Music and Business 101

Disclaimer: The aim of this article is information and enlightenment; please consult a solicitor for individual professional advice.

MUSIC AND BUSINESS 101

One word of self defence: I am not a prophet of doom, clanging bells and warning you of impending dangers. Well, maybe I am. On the Nigerian entertainment scene, things have been taken for granted for far too long, but thankfully, stakeholders are either sitting up or the economic dip has taken a position on their favourite seats and they are standing up to attention.

This is Making Your Music Business Work 101. Because IT IS A BUSINESS. No sense spending all your good hours making music and going to bed hungry. Yes, music could be the food of love, but it may not work for your stomach. When you’re hungry, there’s the likelihood that good music turns to bad noise.

The Nigerian music scene is quite peculiar. There are not so many standard record labels around. When I say record labels here, I’m not talking about the ones carelessly formed by the artistes themselves; those are all over the place. I’m talking about the standard record label: Artiste and Repertoire, Business and Accounting, Artiste Development, Legal, Art and Graphics, Promotion, Publicity, Marketing, Sales, all the works.

I acknowledge that getting a record label that really understands the business would go a long way; however, this is for those who do not belong to such a label. You must still learn how to make your music business work for you and other stakeholders.

Chances are certain parties are involved:
• You
• Other group members
• Marketers/Distributors
• Your dear Uncle Kayode that loaned you some money (or some other sponsor)
• Your Manager (well, where’s the swagger without a manager, even if it’s your kid brother)
• A media and publicity company (if you are lucky or trouble-prone).

Now, whether you know it or not, admit it or not, everyone listed above (and maybe even more) has a stake in your music career, so sit up, this is business, and you are not in Kansas anymore.

Here are some things you may do:

1. Create a legal structure that gives all the ‘major’ participants a stake in the business. The singers in the group may be two or more. You may create a partnership or even a company. Creating such an entity ensures that the reasonable interests of all the members are identified and documented. There’s nothing that turns off potential investors and business associates like a group of bickering and unorganised singers.

2. Create a profit-sharing structure between the financial stakeholders and contributors. This structure should recognise the financial, labour and other investments of each member. It should also capture the major present (and speculated) income streams: CD sales, other royalties, fees from tours and shows, celebrity endorsements and advertisements, etc. Your sponsor(s) will be included in this structure. It is wise to specify very clearly whether the sponsor(s) will be sharing the profit realised from the particular song/video/album they sponsored or throughout the entire music career.

3. With the marketers/distributors of CDs, it is likely that they will want to fix a price or percentage as their cut in the wholesale price of the CD. If it is possible, link this cut (or a percentage of it) to the profit on the CD sales, so that they get fully or partially paid after, not before, the sales. This may come at a price (for instance, a higher cut), but it might be worth it. Up your negotiation skills (and your prayers) and you might get that. This approach also get’s them to work for the general success of the sales, since their gain is linked to it. In addition, they are probably your best allies on the issue of piracy, since the chances are that they know the pirates. However, take care not to link their payment to your general profit (made from other sources except the CD sales).

4. Spell out who does what. If you’ll be hiring a manager (and you really should), his duties, responsibilities and boundaries should be clearly stated out in a contract.

5. There is the possibility that the group may be very successful, and decide to go into merchandising and spin-offs from their public image and good will, or maybe start a clothing line (think L.A.M.B or September 20th). It will be wise to put the possibility of this arrangement in black and white.

6. Invest on a good accountant. There’s no avoiding your dealing with numbers. And when you earn some profit, you will be subject to the payment of tax. A good accountant can help with both.

7. If you are incorporating a company, make allowances for a shareholding structure that could accommodate future investors, if need be.

8. If you’ll be signing up with a media and publicity company, go in with your eyes open. Understand and be clear on what they will or will not do for you. It’s not likely that their fees will be linked to your profit, but if you are pinching pennies, you may want to go for the lowest media package possible.

9. Get a lawyer, for goodness sake. You’d know that by now.

When you have these basics in place, it does a few things for you. For one thing, it keeps you in control of many aspects of your music career. For another, if at some point you decide to sign up with a record label, you would have upped your financial and general business worth, and you would be respected for it.

Getting your acts together would also make it easier for you to acquire capital from different types of investors if you need it. You may want to invest in other types of businesses (say, fish farming or even pure water production), afterall, the entertainment industry is very volatile and you may not always wow the crowd. This organisation helps you to streamline your investments.

Hey, you may even decide to start your own record label!!