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The EvO:R-Pedia Musicians Tips Section
Welcome to the EvO:R Tips Section. We call this section EvO:R-Pedia because it is like a complete
reference library for Indie musicians...Just about every tip has been used so you won't find false
promises and a series of books to buy after reading each tip. This section was put here by musicians
so that people that followed can take this knowledge and use it's power.
What Is My Music Worth?
By Moses Avalon
Buying and Selling Of Catalogs Is The Back Bone Of The Music
Business Economy. Is It In Danger? Recently, a client of
mine was trying to sell his small independent label. He
thought he could sell it for about $1,000,000 and wanted to know
what independent labels had sold for lately. I know many
of you on this list own or control musical works of some kind
and wonder the very same thing: what is my lifetime investment
in this god-forsaken business really worth?
Thanks to some on this list, I got very helpful data. For
example, a very smart lawyer who sits on the advisory board for
the Future of Music Coalition told me in an email, “$1,000,000
isn't much. I'd venture that virtually every indie that
got bought in the last 10 years fetched more than that.” Of
course, I expected an answer like this from someone who advises
the FMC. They tend to see labels as high-on-the-hog.
However, an executive from Yahoo Music, who works closely with
labels, promoting their music on the web, had this to say, “I
imagine most of those indie deals have been considerably less
than a million.”
Hmm… Who’s right? It depends how you define the operative word.
WHAT IS INDIE ANYWAY?
The subject of "indies" always prods the question, “What is a
true indie and ,therefore, what is a true indie buyout?" Would
you include the deal where Warner bought about 75% of Roadrunner
for close to $75 million; or where Disney bought Mammoth for
around $25 million in 1997; Warner’s buy-out of Ryko for $67
million in 2006; or Universal’s ownership of Def Jam for insane
Nah. Those deals just don’t seem to ring the “indie” bell
in my heart. However, if we revert to the hippie standard
for “indie,” where one has no ties whatsoever to a major, we are
left with virtually no one worth researching (save a few
significant exceptions like TVT and Kotch).
Those who have taken my workshops know that I don’t use the word
“indie” to define non-major labels, but rather my own terms like
“one deep” and “two-deep” to describe a label’s placement in the
hierarchy of the business.
So, is there another standard?
The Association of Independent Music (AIM) has tried to create
one. Their constitution states, “If a major [label, like
WMG] owns 50% or less of the total shares in your
[“independent”] company… you can join AIM.”
But that has problems too. Even if you only own a minority
49% share, you can still assert majority leverage over your
asset when you’re making executive decisions regarding their
distribution. Plus, as far as the artist is concerned, if
the rights granted in a contract with a supposed “indie” label
are the same as those granted in a 50 page, major-label deal and
that indie is 49% owned by the same major, then all you have
there is a major label deal—without the major label perks.
This sucks. But it defines one of the primary reasons
people start indie labels—to one day be bought out by a major.
And to do this you’re contracts need to be similar.
Then, there are credit deals where large companies give lines of
credit to smaller labels without actually “acquiring” them.
So, we’re stuck again with trying to define and answer the
question: “What indie labels have been bought by majors and for
what amount in the past ten years?”
BIG FRANK, LITTLE FRANK
So, here’s what I found.
(Thanks to those on this list that helped with the research.)
--Presently, there is a Universal offer to buy Sanctuary for
about $88 million. Sanctuary is a multifaceted company
with label, publishing, management and merchandising interests.
--25% of Victory Records was bought by Universal in 2002 for $20
Million. They had a couple of Gold acts at the time of the
purchase and had revenues that year of about $7 million.
Their founder Tony Brummel holds the remainder of the company.
--Warner paid $10 Million for a minority part of Lizard King.
Founded in 2002, the label had the multi-platinum selling band,
--Higher Octave was bought by Virgin in 1997 for something north
of $15 Million and then folded into another label, Narada World.
At its peak in the mid-90s, it was doing $12 million, per year
in annual sales.
And the grand prize goes to…
--Mp3.com's acquisition by Vivendi Universal for a mother lode
of $372 Million; 66% higher than the worth of the company’s
DID YOUR REALITY CHECK BOUNCE?
So, those are the big dogs. But these deals, fueled mostly
with Wall Street money, do not tell the whole story. The
vast majority of label sales are ones where you have a small
hard-working team with twenty or so acts on them that are lucky
to sell 15,000 units for a single release. These deals
don’t make the trade mags. Not sexy enough. In most
cases, the owners are thankful to get any sale and neither the
acquiring company or the indie is interested in advertising
details of the buy-out.
My data tells a more typical truth: the vast majority of
“indies” are only tipping the $1 Million mark in the buy-out
department. In many cases, it’s mostly a paper sale
anyway, consisting of stock as a bolster for the small amounts
of cash put on the table.
--Universal bought half of Octone for a bit more than $1
-- In 2003, Triloka was bought outright by Sheridan Square
Entertainment (Artemis Records) for around $800,000.
--Tone-cool (also bought by Sheridan Square) for around
-- In 2004, Sheridan Square was then acquired by Compendia Music
Group (Intersound, Light Records and Compendia Records) for
approximately $7.8 million.
What does this tell us? There is plenty of money on the table
despite the doom-and–gloom proselytizing by some of my
contemporaries (I meant to say lazy journalists who just
regurgitate press releases instead of doing any investigating,
but I’m being polite.) Wall Street is still bullish on the music
biz despite CD sales taking a deep dip. What do they know
that the papers and bloggers are ignoring?
Probably that just because CD sales are dialed back to 1991
levels doesn’t mean it’s the end of the world. 1991 was
still a very good year for the record business. Plus,
there is more revenue coming to the business than before, just
in different forms. The labels that are surviving are the
ones embracing the transition. (I’m proud to say some are
my clients.) These numbers prove that the catalogs are still
valuable even if no one has yet to completely master monetizing
them in nickel-and-dime unit-sales like singles and CDs.
However, there is one sobering fact to these numbers: unless
you’ve got a hot act, or a publishing catalogue with a hit
buried within the filler, you are probably looking at a buy-out
of somewhere between $800,000 and $2 million. But, any
gold at all in your hills will practically guarantee the price
jumping to incredible heights.
Not much new here, except some reality on the numbers; get a hit
and you are paid!
Same as it ever was. Same as it ever was.