The following MBW comment is from Ian Flanagan, the founder and CEO of Voly and its subsidiary Voly Music. Voly Music has introduced an integrated financial management software and payments platform that aims to simplify and streamline budgeting, accounting processes and reporting for artists, managers and directors.
The entire live touring business relies on traveling across multiple markets. Therefore, a lot revolves around currency.
A large part of what we do at Voly Music is managing foreign exchange (“FX”) payments for the clients we work with.
Here I will try to explain why this is much more important than it might sound at first.
Voly recently audited the tour cost of one of our music clients. This artist is an arena-level act with platinum records in multiple markets.
We paid particular attention to examining the exchange rates and fees that were processed on their behalf through a well-known major bank.
“I have anonymized and rounded the data. But it is real data based on a real tour that took place over a nine month period before Covid.”
I hope that breaking down what we found out about this artist’s touring finances will make every successful act out there – and the teams around them – take this part of their P&L that much more seriously.
For obvious reasons, I have anonymized and rounded the data. But it’s real data, based on a real tour that took place over a nine-month period before Covid.
The artist in question toured several markets during this period, including Europe, the US, the UK and Canada.
The total revenue generated was substantial, with the tour’s biggest expenses being production and travel.
But there were other big costs that many artists accepted as “a simple part of touring” – those foreign exchange costs paid to a big bank.
“During this artist’s tour, these exchange rate fees totaled no less than $650,000.”
Throughout the tour, these exchange rate fees amounted to no less than £500,000 (approximately $650,000 USD).
And here’s the headline: When the Voly Music team analyzed this data, we found that if this artist had used our platform along with our chosen banking partner, they would have saved £336,814 (around $440,000).
That’s almost more than the tour’s entire catering budget!
To clarify, instead of accepting the sometimes outrageous fees that big banks slap on tour costs, companies like Voly Music can take steps to ensure artists get a better deal every step of the way.
In our case, these steps include: (i) offering the option to buy currency at a wholesale rate; (ii) taking such measures as forward spreads when necessary; (iii) use of customized prepaid cards; and (iv) most importantly, the use of special technology to take the legwork and complexity out of the overall FX process.
“This artist could have saved over $400,000 on this tour just by hiring a company like Voly to handle his foreign exchange fees.”
Again, this artist could have saved over $400,000 on this tour by using an alternative company like Voly to improve their FX fees.
That’s an insane amount of money for artists to give to the big banks at a time when the music industry has been hit so hard by factors beyond their control.
Already, touring artists are finding it increasingly difficult to effectively budget for 2022. Fuel and energy costs are skyrocketing, and the general cost of living is increasing exponentially.
Recently, for example, it was revealed that British band Alt-J are likely to shell out an additional $30,000 to $40,000 on their latest US tour simply because of the “runaway” gas/petrol price hikes.
Fluctuating and unpredictable exchange rates make it even harder to plan ahead—and harder to make money.
Of course, a large part of the reason the big banks get away with siphoning off these vast sums of money from artists’ profits isn’t just because of the money—it’s because of the timing.
Voly Music didn’t start life in the music industry; Our business first found success in superyachting. There we learned how certain pressures – particularly on individuals – transcend specific areas of the company.
Superyacht captains carry out complex logistical operations, often involving hundreds of thousands of pounds/dollars. Every international voyage they embark on comes with numerous expenses to manage – not the least of which is fuel, food, equipment and mooring fees.
“Obviously, a big part of the reason the big banks get away with siphoning off these huge sums of money from artists’ profits isn’t just because of the money — it’s because of the timing.”
Often these fees have to be paid in multiple currencies and then reconciled for accountants and finally for the yacht owners.
It’s not that different from the live touring business when you think about it.
With so many things to do and so little time to get them done, those tasked with managing and balancing tour budgets can understandably choose the path of least resistance. That means important decisions like how to handle forex transactions take a bit of a backseat.
That’s why we’ve created a platform that does the heavy lifting for you. Because people don’t have time.
Those who manage tours are under immense pressure to juggle complex financial procedures while ensuring every penny is properly accounted for. It’s easy to see why something like a high street bank that charges excessive fees for foreign exchange transactions is easy to overlook.
But this reliance on big-name banks to process foreign exchange transactions can cost a fortune — and shockingly, eat away at an artist’s income.music business worldwide
https://www.musicbusinessworldwide.com/with-touring-costs-spiralling-artists-mustnt-dismiss-how-much-theyre-wasting-on-foreign-exchange-payments/ With touring costs skyrocketing, artists can’t dismiss how much they’re wasting on foreign exchange payments.