Latest / Clone Wars: The Spinoff / Cash Flow, Ownership, and the Real Cost of Fame

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Cash Flow, Ownership, and the Real Cost of Fame · Clone Wars: The Spinoff

• 0:00
  Welcome to the show, everybody!
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  I'm Dangerous Zygos, here with DJ Universe, Calvin Blingwell,
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  and Dandy Market.
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  And guys, I want to start with a rumor that represents a massive shift in the music
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  business: Drake reportedly self-financed his entire ICEMAN rollout.
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  No label backing, no advance money, just direct wire transfers from his own accounts
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  to fund the whole visual campaign.
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  Self-financing ICEMAN is wild because a rollout at that level easily clears seven
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  figures.
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  As an artist out here in Calabasas, I see guys fronting like they're independent,
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  but they're secretly taking five-million-dollar checks from gamma or Virgin to cover
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  their marketing.
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  Drake doing it with his own actual cash flow?
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  That is a completely different level of leverage.
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  It's the ultimate power move, but look at the flip side of how messy this gets when
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  you don't manage the back end.
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  Look at Kanye West.
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  Yeezy reportedly got hit with a one hundred and fifty thousand dollar lawsuit just
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  for unpaid web design fees.
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  A brand valued in the billions, getting dragged in public over a one hundred and
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  fifty thousand dollar vendor bill.
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  You gotta stay lit, but you gotta pay the people who build your digital storefront,
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  man.
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  That one hundred and fifty thousand dollar bill is exactly what happens when you
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  have creative genius but zero infrastructure.
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  As a manager, I see this daily.
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  Artists confuse paper wealth with actual liquidity.
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  They see a five hundred thousand dollar advance from a major label and think they're
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  rich, not realizing that money is just a high-interest loan they have to pay back
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  before they ever see a dime of royalties.
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  Exactly, it's a recoupable loan.
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  If you take that five hundred thousand dollar advance, the label owns your master
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  recordings until that entire five hundred thousand is paid back from your tiny share
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  of the streaming revenue, which might only be fifteen or twenty percent.
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  You're basically renting your own talent while the label acts as the bank and the
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  landlord.
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  And that's why the old heads had to build their own systems.
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  Think about Master P back in the nineties with No Limit.
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  He secured that eighty-twenty distribution deal with Priority Records because he
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  came to the table with his own product and his own cash.
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  He wasn't begging for an advance; he was buying the press.
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  That eighty-twenty split Master P had is the holy grail.
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  Most young artists today are signing eighty-twenty deals in reverse,
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  where the label keeps eighty percent.
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  Roc Nation and Drake are just modern, highly polished versions of that same Master P
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  blueprint.
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  They realized that owning the IP is the only way to survive the transition from
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  being a hot artist to being a legacy brand.
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  But look, the ownership blueprint only works if you actually set up your pipes
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  correctly.
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  The biggest tragedy in this game is the producer or writer who has a song with fifty
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  million streams but is living month-to-month because they never registered their
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  music.
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  You have master royalties, which go to whoever owns the recording,
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  and publishing royalties, which go to the writers.
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  If you don't know the difference, you're leaving half your money on the table.
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  That split between master and publishing is where the industry hides the cash.
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  If you wrote the melody but didn't register with a Performing Rights Organization
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  like ASCAP, BMI, or SESAC, those digital performance royalties just sit in a black
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  box.
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  After a few years, if that money isn't claimed, it gets distributed back to the
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  top-earning publishers.
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  You're literally donating your royalties to major corporations.
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  ASCAP and BMI are literally holding millions in unclaimed writer shares right now.
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  I remember my business classes at LSU, they hammered this home: a business is just a
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  collection of systems.
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  If you're an artist, you need a simple, strict operating model.
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  I use a basic allocation rule for every check that comes in: thirty percent straight
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  to taxes, twenty percent back into marketing and production,
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  ten percent for legal and admin, and forty percent for personal operating expenses.
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  That thirty-twenty-ten-forty split is beautiful because it stops you from buying a
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  chain before you've paid Uncle Sam.
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  I've seen guys get a fifty thousand dollar festival booking check,
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  spend forty thousand of it in one weekend, and then get hit with a fifteen thousand
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  dollar tax bill a year later.
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  Now they're doing club walkthroughs for peanuts just to stay out of federal prison.
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  And you need a separate business bank account for that allocation.
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  Never co-mingle your personal cash with your LLC's funds.
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  On top of that, you need a three-month operational buffer before you launch any new
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  project.
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  If your monthly overhead is ten thousand dollars, you don't start spending on a new
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  rollout until you have thirty thousand sitting untouched in a reserve account.
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  That three-month buffer is crucial because touring money is incredibly deceptive.
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  Let's talk about the math of a twenty-five thousand dollar show.
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  Young artists see that twenty-five thousand dollar guarantee on the contract and
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  think they just cleared a light twenty-five grand.
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  But once you break down the actual execution, that number evaporates.
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  Man, that twenty-five thousand dollar gig is really a ten thousand dollar net profit
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  if you're lucky.
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  First, your booking agent takes ten percent, which is twenty-five hundred.
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  Your manager takes fifteen percent, which is thirty-seven fifty.
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  Then you have to fly out a crew of four, book three hotel rooms,
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  pay for ground transportation, and rent backline gear.
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  By the time you land back home, you've spent twelve thousand dollars just to put on
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  a forty-five minute show.
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  Twelve thousand dollars in expenses just to make ten grand back.
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  That's the reality of the road.
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  If you don't have your merchandising set up at the venue to offset those travel
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  costs, you're basically working a high-risk manual labor job for minimum wage.
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  It comes down to this: gross income is a vanity metric; net profit is sanity.
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  Whether you're Drake funding a multi-million dollar rollout or an indie artist
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  booking a regional tour, the laws of cash flow don't care about your follower count.
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  If your system isn't tight, the music business will gladly keep the change.
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  See you guys next week.