"Manage for Success" is a free monthly newsletter for record label executives who want to operate their companies efficiently and successfully. It's published by Keith Holzman of Solutions Unlimited, a management consultant and troubleshooter, and is based on more than thirty-five years of senior management experience in the music industry.
Copyright 2001 Keith Holzman, Solutions Unlimited. All rights reserved.
What did it cost to record your latest release? Was it under, on, or over budget? Do you have the information readily available?
The process of budgeting and controlling recording costs is called A&R Administration. Insufficient care and attention to it can cause costs to balloon completely out of control.
But first, what is A&R?
Most of you know, but I recently received an email from a potential client wanting me to explain it! My answer was that it stands for "Artists and Repertoire" and is the heart and soul of any successful record label. It refers, in short, to the scouting for, signing, and recording of singers, musicians, etc.
Ill make a few comments on A&R in general at this point, because I want to devote most of this message to discussing how to keep track of recording costs.
Its my philosophy that you should not make a recording unless an artist has something unique and special. An artist should have a new sound, a new interpretation, or a new vision -- whether as a singer-songwriter, composer, or interpreter of others music.
More important from a business standpoint, not only should an artist be special and unique, but should also be one who is performing regularly -- not just in his home town, but throughout his region and his state, if not the entire country.
I also think the artist should have professional management. I've found that artists without representation place a tremendous amount of stress on a label's staff, because the label ends up having to manage their careers as well as get them gigs. This is a potential conflict of interest, and the artist should be represented by his own manager or agent.
Once you've signed an artist and have come to an agreement as to the nature of the recording you're going to make, it's necessary to put together a budget which can be agreed upon by all parties.
Recordings can sometimes cost as little as $1500 to $2500 -- particularly if an artist has his own in-home studio -- but can range to many hundreds of thousand of dollars in the case of a major artist at one of the big multi-national companies.
What's involved in establishing a budget? And what do you have to provide for?
First, of course, are fees to the artist, which may be an advance against royalties and will have been negotiated in the contract. There also may be an outside producer who may be getting either a straight fee or a fee plus royalty points. And, in the case of a larger-scale recording, there may be an arranger for whom you have to budget, as well as allowing for the cost of copying parts.
In addition are the costs of musicians. They may or may not be union members. Large labels, who are most likely signatories to the AFM (American Federation of Musicians) agreement, will be paying through the union. Smaller labels are generally not signatories, and will pay negotiated rates for musicians on a per session, or day, or project basis. You must estimate how many you will need per session, and multiply that number by what you've agreed to pay per session.
If the recording includes use of a piano, you will need to budget for a tuner who should tune prior to each session in which the instrument will be used.
Then there are all the other costs related to recording sessions, such as the rate for the studio, either by the hour or by the day, and perhaps an outside engineer in addition to whoever the studio may provide. Add the cost of tape (one or two inch) for multi-track recording, if applicable.
Any instruments or equipment that needs to be rented must also be put in the budget, as well as cartage costs.
You'll also need to allow for the cost of mixing, which includes the studio, the number of hours or days required, an additional engineer or equipment if necessary, and the cost of tape (quarter, half inch, or DAT -- although I dont recommend DAT as your final master storage medium.)
Finally, you should include the cost of mastering -- not an insignificant amount unless this is done on a Macintosh or PC using a program such as Jam or ProTools.
Do the computation in a simple spreadsheet and you will get a good estimate of the cost of the project. If the resulting number is higher than you'd like, see where you might be able to cut back. But once the various parameters are agreed upon with all involved, the budget should be set and frozen.
Now is when the actual administration of the budget comes in.
Sometimes an artist will book the studio, sometimes the record label, but in all cases the cost should be controlled through the A&R administrator. This may be the head of the label, or it may be someone whose specific task this is. Larger labels have entire departments who handle A&R administration. But the person who is handling the project should give a purchase order (written or verbal) to the studio for the agreed upon rate, and the number of sessions or days. Many labels do it verbally, but the P.O. number should be written into the budget when it's been given out -- in new columns (alongside the budget column) by P.O. number, dollar amount, and date of authorization. The P.O. number should appear on the studio's or vendor's invoices when rendered.
Also note that, in the case of a new label, studios may wish to be paid a portion of the fee in advance, and they may not release the recorded tapes until after all bills have been paid. So be prepared to pay right after sessions have been completed.
After recording has started and invoices come through, the administrator should check off the appropriate column, making adjustments in an "actuals" column in the event the invoice is slightly lower or higher than estimated.
Most important -- your budget spreadsheet must be kept up to date on a frequent and regular basis.
Additionally, where studio musicians are involved, the administrator or the producer should be responsible for seeing that the musicians fill in the appropriate forms, which include W-4 tax forms so that your accounting department can withhold the appropriate deductions, as well as I-9s -- government-required forms that verify employment eligibility and which must be accompanied by appropriate identification.
When union musicians are used, as soon as sessions are completed, AFM session contracts have to be prepared showing the musicians' names, the location (studio name) and times of recording, the songs recorded, and the amounts due to the musicians, plus additional amounts for Health and Welfare, pension benefits, etc. Checks should then be drawn and sent to the union with the AFM contracts. The amounts of these checks also have to be entered into the "actuals" column of your budget.
In the case of most smaller labels whose musicians are not union members, a similar situation will apply, but at lower cost. Of course musicians will want to be paid, sometimes at the end of the session, so checks should be prepared and given to them as soon after recording as possible. The amounts of these checks should also be put into the "actuals" column of the budget.
At all times, the administrator needs to be aware of any significant difference between the actual and estimated costs, and if it appears that the actual may be exceeding the budgeted amount, senior management should immediately be advised.
Another useful tool for senior managers, in the early stages of deciding whether to record a new artist, is to make a spreadsheet and estimate what it would cost to make the record, add how much you think you'll need to spend on marketing, and add the cost of sales for the number of records you think you'll sell. Divide the total outlay by the average sales price to your distributor. The result is the quantity of units you'll need to sell to break even. This can help you make your signing decision.