Time For Looking Backward And Forward

By L. Kevin Levine

OK, before I even start, I recognize that this is going to be a rather cliche post (my apologies).  As we close out another year and look toward 2010 with a mix of aspirations of new business opportunities and concern for the music industry, I encourage you to take some time to assess your music business.  Consider those things that went right in 2009, as well as those that didn’t quite hit the mark.  Where do you want to be this time next year?  How do you plan to get there?

Several months ago, I wrote and posted an article titled Beware the Status Quo, in which I suggested setting aside ten minutes each day to think about your music business and how it will operate in the future.  I now challenge you to take some time before the end of the year and put pen to paper and map out your goals for 2010.  To the extent that you have not already done so, I also encourage you to thank those who have helped you to advance your career over the past year.

I hope that each of you has a wonderful holiday season and a happy, safe, and prosperous New Year.

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Defining Success

By L. Kevin Levine

How successful are you as a musician?  These days, that’s not such an easy question to answer.  I know many songwriters whose idea of success is being offered their first songwriting deal.  I sometime receive puzzled looks from these folks when I ask them why they define success in those terms.  Don’t get me wrong, I don’t mean to diminish the significance of being offered a songwriting deal — by a legitimate publisher, of course (which, contrary to popular belief, doesn’t necessarily mean a big publisher).  Other musicians I know claim to have the seemingly simple goal of “just having my music heard.”  Here too, I do not want to diminish the noble aspiration of contributing to the creative fabric of the world.  However, most artists and songwriters with whom I associate are most interested in achieving commercial success (i.e., making a living through live performances and/or commercially released recordings as a writer, artist, or both).

What is the point of this post?  Put simply, you should take time to periodically evaluate and adjust your goals as a music professional.  Part of this is defining what you consider success.  After all, if you don’t take the time to define success, how will you know when you achieve it?  You may already be more successful that you thought!

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Business Plans: One Size Does Not Fit All (Part 2)

By L. Kevin Levine

In part one of this two-part article, I discussed the basics of a business plan.  Business plans frequently include the following sections:

1) The Executive Summary
 This should be the first section of the business plan.  As the name implies, this section is a summary of the key points discussed throughout the business plan.  In the context of a music business, this section usually includes, but is not limited to, information about the types of products and services to be provided, the applicable musical genres, company goals (often broken down into short-term, mid-term, and long-term goals), and information about the target markets for the company’s offerings.

2) Mission Statement
The mission statement often appears second in the business plan.  The mission statement should paint a picture of the company’s goals, ideals, and business philosophy.  Because the mission statement often provides a persona for the company, the creator should take great care to develop a message that accurately reflects the character of the company.

3) Company Overview
This section provides information about the basic structure of the company, including its legal structure (e.g., sole proprietorship, general or limited partnership, corporation, or limited liability company (“LLC”)).  If the company requires special licensing, it is also advisable to include that information here, as well.  This section should also include a description of the basic management structure and company hierarchy (sometimes including a flow chart can be helpful) and provide descriptions of the various positions in the company and how they interact with each other and with individuals and entities outside of the company, including vendors and other parties that provide goods and services to the company and, of course, consumers.

4) Marketing Analysis
I generally recommend describing in this section what marketing professionals refer to as the “marketing mix.”  The marketing mix contains four elements, which are often called the “four Ps”: (1) Product, (2) Price, (3) Place (distribution), and (4) Promotion.  Without going into too much detail, this section should provide rather detailed information about the precise goods and services that the company plans to offer, pricing information for those goods and services, the methods of distributing the goods and services to the consumer, and how the company plans to promote the goods and services.  This is a grossly oversimplification of the marketing mix.  In reality, each of the four elements contains subelements, which must be analyzed carefully.

5) Financial Analysis
This section should include basic pro-forma style estimates of financial performance.  For this step, I strongly recommend consulting your accountant for assistance.  This section should also contain preliminary budgets for the company and its various departments.  I also generally recommend including a breakdown of upfront capital requirements and how the company plans to raise those initial capital requirements (e.g., debt or equity financing).

6) Risk and Opportunity Assessment
As the name implies, this section should contain a realistic assessment of the various risks and opportunities for the company.  I sometimes recommend preparing a “SWOT analysis” prior to completing this section.  In a nutshell, a SWOT analysis is an analytical framework for assessing a company’s internal strengths and weaknesses and external opportunities and threats.  It is generally prepared in graphical form for ease of use and to facilitate a quick understanding of a company’s position.  For purposes of the business plan, I generally recommend translating the results into standard paragraph format.

7) Exit Strategy
Although no one likes to talk about ending a business before it even begins, it is important to include a roadmap for getting out of the business, for whatever reason.  This section is particularly important to include if you plan to take on investors.

As I mentioned in part one of this article, business plans come in all shapes and sizes.  The sections that I have described above are some of the more common topical areas to include in a business plan.  Ultimately, each company must adopt a style of business plan that works best for that particular company.

As a parting word, do not forget to look up from the plan from time to time.  Do not become so obsessed with following your plan — or, more accurately, trying to force your company to fit the precise contours of the business plan that you developed initially — that you overlook changes in the market or in various areas of your business.  The business plan should not be a static document.  Rather, it should be somewhat flexible to allow a company to prepare for, and ultimately weather, the changes that might come down the road.

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Business Plans: One Size Does Not Fit All (Part 1)

By L. Kevin Levine

Entrepreneurial musicians — like all businesspeople — often find themselves in quandaries concerning their daily business operations.  If only there were a magic book to which one could refer when faced with a particular problem or new opportunity.  If only.  Unfortunately, no such book exists (believe me, I’ve looked).  The reality is that if there were a book that could tell you how to operate your music business, it would take at least half of the fun out of running the business.  True entrepreneurs enjoy the ever-changing challenges that come with any venture.  However, that doesn’t mean that you shouldn’t have some game plan in place at all times.

Enter the “business plan” — that intimidating sounding document that casts fear in the hearts of start-up business owners everywhere and, sadly, has created much more stress for many individuals than it really should.  The good news is that, while there are certain issues that all business plans should address, there is no absolute format for a business plan.  In fact, a comprehensive and workable business plan could be jotted down on a napkin.  However, if you plan to submit your business plan to other parties in the course of securing financing or some other purpose, I suggest that you avoid the use of napkins and prepare a more presentable document.

But remember that there is no one-size-fits-all business plan.  True, there are model business plans available, many of which are quite good.  But there are no perfect “off-the-rack” solutions in any business.  I will provide additional information about business plans, including the various information that they should contain, in a later post.

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Beware the Status Quo

By L. Kevin Levine

Those readers who have hung in there with me for any length of time know that the DIY Music Mogul™ blog is dedicated to entrepreneurial musicians who are ready to take control of and grow their independent music businesses.  As I have mentioned before, with advances in recording technology and, of course, that great leveling factor known as the Internet, today’s music industry provides business-minded musicians with many opportunities that were not present just a few years ago.

However, any opportunity comes with its fair share of risks.  One very real, yet rarely discussed, risk is the threat of complacency.  I won’t bore you with worn-out cliches like “thinking outside the box.”  However, I will encourage you to never stop thinking about the way that you do business and asking yourself a simple question: “Why.”  “Why am I doing it this way?”  “Why did I start doing it this way?”  “Why should I continue doing it this way?”  You get the picture.

Does the music industry look different than it did in 1920?  No question.  1950? Absolutely.  1980?  Of course.  How about 2008?  You bet it does.  Indeed, the music industry has survived to this day because of individuals who recognized that they could not merely accept the status quo and had the foresight to develop and capitalize on the “next big thing.”  Want proof?  Just look at the opportunities that the recording industry’s initial failure to embrace digital distribution as a viable — and vastly desirable — method of distribution created for independents.  Had the established industry jumped on the digital bandwagon immediately, would there be as many different digital services today or would there be only a few mega-outlets?  Would it be as easy, or even possible, for an independent to enter distribution deals with those outlets?  Maybe so, maybe not.  The point is that the industry’s early hesitancy to change the established model created opportunities for independents that continue to develop.

I challenge each of you to set aside ten minutes each day to just think about your business and how it will operate in the future.  This should be a workable exercise, so don’t allow yourself to get too bogged down in details.  Think in terms of today, this year, next year, five years from now, and ten years from now. Don’t worry if your thoughts change over time — that’s precisely the point.  There are no maps in life or business.  However, a business that continues down a particular path simply for the sake of seeing it to the end will rarely survive. Keep your notes in a journal and review them periodically to see how well you were able to predict changing trends.  This is one of the most critical abilities that you can develop in your music career, as well as life in general.

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“To Be, Or Not To Be” [Your Own Music Publisher]

By L. Kevin Levine

Last year, I sat on a panel of music publishers at a conference for independent musicians.  At one point during the discussion, an attendee asked, “Why do I even need a music publisher?  Couldn’t I just do what a music publisher does, myself?”  My response was quite simple: “Will you?”  It is true that out of all of the players in the music industry, the role of music publisher has one of the lowest thresholds to entry.  Indeed, countless books on the subject state quite correctly that even a very successful music publisher’s stock in trade often can be contained in a single desk drawer.  However, that does not mean that the job is easy or inexpensive, it just means that there are relatively few steps required to become a music publisher.  It still requires a firm commitment from the would-be publisher to perform the functions of a music publisher.

Songwriters often receive free advice from “concerned” individuals (including other writers, family members, friends, rabbis, etc.) that they should never, under any circumstances, “give” their copyrights to anyone.  And, because the vast majority of publishing agreements do involve the transfer of copyright to the publisher, many writers automatically deem publishing agreements to be inherently evil.  Of course, it is never a good idea to enter into a songwriting agreement with just any publisher who is willing to sign you, just so you can brag to your family and friends that you signed a publishing deal.  Moreover, it is important for writers to understand the importance of two magic words: “reversion clause” — more on this in a later post.

However, a good music publisher does bring to the table at least four things that, in my experience, few “self-publishing” writers do: (1) an understanding of the music publishing business and the publisher’s role in the larger music industry; (2) a set of office procedures established to effectively manage a catalog and explore exploitation opportunities; (3) existing relationships in the industry; and (4) a relentless drive to create a successful music publishing business.  Notice that the last item does not say “a relentless drive to write great songs.”  That is a songwriter’s job and if a songwriter does not also possess a desire to build a successful publishing business, then that songwriter’s career would be better served by finding a knowledgeable music publisher to fill that role.

OK, I know what you’re thinking: “I thought the whole point of this blog was to assist musicians who decide to ‘do it themselves.’ Why are you now telling me that I need to have a music publisher?”  Well, I’m not telling you that you absolutely have to find a music publisher to achieve success as a songwriter.  Nor am I trying to discourage you from developing your own music publishing company.  However, I do encourage those of you who make the decision to take on the role of music publisher to learn as much about the business as you can before you begin and to seek help even before you realize that you need it — and believe me, you will almost assuredly need it at some point.

We all know the cliche, “knowledge is power.”  Well, it definitely rings true in the world of music publishing.  Two of my favorite books on the subject of music publishing are Making Music Make Money: An Insider’s Guide to Becoming Your Own Music Publisher by Eric Beall and The Plain & Simple Guide to Music Publishing by Randal Wixen.  Both of these books are readily available through most bookstores or online and provide great overviews of the business.  Also, do not overlook Don Passman’s discussion of music publishing in his perennial favorite, All You Need To Know About The Music Business, or Jeff and Todd Brabec’s detailed coverage of the various publishing income streams in their book, Music Money and Success: The Insider’s Guide to Making Money in the Music Business.

As a parting thought, I will also encourage you to remember that one of the traits that distinguishes successful entrepreneurs in any industry is the ability to recognize one’s own strengths and weaknesses.  Most successful entrepreneurs recognize that they are only human and cannot possibly do everything themselves.  Delegation of certain tasks to companies and individuals who are skilled in particular areas is a reality of the business world.  Indeed, even seasoned music publishers often enter into administration agreements with other publishing companies that are better able to perform administrative functions, leaving the non-administrative publisher free to concentrate on creative development and exploring exploitation opportunities (you know, those essential functions that keep the catalog fresh and attractive).  Also, remember that although entrepreneurial writers can certainly acquire knowledge of the publishing business, established music publishers are already in the publishing business, which means that they can often open doors that might otherwise remain closed to a songwriter who is still being fitted for his or her publisher’s hat.

Regardless of the path that you choose, you owe it to yourself and your music to make an informed decision.

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“I’m With The Brand, I Mean Band”

By L. Kevin Levine

What’s in a name?  Everything!  Although most people recognize the power that a strong brand can carry, few take the time to consider what a brand really is.  The term “brand” is commonly used interchangeably with the word “mark,” which Black’s Law Dictionary (7th ed.) defines as “[a] symbol, impression, or feature on something, [usually] to identify it or distinguish it from something else.”  True, a mark is used to identify goods and services, but at its core, a mark represents all of the goodwill associated with a particular company, product, or service.  Unfortunately, a mark can also conjure up the negative vibes that one might associate with the mark’s owner.  But let’s not think in terms of negatives.

Most successful companies recognize that their trademarks and/or service marks (as well as other forms of intellectual property or “IP”) are among their most important and valuable assets.  I encourage bands, individual artists, and writers — particularly those who develop their own labels and/or music publishing companies — to do the same.  The building of a brand takes time and requires careful planning.  Therefore, I always recommend consulting legal counsel who is versed in IP law well before the launch of any new brand (and yes, this includes the adoption of a band name, hence the title of this post), as clearance and registration issues are rarely as straightforward as they may seem.

Far too often, a band will begin performing under a particular name without first taking steps to clear the mark.  In most cases, the band will labor in relative obscurity for a number of years, flying under the radar of any other bands that have adopted the same name (unless the other band undertakes the highly advisable practice of conducting periodic vigilance searches to detect and prevent the unauthorized use of its name — more on this topic in a later post). However, for those talented and lucky few, opportunities can arise that thrust the band into the regional, national, or even international spotlight.  Today, with the ease of establishing an Internet presence, even bands that have not yet seen any appreciable commercial success can place themselves on the world’s stage within a matter of minutes.

The failure to clear a band name before using it in commerce can come back to haunt a group, because, at least under United States trademark law, one obtains priority in a mark by being the first to use it in commerce, rather than by being the first to register the mark.  Thus, a band that has been using an unregistered name continuously for the past five years on the hotdog stand circuit in “nowheresville” could potentially force a platinum-selling band that has registered and used the same name — or even a confusingly similar name — for only four years to change its name.  This is an oversimplification of the issue, as courts do have rather liberal power to fashion remedies on a case-by-case basis, including the carving out of a party’s right to use a mark in a particular geographic territory.

Although it is impossible to be 100% certain that a proposed use of a mark will not infringe upon an existing use of the same or a substantially similar mark, one should always take steps to limit potential exposure to infringement actions.  Indeed, even if a challenged mark is ultimately deemed non-infringing, the legal expense to get to that point can put most bands out of business. Seek help early from a lawyer who deals regularly with the clearance and registration of trademarks and service marks.

Also, I know this will come a shock to you, but there is a great deal of disinformation on the Internet.  (I’ll give you a minute to compose yourself.)  There are websites that purport to reveal the inside scoop on the techniques that IP lawyers employ when clearing a trademark or service mark, some going as far as to state incorrectly that lawyers only check proposed marks against the online registration database maintained by the United States Patent and Trademark Office (the “USPTO”).  Although most lawyers will begin their searches with the USPTO database, as it is often the quickest way to rule out a potentially infringing mark, this is only the starting point.

I always recommend using a two-step clearance process.  The first step is generally termed the “knockout” search, which incorporates searches of the USPTO records, websites, and other databases.  Assuming that the knockout search comes back clear, many lawyers — including yours truly — will then employ the services of a third-party search organization for a much more comprehensive search in those geographic territories in which mark is to be used.  This search incorporates the previously mentioned sources, as well as business filings, industry directories, and other proprietary databases.  Obviously, this is a more expansive and, frankly, more expensive approach to the clearance of a mark.  However, I can almost assure you that the extra expense pales in comparison to the defense costs associated with a typical trademark infringement action or, even worse, the amount of an adverse judgment.

I will not mention names here, but I have spotted multiple non-lawyer, Internet-based companies that purport to offer the same level of service that you can expect from a qualified intellectual property lawyer, only at “cut-rate prices.” Having had no personal experience with any of these companies, I will reserve any comment on whether they can actually deliver what they promise.  However, I do suggest that you do your homework before engaging any company — or even any law firm — to perform IP services.  Many qualified lawyers will offer some services on a flat-fee basis, as opposed to billing by the hour (e.g., federal trademark or service mark registration).  A flat-fee structure generally translates into cost savings for — and certainly less nail biting by — the client.

It is also worth mentioning here that bands should also discuss and reach an agreement as to who owns the band name (i.e., the mark).  As discussed in a previous post (see “Join Together With The Band (And Get It In Writing)”), band name ownership is one of many issues that should be handled in a written band partnership agreement if the band is operating as a partnership or in a shareholder or operating agreement if the band is formally organized as a corporation or limited liability company, respectively.

To sum up, although your band’s primary business is making great music, you should consider the management of its IP assets, including the band name, to be an important part of that business.  Deal with clearance and registration issues early and with the advice of legal counsel of your choosing.  Do not run the risk of having to adopt a new name after spending valuable time and resources building your initial name, or worse, having to change names and pay damages to another party because of an infringement.

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Join Together With The Band (And Put It In Writing!)

By L. Kevin Levine

I love bands.  I’ve been in bands virtually my entire musical life and I can tell you firsthand, when a band is comprised of individuals who share mutual respect and a passion for their music, the experience can be great.   However, almost invariably, when things go bad in a band, they go bad quickly and irreparably.  Although there are very few things that bands can do to ensure that their members will always get along and keep making beautiful music together (sorry, I couldn’t resist), there are steps that bands can and should take to promote an orderly resolution when things do go bad.

One of the common problems with bands is that they are usually too busy focusing on their music to discuss how they are to operate.  Emerging bands are focused initially on trying to put together their repertoire, and then they start performing and recording and just never seem to get around to formally memorializing their inner workings.  Unfortunately, this often leads to confusion or, even worse, mistaken beliefs among band members.  Indeed, very successful bands have operated for years with no formal agreement on such critical issues as division of income and ownership of band assets.  This is a recipe for disaster that all-too-often catches up with band members eventually.

If a band fails to formally organize as a business entity, it operates as a partnership by default.  Although a partnership is a legitimate business structure, it might not be the best form for a particular band.  Indeed, many bands choose to formally organize as corporations or limited liability companies (LLCs).  The choice of business structure should always be considered carefully and with the advice of legal counsel.  Because of the possibility of conflicts, when representing bands, lawyers should advise each band member of his or her right to retain independent counsel.  Also, because the various business forms carry different tax consequences, band members should also involve their individual accountants or tax advisers in the decision-making process.

Regardless of the business structure that a band ultimately adopts, its members should discuss among themselves how the band will operate.  This discussion should take place very early in a band’s formation and during an official band meeting, not during a band rehearsal.  Rehearsals are for rehearsing and band meetings are for conducting band business.  I am convinced that if bands would devote even one-tenth of the time that they spend in rehearsals for band meetings, many more bands would survive rather than deteriorate because of internal conflicts.

After reaching group consensus (assuming that all members of the band are to “own” the band) the members should memorialize their agreement in a written and properly executed document.  If the band is to operate as a partnership, this will take the form of a “band partnership agreement.”  If the band is to operate as a corporation, this information will be contained in a “shareholder’s (or stockholders’) agreement” and if the band is to operate as a limited liability the information will be put into an “operating agreement.”

The following is a non-exhaustive list of some of the issues to discuss and include in the written agreement: division of ownership and voting rights; division of income; ownership of master sound recordings; writing credits and copyright ownership for musical compositions written by the band members; ownership of trademarks and service marks, including the band name and logo and brands developed for ancillary uses, such as band merchandise; and issues related to departing band members, including the continuation of the band following such a departure, the departing member’s right to use his or her name in association with the band name after departure, and continued payments to the departing member from certain income streams.

As suggested above, in many instances one individual will actually own a band — directly, or through a separate, wholly owned business entity — and will hire band members through separate employment or subcontractor agreements.  This, of course, raises many other issues that should be discussed with counsel.

The bottom line is that band members need to give their band’s business the consideration and time that it requires.  Meet, discuss, agree, memorialize, then focus on making great music with a feeling that all is well with the world — at least until the drummer decides to run off with lead singer’s girlfriend . . . wait, that’s a different story for a different post.

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The Savvy Songwriter

Please click here for my article entitled The Savvy Songwriter, which contains tips for songwriters, particularly those who cowrite with other songwriters.  This article appeared originally in Vol. IV, Issue II (Fall 2007) of The Mountaineer Musician, the official newsletter of the Appalachian Association of Professional Musicians (AFM Local 136).

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Demystifying Copyright

Please click here for an article on copyright basics that I wrote for Vol. IV, Issue I (Winter 2007) of The Mountaineer Musician, the official newsletter of the Appalachian Association of Professional Musicians (AFM Local 136).

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