By engaging in this practice, it does not guaranty success, but will at least give you the wings to soar a little higher.

Business Creativity and Illusion

As an Entertainment CPA, I find my clients are not short of creativity. Every year, clients retain us to create a business (and sometimes a strategic) plan for an entertainment industry venture. Usually they google Entertainment CPA, or Business Manager CPA, or Strategic Planning Entertainment CPA, and find us. However, we convince them that our role is not just as a mere number cruncher, but an integral part of developing the concept.

For example, a common prospective client is one who is trying to start a record company. Usually, it is two musicians that have not posted their first hit. One of them has parents (or potential investors) that believe in them. They want to start a record company and collaborate with other writers and performers offering them 360 degree contracts, or some variation of it.

My response to them is always the same. “So what?” They then look puzzled. I ask, “What makes you different from any other record company that is struggling to survive? Where is your Blue Ocean?” Then I proceed to give them a 3 minute explanation of Kim and Mauborgne’s Blue Ocean Strategy.

From an entertainment CPA point of view, the most troubling of the prospective clients are those who base their success on one band, one writer, or one performer. I remember one time, there were a group of people who wanted to start a record company, but it was dependent on the musical composition of only one of them. The entire business model depended on one guy(who had a tiny bit of success) writing music for potential bands. I asked the question, “What happens if he dies or gets really ill?” They didn’t hire me.

Even though many see us as entertainment CPAs or entertainment business managers, we have designed business plans for more than the entertainment industry. Strategy too, has no industry. Many of the issues are the same. For example, companies both inside and outside the entertainment industry usually make the same miscalculation, i.e., how much start up money they will need. Usually, I find that clients need 2-3 times more money than what they originally project. The reason for this is mainly the start up phase. Most are under the illusion that once they “open their doors,” they will reach operating capacity within a few months. Full capacity takes years. If you create a company with an unusually high overhead for its size, full operating capacity may not make a difference because the “monthly nut” is too high. In other words, if you hire your friends, family, and anyone else who strokes you, your company probably won’t survive. Keep it smart, keep it simple, and you may keep it past a year.

This is a wonderful time to start a business both inside and outside the entertainment industry. Fortunately, as entertainment CPAs we are not emotionally involved in the project and can offer some objective advice. But, creativity, fantasy, and ego has to take a back seat if they obscure your vision.

Small Business and the Social Media Complaint Game

Last week, I joined a conference call with an individual that can help my client’s entertainment business. What we found out after the call was that this individual and his company had two scathing unanswered criticisms reported online. Immediately, red flags went up.

Then yesterday, a client set up a meeting with another individual in the entertainment industry. When I looked up his name, guess what? In bold print was a scathing feedback on Yelp, it too was unanswered.

Courtney Rubin’s article, Why Every Minute Counts When It Comes to Social Media Complaints reminded me of the social media dangers in any industry. She wrote, “A whopping 88 percent of customers said that if confronted with unanswered complaints on a company’s social media site, they’d be either somewhat less likely or far less likely to do business with the company in the future.”

Any a small business, especially in the entertainment industry, must be vigilant about what is posted on line. If you grow to a size where the Twitter and Face Book comments become too numerous, you may have to hire a company to do this for you.

So, let’s say you are a small company and don’t have the resources to hire a company to find these comments. What I suggest is you do it yourself. Type your name, or your company’s name with the term, “scam,” “Ripoff,” or “review” and see what comes up. Make sure you go through a few pages and not just page one.

If you find one, address it professionally. Take the high road, and reply to the concern. Use the platform to state your company’s values like how customer satisfaction comes first. Don’t beat up on the complainer no matter how abusive they are. Give examples on how you remedied issues.

Another thing you can do is have some of your good customers write a response to the posting, along with yours. The positive comments should outweigh the negative one.

Any small business, and especially one in the entertainment industry, should be aware of what is said about them in social media. Don’t be a ostrich and ignore it.

Artists’ Futures are Truly in Their Hands

I was twenty-one in 1978 when I got my first part-time CPA accounting job while studying at UCLA. The adding machine I used had a crank…really.

Over the last year or so, I have written about apps that help business people run their businesses better. Recently, I came across Artistgrowth that literally puts “organization” in the hands of the artist, manager, and others in the music world.

The app helps you manage your schedule, gigs, and tours. In addition, it helps you and your CPA manage your finances by allowing you to photograph your receipts and attach it to a report. The app also has a portal that connects you to many different informational sources, videos, etc. that discuss such things as promotion, songwriting, and instrument repair.

The Action Packs section helps you implement the knowledge you learned in the informational sources. I thought the business plan pack was very superficial, but at least it displays the basic concept. (These packs are limited depending on your subscription level.)

Before jumping on your phone and buying it, step back and think about what you and your music business lack. The problems with apps is that they offer a whole list of bells and whistles that you may not need.

I have written several times during the last year that now is the best time in the last 100 years to start a business because of all the resources available online. This app seems to be one of those gems that a music professional can leverage. The boundaries that separated CPAs, managers, and even artists are changing. The things that one person used to be responsible for, may no longer exist. If you have the ambition and maturity, you can evolve your role to further your career and maybe save you a lot of money and grief.

I am not saying that you should replace your CPA or manager with this app. However, by assuming some of the lower level responsibilities, you can empower your CPA to provide higher level services that could multiply the financial return of this app.

With FaceBook Music, You Don’t Need No Stinkin’ Payola

My father sang rockabilly in the 1950s under contract with Capitol Records. (Click here for a Bobby Norris sample.) When I was young, he told me stories of “payola.” Payola is the (illegal) practice of record companies (and I guess artists) paying discjockies to play their songs during the normal daily rotation.

Capitol Records, to his knowledge did not offer payola for him and his records didn’t sell much. However, with the rockabilly resurgence of today (nine years after his death), his music is making its way to loyal fans.

Carl Jacobson’s article Fans on Facebook: What to Do Next to Engage Your Fans, Increase Sales and Grow Relationships provided some ideas that my dad would have benefitted from if such an opportunity existed in the 1950s.

IDEA 1 – Be Ready to Sell Today! Carl’s idea, here, actually transends any art or commerce. Don’t launch your product of art until it is ready. This is one of the biggest errors authors make with their first book. They are so excited about getting their first book out that they fail to hire someone to read it and provide feedback. The result many times is the author blows his or her chance to sell a great story because it is poorly written. Carl suggests Mystore for Facebook to capture fan’s information. But, make sure your product is absolutely perfect. This concept transfers to any business, in that you should not reach out until you have perfected your strategy, product, and service.

IDEA 2 – Engage…Don’t Advertise This works with any business of relationship. People want to be involved; people want to contibute to a goal; people want to feel like they matter. Don’t lauch your music saying “Buy this!” Remember the advent of American Idol? FaceBook allows people to share their opinions, so ask them to.

IDEA 3 – The Virtual High-Five The FaceBook “like” gets a lot of traction these days. Thank and compliment others when the opportunity arises.

IDEA 4 – Reward Fans Then Ask Them to Reward Their Friends Freebees are nothing new in business. Just make sure you limit what you are providing to your fanbase.

IDEA 5 – Advertise Yourself to Fans of Similar Artists In business we call this strategic relationships. You can trade recommendations with other artists using MyStore. This can also work in other business contexts. Use complimentary companies to partner with in promotion. For example, let’s say you own a beauty salon. Women that go into beauty salons are concerned with their appearence. So, you may want to partner with a Yoga or Spinning instructor to advertise and offer combined deals. This way, your customer is enhancing her appearance in different ways.

With the proper use of social media(e.g., MyStore for FaceBook), you can reach your fans with investing just your time. Payola is Gonola.