- 21 May 19
THE MONEY WILL ROLL RIGHT IN - Not, of course, if you don’t do the right deals. Or know how the entertainment industry works. Here, music finance maestro Dominic Kelly of DKC offers the ultimate primer in the potential pitfalls – and windfalls! – of money management in the music industry.
Having worked with names like Picture This, The Hothouse Flowers, REM, Robbie Williams, Van Morrison and The Corrs, it’s clear that Dominic Kelly is not your average accountant. Dominic started his career in an office above The Factory rehearsal studios on Barrow St. While there, everyone from U2 to David Bowie and thousands of aspiring bands worked on their music in the practice rooms below. He’s been at the heart of the Irish music industry ever since.
In his time upstairs at The Factory, Dominic’s clients ran the gamut between guitar-techs and bands, to big sound and lighting companies, before he embarked on a 24-year association with major irish concert promoters, MCD. There, he was effectively managing the whole financial side of things and as a result had a hand in every aspect of what is a complicated industry, from record labels and publishing companies, to sound and lighting companies, to some of the legendary artists mentioned above. Four years ago, Dominic left to concentrate on working with artists full-time as a business manager.
So, in terms of getting advice on the music industry, he’s in a unique place to offer the best. Here, he lays out what he sees as the 10 important lessons to help any new band navigate the choppy waters of the business we call show.
THE MUSIC INDUSTRY HAS CHANGED
The labels have gone through a tough time. Nowadays the most you can expect from a recording deal, at the early stage of an artist or a band’s career, is to have the label pay for the recording of the music. In the good old days there was a huge advance that you could live off and you could count on the labels to get out there and push the music. That’s not what happens now. There is potetntial long-term revenue in publishing. But whan it all boils down, there’s generally very little money in recording for the artist.
TOURING’S WHERE THE MONEY’S AT
Artists used to tour to support album sales. That model has been completely flipped on its head. Now, you release music to sell tickets. The only real money the artist makes in the way most record deals are set up nowadays is through touring. A very good example is Lewis Capaldi. He had a huge hit recently with ‘Someone You Loved’ and, off the back of that one hit, he’s now selling out arena shows. The real job is to make sure that the cost of doing the shows is managed and that the artist takes all the money that they should be getting from the shows, that they’re not leaving anything behind. That is an art form.
WHEN IT’S ALL OVER, WE STILL HAVE TO CLEAN UP
The way I see my role, simply put, is to make the artist more money. And I do, substantially more. At the same time, I’m giving them the peace of mind that there’s nothing left on the table. I ensure that they’re getting everything they should get and that they have the right structures and systems in place, so that there is no waste. I deal with the business side of the artist’s career: working with management and the artist to create a financial strategy, all the way from production planning and tour budgeting to management of the day-to-day finances. By doing that, we make more money from shows, we make more money from tours, we get better prices from suppliers, and we do better deals with record companies and publishing companies. That leaves the artist free to do what they do best which is to write and perform music.
RECORD AND RELEASE YOUR OWN MUSIC
Picture This did it right when they started, because instead of doing a deal immediately, they built their following and released and managed their own music. That was a very smart approach. The recordings were then licensed for distribution through Warners in Ireland. I would advise any band to try to do it that way, at least initially. It’s easy for people to produce music now. You can do it in your back-room or on a tourbus with a laptop. If you can record and release the music, then the opportunity is there to hang on to it for as long as you can. The timing for taking a label on board is really important, which Picture This have now done with Republic Records. But they were in a position of strength when they did that deal.
PAY ATTENTION TO WHAT KIND OF DEAL YOU’RE SIGNING
What’s happening now is that most labels want to do 360° deals. If you do a full 360° deal, then the label is also taking money from touring and merchandise sales, in addition to music sales. You’d want to be getting a huge advance against that. Now, how much of that 360° the label can take is part of the negotiation that I do. You’ve got to make sure that there’s enough money in this for the artist to survive and hopefully to thrive. If you take the average royalty rate that a label pays, which is 18–20%, you’ve got to remember that the label is then taking 80% of the money made from your music. Plus they’ll try to take money for packaging and so on. That’s why many artists who become successful get out of their label deals and go back to distribution deals with the likes of Warner ADA. Then the artist can take 80%, which given the fact they create the music, is fair.
SUPPORT THE ECO-SYSTEM
My job is to make sure that a band gets – and keeps – as much money as they are due. I think of the music industry as an eco-system. Every part of the eco-system needs to be protected, because if any one player becomes too big or too dominant the whole thing is more likely to fail. It’s very important that the band get what they should, that the promoters get what they should, and that the labels get what they should – but no more. Somebody has to look after the artist to make sure that the system is working right, because otherwise musicians get a raw deal. And as we know far too many of them do...
TRUST THE EXPERTS
Artists, by their nature, are usually not financial experts. The manager might be reasonably good with money, but it’s not their speciality either: foreign taxes are not their speciality, financial structures and systems are not their speciality. An artist would never dream of letting a well-intentioned amateur run the lights or sound at their show, so why let a well intentioned amateur run your entire financial strategy? That just doesn’t make sense. It’s a sad fact that in Ireland, Europe and even in the US, artists tend not to focus on the business side of things. Then, 10-20 years down the line, they suddenly go, “Where’s all the money?!” Too often the answer is: it was wasted and you never even saw or understood where it was going.
The most important thing, knowing how treacherous the business can be, is for an artist to have a team around them, where every member of that team does what they do well. If you build a small team of specialists, then everything is much more likely to work. It might sound like overkill to an artist starting out, but it doesn’t have to cost anything. Managers work on a percentage, and a percentage of nothing is still nothing! That’s the risk they take. A business manager, which is what I do, works the same way. If it doesn’t work, it doesn’t work: that’s the risk I take. But, if it does work, then it’s always a net benefit for the artist. As a rule I would make on average 30-40% more for an artist across the board. That’s the way I think. How can I get more for the artist?
DON’T FEAR THE TAXMAN
On the compliance side of it, every band must be aware that you have to keep accounts and do tax returns. That is vital. Lots of the bigger bands will have a general accountancy firm, who’ll do that, but there’s often a disconnect between that and the financial strategy. The band, the manager and everyone associated with them spend time building up a huge fanbase, and that’s all about publicity. What you don’t need, therefore, is to pick up The Irish Times and find yourself on the front-page for not paying your VAT! It destroys all the good work. On the flip side, it’s really easy to waste money on taxes that you don’t have to pay. Clearly I’m not suggesting you don’t pay taxes that are due. On the contrary. But you have to know also what your entitlements are. For example, when you play in the UK, there are FEU deductions, which can be avoided, quite correctly. In every foreign territory you play you can lose money at the source, just because you don’t deal with it, and it’s very hard to get it back after the fact. So getting the financial approach right, from the start, is vital.
Music business horror stories are true and they do still happen. I’ve seen plenty of bands exploited, taken advantage of and waste money – and not small money. Of course that happens. It’s a commercial system. The industry will take what it gets away with taking: that’s capitalism. But it has to be fair. With a bit of luck, people will start to realise the importance of the business side of music, but I will keep coming back to this: you need specialists. The music industry is very poorly served by the common or garden variety accountancy practice, because they don’t know where the pitfalls are, where the skeletons are, or how to deal with very specific issues that arise. Getting people with that knowledge involved can make a huge difference in the long run. In fact it can be the differemce between long-term success and failure. And it doesn’t even have to cost anything.
Dominic Kelly is the founder of DKC – Business Advisers, Tax Consultants & Accountants. Web: dkc.ie Tel: 086 2581655 Email: [email protected]