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June 27, 2016

Why Brexit Might Actually Be Good For The Music Business

Brexit and the music businessNow that Brexit has unleashed its shock and horror on the financial markets worldwide, other much smaller sectors are wondering how it will affect them as well, and the music business is no exception.

The traditional music business (meaning record labels) is run by a crafty street-wise bunch that know how to roll with the punches, and that’s why I think they’ll find a way to come of this with a net gain when all is said and done.

Most of the analysis of the situation that I’ve read so far centers on the fact that doing business in both the UK and Europe will be more expensive because of the escalated operating costs associated with keeping offices either in London or in Europe. Travel, labor, and finances will all take a hit as costs rise because of the increased paperwork involved.

It’s a fair premise that will likely play out that way, but remember that the industry has a talent for turning lemons into lemonade (although usually that doesn’t apply to the artists).

For example, back in the ‘60s, all record producers were just staff personnel of the record label, and paid as such. After Sir George Martin had huge success after huge success with The Beatles that netted EMI hundreds of millions of dollars in profit, he didn’t get as much as a Christmas bonus, let alone a raise, in appreciation for his efforts. As a result, Sir George bolted and became what amounted to the first independent record producer, demanding his own royalty on the records that he produced in the process. Of course, an exodus of successful record producers followed, and it looked like the major labels had a huge new cost on their hands.

The lemonade came when the labels hit on the idea of passing off this new cost to the artist, and the producer royalty has been the responsibility of the artists ever since. The record labels came out ahead because there were now fewer employees on the payroll, and this new very expensive cost wasn’t theirs to worry about.

Another example came in the late 80s when recording budgets where skyrocketing. At the time, the labels paid all the invoices resulting from the recording process no matter how large or small. This resulted in an accounting nightmare, with vendors constantly upset with slow payments, and everyone in the supply chain from the artist on down being constantly hassled about it. The budgets were higher than ever, resulting in more invoices than ever, requiring more accounting manpower than ever to keep up. [Read more on Forbes…]

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