• 3QFI

Investing in The Music Industry: A COVID Reality Story

Updated: 16 hours ago



I'm a music fan. I like my music heavy. I like my music progressive. I like my music loud. A day spent listening to hard, twisting, unpredictable music (in addition to financial podcasts of course) is a good day for me.


In early January 2020 I made a sizable investment in the music industry. This was right before the COVID global pandemic started kicking the worlds ass.


The timing could not have been worse.



The Band

I'm going to keep the name of the band anonymous, but can tell you a bit about them. Their music is heavy; heavier than Five Finger Death Punch, lighter than Slayer. More like a Pantera level of heaviness.


The members of the band are established musicians. They themselves are not household names, but they've played in bands with members whom everyone reading this article would know. Needless to say they are polished, and at the top of their craft. They are not a group dreamy eyed 20 year old dudes with more ambition than talent. These guys are legit. And mature. And proven. They can flat out play.


They formed as a band a couple years ago. Wrote some killer songs. Hired top tier recording professionals. Recorded an amazing debut album. Had offers from record labels but didn't want to give up the creative control required. They wanted to start their own label for their music so needed investors to make that happen.


Insert me.



The Deal

I've been a big fan of the band's drummer since 2011 or so. The band he used to play for was one of my favorite bands of all times. Unfortunately this band broke up in 2018. I was bummed. It just so happened that at that time I was looking for my next investment opportunity. I sent the drummer an email basically letting him know that I was interested in getting involved with whatever he was going to do next.


Fast forward a year or so and we were finalizing a deal.


I invested $60,000. There's another investor who put in $100,000. Total investment: $160,000.





The investment dollars were to be spent in the following ways:

  • $84,000 Album Production

  • $42,000 Marketing / Vendors

  • $34,000 Touring



I would earn my investment back in a couple different ways. (Note: I've boiled down many pages of contract language into these two bullet points - so there may be gaps, but it's directionally correct).

  • First is revenues from the download, streaming and physical sales of the album. I earn 37.5% of net revenues from this until the initial investment is paid off, or January 1, 2022 (whichever comes latest). Then I earn 5.6% of net revenues for life.

  • Second is revenues from merchandise and touring. I earn 18.75% of gross revenues from this until the initial investment is paid off, or January 1, 2022 (whichever comes first).

So the bottom line is that the first couple of years after the albums release are the most critical to earning back the investment and starting to make a profit.


Sales for albums of a new, unproven bands like this are really dependent on tour support. Hitting the road, playing in front of crowds, that's where the buzz really happens and sales start to increase.


In addition much of the revenue from merchandise sales happens on the road as well. Sure there's always some online purchases that take place, but the majority is fans at your shows picking up your merch.


Touring was vital to the payback.


Vital.




The Album:

The album launched in March of 2020 to rave reviews. It was covered in multiple heavy metal magazines (Revolver, Blabbermouth, Metal Hammer etc.). Most publications gave it 4 to 5 stars out of 5. Interviews were taking place on radio stations & podcasts around the world.


So far, so good! The band had a great sounding product that fans and those in the industry were digging.


Fuck yes! We're doing this.




The Tours:

The band's first tour was scheduled for Europe in March/April of 2020. The tour was starting right when the album was released, so the timing was awesome! It was a 5 week headlining tour covering a dozen different countries. Presales for the shows were strong, and the band was getting decent guarantees (basically the venue ensures that band will make so much regardless of ticket sales).


After the European tour the band was preparing to tour North America. The details of that tour were being worked through right before the albums launch. After that the band was going to head back to Europe towards the end of 2020 to build on audiences from the first tour, as well as hit new cities.


So overall the touring scheduled for 2020 looked like this:

  • March/April: Europe

  • July/August: North America

  • October/November: Europe

In addition to a packed 2020 touring schedule we were kicking around ideas for a 2021 tour and what that would look like.


We were ready!


Unfortunately, not ready for COVID.




COVID Hits

In February, a month away from the album launch and the European tour, COVID was taking a toll. At that time Italy was hit exceptionally hard. I got on the phone with the drummer to discuss the situation. It wasn't looking good. The Italian shows were most likely going to be cancelled, with many of the other countries following quickly afterwards.


Within a week of that call, the entire European tour was cancelled. So here we were, a new band relying on tour support to drive sales and revenue...without a tour.


At that time there was still optimism that we could do something later in the year. So we quickly began rescheduling the European dates to October 2020. The thinking was that the summer would hit and COVID cases would drop and become managed. Then the band could hit the road.


That optimistic path forward was shut down in June as there was no way COVID was going to be under control by October.


COVID had destroyed all our plans.


Now What?

Never giving up. Ever. That's the way we approached this. Sure, COVID had crushed our well mapped out plans for 2020, but it wasn't going to get the best of us. We had to adapt and overcome.


  • Online Content: The band cranked out a ton on online content at this time. Lyric videos, playthrough videos, "insider" videos. We knew they had to keep the fans engaged somehow, someway.

  • 2021 Tour: We also are in the process of re-booking the European tour for the late summer 2021. For the venues that are still around (many have gone out of business) the band has been able to still get good guarantees.

  • New Music: The band also took this time to work through new music, which is being recorded as I type this. The new stuff is amazing! Really looking forward to getting it out. We expect to launch the next album in a few months.



Outlook on my investment?

At this time, it looks bleak. IF COVID clears up enough for the band to sneak in a couple of tours between now and the beginning of 2022, that'll help. But who knows how that plays out.


Worst case, I don't recoup my investment by January 2022. At that point I'll no longer earn money from merchandise and touring, but I'll still have a sizable claim on the revenues from streaming and album sales until my investment is repaid.


That may take a long time however.


Would I do this investment again?

100% yes. Nobody knew about COVID when the contract was signed. The plans were in place for decent returns on the investment. It was a sound decision.


Plus I've been having an absolute BLAST with it! Being part of the music industry like this has been a dream come true. I'm just getting started on this journey into the music industry as well. I'll most likely spend a lot of time there once I FIRE and leave my W2 behind. Needless to say it's been a helluva education on this industry, one you cannot get from a book.


Didn't know how to close this article, so I'll close with a loosely related quote:


“Rock and roll is a nuclear blast of reality in a mundane world where no-one is allowed to be magnificent.”


Kim Fowley, former manager of the Runaways - 2005






Wanna support this blog?

  • Personal Capital: My go to place for tracking all things Net Worth.

  • YNAB: My go to place for managing my spending and budget.

  • Betterment: I use this account for general investment purposes.

  • M1 Finance: I use them for my dividend stock investments.

  • SoFi Invest: This is where I make individual stock investments.


87 views0 comments
  • Twitter

©2020 by 3QFI. Proudly created with Wix.com