Manage for Success: Just Desserts, Newsletter #79, November 2007


"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, troubleshooter, and trusted advisor, and is based on his many years as a senior executive in the music industry.


Copyright 2007 by Keith Holzman, Solutions Unlimited. All rights reserved.


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When trying to come up with a topic for this month’s edition, my wife suggested I write about the current strike by the 12,000 members of the Writers Guild of America against the Alliance of Motion Picture & Television Producers. To this I replied “What does that have to do with the record industry?” But then I spent some time thinking about it.


The primary reason that the writers are striking is so that they can obtain a bigger piece of the revenue pie. The ingredients of this pastry are derived from television re-runs, licensing of feature films to TV for broadcast on both commercial and cable outlets, and ancillary, but substantial, income from sales of DVDs, Internet downloads on devices such as iPods, streaming, smart phones, straight-to-Internet, and other "on demand" distribution methods for video and film.


Since the last contract was signed in 2004, sales of DVDs have steadily increased, and downloads of TV shows and movies didn’t even exist. But since 2000, media conglomerate revenue from entertainment segments has risen 51% from $63 billion to $95 billion. Over that same period writer earnings and residuals increased only 20% from $1.1 to 1.3 billion.


Some of these conglomerates also own major record label groups. For example, Sony Pictures co-owns Sony BMG Music with Bertelsmann. The writers, not unreasonably I believe, want to increase their income by having the producers give up a bit more of what they've been amassing in their larders. And it's not just the Writers Guild. The Screen Actors Guild contract and that of the Directors Guild of America will be up next June and they too will be trying to get a little bit more of the same dessert -- like Oliver Twist!


When it comes to the music business, the creators (songwriters, composers, artists, etc.) have for some years been trying to get their fair share. As I wrote in my August 2007 newsletter <http://www.holzmansolutions.com/articles/76-aug07.html> record labels and artists receive no income -- not a penny!-- for music played over the air by radio broadcasters in the United States. Publishers and writers receive payments from the broadcasters through their affiliations with ASCAP, BMI, and SESAC. But the performers get none of this, receiving their compensation only from what is sold to consumers through purchase of CDs, music videos and DVDs, and paid-for downloads.


And that's where the comparison applies.


Now the biggest problem here is that so many people -- particularly the younger generation -- don't believe that they should be paying for any music because they think it should all be free. And they steal it over the Internet. Should this continue, it's likely that performers may just decide to get jobs doing something else -- perhaps writing for the next hit TV show!


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The Second Edition of my book, "The Complete Guide To Starting A Record Company," is now a reality! It's been revised and updated and is available as a downloadable eBook in PDF form, or as a printed, spiral-bound volume. Download the Introduction and read the complete Table of Contents at <http://www.recordcompanystartup.com/>.


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There's one piece of slightly good news. Just last week two Senators introduced a bill that would, per Declan McCullagh writing for CNet News.com "unleash the world's largest law firm on Internet pirates. It would authorize the Justice Department to file civil lawsuits against people engaged in peer-to-peer copyright infringement -- with the proceeds going to the company or person who owns the copyright."

<http://www.news.com/8301-13578_3-9813358-38.html >


"This legislation is a simple bill that would give the Department of Justice the authority to prosecute copyright violations as civil wrongs," Sen. Patrick Leahy, the Democratic chairman of the Senate Judiciary Committee, said during a hearing on November 7. His co-sponsor is Sen. John Cornyn, a Republican.


However, don't hold your breath. The bill, called the Pirate Act, has been enacted three times previously to no avail. It seems that the Justice Department in the current administration doesn't want to deal with it.


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It's that time of the year! I've been working with quite a few of my clients during the last few weeks helping them create their operating budgets for 2008. Advance deliberation and thoughtful forecasting is something I believe in very strongly and is incorporated in my "planning ahead" mantra. Every record label -- and for that any business that wants to thrive -- should have a comprehensive budget and operating plan for succeeding years.


How do you go about creating such a budget? Read some of my previous newsletters which deal with the process. See a pattern here?

http://www.holzmansolutions.com/articles/01-may01.html

http://www.holzmansolutions.com/articles/30-oct03.html

http://www.holzmansolutions.com/articles/41-sep04.html

http://www.holzmansolutions.com/articles/53-sep05rev.html

http://www.holzmansolutions.com/articles/67-nov06.html


And if you experience trouble with this DIY Process, feel free to call on me for assistance. I've been doing it for years, and thoroughly enjoy the challenge!


Until next month,

Keith Holzman -- Solutions Unlimited

Helping Record Labels Manage for Success.


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Copyright 2007 by Keith Holzman, Solutions Unlimited. All rights reserved.