We recently ran readers through how Budget 2016 is going to affect the Australian music industry. One of the points we highlighted was how the tax cut for small businesses will serve as a boon to most entities in the music world.
The reason is pretty simple: they’re all small businesses. Even bands are set up as mini-corporations for financial reasons and thus any cut to small business taxes will also affect bands and their individual members.
This is true for small-time local bands and it’s particularly true for big-time arena giants. Like, say, Radiohead for example, whose financials require an MBA and a degree in computational mathematics to understand, but let’s try.
The UK alternative giants recently released a new single in the lead-up to their ninth album, which is believed to be due out in June, but fans have known for some time that Radiohead are close to dropping their new album.
That’s because, as The Guardian notes, the band recently set up Dawn Chorus Limited Liability Partnership and Dawnnchoruss Limited, two firms that will deal with all the money the band’s follow-up to The King of Limbs generates.
Radiohead do this for every new record they make. Beneath their discography is a convoluted corporate empire of interconnected firms and businesses that handle all the cash the internationally successful British band bring in.
Within the band’s portfolio are companies with names like LLLP LLP, Unreliable Ltd, and Random Rubbish Ltd, which is apparently finalising a process of voluntary liquidation. According to The Guardian, Radiohead have formed some 20 companies since they started making music.
The first was Radiohead Ltd, which the band formed in 1993 to handle income made touring. Propelled by the success of ‘Creep’, the ‘company’ made £181,051 ($264,746) in its first year, but after costs were deducted it ran at a £20 loss.
Image via The Guardian
It was then that the band decided to take better care of their finances, especially as they began making more and more money. The following year they made £735,765 ($1,075,891), a figure that kept going up. The band’s 11 festival gigs this year are set to net them £4.5m ($6.6m) in ticket sales.
They subsequently set up a company to produce and sell merchandise dubbed W.A.S.T.E Products Ltd, which then expanded with the formation of Sandbag, which offered W.A.S.T.E’s services to others via a warehousing and distribution arm.
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But it was with In Rainbows, which was famously released on a pay-what-you-like model, that the band began forming companies to handle the profits made from record sales. This is a common practice, but most often artists form one company for all album sales.
What separates Radiohead from the pack is the fact that they form a new company for each album. “It makes absolute sense for them to make each project its own separate company,” Filippa Connor, a director of RNF Business Advisory, told The Guardian.
“Having individual companies also protects them, so if something goes terribly wrong with one business it doesn’t bring down the whole edifice. If they had a record that lost money hand over fist, they wouldn’t want it to affect everything else.”
And according to Ian Mack, a business teacher at the British and Irish Music Institute (BIMM), it’s how most bands of Radiohead’s size operate in 2016. Leave it to Radiohead to make their business practices as innovative as their music.
