Tennessee and Nashville are both facing significant budget deficits for the fiscal year that began July 1. At press time, the State Assembly was wrangling over how to address an estimated $300 million shortfall in state revenues.
Most representatives and senators have resisted Governor Don Sundquist's call for a state income tax, and most pollsters agree that voters won't go for it, either, which points toward other new taxes, mainly on business. The Senate's plan gives consideration to an entire range of new taxes on services, including recording services and motion picture production.
At a time when studio rates in Nashville are under extreme downward pressure, the possibility of an 8.25% sales tax on studio time could be crushing to some. Under existing state law, studios charge sales tax on goods sold, such as tape and CD-Rs. But those sales are a tiny fraction of overall studio revenues; the vast majority of revenues comes from selling studio time. If a tax is imposed on that service, studio owners, like other business owners, would be faced with the choice of either passing the tax on, which effectively raises rates, or absorbing the tax themselves, which would be difficult considering the overhead burdens many of them already carry. Applying the tax to a typical $1,200 daily rate increases the cost nearly $100.
An assessment of the situation was offered by Lou Gonzales, who owns Quad Recording, which has locations in both New York City-where studios are required to collect sales tax on studio time sold-and Nashville. "In New York, the major record labels can provide a resale certificate, which defers the taxes," Gonzales says. "So studios that are dealing with large businesses don't have [sales] tax as an issue. It's the smaller studios, which are dealing with individual bands and producers, that have to pay the tax. I can see the situation developing the same way in Nashville, and that's going to push studios that rely on independent clients closer to the edge."
Gonzales also agreed that a particular strategy could emerge in which studio owners with deeper financial resources could absorb the tax for a period of time by discounting the rate an equal amount-something that Gonzales himself says he might consider. Studio owners without the financial ability to absorb the tax would be, perceptually at least, seen as raising studio rates, a potential death knell for some in this competitive environment.
Denise Lawrence in the office of state Sen. Joe Haynes (D-Davidson) was not certain how comprehensive any services tax measure would be. However, putting such a tax on the table means it becomes a possibility at some point down the line, if not for the immediate future.
Emerald Recording has a new CEo, and he may be the model for the new Nashville. Just as Capitol Records brought in a New York marketing guru in Pat Quigley to run its Nashville division, Emerald has hired ex-New York and L.A. advertising and marketing veteran Joe Romeo to be the CEo of Emerald Entertainment, which encompasses audio recording, audio post, broadcast and a new artist sponsorship division. Joe Romeo-even his name has that My Cousin Vinny, big-city hot shot hitting Twang Town ring to it-wrote jingles for Madison Avenue, including the national campaigns for Levi's 501 Blues and Skittles "Tastes Like a Rainbow." He was named Ad Man of the Year by Advertising Age in 1988. Romeo also ran a music production house, Harmony Holdings, in L.A. and says he has worked around recording studios since he was 11.
Like a lot of other Los Angelenos in the mid-1990s, he was seduced by Nashville's lifestyle and the boom in country music. But even as country falls off the charts, Romeo remains a big fan and a booster of Nashville as a recording center. "We really do have the best musicians and producers in the world here," he says. But he also believes that the old model of studio ownership is over at the upper levels. "Engineers are fabulous people, but you have to do more than run a console these days. You have to market it, as well. A business is only as good as it's run, not as good as its technology."
Romeo sees the diversification of Emerald from its core business of music recording into areas such as artist sponsorship and tour booking as necessary to compete in a broader entertainment environment. "[The studio] now has to make the artist the focal point," he says. "You can't just sell one service and expect to build a relationship long-term. The studio business of the future is based on making sure the artist is successful in everything they do from the moment they book their first day in your studio."
Romeo has even coined a new marketing catch phrase to reflect Emerald's newfound comprehensive approach to the music industry: the "Emerald Advantage." And if that sounds a little like Madison Avenue, Romeo counters, "Hey, what do you expect from the guy who brought you 'Nothing Beats a Bud?'"
The continuing saga of Milan Bogdan: The Nashville studio marketing whiz has moved on yet again, taking the position of general manager at East Iris Studios. Normally, the movements of studio managers are primarily of local interest. But Bogdan has been integral to the workings of several of the city's major facilities, and he's brought significant changes to all of them during critical times in Nashville's evolution, starting with his co-ownership of Masterfonics and his seven-year stint as general manager of Emerald Studios. He left Emerald in December of last year after implementing some unique business strategies, including post-production and broadcast divisions. More recently, Bogdan did consulting work for the newly refurbished Quad Recording. As of June 5, he took the reins at East Iris, purchased earlier this year by ocean Way/Nashville co-owner Gary Belz.
Bogdan's take on that facility is that it has an inherent imbalance. Its major-league tracking room is fitted with an SSL 9000 J console, and its B room holds a Pro Tools system and a Mackie mixer. "What needs to happen here is to expand the B room into a higher-end overdub studio," he explains. "That way, an entire project can be done here, with tracking, overdubbing and mixing all accommodated within the same facility. It will keep more of the work within the studio."
Bogdan is currently surveying the facility's major clients regarding what type of console they'd like to see in the B studio. "We want to capitalize on the fact that this studio offers clients a lot of privacy," says Bogdan. "With a higher-end second studio, they don't have to leave to do overdubs."