The Art of the Deal: Financing Musicians

by Kenneth C. Greene Mar/Apr 2024
Music makes the world go ‘round, but who finances the musicians? Ken Greene explores the often untapped music industry and how lenders and lessees can break into the market.

Kenneth C. Greene,
Law Office of Kenneth Charles Greene

“Just gimme money…that’s all I want.” (John Lennon)

This article addresses a relatively untapped source of borrowers and lessees that may be overlooked in the financer’s traditional marketing quests. John Lennon wasn’t the first musician to articulate that sustaining a music career requires money. He was very direct and vocal about it. Many others followed his lead, writing and singing about how money and business were inexorably intertwined with their artistic and musical endeavors, like Pink Floyd’s poignant “Money.” Some musicians, like Eddie Money, born Eddie Mahoney, even changed their names to bring attention to the issue.

My earliest personal encounter with this issue was a fight with my dad when I was 10 or 11 years old when we were discussing my career path. I told him I didn’t need a career, or money for that matter. I just needed music (I wanted to be a Beatle, as did so many of us at the time). Much to my chagrin, he poignantly and correctly asked how I would buy that keyboard I wanted so badly without money. Hmmm. Touché!

Growing up in the music world, I quickly learned that the keyboard was hardly all I needed. Bands need equipment, rehearsal space, promotional materials, transportation and, of course, beer. If the garage band wants to move out of the garage and onto the main stage, it needs money to record, distribute and market its music. Once they hit the big time, they need professionals to protect them and their assets — managers, booking agents, lawyers, accountants and so forth. The bigger they are, the more they need. Big-time concert tours can cost hundreds of thousands of dollars. They must pay their road manager and roadies, tour manager, travel expenses and, if things go well (as they often do not), the band.

Bands often overlook the sources of capital available from traditional or, more likely, untraditional financers. Unless you’re Taylor Swift (who doesn’t need the money), you probably won’t get a band loan from your local Citibank by bringing the loan officer a copy of your latest demo. As an aside, Taylor Swift is wise enough to know to spend someone else’s money on tours, and with a name as big as hers, she can get Swifty sponsors to foot the bills.

Some bands can do that, but most cannot. So, how does an excellent but unknown band launch a successful career?

As I mentioned, bands need equipment. And, conveniently, equipment lessors and brokers lease equipment. Subject to the usual underwriting criteria, this is an excellent source of financing. Bands also need a way to get from one place to another. Getting that private jet takes more than a little capital. But vans, trucks, trailers and buses can be leased or bought through vehicle lessors and lenders.

Bands also need working capital for rehearsal space and recording time, as the days of the big studios picking up the tabs for unknown artists are probably long gone. Working capital is hard, as it is a relatively unsecured and high-risk proposition in a brutally competitive industry. Bands without collateral need something else, like angel investors or, more likely, angel relatives (hi dad, hi mom, love you both!).

Some people love being part of a musical project, even if they can’t play anything except the radio. In exchange, a band can offer production credits and a cut of the back-end revenues (revenues after expenses). It’s a hard sell; sometimes, it is the end of the road for even the most talented artists. That’s when the dedicated musician returns to the local clubs to bolster their fanbase, growing it and seeking venues proportionate to that growth, allowing them to generate “real money.”

Successful artists can sync, license or sell their catalogs. David Bowie co-created the “Bowie bond,” a unique type of asset-backed security using as collateral royalty streams from current and future album sales and live performances. At the top level, you have artists whose catalogs are worth millions and can be used as collateral for loans or sold for cash. Bob Dylan sold his catalog for between $150 million and $200 million. Springsteen sold his for $500 million. But, let’s face it, there are not many David Bowies on this planet (in fact, regrettably, there are none).

Other financing needs for musicians are real estate, i.e., theaters, galleries, clubs, FF&E, liquor licenses and more.

Most artists (including writers, sculptors and all other forms of creatives) are blissfully ignorant of the potential sources of capital to feed their musical Jones. If you can enter this market as a lender or lessor, you may find a lucrative bread-and-butter niche, maybe more. First, you must establish a presence in that space and let people know what you offer. Social media is a good place to interface with musicians in need, as many struggling creators resort to free media for publicity. Circulating within the music scene and getting to know the booking agents, club owners and managers are also extremely good inroads to the financially strapped talent. Attending conferences like NAMM, seminars and other musical events is also a great way to network. Not ironically, finance people look for the same promo and publicity opportunities as the bands.

For me, after booking a very successful nightclub for eight years and after more than 400 shows, I developed a substantial book of entertainment clients. I am not a finance company, but I offer a service. There is no reason you wouldn’t obtain the same results with your service.

The bottom line is that we all need art, and artists need money. Becoming part of the machinery that grows these necessities can be very rewarding. So go out there and do it, please! •

Ken Greene is an attorney at his SoCal firm, the Law Office of Kenneth Charles Greene. He began his career with BankAmerilease in 1981 and has been a partner in several firms, including Ross & Ivanjack, one of the first law firms devoted exclusively to the equipment finance industry. He continues representation of lenders, lessors and brokers in contract preparation, compliance, licensing, litigation and transactions. Greene is presently general counsel to the AACFB, has served twice on the board of directors of NEFA and was its Legal Committee Chairman, Legal Line Editor, Regional Committee Chair and Conference Chairman. Greene’s passions are family, music, travel and more. In his “spare” time, he plays and records with several bands and produces concerts and charity events.

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