Let the drummer kick, let the drummer kick.
All about me
At first blush, this may seem like a horrid travesty. But really, as I looked at the balance sheet some more, I actually realized that the overall problem isn’t necessarily with the record label, but with the band- and I think Jill’s comments give a good reason why. Bands aren’t good businesses, and the artists within them aren’t very good at business. You would think that their managers would be the business-men, but they seem to have done a huge dis-service to the band.
When an angel investor or a Venture Capital firm funds a startup, they are taking an enormous risk. According to Venture One, only 23% of seeded startup companies actually IPO’d from 1992 – 1997. That is, less than one fourth of the companies got to the point where the VC had a chance to make back its money. (For Record Labels, that's even less- around 10% according to the RIAA.) Now, the new startup has to live off of that money. We have all been in startups and around them, and we know how this can go. Sometimes the startup goes crazy, buying the newest stuff and buying lunch and ridiculous travel. But generally, there is a constant attention to the bottom-line.
On the other hand, the band in the previous article did not keep to the bottom line. Just look at the costs of touring using a tour bus:
Bus......$25,000
Crew.....$7,500
Fuel.....$3,000
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Total: $39,000
If they had just stayed in hotels and driven their own cars these costs would have been:
Motel 8 Room.....$70.00
Rooms Needed.....2
Nights Needed....35
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Total Lodging....$4,900
Fuel.............$3,000
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Total: $7,900
Just that one decision could have saved them over $30,000 and changed their $14,000 loss to $16,000 in profit (an additional $4,000 per band member). Looking at other expenses, the band got $1000 in new clothes (Wardrobe), $7,875 in food and per-diem. They also bought all new equipment at a tune of $15,000. So it isn’t like they had a huge number of other expenses during their tour.
Finally, the band spent $150,000 in recording plus 3% of their proceeds to the producer. Largely those costs included bringing in numerous specialists and $10,000 (!!!) in lodging.
The problem isn’t the music labels are screwing the bands. After all, the music label is risking 100% of the capital. Its that the bands (or their managers) aren’t paying attention to their money.