Is there a good business plan for a high end studio?

[Tibbon]

I was reading over Jules thread here about many studio owners being the ones with the lowest pay in the chain (well asides from the interns).

It struck me then: Is our business model and general business plan for a studio broken? Is there a way to make a high-end studio into a profitable business from scratch? In very few other industries and businesses is it that the owners of businesses are the poorer ones.

Obviously many things are broken for various reasons in the music industry and this might just be one of them.

So is it even possible (if you are not independantly wealthy to begin with) to get a high end studio running today, that is profitable and a venture that your accountant would say is 'worth it', or is the margin just too thin?

[thethrillfactor]

Originally Posted by Tibbon

So is it even possible (if you are not independantly wealthy to begin with) to get a high end studio running today, that is profitable and a venture that your accountant would say is 'worth it', or is the margin just too thin?

The answer is no.

As long as people think they can get what you offer at home in their minds they will find a way not to justify the expense.


But there is money in boutique business that are built on those notions.

[Gregg Sartiano]

The high end studios here in L.A. seem to be closing with regularity -- some of them were institutions in this town before what I always call the "perfect storm" of production industry market loss: (CD sales down 20% in 5 years), Pro Tools putting the "Pro" into "Pro-ject" studio, and cultural apathy among consumers at an all time high (can you say 'low-res mp3?').

If similar things were happening, say, in a certain manufacturing sector you were looking to get into, we'd call you crazy. But ARE WE NOT SLUTZ? And being gearslutz, we are gluttons for punishment if the end justifies the means. Soooo...

If you can find a $$$ business plan, who knows?

-- Post-production

-- Sound design and/or video game sound

-- Creative involvement (label/production/publishing)

Basically, I think your chances are best if you do ANYTHING besides trying to make your studio into a high-end 'sound hotel' for rent.

[aetucker1]

the thing that i keep thinking about is (and trust me, i hate to say it) dont buy so much gear. i personally believe that high end studios (and small to medium sized for that matter) get in over their head with gear purchases and end up spending all their profit on gear. my feeling is that there is always gonna be gear that you will always want and "need", but make very rational decisions on the gear that you can purchase as an investment and that you will use all the time or that your clients will always want. the problem with that i guess is that it is so expensive and face it, gear attracts clients. who knows....lets face it, it is a tough business and it is hard to make a profit..........especially if you are a gearslut like we are.

[thethrillfactor]

Originally Posted by aetucker1

the thing that i keep thinking about is (and trust me, i hate to say it) dont buy so much gear. i personally believe that high end studios (and small to medium sized for that matter) get in over their head with gear purchases and end up spending all their profit on gear. my feeling is that there is always gonna be gear that you will always want and "need", but make very rational decisions on the gear that you can purchase as an investment and that you will use all the time or that your clients will always want. the problem with that i guess is that it is so expensive and face it, gear attracts clients. who knows....lets face it, it is a tough business and it is hard to make a profit..........especially if you are a gearslut like we are.

But then it wouldn't be a High End studio.


A High End studio should have all kinds of things you can't get at just any studio.


A 5 star chef and or Sushi chef on the premises, a spa with Masseusse, an Atrium for relaxing, a hot tub.

[aetucker1]

Originally Posted by thethrillfactor

But then it wouldn't be a High End studio.
A High End studio should have all kinds of things you can't get at just any studio.
A 5 star chef and or Sushi chef on the premises, a spa with Masseusse, an Atrium for relaxing, a hot tub.

i totally agree...but most studios dont realize that they are in the "spend $15,000 for something 5% better." deliema. to me, that 5% isn't always needed, especially if your stuff sounds good already. I think i just decided that I could never own a high end studio....I GOTSTA MAKE ME SOME MONEY YO!!!..............................too bad that isn't happenin' for me either.

[Dave Martin]

Originally Posted by aetucker1

the thing that i keep thinking about is (and trust me, i hate to say it) dont buy so much gear.

Nice idea, except for the clients who think that if you don't have x, then they can't work there (or that you're not a 'professional' room). And then, of course, those same clients will try to beat you up on your rate.

Most of the punters don't understand what it costs to run a 'real' studio - and neither do the guys who have an 002 in their basements. Honestly, I read in forums like this about some of the rates that folks are charging ($15-$35 an hour, $250 a day, and so on), and know that some months, my maintenance and repair bills are higher than those guys would gross if they worked 48 hour weeks. Fortunately, most months, I don't break that much stuff...

As long as people are sure that they can record and mix anything they can think of with CubaseSX or Pro Tools LE in a bedroom, then professional studios will have a hard time charging what they should be charging (based on equipment amortization, salaries, insurance, maintenance, etc.).

On one hand, I can certainly sympathize with the approach of "Hey, I can't hear any difference, so why should I pay that much?". On the other, I wonder why anyone who can't hear a difference is recording, mixing, or producing records.

[djui5]

Originally Posted by aetucker1

to me, that 15% isn't always needed, especially if your stuff sounds good already.

That depends on who your clientel is. Sometimes it's not enough. Trust me.

[aetucker1]

Originally Posted by djui5

That depends on who your clientel is. Sometimes it's not enough. Trust me.

i'll give you that. i am just sayin' that i am betting that a lot of high end studios have A LOT of gear that they NEVER use..............oh ya, and I AM admitting here that I know absolutely nothing about running a high end studio.

[jindrich]

hi,
well i'm afraid the business studio is no longer a business anymore.

Technology has allowed to record anything anywhere for no money, budgets are a tenth of what they used to be, anyone can download any song for free out there in the jungle, and music has become a commodity; music for itself is not enough, it needs videos, games or whatnot.

Nobody calls some friends to come home to SIT and LISTEN to the last QWXYZ disc on a decent stereo system anymore.


As an economist, i've been playing around lately to put out a BizPlan for a recording studio for myself, considering both the low, mid and highend options.
Well, it doesn't make sense, or it's too risky.


Forget the gear. You cannot make rational Biz decisions if you get involved emotionally. Your first and foremost goal is to get clients in, get paid and earn money. If it doesnt work financially, you'll be bankrupt the first year.

There's still place for some studios, after all music is still released, but that doesn't mean they all make money, even if they're fully booked. And even if they make money, they could be making much less of what the same investment in some other business would do with much less risk -there are many ratios to calculate those things.

It's even possible that the best way to get a nice studio ist to get OUT of this business, work 37 hours a week (in europe) doing something else which brings money in, and with that build your own nice private studio, and work in the afternoons with the clients/projects YOU feel COMFORTABLE with (don't forget there can be all kind of awful/undealable clients).



Still if you want to start a studio consider:

-Who your CLIENTS will be.
-How to get them in. Week after week.
-Who your compettiton is, and what they do, and what they do not. What can you offer that others don't. Do Marketing research.

-Set an initial investment acording to what your targeted CLIENT needs, to buy/rent land, build the studio and gear.
-Find out what your fixed and variable costs are!
-Find out where your ZERO POINT ist: how much income you need to cover ALL costs (still not earning anything). Salaries are costs, INCLUDING yours.
-Find out your growing possibilities.
-Keep your Cashflow healthy!

Then make an estimation for a period of 4 or 5 years as if you were going to close doors (recouping remaining amortizations) and how everything could go -consider all scenarios. Confront that with the initial investment and find out what your benefits would be. From those you have to extract a ratio of risk, because if with the same initial investment you could do something else much less risky and get similar benefits, then it doesn't make sense.

etc, etc

hope this helps.

[vernier]

The high end studios here in L.A. seem to be closing with regularity

And once they're gone, they're gone forever. Sad.

[Gregg Sartiano]

Originally Posted by Tibbon

So is it even possible (if you are not independantly wealthy to begin with) to get a high end studio running today, that is profitable and a venture that your accountant would say is 'worth it', or is the margin just too thin?

Is your motivation to make money or to break even and run a studio?

Perhaps there are high-end studios already in existence which need somebody to bring some liquid cash (as well as some new energy -- sharing the load) to keep them afloat -- in exchange for shared ownership or something. Just a thought.

Personally, I can't see why the high-end studios aren't starting boutique labels. Bands would be falling all over themselves to sign something which would give them a month in a sound hotel with a top producer, and the rep of the studio would be a selling point from so many angles. If a top multi-room studio did this (WITH SAVVY A&R!!!) and made ten industry-viable albums a year with 50/50 ownership (or whatever -- I'm just throwing the #'s out there), SOMEBODY would hit independently or score a major deal.

A band I know got $40k for a single T.V. placement of one song -- sync fee (not counting royalties). Let's see: ten master-quality albums/artists, 100 songs/year, foregoing $150k ($15k/month for 10 months)...sell an average of 2500 copies of each CD and place one song -- you've made more than $150k, and you've paid your people along the way.

Joe average studio doing this = pointless. World renowned studio doing this = priceless.

Within the industry, the studio names are BRAND names -- shouldn't this leverage count for something?

[Tibbon]

Originally Posted by Gregg Sartiano

Is your motivation to make money or to break even and run a studio?

Perhaps there are high-end studios already in existence which need somebody to bring some liquid cash (as well as some new energy -- sharing the load) to keep them afloat -- in exchange for shared ownership or something. Just a thought.

My sole motovation would not be only to make money, but I do see a studio that you put a lot of time and money into as a business- and the general point of a business is profit.

The only 'for profit' company I have ever seen who's stated goal was to not earn profit for a few years was Amazon.com, but even they have decided to make a profit!

[Anderson]

Right now I'm stuck with no building for my studio and trying to buy a new place, but my Business Plan is such that the studio comes as "plus" to another business I have, which is a parallel market, Acoustic Engineering.

But I would not even think about opening a "High-end" studio otherwise. My studio is not "high-end" in the sense that I'm far from owning every single piece of high-end outboard that exists, but enough that I could've bought a Porsche instead, add to that the console.
I made sure I had no debt with regards to the gear, it's ALL paid for, and I won't get in debt for gear EVER. I will have a long term loan for the building, but it will be shared by my acoustic company, which will ease things up a LOT.

Then, I'm trying to learn how to repair most of the "stuffs" myself, for some like the console I will for sure call a professionnal because those babies are too sensitive and I am not qualified whatsoever to take care of such a sensitive equipment (getting lost in the tech drawnings all the time ), but otherwise I'll have to make sure I can do it all.

I also made sure that all the basic costs were covered with 3 days of work.

Cheers

[2leod]

Originally Posted by vernier

And once they're gone, they're gone forever. Sad.

True, it's sad when the institutions crumble and fall, but these changes are driven by economy, not by some Mad Max erosion of technology. When market forces in this business correct themselves (as he whistles cheerfully, ever the optimist!) presumably new institutions will establish themselves with current, appropriate technology. These places might look more like franchises ("Would you like drum samples with that?"), making room as thrillfactor and Gregg pointed out for boutiques, who, being the exception rather than the norm, would service those who demand more and expect exclusivity.

[Marjan]

Originally Posted by jindrich

Nobody calls some friends to come home to SIT and LISTEN to the last QWXYZ disc on a decent stereo system anymore.

If we want to change the world for the better, we must change ourselves.
We must to go back to simplicity.

And now back to the topic... it's more important to know how to take full profit of our carefully chosen gear then owning loads of high end stuff. (yes, I love high end stuff too)

[DirkB]

A pro studio or a high-end studio are not the same.

A experienced engineer with 100k invested in the room (of course, depening where you live, could be 200k in more expensive partts of the world) and another 100k in gear can get him self a completely professional studio and deliver solid work.

However, high-end is high-end. There should at leat be a SSL/API/Neve console with probably more than 500k invested in outboard and mics...
Then the building, staff, maintenance/repair cost, running cost of the building and it adds up pretty fast to where you have to doubt wether you will be able to earn it back from "only" renting the place for x amount per hour.
Not a good concept anymore IMHO.

There are however ways of running the high-end rooms and making it work financially.

Greetings,
Dirk

[themaidsroom]

no






be well



- jack

[jayfrigo]

The model of "if you build it they will come" does not work. You need to either diversify services or have some related business activity to supply the studio with work. You need to supply the market with something unique, that there is not already a glut of. "Just another recording studio" won't work unless it's a rich man's hobby instead of a business.

[BruceTheProduce]

Originally Posted by jayfrigo

The model of "if you build it they will come" does not work. You need to either diversify services or have some related business activity to supply the studio with work. You need to supply the market with something unique, that there is not already a glut of. "Just another recording studio" won't work unless it's a rich man's hobby instead of a business.

I double that, Also this whole entertainment industry has evolved so much that there are a lot of other cool things that audio is a very key aspect on. Video game audio, Multimedia, audio post production for film/TV you name it. I know it would be just great to do music, and music only with the coolest gear of it all and the neves and the ssls and all the other awesome toys, but the reality is that people are doing great things for and with way less. Ultimately it is the client's expense that generate our income, and if its cheaper for them in most cases we can lose our gig. Its all about versatility, and incorporating new things to what we know best.
Did anybody read march issue of mix magazine? they had a whole special dedicated to video game audio. Pretty awesome stuff....

[Anderson]

Originally Posted by DirkB

There are however ways of running the high-end rooms and making it work financially.

Greetings,
Dirk

By dropping everything high-end that is not gear or acoustics to begin with. Like all the "extra services", working with strict minimum (but highly qualified) staff etc, thus putting all the financial load of any *extras* on the clients that can afford them... Also, on the music side, working with the Home/Project Studios and not against them is a way to increase chances of 'making it'.

But most of all, 'networking' is the key!

Cheers,

[seaneldon]

a good business plan would be to plan for yearly loss rather than profit.

[octatonic]

Originally Posted by seaneldon

a good business plan would be to plan for yearly loss rather than profit.

I think it comes down to an individuals business acumen- which is often lacking in creative types.
There are ways and means- for some it is to be diverse, some it is to specialise (I'm thinking Albini, Toerag, Wireworld).
One of the most successful people would be Tom Misner - with SAE, many studios and now owning AMS-NEVE. I think that his success with SAE says a lot about where the real money is.

Moving away from high-end only...
The challenge is to keep going with it- many colleagues have blown their budget buying the latest gear only to have nothing left at the end of the year for next years rent.
I'm guilty of this also- luckily my wife and I own property so there is something to fall back on.
The idea that studio/producing will sustain me into my old age is mostly laughable- but I still want to be doing this when I am 60- hence roughly 40% of what I earn net is saved rather than spent.
I think this way it gives us a fighting chance of being able to continue. The goal is to keep working, endure the bad times and get better at what I do. And to have fun.

[RockStarzUSA]

Hi all, I am new to the forum (1st post) but have read much on this forum over the last year or so. The last couple of posts were very accurate, I thought I would add my thoughts as well.....

Owning my own studio/s for the last 13 years, and STILL staying in business has made me come to several conclusions.

1. Network, network, network. Being the lone ranger will get you no where fast!

2. Sell the sizzle, not the steak-In other words get people hyped on your product-ie, your studio. Exploit the good sides and minimise your 'lack of'

3. If you are a truly passionate studio individual type, you should leave the business side to someone who can make un-emotional decisions. You want that $5,000 reverb-well, what do the numbers say? To spend $5k on this reverb, will it generate profit far greater than it's cost as a direct and single result of getting that item? (which it should do to pay it's way' so to speak. How many clients REALLY ask for 'that' item???

4. The best gear doesn't mean EVERYTHING. My smallest studio has a $10,000 fitout of gear (laughable really) yet, it pulls $40 an hour, every hour for 28 hours a week. You do the math. It has been this way for over 10 years. This is the absolute truth.

5. Value add ons. Would you like fries with that? So the engineering doesn't get you that much money. What about those prized A&R reps you know, or good management, whose hands you will get their work into. I knew a guy who would charge $6,000 to do a demo, and then get the thing shopped with at least two labels responding everytime. Would you belive his studio was a Boss BR1180CD-No I am not kidding.

6. Spend time either studying tax law, or get a decent accountant-trist me, this makes a WORLD of difference. You will pay more upfront, but you will be smiling every year therafter!!

I firmly believe that if some studios were to invest in a sales training seminar, and take some business courses they would fair far better in the long term. You could have the best gear in the world, even the best engineer, but without 'charisma' people skills, sales skills, effective marketing, networking and a passion for the 'business' side of things you will nit fair well.

I had a good friend who ran a studio, but did much mastering, very well known guy in the Industry. Well 4 years ago it folded. The vultures came along and picked up his $20,000 compressors etc for mere cents in the dollar. It was very distressing to see this happen, and to see his hair literally go grey overnight as a result :( Fast forward to 6 month ago. A very wealthy German bsusinessman put up the money for the new studio, a $2,000,000 fitout, but he (the german) took care of the numbers this time. I am glad to say they are enjoying great success to date having clientslike 50 cent, Paul McCartney go throuh recently.

If you are fortunate to be both creative, and understand the business-congratulations-I am sure you wil be in business a long long time.

Think of the stats from the SBA (small busiess administration) I believe these are fairly close to what I remember.

In the first year of business 30% of startups go under
In the second year 50% go bankrupt
In the first 5 years 60% will file chapter 11
In 10 years 80% of all the business that started will be bankrupt, liquidated or closed

It's GOTTA be about the business.......

Hope this helps.....

[Jules]

My hopes of entering the lottery to win some 'real money' with my studio (not a high end facility and sorry for being off topic but bear with me here) have been dashed by lawyers.

I planned to use down time for my publishing company...

But mean as mustard lawyers - consistently advised artists against signing with me.

This is DESPITE and industry wide 'that makes sense' overview. fro managers, other lawyers, publishers, record labels etc...

Bum-ER!

I had one band,

Signed to Island Records for a (rare) development deal
Flown from the UK to Slipperman's studio (my suggestion) to do more tracks
Followed around 24/7 for an MTV UK documentary (that ran for 3 months)
That supported Thrice, and other larger noteworthy US Emo Core acts at UK shows
That had profiles in Music Week (the UK's version of Billboard) as 'ones to watch'

But they came to nothing... (band very very young and simply DIDN'T live up to their potential)

In the past - PRE deals I have approached

The Strokes (on the night at Sam Hill's NYC when they first met their manager)
The Darkness - LOOOONG before any deal was on the horizon for them (Platinum selling UK act)

Both turned me down, but at least I was 'on target'!

Anyhow...

Not being able to strike an equitable deal with bands for developing them - has really pissed me off. I have done deals with only er.... uhh 5 or 6 acts (I am on good terms with ALL of them) But they were deals ALL done about 3 or 4 years ago..

There seems to have been a zeitgeist shift... things have changed, These MySpacers are having NONE OF IT.

Oh well..

Nowadays bands are ALL ABOUT wriggling out of ANY agreement, and their managers too..If you ask bands - "do you expect me to offer you all this studio time and work for nothing"? - They and their manager will just sit there, blinking at you... a silent F**K YOU, WE WILL GRAB WHAT WE CAN FOR FREE.

Fair enough...

[RainbowStorm]

Interesting thread. There is a good business plan, strategy and model for a high end studio.

One mistake I see a lot of companies do, and this is especially true in the music business, is in the resource management. If you want to do a successful business, study resource management. Let me give you an example. For some reason a lot of companies think that you succeed the best by maximizing incomes and minimizing outcomes. That's a really short term view on how to make a business grow in the right direction. Outcomes is a very natural part of doing business. It needs to be your friend, not your enemy, because sooner or later you will realise outcomes is just something that keeps the company healthy by telling what's possible and smart to do and what's not. By looking at outcomes as an enemy that needs to be eliminated, the company first stops growing and then it starts bleeding. A natural response to this would be to think that now you REALLY need to cut on the outcomes. But it makes everything worse. First of all the employees start feeling bad about their future. Then the collaboration with business partners starts bleeding and sooner or later those unexpected outcomes tend to appear from nowhere. This is simply just because the company do what they THINK works instead of doing what REALLY works... So keep that in mind...

A much much better approach is to set an income/outcome ratio in %, where you try to balance and match that rather than trying to make it look good on paper. Let me give you an example. The company does very well and you have your employees' salary set to let's say a total of 30% of the total outcomes. Due to the increased income flow the income/outcome ratio is now in a positive balance. Should you put this extra money onto your own bank account? No no, that would really be a big mistake. Should you put it into a security resource account just in case the company goes bad in the future? Not necessarily, if that resource is already OK there's no point in putting more money into it. What you SHOULD do, however, is to make a decision about where to spend the money so that it long term will result in even more income. Suprisingly often this is NOT in the gear. It's fun to spend in gear, but it's not necessarily the right thing to do. This is when you use your priorities. A typical mistake a lot of companies do is to not consider their own resources very good to spend in, sometimes because the employees are not seen as valuable enough. But often the really wise thing to do would be to increase the employees' salary. That will make them spread a good shimmer around the company, work more efficient because it works, influence the internal condition very positively and so on. I have been employed at a company where the boss didn't realise what he was doing to the internal condition of the company, it went straight to hell...

Let me just give you another example of a bad approach in resource management. You let the employees write down what they do each they. I once was in a company where the management thought this was a smart idea. They thought that if every employee does at least 70% hours of their work as work that can be translated to direct income for the company each they, then everything works great. And when this not happens they simply lay off those persons when the time has come. Great! The management had expected to grow by 10 - 20 employees over the next year on this kind of strategy, in practise however they lost 10 of their most efficient employees (and several persons in the management) to the closest competitor to compete with their most important product portfolio, due to "internal conflicts", several of the persons laid off also took the company to court... Last time I heard they still had economic problems...

[aetucker1]

Originally Posted by seaneldon

a good business plan would be to plan for yearly loss rather than profit.

nice!!! haha

[Bob Olhsson]

Originally Posted by Jules

My hopes of entering the lottery to win some 'real money' with my studio (not a high end facility and sorry for being off topic but bear with me here) have been dashed by lawyers...

I think this is a whole bunch of why so little great music is making it into the mainstream today.

I know a very famous producer who tried to set up a Motown-like production company a few years ago. He had the musicians, a fabulous studio, the songwriters, a dream production team by any standard.

He couldn't find any decent unknown artists whose lawyers were willing to sign an agreement that would allow it to be profitable. Most lawyers would much rather collect their 25% of an enormous advance from a label and watch the artist go nowhere than see their clients actually become successful entertainers earning serious money.

[Sqye]

Originally Posted by Bob Olhsson

I think this is a whole bunch of why so little great music is making it into the mainstream today.

I know a very famous producer who tried to set up a Motown-like production company a few years ago. He had the musicians, a fabulous studio, the songwriters, a dream production team by any standard.

He couldn't find any decent unknown artists whose lawyers were willing to sign an agreement that would allow it to be profitable. Most lawyers would much rather collect their 25% of an enormous advance from a label and watch the artist go nowhere than see their clients actually become successful entertainers earning serious money.

what's the difference between a lawyer and a vulture?

[foxonestudios]

check out The E-Myth Contractor by Michael Gerber (a little simpler than The E-Myth Revisted). While I don't do engineering full time (i found something i liked just as much and i didn't have to deal with flaky musicians anymore) this book has helped me in both businesses I do to develop a great business plan for both.

I also have a mentor who has adapted some of the book for his own teaching and my mentor deals with really high net worth people ($50 million+) and he believes in its principles deeply.

Remember, if you want to run a studio, you need to be a business man first, not an engineer...although the engineering part is crucial to the survival of your business, you can always hire someone to do it for you (who can also be better than you)