Introduction

In the Spring 2009 eZine, we argued that every music major should be required to take an "Introduction to the Music Business" course that teaches the rudiments of what it takes to make money in the music business.

We then asked the reader, "how would you advise a student who asked you the following music business related questions?"

In this edition of the eZine, we attempt to answer these questions. (Our answers are below for each question).

1. You’re starting to teach private lessons at home. Is it likely that your homeowner’s insurance covers potential small business liabilities, such as sexual harassment allegations?

Answer: A typical homeowners policy will likely insure only a small amount of business property, and absolutely no business liability. Even with a typical “home-business endorsement” a policy is unlikely to cover business activity liability, though it will cover “premises” liability such as slip and fall. And even many commercial insurance policies will specifically exclude sexual harassment or similar liabilities (see: ISO standard form liability insurance contracts).

2. You have a great idea for teaching composition on the internet via Skype. Site setup: $3,000 plus $100/month to maintain and promote yourself. How many weekly students (at $75/ lesson) do you need to reach “financial breakeven” in 6 months?

Answer: Just two students. Expenses = $3000 + ($100 X 6) = $3600. $3600 divided by $75/lesson = 48 lessons. Assuming 4 lessons / month / student: 48 lessons divided by 4 lessons/student/month = 6 months of lessons for 2 students (the 6 month financial breakeven).

3. The promoter of a concert in which you are the lead performer wants to send the local papers a press kit. List 4 elements that might be part of your press kit.

Answer:

At a minimum, a press kit must have
-at least one reproducible image of the artist or product
-a biography of the artist (very few artists merit more than three pages – remember, busy journalists have to read this)
-a press release explaining why the journalist is receiving the kit (or a cover letter if the journalist requested the kit).
The kit might also include
-articles about the artist
-a bullet-pointed page of talking points
-a CD or DVD
-an electronic press kit with video and audio edited for broadcasting.

4. You’ve been asked (by the film director) to compose an original score for a documentary film “as close as possible to the music of ‘Appalachian Spring’ without violating copyright.” What is the name of the legal agreement you need to help protect yourself?

Answer: A proper “hold harmless” agreement would transfer possible liability for copyright infringement from the composer to the film production company. Note that when a cornered composer simply asks for such an agreement, it will often result in the film production company backing away from the unsavory demand to imitate another composer’s music. Note also that no insurer would ever underwrite a policy to cover either deliberate infringement or “get as close as you can” copycatting.

5. Your best friend Sallie Smith is forming a string quartet to play local gigs.

a. Name a few of the most common business perils of such an enterprise.

Answer:

Common business perils of startups include:
-Lack of a business plan – no one will invest in your business without a plan re: exactly how you expect to make money for them. You should have a plan so you know how you’re going to make money for yourself!
-Inadequate startup cash – how do you pay your expenses, your employees, or yourself? How long until you reach breakeven? (These are also questions answered by a business plan)
-Poorly defined partnership responsibilities – What do the partners expect from each other? This should be in writing and signed by all the partners.
-Unprofessional management style
-Ineffective marketing
-Insufficient understanding of the existing competition.

b. Name two legal entities she might logically choose to build her quartet enterprise.

Answer: Choice of business entity for the quartet would include the very simple option of creating a “D.B.A.” (Sallie Smith “Doing Business As” the Mankato String Quartet). This would allow Sallie to establish a business bank account, but would not shield her from personal liability (for example, if the cellist failed to show up and the facility sued Sallie for failure to perform). Sallie’s more complex options would include forming a limited liability corporation, which would shield her from personal liability, and might generally be a better and more flexible choice under typical circumstances (though it will cost some money for setup, accounting fees, and the like). She might also consider forming a general partnership with the other members of the quartet.

6. The local NPR station is giving you three 60 second slots, for free, to advertise your upcoming concert. Name a few general distinctions between writing good ad copy for print vs. good ad copy for radio.

Answer: Generally, radio ad copy is better if it is more colloquial/conversational than print copy. Because someone actually speaks the copy, humor or irony generally work more effectively in radio than in print. Sentences should be shorter in radio. Mention the event with frequency, or better yet, set up the name-mention with a premise that makes the listener feel attentive and intrigued.

7. You have written an exciting new book about Broadway show music. Name one advantage or disadvantage for each of the following:
a. E-publishing through a web retailer.
b. Retaining a book agent.
c. Setting up download purchases from your own site.

Answer: One of the great Catch 22s – It’s hard to get published without an agent, but most agents won’t look at you until you’re published. As with music, the internet has made strides in leveling that playing field. Since electronic shelf space is virtually unlimited, anyone can publish a book electronically, or on-demand. Some traditional publishers have started making certain titles in their catalogs available solely on demand as well. Some authors have done very well making their e-books available only via their own website. The trick with this gambit, as in music, is promotion -- getting people to your website to actually buy the book.

8. You’re a studio singer, being asked to imitate the voice of Barbra Streisand for a film soundtrack -- something you can do perfectly. Should you do so? Why or why not?

Answer: Your ability to imitate Streisand perfectly (for a fee) might cause a problem under the doctrine of the “Bette Midler Case” (849 F. 2d 460). In this Federal case, Ford Motors and their ad agency were sued for hiring one of Bette’s background singers to imitate her vocal sound and style for a commercial. The court decided that at the least, Bette had been cheated out of the fee she could have negotiated for singing the commercial herself. As a minimum precaution, you should ask for a hold harmless agreement (see question #4). With any luck, that will keep you out of the courtroom personally.

Note that unlike issue #4, this is not a copyright violation. There is no copyright in the sound or style of a voice.

9. You are playing for a small charitable fundraising event. The musicians each receive only a $25. stipend from the charity. Is this a union violation? Must you pay tax on such a fee from a charity?

Answer: It is unlikely the local chapter of the American Federation of Musicians would object to a mere $25 payment under these special circumstances, but if you are the gig’s contractor, we’d suggest checking with the union in advance. The $25 is, in fact, taxable. But keep track of your deductible expenses for the gig – such a small fee would likely turn out to be a wash. (And in reality, of course, it is extremely unlikely the IRS would use its resources to pursue such a minimal sum.)

10. You’re in a union recording session for a commercial, and the conductor says, “Let’s do that again, so we can double-track the strings.” Does this violate union rules? Why or why not?

Answer: Recording the same part twice, for a doubled-player effect upon playback, is perfectly legal under A F of M union rules – if the party responsible for the recording is willing to pay for it. Under union rules, it will double the salary of the session for those players. Note that double-tracking without payment is a highly objectionable violation of session rules and should not be tolerated. (Essentially, unpaid double-tracking puts musicians out of work.)

11. Your first major composition is about to be published. You must decide: ASCAP, BMI or SESAC. State any supportable reason for choosing among them.

Answer: Since this your first publication, it is unlikely that SESAC would admit you. SESAC generally accepts only seasoned writers, via what amounts to invitation-only. ASCAP and BMI present substantive differences, depending on genre (though the internal workings of both organizations are secretive and therefore it is hard to quantify this conclusion precisely). Example: For many years, there was a consensus among composers that on average, BMI paid notably better for TV underscores, and for jazz, while ASCAP paid better for theatrical works. So, your choice of ASCAP vs. BMI should probably depend on information you obtain by soliciting the opinion of experienced composers working in your strongest genre.

12. Powerful new-media developments now affecting the future of all styles of music include: Collaborative filtering, P2P file-sharing, crowd-funding and lifestyle branding. Define each in a few words.

Answer:

-“Collaborative filtering” refers to the process of creating recommendations based on wide participation of the public in the process, such as the way Amazon.com creates recommendations for records or books.

-“P2P file-sharing” (P2P stands for “Peer-to-Peer”) usually refers to the way many people trade music files with each other, or through some facilitating service, without paying for them.

-“Crowd-funding” is any funding mechanism through which many people can directly support a creative product, often eliminating a middle-operation such as a record company. For example, if 3000 fans each contribute $10. to offset the costs of the creation of a new record album, there may be no need for a record label (see SliceThePie.com).

-“Lifestyle branding” refers to the use of specific musical artists and/or styles (from hip hop to classical) to enhance or slant the brand image of a product in the eyes of the brand’s customers. A good example would be the boomer-oriented music offered by Starbucks.

Conclusions

Now let’s now return to our confused vocal professor at the beginning of this article. He didn’t understand that there is a vast difference between the legal concept of “music publishing” and the publishing of a book or folio of music. When you physically publish a book or folio of music, “publishing” does indeed mean to create a tangible thing. However, legal music publishing has many more components to it. It involves such matters as:

1. Registering the work with the Library of Congress via the Copyright Office, using the form appropriate to the nature of the work.

2. Forming a “publishing company” or working with an existing company that will represent, monitor, and exploit the composition via licenses and the collection of royalties.

3. Becoming eligible to collect royalties for public performance through joining a Performing Rights Organization (see question 11).

4. Registering the song with that PRO and with the Harry Fox Agency (which collects “mechanical” royalties for the printing of CDs and other audio and video reproductions of the music).

Publishing is one of the most lucrative areas of the music business, about which many music professionals know little. Certainly, the vocal professor did not understand. He does now. Shouldn’t you? Shouldn’t our students?

References
Chris Anderson, “The Long Tail” Wired October 2004