Financial Case Studies: Revenue vs Ratios

Posted on March 27th, 2012 by Kristin Thomson in Financial Case Studies, Participant Data. No Comments

On March 15, 2012, we released our first wave of financial case studies. In each instance, specific, individual musicians gave the ARS team access to their personal financial documents – tax returns, Quicken files, PRO accounting statements, pay stubs, receipts – which we then categorized and analyzed.  It took time to convince artists to participate, and many more months to complete each analysis. But, when provided with complete data from the artists, we were able to build reports that present a rich array of data, from gross revenue across time, to revenue pies for each year, to income versus expenses + net.  You can review all the case studies, plus our summary findings, here.

Some readers have been disappointed that the gross income figures are not visible on the charts. This blog post explains our research protocol in some detail.

Developing the process

When collecting the financial case study data, our research team adhered to a research protocol and a privacy policy that we shared with our research subjects. In order to gain access to their personal bank accounts and royalty statements, we needed to make certain accommodations. One was that the subjects would not be named, but would instead be described by various characteristics. And the other was that we would not disclose the dollar amounts associated with their work.

This privacy policy was developed after months of consultation with colleagues and members of our Research Advisory Committee, which includes social researchers, survey experts, music attorneys, and auditors. And, we take our project’s privacy policy seriously.

Why privacy matters

The privacy policy, as constructed, represents a careful balance of factors. The musicians who agreed to participate in our work did so knowing that we would protect their anonymity.  If we had insisted that the financial case studies expose dollar figures, there is no doubt that the artists we worked with would have withheld information from us to protect their own privacy.  It’s much less likely that they would have given us access to sales numbers, the number of shows they played, and so on – data that helps us to understand what exactly has changed over time for each of these artists. Redacted versions of the case studies that included dollar figures would have been vague and incomplete and less useful as learning tools.

Ultimately, it was a judgment call and we chose to err on the side of giving our team full access to financials in exchange for complete anonymity and protection for the artists who worked with us.  Given the overwhelming positive response to the case studies as learning tools so far, we feel we made the right decision.

Numbers versus ratios

Privacy aside, our research team also debated the value of real dollar figures versus ratios. We understand the appeal of releasing dollar figures. People can relate to the numbers. They can apply the knowledge they have from their own experience, and compare it to the experiences of the case studies.  That said, when we were designing this phase of the project, a number of managers and artists told us that percentages were just as useful as dollar figures.  We have also heard managers and artists argue that they prefer percentages to dollar figures, as it’s easy to get distracted by dollar amounts.  So it hasn’t been obvious to us that dollars was clearly better than percentages.

It became even less obvious that dollars are better than percentages once we started building the case studies.  The lessons that can be learned from these case studies use specific information from individuals, but we have chosen to focus on the broader themes that apply more widely to musicians who play similar roles and are in similar places in their careers.  The actual dollar amounts are irrelevant to most of what we consider the valuable lessons learned from the studies.

One method of three

To a larger point, this is why the Artist Revenue Streams project relies on three methodologies employed simultaneously: we did 80 in-person interviews, we’ve published these five case studies (with four or five more to be published spring 2012), and we did the large scale survey that was answered by over 5,000 US-based musicians and composers. We chose this strategy because we knew that any one method would  be insufficient in collecting data and telling a story that was accurate and robust.

Our commitment to privacy

Privacy is the first and sometimes longest conversation we have with an artist when they agree to consider giving us access to their complete financials.  These negotiations are delicate and happen over many months.  In fact, we are still in negotiations with artists and managers right now to use their information for the next wave of case studies.  Over the last eighteen months we told artists that we would uniformly protect everyone’s privacy to the greatest extent that we could.  And we will continue with this policy in the future.

The unique value of the case studies

The financial case studies have been the toughest part of this research project, but also incredibly fascinating. The artists who have participated to date have really loved seeing their finances reorganized and presented back to them. But it’s been difficult to get musicians to participate. And you can imagine why — a musician turns over all of his or her financial records to two people, which are then analyzed and published?  The vast majority of artists that were part of our snowball sample for interviews simply declined to take part in this, and we totally understand why. That is why we are immensely grateful to those who have participated, for they provide all of us with an unprecedented glimpse into the financial workings of a variety of full-time musicians.

Read more about the methodology and research structure here.

Learn more about the research team, advisory committee and funding sources here.

We have many more data releases forthcoming.

Are you a music creator who would like to participate in the financial case studies? Contact us if  you would be willing to submit your music-related income and expenses to our research team.

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