The most dysfunctional industry on the planet

If you haven’t realized it yet, artist development and music production are not inexpensive endeavors. And money can be seen as a huge obstacle to many people in one way or another. Artists have just as complicated a relationship with money, as all people in general. It’s often seen as some kind of magic wand by those that don’t have it and can become an albatross around the neck of some who do. That said, money is a tool that relates to your career as an artist.

Myth BustingSomeone should pay for your career. If you think someone should take all of the financial risk in your career because you’re the ‘talent’, then I have news for you; you’ll probably be waiting a long time if that’s your only strategy for success. Although legendary megastars like the Elvis Presleys, The Beatles, and Michael Jacksons of the world, are indeed exceptional and happen once every 20-ish years, the majority of talent that drives the success of the music industry is not as scarce as many of the industry’s aspiring artists might think.  One only needs to turn on any one of the many singing contest reality shows to see many talented people. So although you must hold to an unyielding belief that you can be successful with your craft, you should also stay humble and realize that you will need to invest in yourself with total commitment and resources if you want someone else to commit their resources as well.

A lot of money is the only alternative to no money – If you don’t come from a background of financial education, either through your family upbringing or otherwise, then you might have the view that I’ve seen many artists adopt; you either have money or you don’t. This ‘all or nothing’ mentality is pervasive in much of the way music is marketed, especially urban and hip hop genres. When you’re struggling to pay bills, a few thousand dollars is everything. When you have ten million dollars, then a few thousand dollars is not a huge sacrifice. A lot of money is not always a lot of money. But when you’re struggling, a significant amount of money can seem like all the money in the world. As Jack Ma, billionaire founder of Alibaba once said, “When you have $1,000,000 you’re lucky. When you have $10M you’ve got troubles. When you have $100M or $1B, you have responsibility.” … It’s all relative.

I need money to make money – This is a popular myth that’s been around a long time. It is true that you will need to have ample funding to grow your career. However, that doesn’t necessarily mean that all of that funding will be generated by you. What you’ll need is some validation that you’re worth an investment. The best way to do this is to, not only be a great artist, singer-songwriter, or band, but to have a prototype- an actual finished product that competes at the major label level, or is at a level of quality that can be exploited in the marketplace. Even better, would be music with a great video that is already showing traction with a growing fan base, engagement on social media, and fans coming to your performances. People are people and so are investors. Everyone wants to hear an amazing finished product- not a ‘demo’ or some excuse for why it doesn’t sound amazing.

The Players – Private investors generally come in three categories: friends and family, angel investors, and venture capitalists. Venture capital firms don’t really invest in emerging music artists so they’re not worth pursuing. Friends and family, and angel investors are where most funding comes from for private investment in music artists.

Record Labels – Artists are looking for a record label even though they have no idea what a record label even does for them. A record label is an investor. They also happen to bring a lot to the table in terms of helping your career as record labels have the exact infrastructure you’ll need to be a megastar, if that’s your goal. However, attracting a record label is a bit of a chicken or egg game. Most record labels want to see the kind of success that record labels themselves generate, and most artists don’t have the means to generate the kind of success that labels want to see. industry on the planet. Record labels are the most coveted investor group for your career. That said, they exact a heavy toll for it. Major label record deals are traditionally very heavy handed in favor of the label. Typically a major label will require 85%-88% return of all of your profits and will also retain most of any creative control. In addition to these terms, record labels structure their ‘investment’ in an artist far more like a loan that, although you don’t have to pay it back if you fail, you don’t get any of the profits until they’re paid back first. So, if you find yourself with a major label deal at hand, be mindful of the fact that, whatever money you’re allotted as an upfront cash advance for living expenses while you tour or make records and videos, might be the only money you will ever see – unless the label recoups all of the money they invest in you first. Welcome to the most dysfunctional industry on the planet.

Everything Has A Price – Here’s the part that most uneducated artists don’t get- there is no free lunch. This is a good rule to follow in anything in life- everything has a price. Investors want to make money. And since they’re taking the risk of putting up their money, they will want a handsome return. Private investors will usually offer the better deal. Friends and family are the best place to look because they know you personally, and generally want the best for you. If they can make some money in that process, they’re usually thrilled, but sometimes they just want to help someone follow their dream. I’ve seen friends and family investments with artists structured from “pay it back whenever you can” to “10%-20% for a couple of years”….and sometimes just “you’re our kid, so buy us a house someday”. Angel investors are a bit harder to come by, although they can sometimes be someone from the friends and family circle. Angel investors are typically more interested in making money than friends and family, but have a strong desire to help. They believe in you, but generally are looking at their investment with more business acumen. Angel investor deals can be structured from 10% to up to 50% return (or more) for many years.

Have A Plan – I was interviewed a while back about how important it was to be a good planner when you pursue music. I don’t remember the exact quote (I’m sure it’s on Google somewhere) but it was something to the effect that having a written business plan was a great tool when looking for investors, because most aspiring artists didn’t have any plan at all. Which is still true today. Since most finance people think music artists are flaky creative types, you can really impress people with some kind of written business plan or pitch deck of some kind. Have a plan. It doesn’t need to be perfect since it will likely change in response to reality, but have a plan with some sense of what you want to do to grow your career if you had X amount of money.

It’s a scam – That’s what many parents tell their kids when they come across legitimate music industry opportunities for their career.  First of all, most parents are not qualified to determine what a legitimate opportunity is or isn’t in the music industry. That’s usually why many people will take a dismissive stand with their aspiring talented young adult. As a teen or young adult, parents will feel that they’re more qualified to determine the value of an offer- and in fact, they are. However, although parents are often more qualified than their kids, that doesn’t mean they’re experienced enough to discern the full value of an opportunity in an industry they have zero experience with. So, as a result, insecure parents will hastily deem all opportunities as illegitimate- especially if they have to invest any money- as a way of saving face about an industry that they’re fearful or apathetic about learning to navigate.

Paid Vs. Free Services – I’ve written about various paid vs. free services for new artists in the music industry before. Many people who grew up in the 70’s, 80’s, and 90’s may remember a time when they heard stories of their favorite artist being “discovered”. So naturally, most people go with what they know and this obsolete viewpoint persists today. It is true that some artists are still discovered. Today that usually means that they’ve appeared on Idol or The Voice, which probably resulted in fifteen minutes of fame and nothing else. If they’ve appeared on TV, then that typically means they’ve signed away their rights to do anything with their music career without the show’s benefit or consent too. So an artist gets tied up for some of the most valuable years of their career, just to be rejected from progressing on the show.  A few lucky artists might gain some notoriety but what does the artist that doesn’t fit the generic profile that these shows look for do? The truth is that many thousands of aspiring artists get nowhere when you’re waiting to be discovered. I call this the ‘savior-ship’ model. And it’s prevalent for most people because of other societal factors which I won’t get into here. But the best proactive mindset is that no one’s coming to discover you or save you. If your destiny is success, then you’re going to have to meet it halfway.

Red Flags – Of course, there is a strong argument for real scammers in the music industry – just like in any industry. The hucksters are plentiful and anyone with a laptop seems like they’re calling themselves a “music producer” these days. There are many aspiring producers, songwriters, and managers that are eager to inflate their capabilities, exaggerate their industry connections, make empty promises, learn on the job at your expense, and are often better at selling you to work with them, than they are at the actual work itself. If someone says they’re going to “make you a star”, then that’s a clear red flag. So how does the discerning artist, guardian, or parent, figure out if an offer is ‘legitimate’?…Look at their experience. Who have they worked with? Have you heard of any of the talent or companies they’ve worked for? Talk with them. Ask questions. Inexplicably, have poor judgement. As an artist, this can be a big missed opportunity because many young artists are relying on family for guidance and resources. So use your gut and get a feel for the people on the other end. People that are transparent with their intentions will answer your questions and explain the options. Either way, it’s up to the artist to weigh the options of whether an opportunity is the right one. It will require you to examine the people involved and their background, as well as the offer itself. If the producer, management, or label that’s interested in you comes with years of experience and successes, then you can be rest assured that the question isn’t only “Are these people qualified enough to work with me?”, but “Am I talented, determined, and committed enough to work with them?”

Much credit for this article goes to Alex Houston of Artist Development and Production.



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