The Business of Music, Part 2: Assembling A Winning Business Team

Have you ever wondered who comprises the team of advisors a musician needs for a successful career?  Some of us have.  We know that it is needful and it is quite complicated. Most of us just want to enjoy the music and not think about the business.

So if you’ve been wondering and want the Cliff Notes version from a fan’s observations and research, keep on reading….this is just meant to be a layman’s mini-guide about the basics and to help give us fans a framework to attach the bits and pieces that have come our way about the business of music.

The truth is the artist cannot exist without the dollars and cents side of music.

The team a musician needs to be successful and have longevity in an industry that is known to have, for the most part, short careers are:  Personal manager, business manager, agent (& agency), and attorney.  Of course there are the fans, but we already know about that role, at an expert level at that.

If you want to read on, click on “Continue reading” below, to the right…….

For this segment of the research I’ve done on this topic, I am referencing heavily Don Passman’s book, All You Need to Know About the Music Business (7^th Edition).  It’s one of the books I read from beginning to end, not skipping a page, nor reading ahead.  It was fascinating and enlightening.  Gave me new and mad respect for even trying to navigate the industry and all that a recording artist must deal with to be financially successful.

Passman by the way is a leading entertainment attorney.  He graduated from Harvard Law School and lectures for the UCLA Entertainment Law Symposium, Harvard Law School, the American Bar Association, the Practicing Law Institute, the USC Entertainment Law Institute, and the Los Angeles Copyright Society.

I really found his book easy to read.  He made record-breaking “mega” deals for Janet Jackson and R.E.M. so he appears to have the credentials and chops to know what he’s talking about.  However, all that has to be seasoned a bit with remembering he writes to also generate business but I bet he’d be a heckofa conversationalist and expert on this topic if one chanced to meet him.

Major music business professionals – those that artists would want for their business team – are found in three geographic locations – Los Angeles, New York City or Nashville (mostly for country artists though.)

Personal manager – single most important person in a singer/songwriters professional life.  Some musicians do it their self in the early go due to finances.  The right personal manager will guide the musician’s career to its zenith.  Must serve as the Chief Operating Officer and general manager of the musician’s business.

• Helps with major business decisions like publishing deals, record company deals, how much to ask for.
• Helps with creative process, which songs to record, selection of band members, producers, photographers.
• Promotes career constantly, coordinates publicity campaign.
• Assembles professional team (rest of the team listed below) and oversees their work.
• Coordinates concert tours; works with agents to make best deals for promotion, route of the tour, works with business manager to develop budget, assembles and supervises road crew & tour managers.
• Aggressively communicate with the record company for maximal advertising and marketing of records.
• To be a buffer between the musician and the outside world – field inquiries for personal appearances, charitable requests, endorsements.
• Commission is usually 15% of gross earnings before expenses are deducted but can be net expenses if negotiated.
• Artists who earn $10M or more are highly sought.  Less than that, it’s a sliding scale as to the personal. manager/artist power relationship in terms of who needs who and what the terms of the contract dictate.
• Contract term 3-5 years.  The Manager pushes for longer term.

Agent (from Agency): Find agent who represents the musician’s style of music which means they should represent other singer/songwriters in that same genre.   The Agency may represent a broad array of artists but the agent the musician selects needs to have expertise in the musician’s genre(s).

• The agent’s primary function is to book live personal experiences; sometimes involved in commercials, tour sponsorship, tv specials but don’t participate in records, songwriting or merchandising.
• Usual commission is 10% but excludes record deals, songwriting, royalties, in general.  Agents are heavily regulated by unions, AFM and/or AFTRA.
• Agents usually have worldwide rights for new and mid-level artists.
• Term of contract is recommended to be 1 year but agents may require 3 or more.

Business Manager – In essence, the accountant or Chief Financial Officer of the musician’s business.

• This person is the money person.
• They keep up with what is owed, they collect the money, pay the bills, make investments and do the tax returns.
• They should know the EBITDA* instantly and be calculating the change in EBITDA with every business deal considered.
• They can be paid on a % (like 5%), hourly or flat rate basis.

Attorney – Looks over contracts, gives legal advice, and structures deals.

• They have the biggest clout in the music industry and a major player in shaping the business life of the musician.  Emphasis on a major power player (according to Passman) in the business end.
• The artist wants someone who is heavily connected as the attorney influences deals, and helps in assembling the rest of the team listed above.
• Fees can range from hourly rate, to % (5-10) or value billing which involves a fee based on the value of the total deal.

Well this foray into this topic of a management team has cleared up quite few misconceptions for me as to who does what.  Hoo Boy, was I wrong about a lot of things.  How about you? Agree?  Disagree?  What do you think?

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Last installment:  Part 3 – Is the fleshing out skeletally the business components of record deals, songwriting & publishing, concerts & touring and merchandising.  Betcha can’t wait….lol.

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*EBITDA = Revenue minus Expenses (excluding tax, interest, depreciation and amortization).  Basically you can think of this as the profit if the entity is debt free.  Debt meaning long term as in loans over years.  In business it is essentially net income with interest, taxes, depreciation, and amortization added back to it, and used to analyze profitability because it eliminates the effects of financing and accounting decisions.

To catch the first article in this 3 part series:  The Business of Music, Part 1:  Anatomy of a Successful Musician/Songwriter