The Tennessean (June 27th 2003)

Savvy musical artists keep revenue flowing

Early in his career, before he hit No. 1 with Austin and The Baby, country singer Blake Shelton had a critical decision to make.

A merchandising company had offered him $35,000 for the right to license his name, a then-princely sum that tempted Shelton to sign on the spot.

"Heck, $35,000 might as well have been a million dollars to me back then," he recalled.

But then Shelton remembered reading that Alan Jackson, an artist he admires, had held on to his merchandising early in his own career. He turned the offer down.

"Now we probably make $35,000 on merchandise every few weeks," the Warner Bros. recording artist said. "It's scary to think I would have done that."

The 27-year-old has heard stories like how a young Willie Nelson practically gave away some of his early songs - songs that ended up being worth thousands of times more than the $50 or $150 he got for them.

Financial naivet among creative people is almost a clich . But a new generation of artists is taking the examples of both Nelson and Jackson and learning to maximize revenue streams such as publishing royalties, merchandise sales, touring revenue and sponsorships that can provide them with financial security when their stars fade.

"The newer breed of artist has heard so many horror stories. We're smarter now," said Shelton, who also has a sponsorship deal with Wrangler Western Wear and gets songwriting royalties.

Savvy artists are mindful of fickle public tastes, the glut of instant "stars" produced by reality TV and the shortening shelf life of celebrity.

"It used to be if you had two or three hits you were pretty much guaranteed a career. Now you could have three hits and never be heard from again," said artist manager John Dorris Sr.

"There are very few George Strait and Alabama stories anymore," he said, referring to acts who make hits year after year. "It's a different day, and you have to do the best you can while you can."

A record deal has never guaranteed financial solvency, and it's even less true today. Labels need to recoup their costs before artists see royalties, and that only happens for about one out of every 10 artists they sign.

The cost of breaking an act through marketing and promotion has risen greatly, and with so much riding on one record, labels spend heavily on top-name producers and musicians, an expense that offsets cheaper production costs, entertainment attorney Duff Berschback said.

When counseling new artists on contracts, he advises them to hold on to alternate revenue streams but warns against insisting on too much control.

"You want to hang on to the most lucrative apples in your basket, but there's an opportunity cost," he said. "Your music might never be heard if you don't assign some of your rights to someone who can exploit them better. You have to balance the financial vs. the career risks."

Dorris and Berschback also advise artists to refrain from spending money before it's counted. Shelton co-wrote his Top 15 hit All Over Me, which gave him his first big check for publishing royalties. But he never saw the money. It went straight to the note on his 500-acre Hickman County farm.

"It would be too easy to say, 'Here's $30,000 - let's go buy some four-wheelers,' " Shelton said. "I hope I wouldn't do that, but I didn't want to give myself the opportunity."

The land was Shelton's first big investment, and he pays a mortgage to maximize tax breaks. It's also where he indulges his pastimes: hunting and fishing. This year he treated himself to a bulldozer. Last year's splurge was a tractor.

"Land is my passion. It's the one thing I've always felt comfortable buying. At the worst, one day you'll get back what you put into it."

Curb Records artist Steve Holy says peace of mind is knowing he owns his home free and clear. After the single Good Morning Beautiful hit No. 1, he paid cash for a house that now provides Holy with rental income while he tours. He's building a 4,600-square-foot dream home near his family in Dallas - again without a mortgage.

"I've saved every penny I could from concerts, merchandise, every T-shirt, everything I could to pay cash for it," he said. "If things don't go well it wouldn't take much for me to live. I'm debt-free."

Holy's financial conservatism stems from growing up the youngest of eight and working in the family's foundation business from an early age.

"The bottom line from growing up is: Save your money. Whatever you spend on, make sure you spend wisely. Let your money make money."

Role models might be Eddy Arnold, who invested in numerous properties and businesses around Nashville from the beginning of his Hall of Fame career, and Aaron Tippin, who got his first record deal in 1990 and put his signing bonus in the bank. The "shade-tree mechanic" kept costs down by fixing old vans and trucks instead of buying lavish tour buses.

"I made a promise - no debt. I never borrowed any money. That's what's allowed me to stay in the business," he said.

Tippin also bought land in DeKalb County, the value of which has gone up since a four-lane highway opened, and he owns businesses including a gun and convenience shop and a self-service filling station at the local airport.

"It just sits out there and sells gas by itself. It's very profitable," Tippin said.

The worst mistake an artist can make is buying on credit before he even has a hit record, he said.

"It's tough in that moment when things are going well and you want to keep feeling that feeling that drove you to Nashville. But if you don't back up and take a look at what it is, which is a business, you won't be around too long."

Shelton is saving for the day his chart popularity runs its course - six or seven years, he guesses.

"You're not going to be cool forever. You're not even going to be cool for very long," he said.

"I just want to have something to show for it."