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Diversification: Providing New Services to Different Clients
During my many years in the audio industry, I have often emphasized that although pop music recording is tough, the visual music postproduction business (and now interactive audio for visual) truly separates the men from the boys. With visual music (film, television, CD-ROM, electronic games, and so forth) there are stricter budgets, more challenging format requirements, mandatory deadlines, and uncompromising clients who would just as soon take your head off as say “good morning.” Also, if you don't always have an on-time start, or if your machinery breaks too often, they will walk out in a hot second. If you are not totally secure about having the right equipment and the knowledgeable expertise of your personnel or visiting engineers to do the job on time and on budget, don't even think about being in the visual postproduction business.
If you are in this arena, the major problem you all share is finding new clients to take up the slack of available time. This has been particularly true since inexpensive fiber-optic Internet communications became available from many local cable companies. Suddenly the speed of a T-1 line (1.5 million bits per second), which previously cost $3,000 per month, is now available in your home for under $50 per month. This has resulted in a video post-production “home/project studio” industry for visual off-line editing and other services, which in turn has resulted in cost savings for the production company and therefore a loss of business for the major postproduction houses and other diversified audio facilities. Anyone with a spare room in his or her home and the available credit to lease an Avid or a Fairlight system was suddenly in the postproduction business. The major studios could quickly send a digital episodic television show or scene from a film with an edit list over the Internet to a home studio, which could quickly edit it and send it back. This is another instantaneous new form of business in the industry—an instant add-on for your business, if you know what you are doing.
Other potential diversification possibilities in today's complex sound market include: equipment rental, CD/DVD mastering, DVD authoring, audio for interactive multimedia, advertising, corporate communications, and mobile recording, just to name a few of the major revenue areas worth exploring for your business.
The purpose of diversification is twofold. First, it is the more efficient use of your present core equipment and key personnel. A large and expensive audio console, for example, can be used for almost every type of audio processing. A multitrack digital tape machine provides the same alternatives. Second, to diversify your business into new areas of the industry spreads your financial risk of insufficient bookings. When the music recording business is slow, there is a good chance that audio for video post-production or electronic games is booming. Being involved in several areas of the audio industry at the same time makes good fiscal sense.
At Record Plant, for example, we had eight different profit/revenue centers (a separate revenue/profit-producing audio service with its own personnel and real estate) in two locations. These included two music recording studios, a three-unit mobile recording division, a scoring stage for film and television, an equipment rental division, and a pro audio equipment sales company. All profit centers had access to the others’ information and client base as well as the obvious cost savings for equipment purchases. Access to all equipment by the rental division provided additional revenue (paid for by the client base) for all equipment requirements not included in normal rates for all revenue centers.
Those of us in the audio recording industry share an insatiable curiosity for new trends, equipment, and technology. We are fascinated not only with “How do we make the music better?” but also with “How else and where else can we make and market the music?” Speaking with audio facilities in various parts of the U.S. to find out how they accomplished successful diversification of their services into new areas of the industry yielded the following “how to” suggestions:
PROSPECTING FOR NEW CLIENTS
One executive said: “Early telemarketing efforts by our account executive, who spent her first 3 months on the phone, raising sales for any new area of business where we could make new contacts and utilize our present staff and equipment, was a big factor. Also, production directories, trades, and professional organizations were prospected to further supplement the list. In addition, we give quantity discounts to our new high-volume clients and an occasional commission for new business referral to freelancers who use us often. We also barter our sound services in return for ad space and other commodities to potential new clients to show them what we can do. And we are active in community affairs to enhance our facility's visibility and name awareness. Every little bit helps.”
SELLING VIDEO POST SERVICES
“It's almost rocket science” (referring to video postproduction). What the spokesman for this facility, new to audio for video postproduction, means is (and this is his spin): “We replace old tools with new tools. Nonlinear editing is the visual equivalent of word processing. To attract new clients in this environment, you must show that your product or facility will make postproduction more creative, faster, and especially more cost-effective. If we can't convince them of that, they have no reason to even try us or our new and innovative equipment. Since over 90 percent of episodic television is edited electronically (feature films also utilize this technique), our excellent service and support reputation from our current business is mandatory to convince our potential new clients that we have a better low-maintenance editing environment than the competition. In addition, we must be better than the other post houses at anticipating the needs of the client well in advance of the project start date. In Hollywood, good will and a good reputation generate leads and close deals at both the studio and the independent level.”
SERVICING THE NEW CLIENT
Another successful studio manager reports that she believes “we are most successful in getting a job from a new client if we can actually meet with them in person. We always offer a free consultation with the manager and an engineer to analyze their project and assist them in budgeting and preparation. We also host seminars and open houses for trade organizations, which give potential clients a chance to see our facility and meet our dedicated staff. We do regular press releases and occasional trade magazine advertising. Our best marketing tool, though, is the studio itself. We always make sure that clients’ needs are being met. We have many audio and video formats available, we are maintenance fanatics, and we consistently present a visually pleasing environment.”
DOUBLY EFFICIENT
A studio owner in a secondary market made his facility almost twice as efficient and added 40 percent to his gross billings by becoming a “dual-market facility” that services postproduction clients during the day and music recording clients at night. He believes that a recording facility attracts clients from the personal style of the management. He also treats his postproduction media clients like the artists they are, and therefore is a believer in the soft sell. He says: “You can't kid a kidder, as the saying goes. We lump new business marketing or prospecting in with our broader marketing approaches. The idea is not a targeted direct sell, but rather a long-term, ongoing image campaign. This is a personal, low-key but persistent effort aimed at image building, brand awareness, and name recognition. Our major tools to accomplish these goals are a good solid public relations campaign, a flexible targeted mailing list which presents concise factual information about the facility, and personal contact by the owner or manager with the client on a regular basis. Don't sell too much, just ask for the business.” He continues: “Remember, the most important part of sales and marketing is keeping the business. You must show every client a better overall recording experience than he or she has known elsewhere. We are in the service business, and service is the name of the game. Get them in the door however you can, but once inside, keep them. That doesn't require any marketing at all, and in the very long haul, that is the best marketing there is.”
MUSIC FOR MULTIMEDIA
Just like multitrack digital, interactive multimedia took a long time to become viable. One major reason for the time lapse was the market forces necessary to reduce the cost of hard disk memory for the processing of the data in digital audio workstations. Another was the sale of a sufficient number of CD-ROM drives followed by DVD players to provide a market of adequate size to support the sale of this new music software medium. Now, CD-ROM and DVD are household words. The buzzword is “interactive,” and major record labels have become large-volume clients. Media conglomerate BMG, for example, created a multimillion dollar joint venture with ION (“a six-month-old firm boasting one half-developed product and no revenue . . . operating from a West LA living room,” according to the L.A. Times) to form an interactive music label using the interactive CD-ROM (and the DVD in a separate venture) as the product, in place of the standard CD. Their reason: “to give users a music video they can control—a kind of cross between MTV and Nintendo that lets users select a song, choose the orchestration, and attach it to a variety of still and moving images.”
“Electronic games are now bigger revenue producers than movies”—Wall Street Journal. Another success story from a former studio owner, who is now the sound director for a major electronic games conglomerate, talks about what is different about getting into interactive as compared to other new directions in audio post for video. He says: “The basic difference is that with audio post we added a small amount of equipment, spent a small time learning how to operate it, and we were ready. After all, our consoles and multitrack audio equipment were the same that we had been using for straight music recording. The most important element in this new area of business is the word “multi”—there are many different types of media, with the role of the recording studio being much different than just playing host to an aspiring group of young musicians. The studio had to become technically knowledgeable about these new arenas; hire or consult with a brilliant computer person to interface with the new client's data and scheduling requirements; and hire a sound designer/composer who understood these new problems and their solutions. It is not much different than having a star mixer, except that this star must be a good musician, a good mixer, a computer whiz, and also have sensational communication skills. Also, the equipment is simple. Facilities used to pay hundreds of thousands of dollars for the hardware necessary to perform their required tasks. Now they purchase the necessary software to do the job for, comparatively, next to nothing. Also, you don't often need those large expensive rooms for tracking, so you can greatly reduce your square footage cost for space and let somebody else carry that overhead. Audio for electronic games quickly evolved as an industry and never settled on any one or even several ways of doing business. It may be the best example I have ever experienced of ‘succeeding through chaos.’ The secret is to stay on top of what is happening and position your studio to be able to make quick changes.”
We all must look at every possible diversification that could add to our revenue stream and profit potential. What diversification is the best choice for your facility is up to you. I urge you to take a closer look at the market potential of other audio services available that you may provide in your geographic area (or import by downlink from other areas of the world) and consider their potential for your business. Innovative facility operators must know more than how to operate a complex software program in a computer. They must know how to re-purpose content in a fashion so compelling that the marketplace will buy it. The result is the successfully diversified studio operation.