What does the future hold for studios? Part 1 – Compressor

COMPRESSOR:  What does the future hold for studios? Part 1

I read recently that if you took the daily average price of a recording studio in the 1970’s and applied inflation, in 2010 the daily rate should be €3,000!! As everyone knows, this has certainly not been the case. The daily rate for a studio lies somewhere between €450 and €750 depending on where you are (with exceptions such as Hook End which must be one of the finest studios in Europe!) The challenge of course has been created by the decline of the record buying public and the explosion in illegal downloads. Lower cd sales means lower revenues, which in turn lead to lower budgets. Previously, tours advertised albums….now albums are an advert for live!

To compound the challenges the industry faces, majors are consolidating and struggling to adapt to the new era. The mp3 generation enjoy music in the compressed format which has raised the question whether it matters where the tracks were recorded!

Against this entire framework, the value of the buildings where studios live has probably increased in price by a multiple of 10 over the last 40 years….yields are as low as ever. Is it any wonder that EMI closed Olympic? With a freehold value of €5 mll…..what was the net profit as a yield? Even with internal accounting, EMI would have struggled to make the sums add up. Shut up shop, sell the freehold and bank the cash!!

So, what will happen? I do not have a crystal ball and I do not have the monopoly on good ideas. What I can tell you is what I see at my studio and the huge challenge that we all face. I will also put forward an idea or two that might have some purchase!

My studio is pretty typical of a high end facility.

I have cut my running costs to the bone, every number has been analyzed, cuts have been made where possible and there really is no fat. I can tell you that if I am booked at my going rate for 365 days I WILL make money!  However, after depreciation it breaks even. That’s before I take a dividend.

What are the chances of being booked everyday of the year? Very, very slim!

What are the chances of my equipment being reliable everyday? Mmmm….

What are the chances of me getting my full rate? Well, 90% of clients ask for a discount.

I believe I am typical of my peer group. We all struggle to make the sums add up….We’re all fed up with having our bollocks squeezed on price…although we understand why!  And we are getting tired of being one of 4 studios all being put on hold..at the same time…  by the same client… to have a price pushed lower and lower… only for 3 of us to be ditched at the altar!

The Compressor has his work cut out! Next week I will put forward a few thoughts on what I see as a long term model that promotes viability on a sustainable basis

TTFN

The Compressor