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Chapter FIVE

More About Cash Flow Streams, aka the Money Paths

The four cash flow streams I described in Chapter 2 are “money paths” that link you, the artist, to your fan. These paths are shortest if you sell your product (read: your music: LPs, CDs, live gigs) to the customer (read: fan) yourself. By doing all the tasks, you would reap the most profit because you’re not paying any of the players to do any of the work.

However, there are times when it is more expensive for you to do a task yourself than to “out-source” the task to a service group or company.

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In addition, you MUST count on certain expenses outside the cash flow paths, like lawyers and accountants. Both are large REQUIRED expenses because these players provide a service that involves expertise most artists don’t have. Too many artists fall into a trap: they have worked hard and spent hard in a short period of time, and then the cash flow shrinks, but the expenses don’t. They end up losing most of their assets back to the financiers. To avoid this trap, you need to keep your assets within a long-term budget set up by a “personal” accountant or business manager. Furthermore, you need lawyers, the safety valve we all hate. These guys will advise what not to do far more than what to do or how to do what you want more safely. There are an incredible number of contracts that the band will need to sign, and the lawyer acts as an interpreter converting the legal language into plain English so that the artist can understand it. Finally, there is a huge difference between a good deal legally and a good deal financially. The lawyers advise about the legal, the accountant about the financial and many times they do not overlap. “Good” legally often means “not so good” financially, and visa versa. The best is often a balancing act between the two because many times the lawyers and accountants disagree and the artist is left to decide on these “deal points.” The better these folks work together, the better off the artist is, but it costs the most. The old adage “pay now or pay more later” holds true. Do not under spend on these tasks because it will come back to haunt you.

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The number of “mouths to feed” has risen over the years (just take a look at the players list), and each mouth has a hand attached to it that takes money out of the artist’s pocket. A lot of people are getting rich in the music industry, but not enough is flowing the whole way back to the artist’s pocket. To show you what I mean, we’ll take a look at each of the money paths in the next four chapters.

The good news is that new technology has made it possible for you to do some tasks by yourself and you can create shortcuts that eliminate or change the relationship you have with some of the players. Then the reality of “more effort yields more profits” can be realized. By using some of this new technology, you can direct your destiny first hand in a cost efficient way. This is good and bad. Success (read PROFIT) doesn’t have to be shared with so many others, but you cannot blame failure on others as easily.

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