Manage for Success: Strategic Planning, Newsletter #35, March 2004

 

"Manage for Success" is a free monthly newsletter for record label executives who want to operate their companies efficiently and successfully, and who have indicated their desire to receive it. It's published by Keith Holzman of Solutions Unlimited, a management consultant, troubleshooter, and trusted advisor, and is based on his many years as a senior executive in the music industry.

 

Copyright 2004 by Keith Holzman, Solutions Unlimited. All rights reserved.

 

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Before I get into the main topic of this month's message, I'd like to bring you up to date on the latest numbers from the RIAA. Note that these numbers are based on shipments to retail outlets, unlike SoundScan's numbers that are based on actual scanned sales.

 

The dollar value of U.S. music shipments declined 4.3 percent in 2003, an improvement over the decline of 6.8 percent from 2001 to 2002. The number of units (all configurations: CD album and singles, cassette album and singles, LP/EPs, vinyl singles, music videos, DVD Audio, and SACD) was down 2.7 percent.

 

Total manufacturer shipments to all accounts (including retail) were off 7.2 percent, while dollar amounts for the same sales were off 6%. Interestingly, the decline slowed during the last quarter of the year.

 

The greatest improvement was in music videos, particularly DVDs, while CD albums declined 7 percent and CD singles improved 85 percent.

 

The information is posted at the RIAA web site, http://www.riaa.com/news/newsletter/030404.asp .

 

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Many label executives assume that strategic planning is something for large industrial businesses or the military, but in reality it's something that all record companies should do from time to time. I was reminded of this recently while working with a client on short-term goals and long-range objectives.

 

What follows is just one suggested way to go about the process, since each label should approach the exercise in the fashion most suited to their way of doing business.

 

Start by looking at all aspects of your label's operations, starting with an analysis of its history from its inception, with a review of successes and failures, good decisions and those not so good.

 

Then spend some time looking at your perceived image & is this how you want the industry (distributors, retailers, reviewers, etc.) to picture you, and how well does it relate to your ideal music buyer? Does the perception of others agree with your preference?

 

As part of the deliberations you should analyze your target customers -- the people most likely to buy the music you want to sell. Examine age, sex, education, where they are most likely to buy the music, etc. Remember that there are many kinds of buyers, and their tastes may be quite broad. For example a jazz devotee might also be a lover of country music, singer-songwriters, folk, and classical.

 

If you currently specialize in a single style of music, discuss whether you it makes sense for you to add other genres to the product mix, especially if your own tastes range widely. If you decide to do so, then make the appropriate modifications to your marketing set-up and the rest of your operation so that it can be realized.

 

Amplifying on your sales history to date, project sales numbers for the average release and then extend that out to the total sales figure you hope to achieve for the coming year. That's a short-term goal. Will the result be profitable? Profitability is another short-term goal.

 

Review your distribution. Is it compatible with your needs or will you need to improve on it, either by adding additional outlets, or switching to a distributor you think may do a better job for you. Bear in mind that the prime role of a distributor is to act as the principal conduit of your music to your consumer. Some distributors do this better than others, but remember that the chief responsibility for sales and marketing lies with the label.

 

If you decide to make a change in distribution, how and when you'll go about accomplishing that is another short-term goal.

 

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A reminder: my book, "The Complete Guide to Starting a Record Company," is now available for sale exclusively at http://www.recordcompanystartup.com/ .

 

Carl Caprioglio, President of Oglio Entertainment says "The Complete Guide To Starting A Record Company" is absolutely the best place to start when considering the plunge into the music business. Keith's style is fun, friendly and informative making the book an easy read. I only wish Keith had published this book 10 years ago when I started my label!"

 

Chris Morris of Billboard writes "Holzman's 235-page tome is a crisply written and comprehensive look at label basics, from creating a business plan to putting records on the street."

 

It's an indispensable text for musicians and entrepreneurs who want to start and manage their own independent record labels, a primer that takes them by the hand and guides them through the many steps involved. The book includes numerous checklists, charts, diagrams, forms, and an index, with URLs for more than 100 resources.

 

"The Complete Guide To Starting A Record Company" can be ordered as a downloadable eBook (in Adobe AcrobatÆ PDF form) at $29.95, or as a printed, spiral-bound book at $44.95. You can read the complete table of contents and download the Introduction at http://www.recordcompanystartup.com/ .

 

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Look into your price structure. Is it appropriate to your music and market? You might perhaps decide to experiment, reducing prices for certain categories or genres. In the case of an emerging artist you might decide to reduce the price for a defined period of time or an initial sales target, raising the price when the target is reached.

 

Spend time discussing your existing organizational structure, including a brief review of current personnel and their job descriptions, some of which might need to be modified slightly to reflect current reality. Look into whether you might need to add staff in certain critical areas in order to meet your goals.

 

Review the artist roster, discussing artists who you wish to continue with long-term, and those you might wish to drop after current commitments have been met. Discuss future signings, and additional artists you might want to reach out to. Major labels have dropped a great many artists, either as a result of belt-tightening or shifts in direction. As a result, there are many excellent artists available whose sales may range from 50,000 to 250,000. Those numbers are small potatoes to a major but are substantial to an indie.

 

The best way to find out about such talent is by networking closely with managers, attorneys, accountant, and other labels, as well as by keeping up on news in the trades.

 

Long-range planning involves amplifying on the short-range goals, extending them out a few years -- perhaps as far ahead as five, although three may be easier to work with until you've had fairly extensive planning experience.

 

This process requires projecting goals for any proposed significant changes in the label's image and A&R direction, and how this could result in significantly increased sales.

 

As a result of your deliberations, discuss if you'll need to add staff, and if so, when?

 

Review your infrastructure and space requirements. Will they be adequate for the next few years, or will added staff require you to expand existing space, or move to another location?

 

If you've decided you'll have to add to staff, you'll also need to add computers, desks, etc. to accommodate them. This will necessitate capital expenditures that should be budgeted well in advance. And of course you'll have to increase your sales to pay for them.

 

Such detailed planning is a lot of work, but it's an excellent exercise for you and your senior staff to go through. And you never know what fascinating suggestions and new ideas might come forth from an open analysis and free-ranging dialog. Remember this mantra, "Plan Ahead!"

 

Until next month,

Keith Holzman -- Solutions Unlimited

Helping Record Labels Manage for Success.

 

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Copyright 2004 by Keith Holzman, Solutions Unlimited. All rights reserved.