Do You Need An Accountant If You're In The Music Business?

Music Business 101: Should I Hire An Accountant

When it comes down to the music business, most people would agree that financial resources are vital to artist success. This formal agreement ends typically when it comes down to best practices. On the other hand, some people would agree that you should hire a public accountant or bookkeeper.  On another hand, some musicians believe that they should manage their own finances. While both of these opinions have valid arguments, we wanted to put them side-by-side and see which method might be the best for you. To achieve this, we have partnered a team of public accountants and local artist to see which finance option is the best for musicians in 2019.

Give yourself a few minutes to explore the pros and cons of hiring an accountant to help you manage your finances vs. doing it yourself. Once you're done, tell us what you think.

Are you ready? Let's get started.

Should Musicians Hire An Accountant To Help Them File Their Taxes

International taxes and state taxes can be complicated for musicians without a background in tax accounting. Aside from crunching the numbers, tax laws can affect the way musicians conduct national and international tours. For example, international taxes are shaped by different laws making it difficult for artist and artist managers to manage their own accounting processes. Furthermore, state tax laws also have their own rules and procedures. Failing to meet these IRS guidelines can lead to an artist facing severe tax penalties. Therefore a certified public account with a background in national and international taxes is a valuable asset to have on hand as an artist. Not only will the right accountant help you stay tax compliant, but an accountant will also help you save money and grow your business.  If you're an artist, hiring a CPA as a tax accountant is a smart decision.

On the other hand, managing your own taxes is great for when you're just starting out. However, as you're music business begins to grow, you will need to hire an accountant to help you with making deposits, bookkeeping, and writing checks to pay expenses. Your account can also help you negotiate contracts that minimize your royalties because of taxes.

Should Musicians Hire An Accountant For Bookkeeping

When it comes down to bookkeeping, most musicians can run their own bookkeeping. Quickbooks is a useful tool for managing your own books. However, it can be difficult if you're not familiar with how to set up QuickBooks and run it.  Another solution is keeping track of all of your receipts. However,  it can be a hassle to gather all of your receipts during tax season. Nevertheless, managing your books is an easy task if you have the time to do it.

If you don't have the time to manage your own books, hiring an accountant is a smart decision. In essence, teaming up with an accountant can help you focus more on your music and less on the books. Your accountant should help you start organizing, make deposits, send out checks. An accountant can also help you manage your payroll and employee taxes.


All in all, an accountant is a valuable resource to have on hand. However, if you're just starting out, there are a wide range of tools to help you manage your own finances. But as your business grows, and you need to delegate more of your responsibilities, you should consider finding a certified public accountant to help you navigate the financial aspects of your business.

How Does Unambiguous Language Hurt Artist and Managers ( American Idol Co Founder Vs Sony Music Entertainment)

The lawsuit between 19 Recordings and Sony Music Entertainment enlightens us on the importance of clearly expressing our terms of agreement with other parties and constituents of a contract. Evidentially, unambiguous language grants parties the opportunity to take advantage of operating words with broad definitions. In particular these words permit backdoors in a contract. In the case of 19 Recordings vs. Sony Music Entertainment , SME has been accused of  “violating the licensing agreements revenue structure”. At the same time 19 Recordings is suing SME for breach of contract and breach of covenant of good faith and fair dealing. Ultimately SME is being sued for intentionally not using the  “correct operating words” in its agreement with 19 Recordings. 

Apparently, the SME is racking up revenue from streaming sales that should be considered broadcasts, and not sales with streaming companies. At the same time Sony Music Entertainment made an album sales agreement with 19Recordings. However, Sony Music Entertainment took it upon them to start selling songs individually from the album without 19Recordings consent. In the end, generating a profit for themselves underpaying 19Recordings and their artists.

After  reviewing this situation ,it is critical that artist’s and managers mean what they say, and say what they mean. At the same time, its important to anticipate consumers buying behavior and technology trends. During the time this agreement  took place albums were being sold as fully packaged albums. 19 Recordings probably  didn’t expect for album sales to break down into each song individually being sold. Therefore the option of selling’s songs individually allowed Sony Music Entertainment to take advantage of  19Recordings   terms of agreement.

In short, read your contracts. As important as it is to build a brand you also want to protect it. The money that we take off the table is just as important as the money we leave on the table. To avoid leaving money on the table be precise and clear.  In doing so we lock all back doors.

References:

http://www.billboard.com/biz/articles/news/legal-and-management/6502430/sony-music-fails-to-stop-american-idol-revenue

http://www.hollywoodreporter.com/thr-esq/bombshell-american-idol-lawsuit-claims-681625

Entrepreneurs and Community Development Financial Institutions

What should an entrepreneurs do when traditional financial institutions reject   their applications?   The bank explains that an enterprise is required have three solid years of operation. In addition, the financial institutions, clearly states it does not support companies operated by minority or economically disadvantage entrepreneurs. Above all, the institution can’t imagine your company growing fast enough for their lending purposes.  What should an entrepreneur do?

I’d recommend seeking funding from financial sources outside of   the traditional financial institutions. Below I have found two websites that may help entrepreneurs in seeking funding.

1.    Opportunity Finance Network  

The Opportunity Finance Network   is a national network of community development financial institutions.  Primarily, the Opportunity Finance Network supplies funding to low-income, low-wealth, and disadvantaged communities across America. The company claims it has “ originated more than  $30 billion in financing in urban, rural, and native communities through 2011” As can be seen, the Opportunity Finance Network has supported countless ideas supporting the development of disadvantaged communities. Not to mention the Opportunity Finance Network believes in sticking by its investments.  As a company, the Opportunity Finance Network believes everyone should have fair access to opportunities.

To become eligible for Opportunity Finance Network’s financial support, an organization is required to have a mission striving to have a positive impact on low-income, low-wealth and other disadvantaged people and communities. Originally, Opportunity Finance Network provides funding to profit, non-profit, or community representation.

Opportunity Finance Network’s website also exhibits its mission, core value, partners, and staff members. Companies seeking financial backing can utilize this information to gauge if their organization matches Opportunity Finance Networks needs.  Site map: http://ofn.org/what-cdfi

2.    CDFI COALITION

The Community Development Financial Institution (CDFI) Coalition is a private sector, financial intermediary with a focus on community development.  This organization is made up of community development banks, community development loan funds, community development credit unions, micro-enterprise funds, community development corporation-based lenders, and investors. Ultimately the Community Developmental Financial Institution Coalition provides financial opportunities to help build disadvantaged communities. Also, the CDFI offers loan and investment opportunities for entrepreneurs with poor credit teaching them how to manage their financial resources in an effective yet efficient manner. 

In order to retain a funding from a CDFI, the organization seeking financing must meet the United States Department of the Treasury’s eligibility requirements. Each applicant must meet these guidelines:

• Be a legal entity at the time of certification application;
• Have a primary mission of promoting community development;
• Be a financing entity;
• Primarily serve one or more target markets;
• Provide development services in conjunction with its financing activities;
• Maintain accountability to its defined target market; and
• Be a non-government entity and not be under control of any government entity (Tribal governments excluded).

This information cannot be found on the CDFI Coalition’s website, nevertheless the website is very helpful. The CDFI Coalition’s website offers information on the companies mission as well as its services. At the same time the company shares their countless partners and investors who have partnered together to contribute to financing community development.   In addition the company also helps educate future and prospective borrowers on what the Café’s purpose is and how it is intended to help them.

Hopefully this was helpful. Don’t get discouraged when there is a will there is a way.

10 Tips From Thomas L. Harrison To Build A Million Dollar Business Plan

Thomas Harrison is director and Chairman Emeritus of the Diversified Agencies.  In 1998, Thomas Harrison “ served as Chief Executive Officer of Diversified Agency Service, Inc. Over the years Thomas Harrison has made an impact on DAS helping it make many strides. According to Business week,  “ this person is connected to 116 board members in 10 different organization across 15 different industries.”  (Business week, 2014). While working at Omnicom division DAS he has participated in watching numerous presentations.  Over the years he has found countless mistakes people make while presenting their business plans. The first mistake he notices is “people get confused between a business plan and a marketing plan” (Forbes, 2012). Thomas Harrison makes it clear that a business plan is a business lay out, explaining why a company is in business.  During his interview with Forbes he also provides 10 key points of a business plan. They are:

“1. Describe why your company is relevant. What is the need being addressed?

2. Explain the overall state of the market and any important trends.

3. Explain why customers will buy your product or service.

4. Describe, in detail, which your customers are.
5. Explain who your current competitors are and their advantages.

6. Explain which competitors you will displace.

7. Describe your product offerings, how they compete with other brands and why they are needed.

8. Provide an overview of the various resources, including the people that will be needed to deliver what the customer expects.

9. Describe corporate priorities and the processes to achieve them.

10. Included three thorough financial plans; one that’s conservative, one moderate and one optimistic, each with realistic and achievable sales revenues, margins, expenses and profits on a monthly, quarterly and annual basis.”  (Forbes, 2012).  

The key components are critical because they give everyone a clear understanding of what the business is. Each of these key components help assist the purpose of a business plan Throughout my business plan I intend to describe why my company is relevant to users. Today value is more important than it ever was in the past. At the same time, Time is scarce. Therefore I want people to know the benefits of my business plan.

References

http://www.forbes.com/sites/alanhall/2012/08/26/how-to-build-a-billion-dollar-business-plan-10-top-points-2/2/

http://www.prnewswire.com/news-releases/thomas-l-harrison-chairman-diversified-agency-services-division-of-omnicom-group-named-chairman-emeritus-200412561.html

http://investing.businessweek.com/research/stocks/people/person.asp?personId=505776&ticker=OMC

SoundCloud's New Subscription Service

Will artist stick it out with  SoundCloud once a fee is established to upload content?. Recently it has been reported by  Hannah Karp, publisher at www.online.wsj.com    that “ SoundCloud plans to launch the subscription  in the first half of next year, said SoundCloud chief executive Alexander Ljung.” Accordingly, this strategy will not only impact the business to customer model, this will also  impact the business-to-business model. In other words, music content providers will also become impacted by  this decision. It is stated “ musicians and djs who want to upload songs, mixes, and mashups onto SoundCloud in significant volume pay a monthly fee.”(WallStreetJournal, 2014)  Granted SoundCloud has always offered content producers  payment plan, now they are pushing it more. Prior to their  licensing deal with Warner Music Group,  SoundCloud offered publishers  the option to  upload free, utilize the “On SoundCloud Pro Unlimited” service, or the “On SoundCloud Pro” service” (SoundCloud, 2014). On Sound Cloud Pro provides content publishers extend upload time,  additional stats including plays by country, and pin tracks and play list to the  top of your profile with Spotlight, for $6 a month or $55 a year. On the  other hand, “On SoundCloud Pro Unlimited”   offers content providers unlimited uploads, city to city tracking, website and app analytical reports  for a cost of $15 a month or $135 a month.  As stated before although  these offers have been available,   the  fact that  it will no longer be free for artist to  upload their music causes conflict

Today, SoundCloud has become the format of how people receive artist music. Due to the fact that  mp3 files appear to take up too much space in some audiences  emails. Therefore the question appears will artist be able to  afford to release music once this new fee is established. On top of this ,  the music industry is raising the barriers of entry for independent   to break into the industry. Purely it can be seen through pricing.  By Warner Music Group buying into Sound Cloud it becomes a competition.

References:

http://online.wsj.com/articles/warner-music-group-nears-deal-to-license-music-to-soundcloud-1415127425

https://soundcloud.com/pro

http://www.wired.com/2014/11/aloe-blacc-pay-songwriters/

Taylor Swift Pulls Her Catalog from Spotify

Just recently 24-year-old pop star Taylor Swift pulled her entire catalog from Spotify.  Spotify is a digital music streaming service that provides listeners with millions of songs at their fingertips. Despite the fact that, fans enjoy Spotifiy’s services, artist is not happy.  Taylor Swift has vocally voiced her opinion in numerous interviews. Taylor Swift is convinced that music-streaming services don’t value her art. (Business Insider, 2014) At the same time, Taylor Swift is certain that Spotify could hurt music sales. Her argument that Spotify could hurt music sales is supported by the fact that artist are not even making half of what they could make from an album sale.  Retail sites such as iTunes offer artist albums for $9.99, while Spotify provides artist a payment of $.007 per stream. Essentially, this proves that this model undervalues the artist worth. Even more importantly it’s showing the direction of where the music industry is heading. As consumers demand for digital streaming services increase it makes it more difficult for artist to make a profit from their works. Granted the IFPI views the digital download model as a  “ key revenue stream”, digital downloads are declining. In the last year the IFPI stated “ Revenues from downloads globally fell slightly by 2.1 percent in value, the decline being offset by increases in streaming and subscription revenue”. Obviously it is clear that the streaming and subscription model is here to stay. Nevertheless in today’s mixed economy of revenue streams Taylor Swift should be able to find a solution to her problem with Spotify.

At the same time Taylor Swift should also confront Universal Music Group about the financial terms of her royalties. Granted Spotify may have made a payment to her label the head of the label takes a proportion as well due to their overhead costs.  

Interview With Sound Engineer and Video Director Cory Gales About Negotiating

   Interview With Cory Gales About Negotiating

Having being the lead sound engineer at Emmy Award winning studio YA Momz House and hip-hop and rib radio station WAMO, working behind the scenes of countless projects, Cory Gales is the perfect guy to ask about negotiations. Everyday he negotiates with artist and clients seeking to purchase ad space on the radio station.  Not to mention, he is also a musician himself.  With that said Cory Gales has had the opportunity to see the entertainment industry from a number of perspectives.   Yet, even though he is very talented he understands that it is important to know how to negotiate in order to succeed.

With this in mind he has granted me the opportunity to explore his viewpoints on negotiating. Overall Cory Gale’s views negotiating as a chess game. In further detail, he believes that each move is crucial. Therefore it is important to know what you are negotiating for and use strategies to win negotiations. In addition he also mentioned that power played an important role in how we negotiate. In other words know your worth and stand your ground.  As can be seen in his viewpoint Cory Gales would describe himself as a hard negotiator.  Therefore he tends to negotiate on positional bargaining. Therefore, in most cases there is no flexibility.  However it does depend on the relationship you have with a person because this can lead to flexibility and allowing yourself to build mutual benefits.  Provided that he is a hard negotiator I followed by asking him “ Are people who are hard negotiators also speaking from there ego”. His response was   “ 90% of the people in negotiation hold onto their egos.” He also stated “ Amongst the average people no one wants to be stepped on”. From there he continued to state that   “ Its all a game, however you have to have standards while playing”. 

The next question I asked him focused on the idea that the other party will not play. In other words the second party will not negotiate with you instead they are playing hardball.  To speak on the subject he stated “ Is it worth your time. Nothing is more important than my time.”  Although this may be true there are other ways to look at the scenario. For example I explained to him that it might be useful to look at other peoples interest get them to play.  However he stated  “sure that’s one option but is it worth doing”.  At that moment I thought anything worth having is worth fighting for so yes.  If we can uncover the other person’s position instead of attacking it we can find out what they want.  As a result once we find out what the other party wants we can get them to play.

After talking about people engaging in hardball, we took the time to discuss preparing for negotiations. Cory Gales told me while preparing for negotiations he reviews company’s backgrounds and 10k forms and also asks around about them.  In addition he also reviews their Internet presence to see what they are involved in as of today. He believes its better to come to the table prepared than empty handed. At the same time states that its great to make offers based on hard facts and data. Therefore he as well believed that using objective criteria is valuable while negotiating.  Or else your offers will be unreasonable and prospects wont take the other party serious.

Finally we discussed people losing their tempers during negotiations. His views were “70% of people who lose their tempers during negotiations are just putting up a smoke screen. The guy with a cooler head will always win”. As a matter of fact his is true.  People who lose their tempers during negotiations are blinded by their rage. Therefore they miss great opportunities right in front of them. At the same time they embarrass themselves. Therefore the other party should allow the upset party to blow off steam and not attack the person back. In doing so this allows each party to work separate of their personal problems. In addition this may also make a better working relationship because no each party knows how the other party feels about them.