FEASIBILITY REPORT

Chris Pickett
August 4, 2010
ENGL 320 Unit 3 Project

INTRODUCTION

The purpose of this report is to decide if there is a need for a business such as Pulse Music Services. The
primary options for a band looking to put on shows and record music are through hiring a booking and
promotions manager or company, signing a contract with a record label, or going truly independent and
attempting to promote, book, record, and mix by themselves. Since it is highly improbable that a band
can focus both on the music and also the advertising without getting some outside help, this document
will focus on the two main alternatives: record labels and promotion services.

Although online piracy has affected the music industry in terms of record sales, new bands are still
emerging which look not only to gain a fan base but also to tour on the merit of their music alone. The
problem is that the music itself won’t be able to book shows, print records or t-shirts, get played on the
radio, etc., in order to get noticed. This is where a promotion service or a record label will step in while
the musicians continue to focus on the music.

OVERVIEW OF ALTERNATIVES

Record Label:

The way a record label gets in contact with an individual band is usually through the use of its A&R
(Artists and Repertoire) Department. People from this department will go from show to show in any
given geographical area and listen to different bands. Usually they will target certain bands that they
feel are the closest to signing, or have a more polished and marketable sound. These “scouts” listen to
demo tapes, attend shows, and research a band before they confront the members of the band to try
and open talks to then sign the band.

A “signing” is where the band signs a contract with the record label, typically an exclusive recording
contract meaning that the label which signed the band has exclusive rights to the material that the band
writes. The label will then market the band’s recordings in exchange for royalties on each album sold
going to the band itself. The band will then record as much material as the contract states and the label
will set up shows and tours for the band.

The artists do not pay any money directly to the label; rather the label makes money through album
sales, ticket sales for shows and tours, and television and radio appearances. The label affords recording
space and some equipment for the band to use, but most of the equipment comes from sponsorship
deals also set up by the record label. The band makes money through the royalties on album and ticket
sales, although due to advance recoupment, manager fees, packaging fees, and other such fees, bands
rarely see much money from either record or ticket sales. The following image, taken from the article
“The Music Industry’s Funny Money”, shows on average how much an individual musician makes per
$1000 in music sold.

Source: “The Music Industry’s Funny Money”

This breakdown also even seems to be on the higher end according to the article “RIAA Accounting: Why
Even Major Label Musicians Rarely Make Money From Album Sales.” In this article, the author mentions
an article written by Courtney Love for Salon.com called “Courtney Love Does The Math.” In her article,
she goes on to explain that after a $1 million advance to the band with a 20% royalty contract, the
record company profits $6.6 million and each band member only makes $45,000 even after one million
copies of the album are sold. This is after taxes imposed by the government and fees imposed by the
record label. The “RIAA Accounting” article goes on to describe the story of Tim Quirk, singer for the
band Too Much Joy, and how he actually ended up owing his record label $400,000 after an album
release and world tour. There is also report after report of bands no receiving royalty checks from the
record label. These reports and articles will be liked in the “Links” section at the end of this report.

Promotion Service:
This service acts much like a record label would except for a few major differences. The first major
difference is the contract. Generally with promotion services, including Pulse Promotions, the bands do
not sign contracts but rather retain the service on a monthly basis in order to have access to the benefits
that it provides. Bands are not required to produce a certain amount of music on any sort of schedule,
have the freedom to choose their own producer and what songs make it to the album, can choose their
own price point for albums and merchandise, develop their own websites, and keeps all of their profits.
The supreme difference in business models is that the band, rather than receiving money from the
promotion service, would pay the promotion service a monthly fee.

While this may seem like a raw deal to the musicians, it actually works in their favor because the band
receives 100% of the money from album and ticket sales that would normally be distributed to the
record label with royalties going to the band. Therefore, for every $1000 in music sold, the artists would
make $1000 (minus retail costs, which do not factor into the ROI if the music is distributed digitally),
rather than the average of $23.40 that they would receive if working with a record label. The money
made in this manner, if promoted properly and sold well enough, will certainly cover the costs of using
the promotion service and also has the chance to be extremely profitable. The biggest drawback of
using a music promotion service is that if the band proves unsuccessful, it is possible that they will lose
money on the deal. However, due to the absence of contractual obligation, the band can stop using and
top paying for the service at any point, which will help offset losses.

The similarities between a record label and a promotion service include finding recording space, printing
records, booking shows, releasing singles to radio stations, maintaining a band page on the service’s
website, and promoting the band in any way possible. The only out-of-pocket fee would be the monthly
payment, all other things such as the materials for creating the records, the booking fees, and
everything else would be covered as part of the monthly payment. No additional fees will be charged to
the band.

As far as actual pricing goes, numerous hours of market research must be devoted to the pricing of this
type of service, especially because it is a newer business model altogether in the music market. As a
result, I am not able to provide a concrete dollar value for this service.

CRITERIA

The goal of a band that is serious about making, selling, and distributing music is to get their music out
to as many people as possible and to make a comfortable living off of their efforts. A band that wants to
make it big needs to first of all make excellent music and have that be the main focus. In order to
accomplish that and also be able to book shows, print records, and promote their music and concerts, a
band needs another organization to help them. The main goals of this other organization would be to
help the band out as much as possible and maximize their potential without limiting the creativity and
work ethic of the band.
METHOD

The facts that I have presented above and comment on below have been collected from many different
correlating, credible sources. All of my sources and other supporting evidence of what I have presented
will be linked at the end of this document.

EVALUATION

For the evaluation, I basically put the aspects of a music promotion service and a record label back to
back against each other in order to directly compare and contrast the two alternatives.

Music
Promotion Record
Service Label
Monthly Fee X
Monetary Advance X
Contract X
Money band makes
for every $1000 in $1000 $23.40
music sold
Books shows X X
Finds recording
X X
space
Prints records X X
Gets music on the
X X
radio
Band chooses the
X
producer
Band chooses songs
X
that make the album

CONCLUSIONS

Obviously there are positives and negatives for both options. Record labels keep lazy bands on track
and pay the bands in the form of advances and royalties on the music that is sold. A band has a certain
level of security while under contract with a record label and can usually get access to the top recording
studios and producers. Bands however give up some freedoms, as the producers and the label have
final say on the ultimate sound of the record, including what songs make it onto the album, when the
album is released, and how the album can be promoted.

Music promotion services focus on letting the bands themselves retain creative control, allowing the
band the final say on every decision with the album and more individual control over the path that they
take. There is also a much greater possibility to make significantly more money from album and ticket
sales. The music will still be promoted, the shows will still be booked, the songs will still get onto the
radio, and the band can drop the service at any time. Conversely, the band must front the monthly fee
for the services provided, there is less security in terms of success, and there is a possibility to lose
money in the deal.

RECOMMENDATION

Looking at the facts presented in this document, I feel that the music promotion service is the best way
to go. Choosing this route comes with a higher risk but also a higher reward. Record labels across the
nation are also losing money and may not recover from the blow that peer-to-peer file sharing has dealt
them.

LINKS

Prince, Tom Petty, and Neil Young suing their respective record companies:
http://new.music.yahoo.com/blogs/getback/148896/taking-on-the-man-musicians-who-sue-their-record-label/

Cher suing Universal Music Group:

http://reporter.blogs.com/thresq/2009/06/cher-lawsuit-universal-music-.html

An article describing artists succeeding without the use of record labels:

http://www.techdirt.com/articles/20091119/1634117011.shtml

Eminem suing Universal Music Group:

http://www.cultofmac.com/eminem-sues-record-label-over-itunes-royalties/8931

Tim Quirk of Too Much Joy describing his issues with Warner Brothers:
http://www.toomuchjoy.com/?p=1397

Thom Yorke of Radiohead warning about record labels dying:

http://www.thisislondon.co.uk/standard/article-23842367-dont-sign-to-a-major-label--theyre-dying-radiohead-
singer-warns-young-musicians.do
WORKS CITED

"HowStuffWorks ‘How Record Labels Work’" HowStuffWorks "Entertainment" Web. 04 Aug.

2010.

"Inside Record Labels: Organizing Things." Music Biz Academy. Web. 04 Aug. 2010.

Love, Courtney. "Courtney Love Does the Math." Salon.com - Salon.com. Web. 03 Aug. 2010.

"The Music Industry's Funny Money." The Root. Web. 04 Aug. 2010.

"RIAA Accounting: Why Even Major Label Musicians Rarely Make Money From Album Sales |
Techdirt." Techdirt. Web. 04 Aug. 2010.