Label Management Systems is a company that I founded with Jay in the beginning of 2003 and the purpose of it is to – the purpose of the company is to facilitate independent labels, achieve their goals. And we do that through a number of ways. A lot of it is through tools that we’ve developed and the consulting services that we provided, whether you are a tiny, tiny independent company, maybe one person trying to put your own record out, or up to - we have clients that have joint venture deals at major labels that have sold millions of records, and kind of everything in between. The majority, or most of the clients, are smaller. And the reason we really decided to put this company together was, we saw a shift in the industry with the ease of recording now, distribution, marketing. It’s so much more cost effective that the num – we saw years ago that the trend was going to be that there are going to be many more independent record companies rather than fewer. The problem is that most of these companies don’t really understand what it takes to get a record into the market place. And so over the years of my experience in the industry, and I worked in – I did street promotions, I was a DJ in the very beginning, but I also did A and R and marketing, I was a product manager, business affairs, you know I did everything and had taken the tools and the processes that we use at the various companies and put them all into, you know, a cohesive package and a set of kind of instructions that I use and help guide my clients through, you know, how they can achieve their goals, whether it’s, “Look I just wanna put my record out and maybe sell it online” or if you’re trying to secure distribution through a national distribution company, and you’ve got hundreds of thousands or millions of dollars. How do you allocate that money so that you’re going to be able to effectively use it to achieve your goals?
I had an epiphany one day, working at a label, small label. We would do six, ten million dollars of business a year and we were distributed through a major, well, a large independent distributor. And there were say 12, I think 12-14 employees, but you know it was senior level management, as it is for a small company like that. But when we decided to make a commitment to a project, it was substantial. It was a substantial commitment and would have severe consequences if we didn’t make money on a project, and even just allocating the funds in the beginning, how it would impact the company’s cash flow. Managing your cash flow is essential and really analyzing what your profitability is, is essential. The problem is most people don’t do it, or do it very, very - do a very, very poor job of doing it.
So, the story is, I was in a meeting with the president. I had an idea for a compilation record I wanted to put out. I sat down, I gave him the idea. He was like, “How much do you think you’ll need for licensing?” And we scribbled out some numbers on a piece of paper. “Well how much do you think you’re gonna need for marketing?” scribbled out some numbers, and “How much do you think you’ll be able to sell?” With that, he was like, “It sounds like a good idea, let’s give it a try.” And with that, the company committed a couple hundred thousand dollars to a project. Now for a small company like us, that was massive. Now, if we don’t make money, we don’t have money in the account or coming in, then we didn’t make payroll, and the 12 or 14 of us just didn’t get paid. And as I was walking back to my desk, I realized all this, and I was like, “There has got to be a better way for us to be able to do some kind of real analysis on this.” And I really started that day with just a basic spreadsheet, and a lot of companies have like a very basic spreadsheet that they use to say, “Okay if we sell X number of records, what’s our copyright liability and you know, how much will we make if we sell X number of pieces?” But what I wanted to do was develop something that was much more involved than that. And so over the course of the past three years, I developed a system which started out as a simple one page spread sheet that is now grown into a web based application that manages multiple projects, you know really as many projects as you like. It allows you to have as many users using the system as you want. It does detailed cash flow, profitability analysis. You can run multiple scenarios on each project. So you can tell in really great detail how much money you’re gonna need to commit to a project, when you’re gonna get paid from your distributor, what your copyright liability is, what your artist royalty liability is gonna be, and also when all those things are due so that you have the ability to manage your cash flow, which was one of our biggest issues, managing cash flow.
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