Owning/Running a Recording Studio Questions

an old long lost friend of mine is currently running a recording studio, and he's asked if i'd like to buy up a share of his company. my business sense is pretty good so i'm not worried about valuation and accounts at all.

but i am worried about the business model of a recording studio itself, cos afterall, it doesnt matter how good management or the concept is,..... if the economics dont work then youre sitting on a bankruptcy time bomb.

i do like the idea of a studio over a record label or club etc because of the fact that everyone these days wants to be a superstar. never underestimate the wallet depth of wannabe's. and the first step to that is to get a decent demo recorded and mastered,..... meaning we'd be the first necessary payout that an artist would have to make, which is better than the last. and if no payout is made we retain everything until the lil biaaatch pays up. then theres film, tv, corporate material etc which all need audio.

so a recording studio seems to make sense onthe surface atleast.

if anyone runs or owns a recording studio i'd appreciate your input on some of these things:

what are the main running costs apart from utilities and engineer salaries?

good gear i know will last a lifetime, but what about the little stuff that you have to replace every year or so, what kind of stuff would that be? (mostly computer gear?)

the client list is important as well, so do you guys have any clients otherthan the obvious superstar wannabes and advertising people? i'm guessing alot of tv and film people would have their own setups.

i've done some reading up on the matter, but i dont know anyone that i can talk to that runs a studio, so any input you guys have would be greatly appreciated.

i'll even throw in a discount for mpc-forum people if this works out haha

(provided we dont go under in six months )

Your building lease.......

In a studio your biggest worry is a piece of equipment breaking, so make sure your rate is competitive, but still cost effective enough to cover unfortunate situations. Also make sure you recoup(or even make profit)on parished studio materials(CD, DAT, Analog Tape, ect.)

Your studio manager(whoever is running the show)should know the necessary items and protocol used in running a session properly(and if you give him this power)hire responsible people to do the same. The studio manager should only have to worry about the business operations of the studio(unless there's an emergency).

cheers scorpion.

the building lease isnt really a problem since i'm planning on aqcuiring the building (pretty much a shed) or shifting the studio into a building that we do buy. rent is the last thing i want to think about, and the studio is meant to be one part of a larger setup where we lease office space to design/cg/architectural startups.

the concept was to have a loose creative collective under one roof and leaseing space to them at cheap rates,... the studio wasnt evenpart of the idea until my friend got in touch with me recently. but it seems to be something that would tie it all together.

i certainly wont be running the studio, leave that to the current owner, since i have no experience in that area. i'm more comfortable dealingwith the business side ofthings, which i guess is why he asked me.

so as with any other business its mostly down to maintenace costs and perishables? thanks man i'll bear that in mind when valueing his equipment.

i suppose inssurance would be a prettyhefty annual pricetag right?

scorpion, do you run a studio? if so any tips on unexpected expenses apart from equipment breaking down?

what about potential legal problems other than someone not paying you?

thanksa gain for the input scorpion.

That basically covers everything.... and I totally forgot about insurance........ Make sure it covers company theft and personal theft(any theft of personal equipment).


Naw I don't run a studio boss..... Maybe someday though..... I just read a lot......

Good luck to you in your entreprenuerial endeavors......


And always be on the lookout for deabeat clients.

cheers scorpion, thanks for your input.

deadbeats are everywhere so especially in this case i think a deposit is definately necessary in this business.

keep reading before you make your moves, youd be surprised at how many people mess up cos they moved before understanding even the basics. just cos you can doesnt mean you should kinda thing.

thanks again for your help mate.

discounted sessions for you anytime hahaha!

im trying to start up a production house, and one thing my accountant advised me of is to make sure it is a S Corp or LLC. the S Corp protects your assets if somebody decides to come after yall, but the S=sole so yall maynot be able to go that route. do you have a lawyer on retainer? if not get one! with insurance make sure you cover any injuries that may arise, god forbid, cause if I came to your set and fell i will get you for everything from your console down to your jewel case if u aint got the right(LMAO) insurance and get your tax id # so you write off everything.

hahaha yeah i forgot about the "injury" side of insurance. thanks forthe reminder man.

its most definately going to be an LLC, anything else just doesnt provide enough protection should something go wrong.

on top of insurance i guess security systems would be quite a big bill too, then again i'm pretty sure all that stuff canbe written off, and needs to be incorporated into our rates.

wales, have you looked into the estimated annual profit margins on revenue on studios or production houses? what can one expect on average? i know it depends on so many different factors, as with any other business, but a ball park figure would be appreciated....... are we talking 5-10%, less, more?

as i mentioned, i have the option of purely leaseing space to the studio and not investing. as with any investment, it has to be compared to other investments to fairly determine the viability of it all.

a small profit after paying everyone would be fine, but operating at a loss would truelly suck cos this aint no charity shop. with what i currently do on the markets i could pull in 10% over the dow jones easily, and theres almost no maintenance/running costs involved in owning stocks. different risks i know but i treat the markets as a business as well.

any thoughts on that?

i have a few ideas i would liketo throw out for you to think about.

besides security and the like, what about back-ups and data loss prevention?

a client will be very attracted to a company that takes pride in protecting there investment while its in your hands. When im doing professional workfor film/TV, i take it very seriously. not only the files im working on, but also the files they gave me to start with. All data is stored in alot of places. 1st its stored localy on a mirrored hardrive system. if one drive burns up, a copy of the drive is right there. I do external network back-ups every few hours. Once ive made a breakthrew or im going to take a break, ill send back-up copys of the data to a terrabyte external network drive in my office under the desk. and every day at 3am, a server i have offsite receives all updated files of the day, its an exact copy of the network drive. and i burn DVD copys of the PT session files too.

If you plan on going into TV/Film and useing PT, get the DV tool kit. Im not useing PT HD, i just use a digi002 rack with a ADAT bridge. with the DV tool kit you have lots of tools for dealing with video.

But everything else suggested is a big part of it, insurence is major in the states, here in canada its not that big a deal cuz we dont sue people for everything that happens, but its still nice just incase.

good luck in getting this off the ground, im still working on getting mine to turn a profit, but i love it so much it doesnt really matter so much right now.

Peace,

Rob

thanks for your input hooligan, definately something i hadnt thought of, that data loss protection thing.

but its something i'll definately have to look into when i fly out there. as i said i'm not an engineer and i've never run a studio, and i'm more than likely to leave the management to do what they do. so everything you mentioned i'll have to ask them about.

i'd rather not buy the damn thing than have to replace management, especially since i have no experience in this area. lol i wouldnt even know who to replace them with!

but yeah thats a great addition to my checklist hooligan, cheers for that.

about the profit side which you mentioned,.....

thats after you get paid yourself right as well as look after everyone else concerned and after taxes?

if thats the case, then thats pretty reasonable for a newish business, especially in the service/reputation based industries. i do love the idea of owning a studio, which is why i have to be extra careful i dont runaway with my emotions

well atleast not too much

good luck turning a proft hooligan, sounds like you know your shit, so it should only be a matter of time mate.

As for making money, in your first 2 yrs of existence expect a loss unless you have that special block fund in full effect! for my production house being that its just me i cut out the payroll aspect, being that im unheard of i can only sell my best shit at wholesale prices meaning little or nothing until i get a name for myself. if yall already got a clientel, a paying clientel, then you should see a little something and i do mean little, nothing to quit your day job over. remember a studio can be ran by 3 people, producer, engineer, mixer; which can all be the same person until yall get a rep. try to keep cost and overhead down, even though you can right off every year i would rather keep a lil change in my pocket through the year. how are yall getting the word out about your studio? publicity and exposure will make or break you, cool if all the hood cats like yall work but at $100 a track for a 4 song demo will not keep the lights on. keep work in house as much as possible, never let a session go, make ****** sign contracts for everything, copyright, trademark, protect yourself in everyway possible cause folk will take your shit flip it make doe off of your idea, seen it happen, matter of fact they to the song, im not gonna call name but they are right hear in ATL making doe off of that stolen track, but what can you do when you have no cash for a lawyer and you gave them the damn session with no contract.

bottom line, recording studios don't really make money.


sure, they can do ok, but if your looking to make a lot of money than look elsewhere.

maintaining your gear is going to be a costly expense, things are always breaking and its not cheap to fix pro audio gear. this is even more true if your thinking about putting in an SSL or other large format analog console, these things constantly have something breaking and again, they're not cheap to fix. then you have to account for the downtime that this maintenance is going to bring.

also, your going to have to be buying new gear pretty regularly to keep up with advances in technology, people who book studios expect the latest and greatest converters, plugins, consoles, etc.

security and insurance is a huge expense.

You NEVER release anyone's masters until the session has been paid for in full. You ALWAYS back up their stuff as well. Up front deposits for bookings is recommended. If your dealing with labels, make sure you get PO numbers (purchase orders)

Your going to need an experienced studio manager, preferable someone who has been in the industry for awhile so they have connections at all the major record labels, this will help you get work and get paid for work thats been done.

Bottom line, the studio business isn't a profitable one. The industry is shrinking, studios are closing all the time, even the big ones like Hit Factory, and these are places that do major label, big budget work every day of the week. I'm not trying to piss in your cornflakes, but i see a lot of people that want to get into owning a studio, and fall flat on their faces. They think that its a big profitable business, but it isn't. If i had to advise you one way or the other, I'd say don't do it.

yes rickrock is very very right, your not going to turn a huge profit, big studios are closing all the time. one big reason for that is this:

They only do music! the real money is in post production more then big budget music production.

I do work mostly doing ADR and film score for documentorys and local TV/Film. I also do alot of extreme sports vid's like skate and snowboard vid's, FMX, BMX and stuff like that.

turning a profit for me isnt that big of a deal right now, i have a 9-5 in audio post already, i do this side work mostly because i can pick and choose the projects i want. Plus its a huge tax write-off, meaning last year i didnt pay any at all, everything was refunded to me.

I bought most of the gear on credit, meaning interest is a write off, as is a percentage of the cost in the firstplace every year for so many years. Then i can write off the electrical bills and a certain amount of the rent by square footage of the condo.

Best thing you can do is first off, talk to an accountant, then a lawyer just to get as much info as possible. Then decide where the business is, what your going to concintracte on, then pick your gear depending on that.

Me personaly, i use a digi002 with a dual 2.2 G5 powermac, and 2 19 inch lcds, and a 30 inch lcd TV for preveiwing. i have a control8 for PT, and DV tool kit. with the digi002, i use an ADAT bridge to add another 8 channels of audio. and some DSP card to run your plug in are very handy also.

thats pretty much all i use in the "day to day", the clients give me the final cut of the footage, and the cleared list of audio. Some videos i make some ofmy own audio, like beats and such for skate vids.

I cant give much advise, as it all depends on local laws and country laws. copywrite laws in the US are very diffrent then canada as are business law.

Dig in and start reading, talk to as many people as you can, and dont pigon hold yourself to one thing. new media is the way to go man, Video, Audio, Web Content, all under one roof.

Peace,

Rob

thefirehooligan wrote: the real money is in post production more then big budget music production.

I do work mostly doing ADR and film score for documentorys and local TV/Film. I also do alot of extreme sports vid's like skate and snowboard vid's, FMX, BMX and stuff like that.

very true. if you can get into the audio post market there's a LOT more work to be had. voiceovers, commercials, sound effects, tv ads, etc.

thanks for all the input rickrock and firehooligan.

my apologies for not replying sooner,.... too many late nights in a new city hahaha.

everyone i've spoken to have echoed your sentiments exactly,.... post production does indeed seem to be the way to go.

i'm still undecided on the whole idea but definately leaning towards the "not investing" side. i think it would be best to limit my risk and just lease space out to these guys. theres always later when they decide to expand because of a growing client list,... if that does happen.

anyway thanks again for all your input, it is much appreciated guys.

cheers

skunk.

first of all I can't help you becuase I don't know a damn thing about running a studio lol....but I do have an opinion from an observation...anyway I had taken this recording artist business course and yes one prerequisite was to visit a couple of studios...outside of that I visited a couple more for the F of it becuase it was fun...cut to the chase...I found that all of them, not being in an area of major markets were doing business for the local university...which is the major business in the area...they were doing ofcourse post production as mentioned and duplication dvd and cd as well as audio cassette tape....however on the flip side of that, yes they recorded and two out of the four I visited were major leagued equiped (one was designed so well that Ford was using it at one time to test the noise level from some of their engines...the joint was that Fn quiet...dude has it double layered and built into the side of a mound...all this built behind his Fn house) so from time to time they are able to bring in some major peeps from various genre's and ya know...stick a signed photo in the lobby to geek the fame seekers which helps to open their pockets...on another note...which is understandably overlooked here, because it is a music forum, is design and packaging...a couple of the studios...the ones with the deeper pockets had an onsight graphic designer...so factor in his/her equipment, labor cost....sooooo thats design....now are you going to print this ish, the packaging...probably not on large runs but you can get some printers that could handle some short run stuff with decent quality....large stuff farm that out then your down time you make the young glorified engineers package the ish lol, box it, shrink wrap it ready for pick up or delivery...thats my 2 cents