We've Bootstrapped Two Successful Music Licensing Businesses [With $0 In Marketing]
Hello! Who are you, and what business did you start?
I’m Tanvi Patel, and in 2006, I started Crucial Music Corporation, aka CrucialMusic.com (a music licensing company), with my mentors Jim and Deborah Long. In 2015, we launched CrucialCustom.com, and in 2016 I bought out Jim and Deborah, and now I am the sole owner of the company.
The main product of both services is music licensing for film, television, and advertising. CrucialMusic.com contains 16,000+ pre-existing recordings in all genres of music, and CrucialCustom.com is a virtual custom music house that creates on-demand music for clients by the artists who are signed to CrucialMusic.com.
Our customers for both services include big studios and streamers such as ABC, Amazon, AppleTV+, CBS, Disney+, Fox, HBO, Hulu, NBC, Netflix, Paramount, Showtime, Sony TV and Pictures, Warner Bros, and Walt Disney; ad agencies such as Ogilvy, Energy BBDO, FCB Chicago, and McCann; and independent music supervisors who work for the above and independent productions.
What’s compelling about our company is that our annual marketing budget is $0 for both services. When we launched CrucialMusic.com and CrucialCustom.com, we definitely spent money on PR, advertising, and SEO. However, after the initial launch expense, our artist roster and sync licensing income have grown strictly by word of mouth. Artists tell other artists worldwide about our company’s reputation for fair agreements, transparency, industry contacts, and on-time payment. Our clients have come to trust our quality of music, fair pricing, and hassle-free licensing, so they recommend us to show producers and their music supervisors; many have placed us on their preferred vendor lists.
What's your backstory and how did you come up with the idea?
My entire career has been - in one form or another - in the music business. I started broadcasting with a 2-year gig at a public radio station (WVXU in Cincinnati), spinning CDs and reading the news. Record labels would send the station CDs to play on-air. These mailings were followed up by calls from the radio promotion staff to encourage me to spin their latest releases. I quickly realized I could do that job, and so I moved to Nashville to finish my MBA at Belmont University and embed myself in the music business at a major record label. While in Nashville, I worked at BNA Records (country music label for Lorrie Morgan and John Anderson) in the publicity department and Gibson Guitar in the entertainment relations department. I soon realized that climbing the corporate ladder was not for me, so I quit and looked for jobs with smaller companies in the local newspaper want-ads; back then there was no monster.com.
I found a job in the paper with a record label called Honest Entertainment, owned by Jim and Deborah Long, handling their radio promotion, publicity, and eventually sales. This label represented Charlie Pride, Jack Jones, Toni Tennille, Pat Boone and a small jazz label from Scotland called Linn Records. Jim and Deborah eventually sold Honest Entertainment to Pat Boone, and I transitioned into a marketing/sales/production position with their other company called OneMusic, which was a production library.
Everything I know today is because of Jim Long and my time at OneMusic. I learned how to work with musicians to create music specifically written for usage in films, tv shows, and advertisements. And then, I learned how to license that music to the same clients I have today. Eventually, Jim and Deborah sold OneMusic to Universal Music and shut down the Nashville office. I moved to LA as the marketing and sync licensing director for their other company called Point Classics, a classical music catalog. During this time, my film, TV, and ad clients would ask for music other than classical for the productions they were working on. The O.C. (TV show) was a big hit and known for using independent artist’s work in their score, and because of their success, more and more shows were now using indie music. I thought to myself, supervisors are already coming to me for classical music, and now they are asking for indie music, why not offer indie music too, so I pitched the idea to Jim, and that’s how CrucialMusic came to be.
Fortunately, in 2006, the competitive space for indie music licensing was minimal. There was one big company called Pump Audio with millions of songs (high on volume but low on quality) and a handful of smaller companies lacking tech-savvy. CrucialMusic was one of the first companies to operate completely online from artist submissions to sync licensing and focus on quality in both product and service.
Jim Long invested the capital in launching CrucialMusic, however within 18 months, we were making some waves in the industry and found ourselves in a buyout offer from a larger publishing company. I was ready to go work for the new owner, and the deal was nearly inked when my parents stepped up with a bit of advice “You aren’t making that much money, but someone wants to buy you? You have something here. Don’t you think you should buy into the company instead?” I was floored that my parents saw the opportunity and thrilled that they would help me invest in the company, and so Jim politely declined the buy offer and sold me 50% of the company.
Describe the process of launching the business.
I was lucky enough to have a mentor who eventually became my business partner, Jim Long, who financed the launch of CrucialMusic.com. We didn’t have an unlimited budget, but we spent what was needed to launch and build a business; I wasn’t privy to the exact number, but it was a couple hundred thousand dollars.
Since I had designed and maintained the Point Classics website, as well as developed previous websites for Honest Entertainment and OneMusic, I knew what would be needed for the launch of our sync licensing service: we needed a dual-purpose website that would handle music submissions from artists (from submission to contract execution); and for our clients, it needed to be a searchable database where one could search, listen and download the songs that fit their music briefs.
We had an established relationship with our programmer in Nashville, so we hired him to program the back end of CrucialMusic.com. And for the front end, we hired a graphic designer based in LA and a marketing company called Lazdore to write all the site copy and develop our marketing campaign, which also included hiring a PR company to promote our services in the trades, blogs, and online magazines. Our attorney in Nashville drafted our artist contract, which would be incorporated into the site. As songs were accepted, contracts were automatically emailed to the artists to print, sign and return for execution.
Once the site was complete, we launched in May 2006 with 100 indie songs by artists I had worked with previously and 200 classical tracks from Point Classics. In the early days, we only received 5 submissions a week from artists, but as the years progressed, more and more artists submitted their music as word got out in the artist community. As of June 2021, we receive 30-50 submissions a day; we have over 16,000 songs in our catalog and are adding approximately 1800 songs a year. We reject nearly 90% of the music that is submitted to us, as we like to focus on the quality of music rather than quantity.
On the sales side, since I was already working the Point Classics catalog for synchronization, I had established relationships with the studios, networks, and music supervisors, so it was just a matter of getting on the phone and telling them about the new catalog available on CrucialMusic.com. For the most part, it was easy to add Crucial as a trusted vendor as Point Classics was already approved. From there, it was a matter of bird-dogging new clients and building/maintaining relationships the old-fashioned way, i.e., wining and dining and emailing weekly or monthly to see what they were working on and what they needed for specific scenes their projects.
Since launch, what has worked to attract and retain customers?
We are not your typical service business from customer acquisition and retention perspective. Quite simply, we don’t do SEO, email marketing, google ads, or social media as it’s just not needed; our sales increase with the strength of our relationships. Clients come back when you provide the exact song they are looking for at a reasonable cost. They come back when you provide custom music within 48 hours of receiving the brief, and you nail the job. They come back when you take responsibility for a problem and offer solutions that make everyone look good. Retaining customers requires excellence in customer service in our B2B service.
Stay focused, and keep going. Great ideas need follow-thru. It’s very easy to get sidetracked or give up because it’s really hard.
The best way to retain an artist is to make their money and pay them on time.
When we looked to expand our reach, I hired another salesperson to work the markets I didn’t have time for or didn’t want to work: preview trailers and advertising. Both markets require a lot of time, and multiple pitches for the same campaign, as there are too many decision-makers who can’t agree on one song to work for the spot. Each year I send my salesperson on three business trips to the various agency hubs (NYC, SF, Chicago, etc.) to build and strengthen his relationships with the agencies. For our LA clients, we both spend time with them, whether it’s chatting on the phone about personal stuff or meeting up for lunch, dinner, or cocktails; it’s all about getting to know the client better and building trust.
In terms of attracting artists, for the first six or eight years, we ran requests for certain styles of music in an “online forum” run by a local California company called Taxi. They listed our music request postings, screened the music that was being submitted, and then forwarded the high-quality music to us to reach out to the artist to sign. But after a while, the artists figured out they could submit directly to us and so our site submissions grew as a result. I have also spoken at many music conventions such as DIY by CD Baby, SXSW, and the Taxi Convention, which all focus on educating the artist about the music business in general and sync licensing specifically.
The best way to retain an artist is to make their money and pay them on time. However, we also believe that providing full transparency builds trust and ultimately keeps the artist from renewing contracts. In our Artist portal, the artist can see exactly where their music is being pitched, have access to their royalty reports and payment history, and view their contracts whenever they want.
How are you doing today, and what does the future look like?
Fortunately, the company has been profitable for many years, averaging a net profit margin between 30%-35% a year for the last few years. We have two revenue streams. One is the upfront money we receive for the sync licensing of the master and publishing for each recording. We split the sync money with the artist 50/50 which you could consider our cost-of-goods. The second revenue stream is called performance income royalties, and that is basically mailbox money. It is generated every time a TV show or film is aired on television or streamed on Netflix, Amazon, etc., around the world. In certain countries, you can also earn performance royalties when the film is released in a theater (this is not the case in the US). We are paid quarterly by the US performance rights societies who collect the fees from the broadcast networks and streaming companies. Each country around the world has performance societies that perform this same task. If you or your company are not a direct affiliate, the money from the foreign societies is paid to the US societies, and then they pay the writer and publisher. The performance income we receive is the publisher’s share, and the writer receives their share directly.
Over the years, our site’s features have really expanded from what we launched. We started with a simple site with artist submissions, a search engine, and playlist download capability. Then we added eContracts, encryption, pitch activity pages, online royalty reporting, QuickBooks importing, GDPR compliance and payment processing. We’ve redesigned the site twice now, and we are in the middle of programming a more intuitive royalty importing feature.
The current landscape for sync licensing is very competitive. The low barrier to entry has resulted in hundreds of companies that offer music for licensing at affordable rates. However, it’s difficult for a small catalog to increase market share, as it’s all based on the right song for the spot. Everyone has great music, so quality isn’t much of a differentiator. The only way to increase market share is to sign hundreds of thousands of songs so that you have something that could potentially land for every pitch you make. At this time, it’s not something that we plan to do.
I decided that the best way to increase revenue and profits was to self-administer our publishing in foreign territories. This means signing up directly with the foreign performing rights societies and registering our catalog in each country, so that the data is correct, which results in better tracking of performance income. We are now direct in seven European countries and have seen our publisher’s share of performance income increase substantially; 1H2021 is 50% above 1H2020. We may register directly with other countries, but it does require a lot of work, so that may entail another hire to handle that.
Through starting the business, have you learned anything particularly helpful or advantageous?
The biggest lesson I've learned is to stay focused on the core service we provide. Many opportunities have come our way over the years, most we’ve turned down, and some we’ve taken advantage of. The ones we passed on usually didn’t jive with the core service. Even the opportunities we took advantage of, sometimes fizzled. Nothing is certain, and you have to be able to try new things to see what will stick and what won’t.
The hardest times have always been related to copyright infringement issues. Artists say they own something and then they don’t; and then the rightful owner will find out, sometimes years later, and pursue restitution. Even though our contract has an indemnity clause, it always falls on our company to straighten out the problem and negotiate the settlement. All this has to be done while carefully managing our client relationships. The one thing I have learned from this is that as long as you handle it with grace and resolve the problem to everyone’s satisfaction, you will not lose a client. In fact, the client relationship is strengthened, because they know - when something does go wrong - they can trust you to handle it well.
An unexpected curveball for our company and the entire world was the pandemic. Since music licensing is dependent on film and television production we found ourselves without sales for 6 months with the economy shutting down in March 2020. Fortunately, the big studios had more to lose than we did, so I felt reassured that they would figure it out and get back to work quicker than others, and they did. They were the first to establish Covid protocols on sets, and production started back up in October 2020. We took advantage of the downtime by redesigning our website. What I learned from this is if my business can survive a global pandemic, it can survive anything.
What platform/tools do you use for your business?
Most of our website has been built from scratch. However, I do use some third-party services that help me manage other aspects of the business.
Salesforce is my CRM tool that helps me manage my contacts and the sales process. I was able to customize the system to help me track pitches, sales, invoicing, payment, and then export CSV files that can be uploaded into our website so I know who to pay and how much, without having to repeat data entry.
Quickbooks is my accounting software, and I can import all the payee and payment data from our website using QB WebConnector into Quickbooks, which eliminates errors.
Payment Rails is my payment processor and tax service. They have an API that connects with each Artist profile on CrucialMusic.com, where the artist can choose how they want to be paid (bank transfer or PayPal) and upload their tax form, which is encrypted at the highest level and makes it very easy for me to pay the artist using a few simple steps. I also use this system to file 1099s and 1042s with the IRS each year. Having artist financial and tax data housed with a third party also helps reduce our liability in case of a data breach.
What have been the most influential books, podcasts, or other resources?
Honestly, I’m not an avid reader or into podcasts. I mean I’ve been reading Shantaram for years, like 30 pages at a time, while I’m on flights. What inspires me is when I hear stories about other people in the music business such as Jimmy Iovine or Tina Turner. They just didn’t stop. They kept going no matter how many hurdles they encountered; because they believed in themselves, and they had the drive to succeed. I think self-confidence is one of the best assets an entrepreneur can have.
Advice for other entrepreneurs who want to get started or are just starting?
If you have an idea for a business, you need to research the hell out of it. No great idea lives in a vacuum. Odds are someone else has already thought of it. Once you identify the other players, research their strengths and weaknesses, which will help you solidify your angle, how can you make your business better than what’s already out there.
Another tip is to stay focused and keep going. Great ideas need follow-thru. It’s very easy to get sidetracked or give up because it’s really hard.
Only embark on the path of entrepreneurship if you are really passionate about the business and product you are selling. If you are not, I truly believe you will fail.
Are you looking to hire for certain positions right now?
I am not looking to hire anyone at this time.
Where can we go to learn more?
- Website
- CrucialCustom
- Twitter: @Crucial_Custom
If you have any questions or comments, drop a comment below!
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