This process can continue for years, and it is no wonder that by the time artists get to the grand-tour years, they are likely to be out of touch with what most people consider reality.
Out of the Clubs and Out of Business
Most professionals who live and breathe the world of live performing are of the opinion that club business is no longer a viable part of the global concert business, where many millions of dollars are at stake. Attendance is down across the country, and very few clubs can do anything resembling profitable business absent the implementation of other money-making methods such as merchandising, satellite radio broadcasts, Internet distribution of live shows (for example, via eMusicLive), beer deals—you name it. Despite the fact that club owners, often with the help of record company subsidies, still do all they can to keep open these venues, which have been such a vital means of disseminating the music and musical ideas that reflect an evolving culture, it has become extremely difficult for record companies and promoters to focus on, and invest in, developing acts on the club circuit.
THE GRAND TOUR
Sounds like a movie and sometimes it must feel like one. Almost Famous, The Rose, Truth or Dare, Helter Skelter—their depictions of the “road” are not exaggerated.
For artists who reach this privileged stage, the ultimate financial return for the years of effort by the artists and their representatives can be astronomical. Yet no matter how much is made, it can be squandered as a result of any number of excesses, errors, and extravagances of the artists and their handlers.
SAMPLE TOUR BUDGET
INCOME
Performances:
$100,000/show × 65 shows $6,500,000
Sound and lights (reimbursed by venue):
$17,500/show × 65 shows $1,137,500
Merchandising (guarantee) $1,000,000
Total $8,637,500
EXPENSES
Commissions:
Management @15% (excluding sound and lights reimbursement)*† $1,125,000
Agency @10% (of performance fees only) $650,000
Business management @ 5% (excluding sound and lights) $375,000
Hard production costs (including trucking, sound, lighting, equipment rental, equipment supplies, set construction & design, set fee, misc.) $700,000
Pre- and post-tour expenses (such as airfares, advance, equipment purchases, transportation, wardrobe, immigration [i.e., cost of services to obtain permits or visas for countries in which performers are not citizens]) $120,000
Ancillary production and tour costs (e.g., band members’ payroll and fees; entourage [road managers, security, etc.]; stage crew, including guitar and drum techs; keyboard programmer; carpenter; grounds man) $350,000
Per diems (individual band members, entourage, and crew) $120,000
Hotels (band, entourage, crew, and drivers) $425,000
Transportation (airfares, auto and bus rental, limousines and taxis) $400,000
Tips and gratuities $11,500
Miscellaneous expenses (e.g., wardrobe, shipping, dues) $300,000
Insurance (nonappearance, liability, equipment, Workers’ Compensation) $300,000
Legal $45,000
Publicity (independent/not paid for by record company) $20,000
Rehearsal costs (rehearsal studios in home city and on the road; local labor, hotels and apartment rental, telephone, food and drinks, equipment rental and supplies, transportation, payroll and fees, per diems at $4,250/month for 4 months) $17,000
Contingency $50,000
Total expenses $4,783,500
Net profit on tour ($770,800 per band member) $3,854,000
* * *
*Note that for this tour, the manager makes 1½ times as much as of any one member of the band. While the amount of the manager’s commission is calculated at 15% of the gross, it actually works out to be 29% of the net. For a 20% manager, the numbers would be $1,500,000 to the manager, or 34%, with each member of the band receiving $695,800.
†For this tour, the business manager makes about 50% of what any member of the band makes. While 5% of the gross may not seem like much, that actually works out to be about 10% of what the entire band receives when the manager is a 15% manager and about 11% when the manager is a 20% manager.
The Tour Budget
The accompanying table is a real-life example of a touring budget for a sixty-five-show tour—over a period of four months—for a moderately successful five-member band. Observe how many different categories of costs must be dealt with. Each category requires specific expertise, or experience, in order both to estimate potential costs and then to meet these costs on budget. For this tour, the net profit would be divided by the five members of the band: $3,854,000 divided by five equals $770,800 for each member.
The issue often facing artists and their representatives is not so much whether costs are reasonable or should be cut, but whether there has been sufficient time and expertise invested in preparing the budget to justify getting the tour under way in the first place.
Even a cursory glance at the budget numbers listed in the table reveals that it costs a lot of money to mount a major tour. When so much money is involved (and note that the profit margin is usually much smaller than in my example), the difference between success and failure can be the result of fine decisions in one area or another. A small mistake in estimating personnel costs, multiplied by many persons over a long tour, can be nothing short of disastrous. Both the projected income and the projected expenses must be analyzed carefully, and the projections for both must be flexible enough to allow for all kinds of contingencies over and beyond such things as weather and illness and other insurable events.
Now, what if you put on a tour that is supposed to attract one million people and no one comes? What if the current single of the artist goes from a bullet on the charts to an anchor? What if the next single is a bomb? What if the entire promotion staff of the record company leaves for another company? What if the promotion staff at the record company is forced to shift its attention from the touring group’s record to a different one that is exploding well ahead of and beyond expectations? I have seen these things happen time and time again. But, although there is really no way to control events, what can be controlled is the financial discipline necessary to avoid disaster. Timing is very important in planning a tour. And it takes time to plan a tour to promote an artist’s latest release. By the time the stage is built, or the venues are booked, the record may have tanked, or the economy may have gone south, or both. In 2002, no less a star touring group than the Rolling Stones postponed a potential hundred-million-dollar tour because they feared that their demographic was getting too old at the same time the economy was experiencing a downturn. Seductive as it may have been to the group and their advisors, all of whom stood to make a fortune, the decision protected them from what could have been a financial, as well as an image-destroying, debacle.
While it is customary for an artist and the artist’s business manager to find a way to help out a promoter who has taken a bath at a show, this is not something that anyone wants to experience. A misjudged and poorly planned tour can easily result in one of these sad late-night negotiations where the artist has to help out the promoter by waiving fees, bearing unplanned expenses, and perhaps agreeing to terms for a future date that are less favorable than they should be.
Tour Riders
Performance riders are the multipage addenda to the (usually) one-page employment contract that establishes the basics of a booking: the date, the location, the price, the terms of payment, the number of shows, and whether the act is headlining or not. The rider is where the fun begins. Rather than review all of the customary provisions, suffice it to say that they cover everything from staging, sound, lighting, and electrical requirements to backstage food and drink (a generous serving of moo goo gai pan was my favorite—but for sixty-five dates?). Included among the more important provisions are restrictions against recording (audio and video); a commitment to provide c
omprehensive general liability insurance (in case something happens at your concert to someone attending it—that needn’t be as dramatic as what happened to the Rolling Stones at the Altamont); and satisfactory accommodations (always with 24-hour room service).
What is important here is, again, not so much the content of the rider, but the thought that goes into drafting it. It matters who writes it, who reads it, and who sees it. There are hidden costs included within the rider that can bankrupt a tour if the person who draws up the budget is not aware of them. While the costs of advertising (for example) and the nature, variety, and extent of the backstage food are usually borne by the promoter, what happens when the promoter suffers significant losses and looks to the artist for help? After all, in the promoter’s opinion, it is the artist who failed to draw the crowd—not the inefficiencies of the record company, not the local radio promotion people who awoke too late to the fact that the artist was coming to town, and not the inept (or nonexistent) advertising by the promoter. So, the more costs the promoter incurs because of the artist’s whims, or the artist’s manager’s misjudgment or mismanagement, the bigger the financial hit the promoter may experience later—and the less likely it is that the promoter will be willing to accommodate the artist when he or she wants to play that venue again.
Even in the event of a successful concert, these superfluous costs can have a considerable impact on the artist’s net income derived from the date. The profits of a concert are customarily shared by the artist and the promoter on some percentage basis, with the much larger share (upward of 80%) going to the artist. When the expenses incurred as a result of excesses sought in the rider are higher than they should be, the net to the artist is naturally lower than it could be. Remember, in traditional arrangements, the manager, business manager, and agent are all commissioning the gross, so they do not have the same stake as the artist does in controlling costs, which ultimately determine the net profit.
Most of the time, the artist has no clue as to the goings-on behind the scenes that cause expenditures to spiral upward, expenditures that, in a nanosecond, can exceed those imagined in the artist’s wildest dreams mere months before. That is too bad, since the artist will end up paying for all of them.
Another reason why it is important that each artist’s rider be carefully vetted and drafted by the artist’s representatives who care about that particular artist’s specific interests, deals with how he or she deals with his or her own celebrity. Without intending to slander any particular artist for being excessively paranoid, or egotistical, suffice it to say that some riders require the promoter to ensure that no eye contact is made between the artist and backstage personnel. “No autograph or photo requests” are quite prevalent, although one can appreciate how artists, thrust into environments of strangers, and seeking to establish a cocoon of comfort before facing a crowd of 2,500 to 100,000 fans, do not wish to be disturbed—especially while preparing for the show to start.
Foundations of Success: Team Planning
The preparation (or lack thereof) for a grand tour can have a profound effect on an artist’s future. A poorly planned tour can not only destroy the fiscal health of an artist, it can also kill a career. In no other area is it more important that planning time be spent wisely by the artist’s team of advisors, and nowhere is it more appropriate for all of these advisors to be in constant communication with each other. The purpose of establishing and maintaining fluid contact among advisors is not to make it impossible for any of them to claim innocence if something goes wrong—that will not help revive a bank account or a career. Rather it should be established so that the advisors will be able to truly test each other’s judgment when critical decisions are being made. In a finely tuned organization, all the information gained as a result of following the guidelines in this chapter would be shared by all of the important decision-makers within that organization—including, of course, the artist.
Cash Flow
Cash receipts and cash outlays are not always in synch. Accordingly, it is crucial that the band’s business manager establish a line of credit with a bank to ensure that cash will continue to flow despite unanticipated glitches. For example, the band’s own agent may hold back funds that have been paid by promoters for dates already played. Similarly, some agents inexplicably take deposits for future shows well below the recommended 50%, meaning that if the date is not played because of a default by the promoter, the artist is left without any of the budgeted fee for the date. The impact of such actions on the finances of a tour can be devastating. Some agents “settle” accounts, after a date is played, once a month. This is bad practice. Remember, they already have their commission (usually 10%), and they should remit the money they collect without delay rather than sit on it. The band’s business manager must keep on top of the agent to ensure that the band’s money is in the band’s hands as soon as possible. This issue should, of course, be dealt with in the written agency agreement, but even when it has been, the band’s business manager must take steps to keep the cash flow going. Remember, the contract is in the filing cabinets of all parties.
Trucking and Busing
There are a number of issues that must be explored before projecting a budget for this extremely expensive category. First and foremost, or course, is the reputation and track record of the companies you will deal with. If you have knowledge of a reputable firm, fine. If not, will you need a broker (who will add to the cost)? Following is a comprehensive list of items that need to be evaluated in the planning stages by the artist’s professional representatives—and occasionally by the artist as well. (For simplicity’s sake, I have used the pronoun “you” to refer to the artist and the artist’s team, collectively.)
Contingency Planning
• How committed must you be to reserve the vehicles—for example, once the deal is agreed, what is the cancellation policy? Seven days? Fourteen days?
• Is everyone absolutely clear about dates, and has some flexibility been provided, in case there is a need to change start and end dates as well as venues in between?
• Has anyone thought of negotiating a renewal option if the tour does particularly well and the artist is in a position to extend it?
• Has anyone thought of negotiating a termination option if the tour does not do particularly well and the artist is in a position to end it? What is the “kill” price and is it reasonable?
• If there is a mechanical failure, what kind of damages can ensue and what kind of costs will the trucking company be required to bear to provide alternative transportation? In the case of buses, who decides what this alternative transportation will be to ensure that the artists arrive at their destination in the same shape as they would have if there had been no mechanical failure? The same issue applies to gear in the trucks that obviously must be at the venue in time for sound check and, of course, the show itself.
Insurance and Liability
• What are the claims procedures?
• What kinds of insurance must be provided, how much does it cost, and how secure is it?
• Is there a way to make sure that the trucking company bears some liability in the event the drivers commit acts of negligence or incompetence due to poor training or substance abuse? Or worse?
• Who is responsible for mechanical failure and can it be insured against?
• How are third-party liability and property damage dealt with?
• Since the artist will have to reimburse the trucking company in the event the artist’s guests trash the bus or cause damage, the artist (and, if a band, each member) and the entire entourage (wives and husbands included) had better be forewarned of the possible liability.
• If the vehicles are used for any illegal or unlawful purpose (such as a violation of a federal, state, or even municipal statute or law applicable to the operation of the vehicle or possession of drugs), the vehicles themselves can be subject to confiscation by the authorities. This would be a disaster! Who knows w
hat the damages could be? At the least, the artist would be liable for the fair market value of the vehicles (as depreciated) or even the actual cost of replacing them with brand-new vehicles. The artist might also be liable for lost profits if the vehicles were scheduled to be leased to a customer following the expiration of the current contract. Even if the artist does not do anything illegal or unlawful in the bus, many of these contracts require the artist/group to agree not to permit the vehicle to be used for such purposes. Thus an affirmative obligation is placed on the artist regarding the eventual risk of cost.
• Even if the artist is completely insured, if a loss occurs, the insurance rates on the next tour will be even higher. It is a good idea for the attorney, or business manager, to inform the artist about this issue.
• In the event of injuries or death of the artist’s personnel or passengers resulting in claims in excess of the insurance, or in the event of damage to or loss of baggage, cargo, or personal property not caused by the artist, who is responsible for the costs incurred or, for that matter, the legal fees to defend the eventual lawsuits?
The Drivers
• Who is responsible for the drivers? Their accommodations? Their insurance? Their withholding taxes? Their benefits? Their Workers’ Compensation fees? Their per diems?
• How do you know if the drivers have good driving records?
What They'll Never Tell You About the Music Business Page 33
