Music CPA Archives | Rick Norris

Music Royalties Are Not a Bed of Roses, But There Is Help

When I was six years old, and taking guitar lessons for about six months, my music school arranged a big (“giant” to a six year old) concert at a plush Long Beach Hotel around 1963. I was playing The Yellow Rose of Texas with about twenty other guitarists and assorted band members. The guitarists were to play the lead (I was a lead guitarist) until the violinist’s solo part. At that point we were supposed to stop playing…I didn’t. How did I know? Because they were recording us, and it came out on the 33 RPM vinyl album. Yep. The highlight of the song during the violinist solo was interrupted by note here and there by a six year old who played in a daze.

The interesting thing was nobody talked music royalties. Surely they were going to sell our album. It didn’t matter, all I wanted to do was play.

Sometimes musicians that I work for have the same opinion. They don’t care about music royalties very much, they just want to play their music.

You don’t have to be a music attorney to know the basics of music royalties. In addition to the web, there are a couple of books that can help you: Music Money and Success by Jeffrey and Todd Brabec, and All You Need to Know About the Music Business by Donald S Passman. Both these books are excellent sources in learning about the different types of music royalties like writer’s royalties and publishing royalties.

However, there are online sources that can inform you about some of the latest royalty streams like Brain Tarquin’s article at Music Connection, Get Paid, Alternative Royalties for Indie Artists. Brian discusses the different royalty streams that have emerged with later technology like satellite and cable TV. Organizations like Soundexchange, LTVSMF, and SENA are explained in his article.

I have personally dealt with SoundExchange for years and have found a reasonable royalty stream for my clients. Any possible money left on the table is worth the effort of contacting them.

SoundExchange didn’t have any royalties for me on my Yellow Rose of Texas debut. Maybe next year.

Is it a Good Business Practice and Strategy to Hire a Ghost?

It worked for Disneyland in their haunted mansion, but will it work for you?

Living in Southern California had one big perk for a young lad, Disneyland. Growing up, I would go one or two times a year, and would ride the attractions over and over. One of my favorites was the Haunted Mansion. My cousin Bill and I watched it being built for years tying to imagine how the Disney Imagineering could conduct a ride in a fancy mansion. We weren’t disappointed once it opened. What I recall was at the end of the ride was a miniature female “ghost” hologram. After exiting the pod you were riding in, you would get one last thrill riding up the escalator by this woman who would say, “Come back! Come back!” It was just too cool, especially to two 12 year old boys.

Now, this holographic technology has made it to the mainstream as a hologram, virtual assistant that offers customers information in place of a real person. (Hologram Employees: Can Virtual Workers Replace Real Ones? by Anthonia Akitunde.)

These holograms come with a basic touch screen to help visitors ask questions. The article claims they will be everywhere in five years. (You have already seen them on live concert stages like Tupac (pardon the language).

If you are an industry leader with a heavy cost in sales personnel, you may be asking if this is right for you? The answer is that you are answering the wrong question.

It is very tempting to follow the herd without thinking. But you must remember the first step in business development: Develop and implement a strategy. Jumping into the latest and greatest is not a strategy, it is an orphaned tactic. It would be like setting sail on a brand new boat with no map or compass.

Strategic planning is a “must” for any business. To ignore this step increases your risk of failure, or at least solidifies years of frustration. You must stop, step back, and lay out your 10-20 year plan with strategic planning aspects. A great combination is to lay out the strategy in light of your current accounting situation, and then monitor it by combining your strategy with your accounting tactics. These will be the milestones that will monitor your progress.

Good business practices dictates planning. And planning is not a ghost that hovers in the back of you mind. It is a real, deliberate direction that may prevent failure.

Killing Me Softly With His Song: How the Social Media Strategy Is Killing Some Bands

Abraham Maslow stated in 1966, that if the only tool you have is a hammer, you would be tempted to treat everything as a nail.

Such is the case with social networking. If all you strive for are “followers” and “likes,” you are using the social networking the wrong way. You are using it as a hammer to pound non existing nails.

Such is the jest of the article Are you Guilty?–4 Ways Indie Musicians Are Killing Social Media by Joshua Smotherman. Smotherman exposes the practice of “Me, me, me Marketing.” No social conversation, no interaction, and most of all, no benefit to the reader.

Regardless if you are a band or a bar, you must engage your audience in something that can help them. It might be something educational like videos of band rehearsals, or the manufacturing of your product. Your reader (or viewer) walks away a more educated person.

Don’t make yourself the center of the hub because you are selling yourself. Instead, be the center of aiding the reader. “Seduce” readers into your world, don’t force them. If you offer something for them to use, they will find YOU useful. If you offer them only you, they will find you boastful.

Become the expert, not the exhibitionist. Advise others who seek your expertise, don’t pitch them for their attention. Your assistance will make you the expert, and you will build a loyal following.

The trick really is to weave what I have stated into your web page, blog, social network, videos, and appearance into your marketing strategy. Everything should be interrelated and substantially greater than if you did each one independently. Everything must tie into every “other” thing. You should not have a piece of the tactics sitting out in left field not integrated into the rest of the strategy. If you can’t integrate it, dump it.

Musicians and other business people must understand this going forward because at least one of your competitors will.

Artists’ Business Strategy: Give Them Something To Talk About

Sometimes the hardest part about struggling to reach your dream are the people around you. Dreama’s article, 5 Annoying Conversations Non-musicians will have with you talks about humorous questions insensitive people ask musicians who have not yet realized their dream. I think most people are not deliberately insensitive, they just don’t understand what it is like to be a struggling artist.

I was speaking to a good friend of mine, Dean, last night who is pursuing his Christian Music dream while balancing his “day job.” He agrees. Just because you are an artist doesn’t preclude you from also having (or seeking) business skills. There are so many sources (like this site) where you can learn basic business principles. Here are a few tips to get you started:

The world doesn’t think they owe artists anything. Some musicians/songwriters (prospective clients) I meet think that because they are “the next great” artist, the world owes them them a livelihood so they can create. Some of these mooch off their parents, friends, or anyone with an extra dime that will pay their rent. History doesn’t support this frame of mind. The first step is to take responsibility for your own support. If you have a spouse that is willing to support you, great, but treat him/her like you would an outside investor where you must work hard to provide a return on his/her investment. It may save your marriage.
Understand the business. There are many books, speaking engagements, and associations that can inform you of where the “business” is at the current state. Especially in Los Angeles, organizations that I belong to are always clamoring for new attendees for our speakers. Connect to various social networks and seek them out.
Create Real Business Alliances There are people people who believe in you, but less than you think. I have been in the industry for about 27 years, and I cannot stand insincere people. For example, a producer who gushes over an actress telling her she is great and are just around the corner from stardom. When the actress tries take the next step with the producer, the producer is inaccessible. Likewise, bands who find “investors” for their great new project are told they are only in need of a business plan. When they approach me I drill them about their investors before taking a penny from them. They tell me that the investors are ready to write the check but only need a business plan so they can understand the vision. So, the band member pays us to design a business plan. The investors seem surprised because they didn’t think the band could deliver. The result is the investors back away and sever the relationship for no apparent reason. What I suggest for artists is to take baby steps. Don’t go for the whole investment but work your way to it with little investments, and a return. This will serve two purposes: 1) You will see how sincere your investor is, and 2) You will build a real business relationship based on a history.
Be a creative artist with a creative vision You are creative. That doesn’t mean that you are limited to comedy improv, or jazz riffs. You can leverage that creative energy into your business vision, once you followed the steps above. This is an area where our society is deficient. People seem to bifurcate artists and business. Right brain, left brain. There is nothing stopping you of using your whole brain. Build a foundation as stated above for the business side and let your creativity soar.

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 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.

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.

Strategic Planning for the Artist: A Los Angeles CPA Business Manager’s Attempt to Integrate Business Concepts

Tomorrow, as a Los Angeles CPA business manager, I will be merging two of my skills with a client. My entertainment business management skills, and my strategic planning skills. This client is a singer/songwriter who produced a music demo and video. My question to her was, “So what?” If you pursue the path of other musicians to acquire a contract, a 360 deal, you are no better than them, and may be just one of many homogeneous artists trying to make it.

This actually happened to my dad, Bobby Norris, in the 1950s. He signed with Capitol Records as a rockabilly artist, only to receive very little promotion for his records. It wasn’t until after he died, 2003, that he receives the recognition that he longed for as one of the original rockabilly personalities.

As a Los Angeles CPA business manager, I really don’t see artists driven in their profession from a real strategic planning position. I did stumble onto a book that seemed to address strategic issues. But I will have to buy the book to see if they do more than just scratch the surface.

So how would I, as a Los Angeles CPA business manager recommend how an artist should strategically work their career? Here is a short answer to a long question:

Identify an issue. What are you really trying to accomplish? It has to be more than “be a star.” You have to really focus on something and list your assumptions on why you are equipped or not equipped.
What is your vision? Quantify what you want. For example, to have 1 top ten single on the charts every year, or play to an average of 200,000 per event. See Jim Collin’s Good to Great and Build to Last for big, hairy audacious goals.
Why would the fans want you? You must focus on your fans. Many books like Blue Ocean Strategy help you think on a level of satisfying your fans and creating an uncontested marketplace. Don’t give the fan more of what they heard. Find out their needs and satisfy them.
SWOT analysis and quantifying: Now you can look at your strengths, weaknesses, opportunities, and threats. You must also put some real numbers to your goals.
Lay out your strategy
Reduce the strategy to tactics

I’ve produced this approach, in part, from Johnson and Smith’s 60 Minute Strategic Plan.

In my opinion, as a Los Angeles CPA entertainment business manager, you must think strategically about your career and stop focusing on yourself. Focus on your fan base and serve them the art they deserve and are entitled to. As Los Angeles CPA business managers, we try to work with clients on the front end, not just record the results on the back end. That is where we strategically differ in our profession.

Jeff Bridges: Be an Actor or a Singer, His Skills Are Transferable. And In Business, So are Yours

Many articles surfaced earlier this year about Jeff Bridge’s crossing over to country music. Some were not flattering. For example, theweek.com quoted comments that branded Jeff as “country-lite,” and “a troubadour tourist.”

But the critics missed the biggest point about Jeff Bridges. Back in the late 1980s I work on the Bridges family(Lloyd, Jeff, and Beau) in a business management firm. I remember my boss commenting about Jeff being the consummate artist. He said Jeff knew what he loved to do (act) and did it intensely. He also mentioned that Jeff’s wife, Susan, took care of the typical things in life and family allowing him to pursue his career unheeded. It is no surprise that Susan was the first person Jeff acknowledged after receiving his Oscar.

But the critics missed the point. What Jeff demonstrated, was that he could transfer his artistic skills from one medium to another. The movie Crazy Heart was just his first vehicle, and it won’t be his last.

The same can be said for anyone today, whether an artist or small business person. This is echoed in 8 Tips: How to Make Your Company And Career More Dynamic by Shira Levine. In the article, Shira quotes James Marshall Reilly who says:

“We’re lucky, because these days, our skills are more transferable. ‘Advances in technology have facilitated easy access to self-education and idea exploration,’ he says. That makes it easier to take information we’ve previously learned and apply it to other ideas, concepts, industries and businesses. ‘These iterations allow the individual to grow intellectually rather than stagnate in one position,’ says Reilly. ‘They also allow for the influx of new ideas to established fields as people move around and infuse new lines of thinking into conventional and often rigid spaces.'”

The Reilly article equates our current society status to the Renaissance period, when there was an explosion of ideas in society leading to leaps in the area of art, science, literature, etc. If he is right, then everyone reading this article, no matter what you profession, has the opportunity to be a part of it.

For example, if you are a singer/songwriter, are you just trying to match the path of those before you, like acquire a recording contract? Or how about a small/medium sized business? Are you evaluating every new technology in light of how you can change your company?

Looking at our CPA practice, we have done just that. Many companies cannot afford comptrollers and an accounting staff due to the economy. What we have devised systems that provide accounting, tax, bookkeeping, and access to any of our financial affiliates. We have leveraged the current paperless and remote access technology, among other things, to provide this service.

The skill transfer also surfaces from our entertainment industry experience. As business managers, we sometimes deal with all financial aspect of entertainer’s lives. We have transferred that skill to our small business clients if needed.

You don’t have to be an actor to transfer skills. The pallet of gifts are there for you to use. You just have to grab the brush and execute a strategy.