Expert Views On The Importance Of A Business Plan

Andrea Cockerton  

According to this post on a BP Expert Views Blog Andrea "is an independent pitch expert and advisor in the United Kingdom. She has her own business Brick Handbag and has worked for Microsoft in the past. Why have a business plan? 

What to look for in a plan?

During a talk in 2008 Andrea says that some of the most important things to show in a business plan are that the company is going into a market that is growing and "has a need for your product or service." She also says that the plan must show that the team behind it all has the experience and talent to make it happen, and last, but not least, the plan must show that the "product or service is groundbreaking."

Why these are key

Andrea says, "These specifics are necessary to increase the strength of the pitch for financial backing." An investor will be asking themselves why the business should be started and if it will be successful enough against competitors to be profitable.

And now, for something completely different…

Chuck Blakeman

The same expert blog lists Chuck as a "serial entrepreneur and business success mentor" who believes that business plans actually do more harm than good. He says that forming a business plan to look into the future takes time away from the changes that could be implemented now to change the future as the company goes. Essentially, take care of today, and tomorrow will take care of it’s self.

Why to avoid a plan

Writing business plans wastes time and can make things worse by allowing a company to follow the wrong trends, could make the company miss opportunities, fill a niche, or become a leader.

Why this is key

Chuck offers these statistics as evidence of his points. I encourage all readers to vista Mr. Blakeman's article and take a look at it entirely and then leave a comment below and let us know where you stand on the topic!

“A Harvard researcher found that 97% of all businesses leave their prime objective in order to be objective. The world’s greatest past and present businesses (Apple, Google, Facebook, HP, 37signals, etc.) all started out to do something other than what they ended up doing. And none of them did much pre-planning, if any.”

Chuck Blakeman’s Company

A Business Consultant Should Have Experience

     For the content here on my blog I have tried to focus on the questions and topics I deal with most in my daily work as an Entertainment Business Consultant. Within the last two weeks the question of what is most required, or what one should consider imperative, to be a business consultant in any sector of a given industry has arisen in conversation several times. I have taken this as a fateful hint to quickly cover this question as a topic in my post this week. In my humble opinion, the most important attribute one must possess in order to be qualified to work as a business consultant in any sector of a given industry is experience, and lots of it. The best possible scenario is for one to have a good deal of experience in many sectors of a given industry in order to be most effective as a business consultant.

     Education is also extremely important, but this is secondary. Some of the most sought after business consultants have indeed risen from years of experience before they decided to get an education. Some of the best in the entertainment industry, such as Gerry Barad, head of Global Touring for Live Nation, have risen to such positions through years of experience and learning in the trenches alone. While it is surely important for one to have a solid education under their belt, years of experience, contacts, and "been there done that know-how" just cannot be matched by classroom education when it comes to being an effective business consultant. Here is a quote taken from Business Consulting ABC's website," Having an MBA from a good business school isn't enough. The Business Consultant must have solid real world experience with many types of companies in order to be an effective consultant." This statement could not be truer when one is speaking about the entertainment industry.

     An experienced Entertainment Business Consultant will have been in the trenches and have been involved in many different dealings across many sectors of the industry. He or she will know exactly what is needed to get a project back on track without having to do hours of research or call in a team of outside experts costing a client more time and money. When choosing an Entertainment Business Consultant one must choose someone who fits the bill and must not pay attention to the individual's education, this is a bonus. Finally advice for anyone who wishes to get into the field… Jump into the industry with both feet, get involved in everything you can, and if in ten years you are the one everyone is calling for advice, you have arrived at your destination.

Profitable Markets For Foreign Distribution

     In the last couple of posts on this blog I have spoken about budgeting for media distribution as well as a bit of the change that has occurred in laws governing the content that is being distributed. In addition to the posts regarding law and technical changes of the overall entertainment business landscape, there have been more specific entries regarding information for foreign distribution and licensing for ancillary revenue sources. Topics for entertainment business consultants, publishers, and independent artists, labels, and managers are the purpose of this blog, and specific information is often not repeated unless it is asked by the audience to possibly provide some additional resources on a topic in general, as most of the posts here reflect questions I am asked weekly in my work.

     So, this week for my independent audience, as well as my entertainment business audience of consultants, producers, publishers, etc, I will provide a few resources that will build on my previous post, found here, regarding global music sales, territory specific sales information, and global charting history for researching genres, songs, and artists, that have found success in foreign markets. I know you will find the information valuable, and after a bit of research you will undoubtedly begin to "get in where you fit in."

1. The Digital Global Music Report 2012

This report from the IFPI will help anyone looking for specific information as it relates to separate platforms, territories, and more.

2. Historical Global Charting Information

Here one can search charts and successful artists, genres, and songs across different time periods in just about any country in the world.

3. This chart is an indicator of global music sales separated by country and can give one a starting point when thinking about where to begin their research, or campaign.

Sink or Swim

     Over the last two years I have met with or consulted nearly five hundred artists, associated managers, and a dozen or so independent labels. Beyond issues related to touring, shopping for specific licensing, and building strong fan bases in foreign territories, the question and concern most often asked and addressed is what type of return in revenue can one expect in terms of sales versus marketing dollars. Some truly believe they can make it by passing out CDs and doing a few shows. While historically we have always seen one hit wonders, and the occasioned artist or group that literally explodes over night without much help, the true answer is that your sales level (given a quality commercial product) will definitely depend on the size of your budget, as well as the connections you have in the industry to properly make use of that budget. If you have no budget, you have no chance. 

     People have been really excited about digital distribution, the wide array of providers in this sector, and the ease of which they function, and they should be, at least you have bought a chance. But this is the same as the lottery without an effective plan ready to be put in place and a proper budget with which to make it all happen. As stated by Thomas Jefferson and many others, "The lottery is a tax on the ignorant…" and this is also true in the example of distributing widely around the world with no budget to market to anyone outside of your email list, local bars, and Facebook. I found a quick list of free and cheap for those on a small budget here.

     The explosion of thousands of niche sub-genres had a ripple effect on the music business as well, this took each sub-genre that found any success and quickly pumped out thousands of acts for each, each trying to fill the top three spots with almost identical feel if not material. To be an artist today could be compared to the mass explosion of female doo-wop groups in the fifties and sixties that exploded so fast with so many artists that not even the companies knew who to pay for what song. When this is taken into account, even the most singular and individualized, well branded, and unbelievably talented artist will have to spend a good deal of money and resource to cut through the clutter of those merely taking up empty space just to be noticed and remove themselves from the lottery and enter an honest selection of taste.

Necessity and Invention

     While there are certainly many new opportunities for one to license their content given the mass indulgence of the public in video games, brand new forms of advertisement, the different places and ways content is consumed digitally, etc, problems arise when parties are requested to acquiesce as to how the pie is cut. Indeed, everyone must be paid fairly for his or her time and service associated with any product whether it is for the production, manufacture, storage, or delivery but what constitutes fair, and who decides? Are the producers and license holders of the content due a larger piece of the pie for providing the content, without which there would be no product for service? Is a distributor to receive a larger piece of the pie due to their contracts and connections with stores, kiosks and other providers, or perhaps fees associated with commerce?

     There seems to be a lot of forward marching towards the technological advancement of media distribution in an effort to keep up with the full speed run of a concurrently growing appetite and consumption of digital media but there also seems to be a lot of clinging to old systems and statutes out of fear, like the rates that are paid out after collection for example. Yes, there have been some very beneficial court cases over the last ten years or so that have inched an industry closer towards change, and a few very important cases going on now that should be watched closely. But why should noticeable and mutually beneficial change have to come from extended trial and appeal?

     The very basics of economics and history shows us that when technology is revolutionized and industries shift there is a time where traditional roles and employment will cease to exist, old forms of business will also cease to exist, and new regulations and education are of the utmost importance for those who wish to succeed and live to tell the tale in a completely new environment. So why are so many intelligent people missing the bus?

     In a world where human ingenuity has proven over and over that necessity breeds invention we must also carry this philosophy and living ethic over to the statutes that govern our consumption, collection, and payment of/for media by reviewing and revising, as well as being willing to throw away old and make way for new to guarantee that traditional ways of doing things do not directly inhibit the growth potential in revenue for the artists, producers, and rights holders, or the industries from which these may also thrive. In an annual meeting with Congress, David Israelite, president and CEO of the NMPA, had this to say. "We must find efficient ways to license our copyrights and empower new business models. Much of the current licensing system is outdated and inefficient. It was built to service outdated business models." 

Avoiding Liability Through Continued Education

     As a business professional in the entertainment industry one should remain a firm believer in, and constant practitioner of, continued education. This is especially true where there is opportunity to study cases that set precedent(s) in our industry or evaluate existing cases, laws, and statutes that still have a tendency to effect how we do business everyday. As a publisher, record executive, or producer, the information below can help to remind one to stay on the "up-and-up" when it comes time to do research, make promises, and handle agreements through not only the use of what most would consider standard industry practice, but also by knowing what is currently changing to protect oneself in/from the future. As a consultant on these matters, it becomes even more obvious why one should stay apprised on all possible matters relating to the law and how it may affect a party on "either side of the fence" ensuring proper advice is always delivered.

     Two of the podcasts used for analysis this week come from Gordon Firemark's "Entertainment Law Update" series. The first, titled "Lawyers, Libel, Logos, and Lolipops" covers some changes to infringement process through language clarification for ISPs, and the findings of the 9th circuit regarding clarification of language in the Eminem (FBT) v UMG/Aftermath royalty dispute case. Because this is a blog, and meant for a comfortable read, I will not get into the technical specifics of the cases regarding Viacom, YouTube, Veoh, etc, and just say there comes a time when companies, and individuals, need to know exactly what their responsibilities are, and why. In this case the question is, what (or how much) does an ISP have to know regarding the use of a service for purposes of infringement before they take action or send notice (and to whom) in order to be safe under the DMCA. This could also be worded the other way to ask, how much attention does an ISP have to pay to cases of infringement within their networks and how little can they know before they have to bother going out of their way? Thankfully the answer from the 2nd and 9th circuits reflects that ISPs have to alert copyright owners when an infringement complaint is filed. This is a good thing as the copyright owner is much more likely to act both quickly and aggressively instead of waiting on a mammoth ISP to drag their heels.

     Next we have F.B.T. Productions bringing claim in California to show that product sold digitally (iTunes, etc) are to be determined as "digital licenses" and not sales under the same terms as physical product. The difference is huge in terms of the royalty paid per the agreement made between Plaintiff and Aftermath, Interscope, UMG; digital licenses carry a 50% royalty in lieu of the 12% being paid on simple "sales." The case was handed off to the 9th circuit of appeals for clarification on the language and for a final determination as to whether digital product indeed qualified as license or sale, and thus carried a 50/50 split. The 9th circuit has concluded that products sold digitally are in fact a digital license per the terms of the agreement and are to be paid per the higher rate. This is where the case gets even more interesting.

     It could seem to anyone who has been in the industry for a while that this lack of proper payment was intentional, but now the judge has caught on and has accused UMG of trying to "bamboozle the court." It gets worse, F.B.T. now claims that not only has UMG intentionally paid a lower rate on product sold digitally, but that this revenue, from source, is then intentionally cycled through foreign subsidiaries to further lessen the pot that is available for Aftermath, and hence a much smaller pot from which F.B.T. may take their percentage. In other words, instead of getting 12% (now deemed to be rightfully 50%) of 100% (net) they are actually receiving 12% of 29%. Against the arguments of UMG, et al, the court has agreed to allow F.B.T. an amendment to their original claim. I urge everyone reading this blog to follow this case as closely as possible. Just try not to throw things while reading in public.

     In podcast #27 of Gordon Firemark's series there is interesting conversation regarding a case that serves as a reminder for how important it is to not only have a very firm understanding of copyright law, i.e. specific rights and lengths of term, but to also properly execute, as well as administer, the imperative forms and contacts required to implement these rights. Take for instance, the example given for discussion in this podcast regarding the song "Santa Claus Is Coming to Town." An Heir of the writer of this song claimed the writer had terminated the original grant of rights during the first "window" of availability in the early 80's but faced difficulties and the process was never fully completed. Since the Sonny Bono Act allows for a second "window" the family of the writer has once again tried to terminate the grant of rights and take the rights back for themselves.

     EMI, the current holder of the rights says they have paid out considerable sums of money since the early 80's, after having paid the writer not to terminate. Further, EMI states that a writer or heir can only use the termination process one time, even if there are two windows, the termination can only be attempted once thereby rendering the second termination attempt void as they are no longer entitled to terminate. This case is a great reminder of how important it is to read carefully, and to have a great entertainment attorney or consultant who can help sift through the language and offer an educated and experienced interpretation. Indeed, it should be a part of any professional's original business plan to find and retain the absolute best entertainment attorney or consultant one can afford, as well as continually keep close eye on the court opinions provided on the Internet through direct findings, or even the press.

     Finally, in a talk given by a Duke University School of Law IP concentration professor during a visit to Suffolk University, we find a great conversation on net neutrality, as well as brief descriptions of trade, patent, copyright, and trademark laws. Also discussed is what is needed to properly back these rights up in an ever-changing, digital world. This podcast is titled "What is net neutrality, regulating the onramp to the Internet." Because this talk covers in great length what net neutrality is, the philosophical and reality-based harms that could be done if too much power is given to only a few large companies, as well as the previously mentioned backgrounds and defenses of patents, copyrights, etc, I encourage you to follow the links provided within this text to listen to this podcast and educate yourself on any parts of this you do not yet fully understand.

     I have included this information within the context of this blog because as mentioned in the opening statements, this article has been written as a reminder to keep up with current cases, expert opinion, and any situations, which may arise that allows for precedents to be set within our industry. As publishers, representation, entertainment business consultants, or even producers, we become liable in the way of civil law, contract law, and even infringement when we do not stay at the forefront of what is going on in our industry, and have an established entertainment attorney woven into the very fabric of our business plans. It would be a shame for any professional in this industry to wind up severely in the red for never properly following through on processes set by statute or setting up deals that can later leave one liable for damages.

Can’t Win’em All

Case 1 - AVELA v. Estate of Marilyn Monroe

     This is a case dealing with publicity rights, which are protected at the state level and are different in each state. This is no different for the publicity rights of the deceased and the laws of the state in which you died govern your post mortem publicity rights. (Butler, 2007, p. 128) Apparently the estate of Marilyn Monroe has been sending cease and desist letters over the years to several companies and in the most recent case sent one to AVELA, a company licensing images to a manufacturing company, Silver Buffalo that slaps the images of celebrities on cups, key-chains, etc. Now AVELA is suing the estate of Monroe for "tortiously interfering with its contracts."  (Gardner, 2012)

     Further, AVELA claims that the Monroe estate has already been dealt with by federal judges in both California, and New York who "previously determined that Monroe's estate was estopped from claiming an enforceable post mortem right of publicity." (Gardner, 2012) Consequently, New York is also where Marilyn Monroe died, so any ruling regarding her post mortem publicity rights here should be paid close attention.

     Here, is my opinion regarding post mortem publicity rights in the case of a celebrity such as Marilyn Monroe. I believe there should be some sort of mechanism that provides royalty to the estate where another seeks to profit from the likeness of the deceased. I would agree there should be a limit on time, or number of generations that control this right, however, and it should generally apply where the estate actually holds copyright for the image used.

Case 2 - Black Keys Sue Pizza Hut and Home Depot

     It is hard to imagine being the artist or manager who is going about their normal everyday business when something in the background, say television noise, catches your attention, and it is one of your songs a company is using without your permission or previous knowledge. I imagine that even more shocking is the irresponsibility; some may say stupidity, of those who know better. Now imagine that you are The Black Keys and it happened twice, in instances not so far apart in time.

     Both Home Depot and Pizza Hut are being sued for infringement by The Black Keys for using parts of their songs in advertisements without any permission whatsoever. According to an article by Anthony McCartney on Billboard.biz, the two songs in question were both featured on the duo's most recent album titled "el Camino" that has since sold almost 900,000 copies. The band is seeking both damages and asking that the ads be taken down permanently. (McCartney, 2012)

     I say that if it is in fact blatant infringement, then good for The Black Keys for standing up for what they believe in and protecting their art. I have no tolerance for outright theft, especially when the companies involved have ample resources to put licenses and permissions in place.

Case 3 - Developments in Eminem (FTP) v. Universal Royalty Case

     For those of you who are not aware of this case (if you're in the industry you should be) then here are the most basic and general points in a long and technical case. FTP productions is the company that originally signed Eminem and they have taken Universal/Aftermath to court over contract language that deals with percentages of revenue regarding sales and licenses of songs online. There is large money at stake and many other artists have taken notice, are watching closely, and others have already similarly filed against their respective handlers/labels. (Gardner, 2012) FTP argues that a digital sale is a "license" and as such should carry a 50/50 split instead of the mere 12% earned on sales of physical product(s). (Gardner, 2012)

     Beyond this, many other technical details such as container fees have been disputed that UMG has wrongfully applied to digital sales though there is no packaging to speak of. Elements of this case was passed to the 9th circuit for a final ruling as to whether or not digital sales qualify as licenses instead of sales and the 9th circuit agreed that digital sales should be considered licenses. (A.P., 2010) With this clarification both side have headed back to court where the judge has essentially accused UMG of intentional dishonesty and trying to "fool" the court. (Gardner, 2012)

     Further, the judge has allowed FTP to amend their original complaints against UMG to include details that UMG has not only been paying 12% where they know they should be paying 50%, but that the revenues from which these percentages are taken have been routed through foreign subsidiaries so that only 29% of the original dollar amount is left. This forces FTP to take 12%-50% of 29% instead of 29% of the "whole pie." UMG argues that they have already reached a summary judgment on the words "our net receipts" in a prior hearing and that the word "our" is to apply to Aftermath. (Gardner, 2012)

     UMG says since this summary judgment is "clear" that FTP knew they were only getting a percentage of what made it to Aftermath and that FTP should not be able to raise this question or be granted an option to amend. In my opinion UMG is desperately grasping at straws in an attempt to avoid having to pay out millions of dollars they know they kept wrongfully, and that's even if one only wants to consider the "container charges" being taken from digital sales. I am glad that in this case there is a judge who not only sees straight through UMG and the tactics taken, but that he also takes personally being lied to and used as a tool to cover up lies to other people, not to mention there is theft involved here. I look forward to a final judgment, and hope beyond hope that all involved get exactly what is coming to them.