The Set-Up of an Independent Label of Zee Ma Records - Essay Example

Zee Ma Zee Ma Records Submitted to Submitted by: 5th January 2009 Table of Contents Executive Summary..1 3.Background.2-4 3.Market Analysis.4 4.Market Strategy.5-7 5.Product/Services..7 6.Finances.7-9 7.Conclusion.10 Executive Summary This business plan explained the set up of an independent label of Zee Ma records. The concept was discussed in terms of the market viability, costing structure, and the human resource. All this was analyzed in terms of the current market rates and competitive rates available. The subsequent financial tables and the conclusion prove that this venture could prove to a successful one for any potential investor and client as well. The market that it is targeting and the sort of experience that the management has would aid a long way in ensuring the eventual success of this organization. Background The independent music industry around the world is renowned for providing a platform to such artistes who are either not considered commercially viable by the large companies or do not consider themselves worthy enough to approach larger music companies. As a result, such artistes seek the advice or aid of independent labels. Theses labels have recently caught the attention of larger scale companies Like Universal etc for their successful promotion and in fact the astronomical sales of certain artistes is a testimony to the success of the labels. In the United Kingdom alone, certain independent labels such as Stiff Records, factory Records and Rough trade have helped define certain vital niches for the artists they promote. In the United States, these labels have a long history stretching back to post-war period such as Sun Records. (Barry 1997) One of the major success factors of these companies has been technology, as now individuals can produce quality music while sitting at home. The decrease in the costing and access to numerous customers has resulted in the recent expansion of the Indies. (David 1999) This business plan would refer to the set -up of "Zee Ma Records"; an independent music label which would pertain to the music genres of punk rock and dance compilations. The reason for having these two poles opposed to each other music genres is that dance compilations would allow the company to earn a steady amount of income while the actual focus would be on promoting punk rock acts which have been overlooked by major companies. Punk rock acts are huge in number and this business plan would be focusing on the punk rocks in the United Kingdom. Another reason for the selection of this particular genre has been the fact that numerous acts have been successful in the recent times in the independent sector especially and therefore a viable sector to invest in. Zee Ma records stands for quality and Originality and it offers contracts to artists with the assurance of proper representation. (Shemtob & Braund 2005) This company would be operating on a smaller scale in the initial phase and therefore, the key personnel would be of a limited number as the cost actor has to be kept in mind at all times. The initial operational phase would include three members as the entire management team. The director would be the main face of the corporation who would handle all the management, legal and business affairs as well as having the final say in the accounts. However, for most deals and contracts specialists would be hired to deal with them as the director would be relatively inexperienced initially. (Andrew 2005) The other two personnel would be responsible for the office administration, book-keeping, press, radio and media promotion. The staff costs would therefore, vary according to the skills of the personnel and the amount of work required from them. The label would offer two sorts of contract; a royalty contract and a 50:50 profit split. The contracts terms and conditions would vary according to the reputation of the artist, their time of association with the label, and their success in terms of revenue generation. The reason for setting up this independent label at a time when a number of labels already exist in the market is that this company has hired personnel who themselves have had stints in the music industry and therefore are experienced enough to judge what music can sell and what cannot . Also, the technical expertise being brought on board by these individuals is extremely high, as they have been trained by Universal itself. The director in fact is a previous employee of Sony, and the reason for the set up of Zee Ma records was to provide a chance to all those individuals who were not being a chance by companies like Sony. Market Analysis The United Kingdom music market is the third largest music market in the world and the recent trends of rising downloads and legal at that, means astronomical business for a company like Zee Ma which primary depends on online sales for its profits. (Shemtob & Braund 2005)Even in the developing world, the trend of buying legal music online has meant a boost forth independent sector and hence, Zee MA can be assured of a profitable venture if the right moves and actions are taken by the label itself. In the 1998, a body was created to represent the independent and this has helped the cause of the independents in demanding competitive rates for digital sales.(Jenny 1999) The reason for having dance compilations as a side business is due to the fact that that will ensure profitable returns and this can be seen by the case of labels such as Ministry of Sound which have relied on dance compilations to become the success that they are today. The customers that Zee Ma would be targeting would be mostly teenagers, people in their early and late twenties and at the same time the dance compilations could allow them to attract people from different ages and backgrounds. The punk rock acts cater to a set audience but the dance compilations are heard by all and sundry. The initial problem that Zee Ma could face would include attracting punk rock acts to sing up, attracting a loyal customer base, promotional activities, and especially the costs associated with this set up. As is the case with all independents, Zee Ma, would to have to ensure that the finances are adequate and do not create a situation of insolvency for them. According to the market research's findings, it can be seen that the market does have potential especially due to the recent positive surge in the number of legal downloads and the success rate of indie's artists. By securing a few good artists, Zee Ma can be assured of good profits in the long run but in order to do that Zee Ma would have to ensure aggressive promotional activities and attracting quality clients. (Johnny 1992) At present, a number of companies are successfully operating in this particular genre and supporting acts such as Radiohead etc. United Kingdom is in fact one of the lone music markets in the world where the independent acts have attained such high rates of success. For a label like Zee Ma, which has technical and financial expertise of people who have had previous stints with organizations like Sony, Universal etc it would be a difficult task but the experience and knowledge would aid it certainly in creating a niche for itself and the favorable market conditions would further greatly add to this cause. The strength that Zee Ma has in comparison to its peers is the knowledge and expertise that its management has already acquired from the previous stints and a major weakness would be its new name and finance issues. Market Strategy In order to be a successful company, one thing that has to be taken into account is a good marketing strategy and that too in the case of Zee Ma records is pretty important as the industry that is trying to create a niche is relies heavily on marketing tactics. The label would need to ensure that in the initial few years a few punk rock acts are signed which would ensure a profitable return of some amount. As the label focuses on quality rather than on quantity, it would be better if Zee ma focused on a few clients which in turn would meaning costs and lack of proper marketing activities. (Shemtob & Braund 2005) The distribution system as is the case with all independent band labels- the recording, manufacturing and finally the marketing activities. All those come up with their own costs and for a start up label like Zee Ma that would be a major factor to take into consideration. For a dance track the recoding cost is higher than for other genres and therefore, the initial focus would be on promoting the punk rock acts and their music. For an act like a punk band, live sessions are an essential requirement and that would have to be taken into note as well. The manufacturing costs can vary and in the recent times, there has been a shift towards mp3s and music online-thus, Zee Ma would have to focus more on trying to sell music online along with the CDs. An important and parcel of the distribution chain, is the marketing activities. In order to ensure the successful launch of any music group in today's time, a lot of focus has to be laid on the marketing of that act. In order to build and promote a music act, it is imperative that positive stories be created and spread in order to cater to a wider audience. (Jeff 2006)The costing element would have to be considered in terms would have to be considered in terms of the online marketing costs, of the online marketing costs, television costs etc. Zee Ma would have to concentrate on building relationships so that it does the marketing activities becomes more effectual. The advertisement would have to be done using cheaper alternatives -such as radio, press, student and online promotional activities. Zee Ma would also be able to make effective use of street teams a few years or even months down the line-abetting the promotional activities. Zee Ma would have to make use of the contacts build through the stints in companies such as Sony etc in order to pull the initial or spread a positive word about themselves amongst upcoming bands. Zee Ma would have to create a good relationship with some sympathetic distributor and Zee Ma would have to establish a Published Price to dealer. Product/Services The product would the music of the punk bands along with the dance compilations. Zee Ma would offer royalty and 50:50 contracts. Besides the contracts, the licensing element would also have to be taken into account. It is considered to be an integral part of the revenue and helps the cash flows. In order to earn greater revenue, Zee Ma would license with a major company in rode to take its business operations overseas while attracting a larger share in the local market. The contractual agreements would be defined by the success graph of the artist, period of association and the sort of terms and conditions sort. (Shemtob &Braund 2005) Finances The cost of managing and operating the office even on a minimum budget is estimated to be around 500 pounds. This would include the operating expenses such as the telephone expense etc the contracts themselves can also decide the profits and expense sharing. In a 50:50 split contract- the profits and in certain cases, the overheads are also shared. In a royalty contract, the royalty percentage would be calculated and in certain cases, the promotional costs would also be borne by Zee Ma. In terms of advances, only after a few years and for established artists who have been generating sufficient revenue for Zee Ma would advances be considered. As of now, these would not be considered as these pertain to future sales. The following cash flow statement would outline the costs and expenditures along with the cash balance: Cash flows from Operating activities Years 1 (signed 3 bands)in Pounds-000s Cash receipts from artists 419000 Cash paid to suppliers and employees (121000) Cash generated from operations 298000 Interest paid (1400) Income taxes paid (5000) Net cash flows from operating activities 288000 Cash flow from investing activities Proceeds from sale of equipment 5000 Dividends received 3000 Net cash flows from investing activities 8000 Cash flows from financing activities Dividends paid (8000) Net cash flows used in financing activities (8000) Increase in cash and cash equivalents - Cash and cash equivalents ,beginning of year 8000 Cash and cash equivalents, end of year 299600 The above chart has shown an outline of the major costs and expenditures via a diagram. The cash from operating activities would be earned through sales of Cds, licensing, broadcasting fees, sponsorship, and lastly digital sales (in Pounds) CD sales: 354000 Licensing: 20000 Broadcasting fee: 20000 Sponsorship Fee: 5000 Digital Sales: 15000 Total: 419000 The interest that is being paid is on a loan that has been taken from a bank- the total initial investment is 8000 pounds while the loan taken is 4000 pounds and the interest being paid is 1400 pounds at a rate of 35 percent. The rest of the 4000 pounds is being invested the management itself. The costing from the operating expenses includes the overheads cost such as recording, producers fees, promotional expenses to a small extent. Conclusion: The overall external environment and the financial viewpoint shows that it is a successful venture and therefore, for any investor to invest in this company it would be a safe bet. References Shemtob D & Braund,S 2005"Independent Record label case study". Commercial Music. Johnny,R 1992 "Introduction" in The Guinness Who's Who of Indie and New Wave Music, Guinness Publishing Barry,L 1997 "Indie Hits 1980-1989", Cherry Red Books, Jenny,T 1999. "Future Prospects for Music and Technology: Musictech's Ben Morgan on the Paradigm Shift in Music Consumption". Andrew, et al. 2005. On the reproduction of the music industry after the internet. 27. Media, Culture, and Society. pp. 177-209". David,H1999. Indie: the institutional politics and aesthetics of a popular music genre. 13. Cultural Studies. pp. 34-61. Jeff,H 2006. "Independent music on move with internet", International Herald Tribune. Read More