Investment Needed to Promote South African Music & Artists

Opportunity Snapshot

Investment Needed to Promote South African Music & Artists South African Music Recording Company is looking for investors to boost promotion and sales. Image Courtesy: Gryphus, 2010, Flickr CC.

Investment Opportunity

The funding will be used to heavily promote our music label through various marketing mediums. Some money will be used for revamping our small office and its equipment.

Heavy marketing (PR promotion) has led to record sales and often handpicked awards by artists who get such promotion. A prime example for 2013 was Avicii & Aloe Blacc’s “Wake Me Up”, which sold more than 10 million copies worldwide, and made more than $16 million in sales alone (including streaming).

With some distributors who charge almost 40% of your sales (*NB: sales exceeding 5000 copies the charges are much lower, they may charge as less as 10% to distribute your music). A single on iTunes sells for £1.29, if it were to sell 10 000 copies. The label surely gets at least £7 740 (assuming it’s a 60/40 spilt between label and distributor).

Selling a million copies for a single song guarantees more than £850 000. An album may usually sell at least 300 000 copies for £9.9 (£2 969 985 minus distribution fees). The label can easily make £4 469 985 if each and every album sold is first accompanied by 3 singles that generate £1 500 000.

Bookings alone will generate at least £1100 (low rated events) or more than £3000 (high rated events) a month. The probability of bookings is sometimes faster than sales. With serious PR promotion and marketing our artists
We can secure gigs paying at least £3000 a month. A single artist may contribute as much as £2 million yearly to the label.

When we were self-distributed (only in limited markets without any promotion) until by Oseao Digital (Canada) we made $1200 in sales and received back close to $400 in 2009 hence the distributor went defunct with several of unpaid cheques. A lot of labels including us, filed a lawsuit in 2011 against former owners of Oseao Digital, but through complications we never got anywhere. We opted on having our music removed from their catalogue.

A good working budget for us will be at least £32 700 (R588 600) to help us cover costs for videos, mastering, website (updated frequently) and hosting, as well as some recording sessions, social media pages management and marketing, and mainly public relations services to market our music. We are also keen on heavily promoting 4 artists within 4 months. As well as heavily promoting at least 2 singles. Much of our profit will rise within 7 weeks of each release.

Our targeted market is based in Europe, with the UK being the prime base. Sales will be gained worldwide, but for bookings our focus will be on most EU countries and the US, where regardless of exchange rates, bookings still make a lot of money.

Radio, press releases, social media marketing will ensure that we get such bookings.

As a loan, we also offering the investor 13% (or more) of our net sales monthly, which makes our investor a shareholder. The initial amount invested will be paid as per our agreement.

Competitive Advantage

Our main direct competitors are Independent Record labels. Indirect competitors are the much larger record labels. But since bookings attract even the smallest of promoters, we may not fair well with sales, but in other ways we will be at least well played on the radio, thus making sure that we get all the bookings we need.

Rationale for the deal

Bookings are generally the best way of making money. Working with the best Management companies will increase our likeliness amongst the great. The fact that I have been working closely with some of the labels and artists proves my position within this market.

The music industry is a very lucrative business opportunity, taken into account that you work closely with industry leaders who help market Independent Record Labels. Record labels such as Spinnin’ (home of Martin Garrix), PRMD (owned by Avicii), PMR Records (home of Disclosure, Sam Smith, Jesse Ware), XL Recordings (label that established Adele into an award winning musician), Ultra Records (biggest indie label in the world in terms of combined revenue), Ministry of Sound and Defected Records (both UK based house labels) roughly make more than $40 million a year (excluding Defected, with a slight gross of less than $10 million a year). While most of these labels depend on their copyrighted material that gets placement in advertising from all types of media, they are still smaller compared to giants such as Universal Music, Sony Music, EMI, Warner Music, Atlantic to name but a few.

Use of financing

70% of the finance will be used on heavy promotion of our music, with a small percentage of that amount used for distribution (record production of CDs and 12", printing done by Distribution Companies).

The information for these expenses will be available on request along with quotes directly from our suppliers or the PR companies we will be contracted with.

30% of the finance will be used for upgrading our current office and for web development, as well as office equipment for the PA. Some of the finance will be used for daily services including making calls and internet access, uploading of content to the distributor (since it is based in the UK) and PR companies.

We were also planning on adding Video Production services in our query for finance, but we are trying to cut costs. It is also viable for us to make several videos. Any amount on the remaining budget will be used for that.

Opportunity for the investor

In case of a loan, we need about $52000 that we will pay back at about 18% interest. The payback will begin in the 3rd month of our sales. We will agree on terms suggested by you as our investor.

A silent investor and or shareholder receives the initial amount paid back (in full), plus 13% of our monthly sales/bookings net. The 13% will be allocated for as long as you are still our investor.

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