Clarifying the economic lines between music and politics.

Lavatory Records

When it comes to discussing socio-political issues, artists in general are usually the most expressive compared to most other professions. This includes musical artists, novelists and fiction writers, painters and sculptors etc. In the last music economy article we spoke about how economic recessions affect the music industry. The article described how politicians utilise the services of musicians when campaigning for elections. As frame of reference and to quote from that article, “In the USA – we have seen artists like Pusha T and Jay Z openly endorsing Hillary Clinton during the presidential elections of 2016. During the time when these prominent artists had tours, they would endorse Mrs Clinton on their social platforms, make special mentions of their favoured candidate during their stage performances and even disparaging the rival candidate. In the context of South Africa, the ruling ANC (African National Congress) party would hold national rallies at stadiums around the country and have a procured list of artists to perform there!”

The paragraph cited above has proven to be a point of contestation and caused some mixed opinions from some of our readers. Some felt that musicians endorsing a politician is one thing, however when an artist performs at an event (such as a presidential inauguration) that is another matter altogether as it’s “just another opportunity”. Much as an opportunity to perform should always be explored, this is where an artist must also be aware and weigh up if this form of exposure is worth any form of reputational damage. It is important to note that there is a difference between performing at political and state functions. For example, performing at a political (pep) rally is different to performing at a presidential inauguration. It is very important to differentiate between the two separate structures in order to evaluate the offers that come the artist’s way.

Continue reading

Advertisements

Expect a surge in spending on entertainment during the recession.

 

 

Lavatory Records

With all the hysteria about  global currencies volatility and the trade war with China and the USA, the global markets in the world are going through a bit of a frenzy due to news of another global recession. This is particular to the financial markets with accusations flying around about currencies being either overvalued or undervalued, depending on what each individual country’s (or region in terms of the European Union) agenda is in the global trade arena. With many businesses now plying their trade in the modern global game as either importers or exporters, the situation could adversely affect businesses depending on which on end of the foreign exchange rates is conducive to the particular success of the business. With all that is going on in the global economy, a good question would be how does this affect the music industry?

In the short term, when there’s a global recession or depression, it can usually be a very good thing for music entertainers! Usually when uncertainty looms the tendency “to distract and divert attention” is deployed by governments or businesses, whenever there’s a looming down turn in business or productivity. For example – when companies know that business activity closer to the end of the year will wind down, they then decide that this is the ideal time to have their office parties which involve bringing, food, liquor and entertainment (music). Much as office parties are a genuine gesture of employees thanking their employees, they can also be seen as an anomaly due to the employer “surrendering” to the forces of the market environment. When the festive season hits with all it’s “festivities”, it’s usually a good time of the year for artists as that is when they are at their busiest in terms of bookings. However, musicians can be busy at other times apart from the festive season. For example, when politicians around the world want to campaign elections – a lot of the time they would turn to musicians for endorsements.

Continue reading

Profit Margins in the music business: How much should an artist give away and retain in this present music economy?

Lavatory RecordsIn the current paradigm music artists find themselves in the position of being wholly independent, which leads to many of them thinking they would be entitled to keep all of their earnings! Unfortunately, it doesn’t quite work like that, as “independent” doesn’t necessarily mean that an artist did everything by themselves – it’s actually quite the opposite! The more successful artists are the ones who actually know who to keep in their circle that make valuable contributions towards their careers.  Through various forms of revenue such as royalties, commercial deals, album sales etc, an artist would somewhere down the line have to pay people who are imperative to their success. This ties in with subject we have covered in our value-chain analysis article. The music economics series this time around discusses how special people are compensated for their efforts.

The splitting of the revenue comes in the form of management fees, agent commission, distributors duty & fees etc. All these forms of revenue split vary and depend on how the artist’s bargaining power is determined. The final fee or cut (in percentage form) from the point of view of the product or service (music album or stage performance)  an artist has to sell, goes a number of ways to cover expenses and then to determine how the profits are split. The moment the conversation comes to profit splitting, there are a number of dated principles that are still presently applied that need to be understood first before deciding to part with 10%, 20% or 30% and so on…

Continue reading

Dr Boyce Watkins says “Don’t try to make money rapping, start a business instead”

Lavatory Records

Dr Boyce Watkins from Your Black World speaks with a young artist Jay Ortiz  about the importance of approaching the music industry with a business mindset. The focus of artists building stages instead of them looking to just jump on to a stage, was the main focus of discussion which was what Jay Ortiz managed to do.

When we started Lavatory Records, it was not just about starting a label, rather more about setting up artists as business people.

Watch this discussion on YouTube or  SoundCloud.

 

Music Royalties in the “free” digital age

An interesting debate has since sparked, following the revenue creation through music royalties article that we published on the in June 2016. It’s a known fact that traditional radio and TV stations usually make money through advertising revenue and subscription fees. In all forms of media (print included), the assumption has always been that media communications,  as a service, were paid for by the consumer.

Lavatory Records

However, the Internet era has presented independent artists with a variety of platforms to ply their trade on, with some being free. This is one of the reasons why social media as a free service, has become the most popular method for musicians to market their music and content.

Continue reading

Your bargaining power as an artist is in your ability to walk away!

Lavatory Records

The term bargaining power is a concept that was widely discussed by economist Michael Porter, when he conceptualised the “Five Forces Theory”. This framework as developed by Porter is a business industry analysis tool to measure a business’s performance in terms of profitability and strategic sustainability. Porter listed these five elements: Threats of New Entrants, Threats of Substitutes, Degree of Rivalry, Supplier Power and Buyer Power. The real reason any business would do an industry analysis is to gain a competitive advantage over other rival firms. Quick MBA gives an extended explanation of Porter’s five forces theory.

Continue reading

Revenue creation through music royalties!

Lavatory Records

One must confess about the subject of royalties, no matter how many times it was explained over and over to this writer, the concept of earning royalties just never truly hit home! This was down to the fact that seeing value in the “unseen” is a difficult concept to grasp for people who are not investors.

With music, the impact of one’s works is not something tangible or physical. For instance, how would something as subjective and experientially based as music be measured in quantifiable terms? Perhaps to fellow right brain thinkers, royalties are simply a good thing because it means more revenue streams for the artist. It is nice to know that you can earn money from making music, depending on how much an album sells or how often the radio and television stations play your songs. However the justification of why and how much is due to you is one that requires much deduction. This is again where financial literacy comes in and understanding all the aspects and perspectives, that would best explain the justification of royalties and different forms of them.

Continue reading

Value Chain: The kind of relationships you form will make or break you

Lavatory Records

While growing up you may have heard sayings like “birds of a feather flock together”, “you are who you surround yourself with” etc. These sayings, pertaining to the company one chooses to keep, may be cliched but never get tired. The fundamental principle is that those who value the same things and share the same interests will find each other; and therefore naturally add value to one another. The concept of value adding is very important in trade and commerce and can be applied in music too.

Lavatory Records

 

According to Investopedia: “Value added is the enhancement a company gives its product or service before offering the product to customers”. In the context of the artist operating within the music industry, this would entail the artist having to take the role of being a producer in the economic sense. Your music composition would be adversely affected by your band mates, featured artists, music producer/ beatmaker, your post production audio engineer, and the publishing house that manufacture your CDs – all these people would be established as adding value to your final song as a product. These inputs ultimately affect the final outcome of the song you compose, to which you (as a composer) would find hard to quantify. This means, for as long as you as the composer/producer and your fans are happy with the final product, how much you spent into creating that piece of art is of little importance. Bearing in mind that the entire process of the creation of your work does not leave you in a pool of debt and you are staying within your means.

Continue reading

Opportunity Cost – The cost of taking that free gig!

Lavatory Records

For many artists who are just starting out in their career there is always the possibility of finding themselves in a situation where gigs or bookings will be rewarded by “do it for the exposure” phrase as much more polite way of saying “you will not get paid”. Many will usually rant and rave and start talking about exploitation and being taken advantage of. However, there are a few things one must consider before writing off an opportunity. This again is a principle of economics in regards to Opportunity Cost, starting from analysis of one’s economic situation at individual level. By mastering the principles of being able to stay within and below your means, you would then be able to maximise off opportunities through developing an investment.

What we are saying at Lavatory Records: STOP COMPLAINING! No one can do to you what you don’t allow. Think carefully before deeming situations as “exploitative”. Taking a free gig can be beneficial to one’s career if done under the right circumstances.

Continue reading