Top Music Biz Managers Share Tips For Weathering The Pandemic
By Claudia Rosenbaum
Cut expenses, recheck your royalty statements and make new music
say these financial advisers
I’m telling them to not panic. We will come out of this. I’m also telling them it’s important to focus on expenses even more than income. Now that we are in quarantine, buckle down, manage the expenses and stick to a budget.
How are you calming your clients, and what are you advising them to do in the near term?
Most of the artists that I work with are pretty emotionally solid when it comes to approaching this. When they call, I remind them that we prepare for this — maybe not to the extent of what we’re experiencing now, but our job as business managers is to create a rainy day plan. We always ask our clients to put aside somewhere between six months’ and two years’ worth of living expenses for the unexpected.
Everyone should cut expenses and release music. Another good thing to focus on is royalty hunting. It’s a great time to double-check your royalty statements. Make sure that there isn’t money out there that’s owed to you
Our job is to be the voice of reason. We tell them to stay positive and focus on what’s under their control. One of the things they really have control over is spending. Besides financials, we encourage them to continue to play and write songs. When you write a song, you own that copyright and have created an asset that can generate income.
In California, with the potential for earthquakes, fires and mudslides, we prepare clients to be prepared for the unexpected. We usually say you should have some cash on hand in the event that the electronic banking system goes down and ATM and credit cards don’t work. We even tell them to stock ample supplies of food and water, first-aid kits and prescriptions, and to keep digital copies of all valuable documents.
There is no “one size fits all” answer. Sometimes you have to calm clients down. It can relax them by talking through the situation. Some, you actually have to scare a little bit. They want to dig their heads into the sand. You have to get them to focus and make tough decisions that they don’t want to make.
Right now, I’m not doing anything proactive other than encouraging them to pay attention to their expenses and to cut costs wherever they can.
Nobody in Nashville wants to lay off their band right now. A lot of my guys have had their band for five, seven, 10, even 20 years. In country music, you have a lot of consistency with your band and crew, and many are on salary. Clients are looking at $60,000 or $80,000 a month going out. If you have no income, four or five months of that can bankrupt you. For some, it has been the toughest, hardest conversation to have. Every artist has their own moral code. Are they willing to spend a little bit of their own money, maybe go into debt to help cover their band costs for a while?
Some of these guys will get a loan because they know they’ll make it back over time. It’s also mitigating other [costs], negotiating them as best you can out of any bus leases, for example, while at the same time being conscious that all these other people have businesses too.
“I am getting calls from every one of my clients,” says Justin Kobay, a partner at LL Business Management. “And if they’re not calling me, I’m calling them to keep them up-to-date on what’s happening with the markets, what’s happening with their own businesses, what’s happening with their assets and so on.”
Source: New York Stock Exchange
With the touring business at a standstill and a recession looming, business managers have been deluged with calls.
How Music’s Top Business Managers Are Advising Their Clients to Weather The Pandemic
President, Wiatr & Associates
Partner, LL Business Management
Lake Success, N.Y.
Founding partner/president, PARR3
Partner, Dunn Pariser & Peyrot
In order to tour, you have to have music, right? Most artists are capitalizing on this time to make music. I also think it’s a good time for them to educate themselves about the business — whether it is capitalizing on new opportunities or understanding the different royalty streams that are given to artists and producers.
What advice are you giving to artists who have had to cancel or postpone their tours?
The simple answer is that this is a great time to make and put out good music. A lot of artists can get distracted by having to constantly go on the road. Touring opportunities are good, but they can distract from the creative process. This is a really interesting moment, which may never happen again, where nobody’s on the road. Without that pressure, everyone can really buckle down and get deep into their creative space.
We may encourage them to use this time to catalog all of their music or work on an unfinished track. We also encourage artists to concentrate on fan engagement; reassure them by holding virtual concerts. Music has this ability to uplift, inspire and heal. That’s a great gift that is often overlooked when we talk about the music business.
A lot of our country artists write their own songs so they have that income. That definitely helps. I’m asking them to use this time to write as much as they can. Record albums. Do all those things that can help you make money in the future.
This is somewhat of a blessing in disguise. When we set them up for business management, they don’t necessarily have financial advisers. I push for them to get one and to start saving early. Most entertainment clients don’t have consistent income. They might sign a big deal, get a big advance and then not get paid for another six to 18 months — or even longer. A 25-year-old client has a long runway ahead of them and will be investing their assets for the next 10 to 30-plus years. They are getting in at discounted prices now, which will work out for them in the long run.
What game plan are you suggesting for younger artists?
It’s exciting to see a lot of our younger clients, who maybe don’t have as much awareness or as much invested in the stock market, start to express interest in learning about investing and saving. We are a relatively new firm, and most of our clients are on the earlier side of their careers. Because of that, they have the opportunity to make aggressive moves for retirement right now.
For clients who are already invested in the market and have seen their accounts decrease — in some cases significantly — I tell them it’s important to hold tight. Everyone wants to panic and pull out all their money, but the reality is, the world only ends once. And if it does, then none of this matters.
What strategy do you recommend for older clients who are farther along in their careers?
We’re still working as if April 15 is the deadline, because it’s important for our clients to know how much they’re going to owe. By doing that, we can strategize and say, “OK, [now that the new deadline is July 15], you have three months to invest this money or at least put it in some sort of money market account.” Capitalize on the money that you are not able to keep.
Are you employing any strategies related to banking, tax filings or the new stimulus package?
The package has been signed into law, but that doesn’t mean everyone involved knows what they need to do with it. I talked to a few of our banking relationships and, as of today, they said, “This sounds great, but we don’t know what the federal Treasury needs us to do in order to accept these applications.” Hopefully, they will get it together this week. This could really bridge the gap for artists — especially those who took a big hit on touring — and help them keep their valued team members afloat until the business turns back on.
The Paycheck Protection Program allows small businesses to take out loans and have a portion of that loan forgiven if they keep their staff employed. There are Small Business Administration [SBA] emergency loans with pretty favorable terms to help with overhead and operating costs. The definition of unemployment has been expanded to include independent contractors and the self-employed. There’s a payroll tax credit and deferment provision, and a forbearance on student loans for a few months. Many of our clients are still paying them off.
Some of the big [benefits] of the stimulus package are loans to keep businesses operating and help retain employees and payroll tax deferment. There is also the ability to take distributions from retirement plans without a 10% penalty. You then have up to three years to pay back those plans.
These benefits are going to take some time to work their way through the system, so people aren’t necessarily going to be able to pay their April mortgages with them, but in California, Gov. [Gavin] Newsom has reached agreements with some of the country’s biggest banks, including Wells Fargo, Citibank and JPMorgan Chase, to allow customers to defer mortgage payments for up to three months.
The actual procedures for accessing these benefits will come out in the next couple of weeks, and, as they say, the devil is in the details. People will need to make sure they meet the requirements, but the bottom line is there are a lot of relief provisions.
Every client has hit me up about the stimulus package. They all want answers because a lot of them are trying to make employment decisions right now. I’m trying to give them the best advice, but there are so many details that are yet to be revealed. I’m waiting for an SBA loan officer to return my call so I can get some answers, but the package as it’s written now provides [a loan] for employers to cover eight weeks of employee salaries, which is great. If the loan is used for that purpose, 75% to 80% of it can be forgiven. It means there is hope for people to help cover some of their overhead and keep people employed.
It’s definitely a once-in-a-lifetime experience, but we’re all in this together. One of the things about the music business is that artists usually take nine to 12 months off from touring to make an album. So, while this is a forced part of the cycle, it’s not a unique situation in a lot of artists’ careers.
Any advice on how artists can keep what is happening in perspective?
It’s funny because I’m a CPA, I have a master’s in taxation, I’m a registered investment adviser, but I probably spend way more time counseling clients on focusing on what’s in their control. We let them know they have somebody here that is looking out for their interests.
After years of a bull market, the music industry — particularly the touring business — is looking at an unpredictable and possibly bleak year ahead, if not longer. “This is an unprecedented time,” says Kobay. While shelter-in-place rules could boost music streaming numbers, public gatherings are not expected to resume for months, and some medical experts predict additional cycles of widespread infection before the coronavirus is contained. In light of such great uncertainty, Billboard turned to four of its 2020 Top Business Managers to discuss ways in which they are helping clients make the most of their financials during this time.
Illustration By Matt Chase
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