MGO CPA | Tax, Audit, and Consulting Services

Topic: Business Management

5 Essential Tips for Entertainers from a Leading Business Manager

Key Takeaways:

  • Navigate the unique financial challenges of the entertainment industry with a solid strategy tailored to your diverse income streams and career goals.
  • Master budgeting and maintain open communication with your business manager to create stability and prevent potential issues before they occur.
  • Prepare for financial unpredictability and leverage your brand strategically to maximize long-term success.

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In the entertainment industry, where the spotlight often shines brightly but unpredictably, managing your finances can feel like walking a tightrope. Whether you’re an actor, producer, director, or writer, the nature of your income is unique — often fluctuating with the ebb and flow of projects, endorsements, and creative ventures.

As you navigate this complex landscape, having a solid financial strategy becomes crucial. Here are top tips to help you maximize your earnings, plan for the future, and maintain financial stability:

1. Understand Your Income Streams

In today’s entertainment industry, your income is likely coming from multiple sources — acting gigs, endorsement deals, social media partnerships, and more. It’s essential to have a clear understanding of where your money is coming from and how it’s being managed.

Different income streams often involve different representatives, each focused on a specific aspect of your career. You might have an agent handling your film and TV roles, another for endorsements, and yet another for book deals or modeling contracts. This diversification offers incredible opportunities but also requires careful management. The first step in securing your financial future is knowing exactly who is managing each income stream and how those funds are being handled.

When you understand your income sources, you can better plan and project your financial future. This foresight is especially critical in an industry where income is not always consistent.

2. Master the Art of Budgeting

Unlike a traditional job where you receive a steady paycheck, your earnings can be unpredictable, often arriving in large sums at irregular intervals. This means budgeting is not just important — it’s essential for your financial well-being.

When a major payday comes in, it’s easy to feel flush with cash. But remember, that money often needs to last until your next project. A key part of effective budgeting is stretching your income to cover your expenses over an extended period so you can live comfortably between jobs. This might involve setting aside a portion for savings, investing in long-term financial goals, or simply making sure you have enough to cover day-to-day expenses without stress.

Effective budgeting also means being realistic about your spending. It’s tempting to see a million-dollar deal as a windfall, but after commissions, taxes, and other expenses, that sum shrinks significantly. Understanding the difference between gross and net income is vital, and a good business manager will help you navigate these waters so you can avoid overspending based on inflated expectations.

3. Prioritize Open Communication

Financial management in the entertainment industry isn’t just about numbers; it’s about trust and communication. You’re not just hiring a business manager, you’re bringing on a team that should be in lockstep with you — understanding your goals, lifestyle, and the unique challenges of your career.

Open communication with your business manager through regular check-ins, updates, and transparent reporting will keep you on the same page so vital information doesn’t slip through the cracks. This is especially important when your financial situation changes — whether you’ve taken on a new project, invested in a new venture, or simply have questions about your spending.

A proactive approach to communication also means that your business manager should be alert to any potential financial issues before they become problems. For instance, if your spending starts to increase unexpectedly, it’s essential to address it immediately, adjusting your budget or planning for additional income sources to maintain financial balance.

4. Plan for the Unpredictable

In the entertainment industry, no two careers are alike, and neither are the financial challenges you’ll face. Whether it’s an unexpected tax bill, a dip in income, or a sudden opportunity that requires quick financial maneuvering, you need to be prepared for anything.

Your business manager should help you anticipate these challenges, providing guidance on everything from tax planning to estate management. Annual financial reviews are a great way to stay on top of your financial health, allowing you to adjust your plans as your career evolves.

For A-list talent with significant wealth, this planning might also include customized reporting and detailed management of a diverse portfolio — from real estate to investments in startups or other ventures. The goal is to keep you informed and confident in your financial decisions, no matter how complex your financial landscape may be.

5. Leverage Your Brand

Today’s entertainment landscape offers more opportunities than ever for you to build and leverage your brand. From creating your own content to partnering with brands, the potential for income is vast. However, with these opportunities comes the need for strategic management.

Whether you’re considering launching a product line, investing in a startup, or simply increasing your social media presence, your business manager should help you evaluate these opportunities so they align with your long-term financial goals. 

There is also a lot of equity to be found in authenticity today. Invest in and promote what you’re passionate about. This authenticity not only resonates with your audience but also increases the value of your brand.

Creating Financial Stability in the Entertainment Industry

Your career is unique. So are your financial needs. With the right guidance and a clear plan, you can navigate the complexities of the entertainment industry and focus on what you do best — creating and performing — knowing your financial future is secure.

How MGO Can Help

Our dedicated Entertainment, Sports, and Media team provides customized business management services to leading and up-and-coming talent in the entertainment industry. We work closely with you to stretch your earnings, plan for the future, and manage your diverse revenue streams.

Reach out to our team today to find out how our personalized approach can help align your financial goals with your lifestyle so you can focus on your craft.

From Artist to Enterprise: How Top Business Management Advisors Help Today’s Music Artists Monetize Their Brands

Executive Summary: 

  • The music industry has changed drastically, with artists now having more control over their careers and revenue streams beyond deals with record labels. 
  • Artists today need to view themselves as enterprises with diverse income opportunities including live shows, merchandising, licensing deals, streaming royalties, content creation, and catalog sales. 
  • To fully capitalize on these opportunities, artists must surround themselves with a team of expert advisors to help navigate all the financial, accounting, and business intricacies involved.

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The journey to success in the music industry is no longer a straight line. While the path to earning substantial revenue previously only had one route — through a major label — those days are gone. The digital age has ushered in a new era, where artists have many direct pathways to their fans and an array of new revenue opportunities. 

But with new opportunities comes new challenges. Today’s artists have to figure out how to navigate, manage, and optimize numerous complex revenue streams with little guidance. This is why having a trusted team of advisors is essential to ensure you are getting the most from your artistic output — both in terms of building your fan base and your financial future. 

Here’s how working with a top advisor can help you transform from artist to enterprise, adept at building diverse income streams and overcoming any associated financial hurdles.

1. Live Performances: Looking Beyond the Spotlight

Live performances and touring remain pivotal for musicians to generate income. However, the financial success of a tour is not just about what you’re getting paid; it’s also about what you’re spending. That’s why meticulous planning is essential. From production costs to transportation, a trusted advisor ensures every dollar is accounted for before signing any contracts. Artists can also leverage performances for additional revenue through avenues like live streaming, behind-the-scenes access, or even concert films (i.e., Taylor Swift’s Eras Tour film). Advisors can help structure those deals to optimize the highest take-home payout.

2. Merchandising: Capitalizing on Brand Appeal

Merchandising offers a lucrative avenue to capitalize on an artist’s brand and deepen fan connections. Advisors can guide artists through various merchandising paths — from direct sales to brand collaborations to affiliations — to help them determine the best financial option. While direct sales may seem the most appealing on paper (where you might see numbers like “90% profit”), the associated responsibilities, such as sales tax management and warehousing, shipping, and staffing considerations, need careful evaluation. A seasoned advisor helps strike the right balance between profit and practicality.

3. Licensing and Sponsorships: Negotiating the Right Deal

Licensing and sponsorships have become integral to the music industry, with brands using music to sell everything from cars and sneakers to movies and fast food. Advisors play a crucial role in evaluating and negotiating these deals — ensuring you are getting fairly compensated for your name and image, and the opportunity aligns with your brand and goals. The evolving licensing landscape—with artists now able to self-publish and go through Spotify, Apple, and other platforms—has made getting licensing deals done easier. One independent artist we work with got a six-figure deal when a network went to TuneCore looking for music to use in a TV show.

4. Streaming Revenue: Making the Most of Royalties

Music streaming platforms dominate the music consumption landscape today. While streaming royalties may be lower than what an artist receives from radio spins, terrestrial radio cannot touch the real-time data streaming provides (providing demographics of who is listening to your music, where they are listening, etc.). When it comes to managing streaming royalties, it pays to have a trusted advisor to track your royalties across all platforms — analyzing streaming data and royalty statements to ensure proper payment and identifying any discrepancies. Advisors also can strategize royalty planning, including estimated tax payments on royalties to avoid penalties, and help negotiate more favorable distribution deals with streaming platforms, exploring creative arrangements and exclusive partnerships.

5. Creator Content: Creating a Consistent Revenue Driver

In today’s creator economy, valued at over $100 billion, creating content is a powerful revenue stream. Many music artists are augmenting their income to the tune of six-to-nine figures a year by creating content for TikTok, YouTube, podcasts, NFTs, as well as a variety of other media and platforms. Advisors can guide you in navigating the challenges that arise from managing online content revenue — which often trickles, and then floods in, from multiple sources, and can quickly become unwieldy without a system in place to manage it. Proper financial management, including tax planning and budgeting, becomes crucial as content creation becomes a more prominent income source.

6. Catalogue Monetization: Structuring Your Ideal Sale

High-profile artists like Dr. Dre and Justin Bieber have recently sold their catalogue rights for large chunks of change. Catalogue monetization is the one time you are in complete control of your asset; you can carve out whatever deal you want (10-year, 20-year, 50%, 80%, etc.). Advisors guide artists in choosing the right partners, structuring deals, and determining the extent of the catalogue to sell. Your advisor will also help you weigh the tax considerations of collecting royalties versus selling all or some of your catalogue (royalties are taxed at 37%, while catalogue sales are taxed at 20%), and set up your sale in the most tax-efficient manner possible (for example, installment sale vs share sale). This one-time opportunity demands careful deliberation, and having the right team advising on nuances is paramount.

Building the Team Around Your Team

Moving from artist to enterprise means building a team to help you succeed. Your advisors are your team around your team. Much like a corporation brings in consultants, having seasoned business advisors available when you need them will help you make informed decisions to grow your brand and secure your financial future.  

How We Can Help:

Our Entertainment, Sports, and Media (ESM) practice helps music artists at all stages, from rising stars to legends, offering financial, tax, and business management services to help you build your brand and maximize opportunities. Contact our ESM team today to learn how we can help take your music career to the next level.