As a person that has worked in various recording studios, I have some insight that I can give on this topic.
The common reality is, when you’re just getting started in the music business you tend to not look at the bigger picture, especially if you’re running the studio alone.
You tend to be typically more concerned with picking the right microphone or figuring out how to soundproof your concrete wall than you would the financial aspect of the business.
Running a recording studio costs money to start up and operate, therefore you’ll eventually ask your self if your studio is a good investment or not.
So it begs the question, is a recording studio a good investment?
A recording studio can be a good investment if you’re particularly a business savvy person and you have a clear financial plan and clear financial goals that you wish to attain over time. This is not an industry I’d advise you to go in if you’re looking to turn a profit quick. The failure rate is quite high and there are no economies of scale in this business, which means that the costs tend to proportionately increase with the income you generate.
That is why it is essential to have a business model in place that breaks down the services and products you’re going to sell, the expenses, the taxes, the deductions and basically how much income has to be generated for you to turn a profit and not run at a loss.
Is owning a recording studio profitable?
In the perfect market, with the right kind of mind set and business acumen, recording studios can make reasonable profits yearly. The start-up costs can be quite overwhelming; however they can be potentially recovered over time.
One way of ensuring that you continue to be profitable is to offer as many services as you can and not only restricting your studio to music work.
You can diversify and offer services like podcasting, voice over services, radio ads and other services that can add to your portfolio.
Let me make on this clear, if you don’t have a lot of recording industry expertise, a business acumen or proper insight, then it is wise you form a joint venture with an individual or company that has expertise in these particular industries or better yet hire people with that particular skill set.
A recording studio can make over $40,000 or more per year for so long as it is run with business caution and a clear and concise profit motive.
Determining the profitability of any business venture will depend on these four main factors:
The higher the sales figure the more likely the financial results will basically post great results. The revenue can be one of the main drivers to profitability that is why any business owner will focus on figuring out the best way they can increase sales.
Any business with low expenses can properly manage its gross profit and increase profitability. The lower the business expenses (Cost of sales) the higher the gross profit you can reap (assuming that the sales revenue doesn’t take any dents).
The operating expenses are also called operating charges and they range from rent, office supplies, fines, depreciation and utilities. The higher the operating charges the lower the net profit that you’ll typically see at the end of any given period.
In most cases this is the number that really matters when comparing financial statements from a previous period and current period. This number tells the business owner whether the business is worthwhile or not.
Are recording studios dying?
Most people have been debating whether recording studios are even viable anymore.
The simple answer is; it depends on the market and the location of your recording studio.
For example if you’re in a town that has a huge music scene like LA or New York or Chicago, you can probably make a decent buck with your recording studio.
You won’t become a millionaire overnight but you can earn some extra cash if the music scene is huge in your town or city. Advancements in the home music studio space have negatively impacted the ordinary run of the mill big recording studios because they are easy to set up and almost anyone can start one up.
Most people can record themselves at home, therefore if you’re in a small town that doesn’t have an established or huge music scene, you’ll find it really difficult for people to come and purchase your services, especially those that particularly feel they can carry out the recording process by themselves.
Therefore you have to be mindful about where you would want to set up your recording studio and make sure that you set realistic dreams and expectations.
Are recording studios obsolete?
There are a lot of factors that have to be considered when determining whether or not recording studios are obsolete.
Only a handful of recording studios are able to operate fully and make a good profit especially if they are not in a location that can offer great clientele.
Due to the rise in inexpensive technology anybody that has interest in recording music can set up a studio and achieve their vision.
With that said, you have to keep in mind that setting up your own studio can be challenging especially if you don’t really know the technical aspects of music production like composing, writing, mixing, mastering or arranging well.
Therefore, recording professionals in professional recording studios will always be in demand, which makes recording studios not completely obsolete.
We can agree that competition is high within the industry (with the rise and the ease with which a person can start up a home studio) but not high enough to completely wipe out the recording studio business.
In conclusion, a recording studio set up right with the right motivation to drive sales can be a great investment.
Recording studios are not entirely obsolete, they are still viable. They only face a challenge because new technologies have made it easier for anyone to set up a studio, but the demand for professional recording studios is indeed still there.