Posts Tagged ‘Record Sales’

Vh1’s Behind the Music Presents: Sound Accounting

Wednesday, June 17th, 2009
Greg Suhocki asked:

What do AC/DC, Busta Rhymes, Justin Timberlake, and the Philadilphia Orchestra all have in common? Each has major record company contracts; each incurs costs and revenues, from touring, record sales, and merchandise sales; and each has to deal with Federal and State Tax Regulations. However, the rules do not apply to only celebrities, but also to “weekend” musicians. “Weekend” musicians are tagged as those who usually sign with an independent label. By analyzing different costs, sources of income, and sources of revenue which musicians and record companies accrue, the need for accountants in the music industry can be established and clearly evaluated.

First off, it should be noted that substantial differences exist between major record label companies and privately owned record companies (independent labels). When artists sign contracts with major record companies, commitments include recording six to eight albums. Large record companies, such as Sony, Warner Brothers, Columbia, and Universal, invest millions into the touring, recording, and producing of an artist. This being said, it seems as if the performer is living the dream, which very well may be the case. Yet, artists’ royalties are disbursed after recording costs, advance pay backs, and other expenses have been taken into account. According to music industry lawyer Dan Engel, royalties are based on complex formulas often favoring the company, leading to audit detections of 10%-40% underpay of royalties. This is just one of the many reasons more rising artists are signing with independent labels, calling for a greater number of independent label accountants.

Today, writing and recording professional sounding music does not require a $50,000 lease of a Los Angeles studio. Technology is advancing extremely fast, allowing personal computer software, such as Pro Tools or Tracktion, to generate music identical to million dollar recordings. Home studios are more efficient and accessible, letting musicians to easily promote and sell their music, if not sign with an independent label. Regardless of the label company size, accountants help the touring and recording life of a musician run smoothly.

There are three types of common costs which every music industry, major or independent, must take into account. First and foremost are the recording costs. These usually range from studio rental costs, engineering fees, producer fees, side-musician fees, and the cost of a publishing license. Next are the duplication costs. While duplication costs focus primarily on tracking the quantity of compact discs manufactured, costs for artwork, graphic design, and photo shoots should also be recorded. It is also important to recognize any costs of uploading music to the internet, known as virtual distribution costs (itunes, mp3, cdbaby). Last, but not least, are promotional expenses. Poster costs, radio program fees, and web ads all play a part in promotional outlay. As a side note, music industry accounts often deal with label companies that charge a commission on the sale of a compact disc or purchasable download, instead of charging for recording, duplication, or promotional costs.

An integral part of accounting of musicians includes touring and gigging expenses. Touring is essentially the beating heart of a musician’s work. For this reason it is crucial that music industry accountants focus on tour accounting. Certain cost drivers, such as all road activity (bus and truck miles), need to be estimated via expense receipts. When working with tour accounting it is important to maintain regular correspondence with tour managers and booking agents and to ensure proper “road” cash management by tracking performance income and performance or “gig” deposits.

Income is recorded by music industry accountants from a number of sources. First off, income (for the artist(s)) and revenue (for the label) is accounted for through the sale of the music. The source could be a distribution store or through the internet. Other sources of income include “sync” deals. Through “sync” deals, income and revenue is received because the music was used in television, video games, or movies. Lastly, income and revenue is also accounted for through ticket sales, merchandise sales, and endorsements.

Whether it is a major record label company or an independent company, all music industry accountants partake in similar duties. Accounting for costs, income, and revenue in a musician’s world is fascinating because of the different sources of cash flows. Publishing, recording, merchandising, and touring are the bread and butter of a musician’s way of life. It is up to music industry accountants, better known as “sound accountants,” to organize cash flows and partake in regular correspondence with tour managers and booking agencies to ensure accurate accounting of costs, income, and revenue. No matter the form of entertainment (music, movies, sports, etc.) accountants are always needed to help the show stay on the road.

Share A CD Didn’t Kill The Music Industry

Tuesday, June 2nd, 2009
Amir Husairi Sharif asked:

Malaysian music industry seems to find its way of doom. According to Recording Association of Malaysia (RIM), the record sales decreased 60 % from nearly RM 300 million in 1995 to RM 111 million in 2005. The only reason they put to blame is piracy. Even there are so many raids have been done, but still it never find its way out. The question mark, what is the factor that makes piracy well-accepted among the consumers? The better quality? No! Easy to be found? No! Cheap price? Yes, the cheap price that it carries is the main factor.

The original CD cost about RM 35 up to RM 45 per CD while pirated CD only cost you RM 5 to RM 7 per CD. As a mindless consumer, they only think about how many pieces of the entertainment they can get from the cash that they have. One thing that music industry should know is the typical Malaysian never cares on what intellectual property’s all about. Hence, giving excuse of high studio expenses and promotion cost will not worth a penny. The consumers only want the cheaper, will the record company ever learn?

The only solution that recording labels should practice now is to reduce the number at the price tag. But please don’t keep promoting the old songs that have been repackaged and selling it at a price of a new album. This is totally ridiculous. Current price that have been tagged on the CD box is quite unaffordable by most of the consumer whose generally comes from middle class of financial strata. Their power of buying still small, especially in buying a CD that only have one hits. Recording labels should by now start to lower their album price. There are one or two releases on the store shelf now that have been priced at RM 20 per CD and yes, it is a new studio album, not the re-released thing. With the digital technology in recording, record labels can reduce the cost of recoding if they know how to do it effectively.

As a consumer, what we can do if we don’t have enough money to spend on our favorite artist’s new album?

Don’t worry, just listen to the radio. Radio provides us with free music, but on some stations, you have to bear with their annoying commercial advertising in return of free music they are giving. There are so many radio stations for audience to select ranged from urban listener, folk music to government generated radio station. Recording label usually send their new hits promos to be played on the radio station. Don’t worry, if you missed the song in the morning, it will be repeatedly aired on the next hours of your listening. A single from Hoobastank called “The Reason” have been spinned on Radio Hits amounted 489 976 times in 2004. So how many time it been played in a day? You do the math.

Since the CD price still high, then why not to share the CD you’ve bought with your family and friends. There is no point of buying the same CD when you can borrow or nicer, you and friends buy different titles of CD and collectively exchange. If you have four friends buying four different CD, then you can listen to five different albums if you trade it among your friends. If you still using tape deck, then don’t change it into CD player because buying tape is less expensive than CD. CD is expensive because you have to pay for the technology used in manufacturing it. Tape is less popular nowadays because tape technology is no longer having demand in market. But recording companies in Malaysia are still giving options for the consumer to buy tapes besides of CD format. You will lose nothing if you buy tape, unless if you only have CD player not the tape deck.

If you own a credit card, buying music online is the perfect way to save money. Taking the current situation where an album only have one only hits, it is better to buy that single online. In Thailand, you can download 890 songs for only RM 3.55. Is it a bargain or what? It is even cheaper than your piracy CD! There are load of websites dedicated to legal downloading of music in the internet such as Nepster and iTunes, but you must have credit card and computer of course. Since Malaysian music industry is still unaware of this new trend of buying music, we cannot buy local music online yet. According to Bank Negara Malaysia, since July 2005 we have 7.26 million of credit card users. Government also had launched a campaign of having a computer in every house. Recording labels, you should start thinking of selling your music in a new way right now!

If you still cannot keep yourself from buying CD, then buy wisely. Choose the only album that you enjoyed most. Don’t fall victim to magazine or newspaper review since most of them are not really ‘in-depth’ and sincere in giving opinion. The media generally have close relations with the music industry, so they never killed each others. Most of the biggest record store like Tower Records and some chain-store like Carrefour have a testing CD player. So you can give a preview to the CD album that you want to buy. If you like the music, then buy, if not, then don’t. It is not a good idea to buy an album because of artist’s popularity, so think wisely. The corporate capitalist are now projecting of selling popularity rather than the talent, if you don’t believe, see how reality program can gains million of dollars just by exploiting emotion and image.

Before buying music, think twice either you really need it or not. But one thing for sure, share a CD didn’t kill the music industry but buying piracy did!