Turning Music Into Money

Critical acclaim has yet to translate into commercial success for a charity’s for-profit record label

Shortly after the nonprofit Manchester Craftsmen’s Guild started its own for-profit record label, its

executive producer found himself strolling down the red carpet at the 1996 Grammy Awards in Madison Square Garden with the likes of Eric Clapton and Tony Bennett.

That night, the label’s first album, Count Basie Orchestra with the New York Voices: Live at Manchester Craftsmen’s Guild, won a Grammy.

“It was unbelievable,” says Marty Ashby, who had spent the previous decade building the Pittsburgh charity’s jazz program.

Subsequent releases garnered two more Grammy nods for the record label, including a win at the Latin Grammys in September.

The organization quickly learned, however, that such critical success doesn’t automatically translate into commercial success. “When we won the first Grammy, we didn’t know what the hell we were doing,” says Mr. Ashby. “We knew how to make great music. That part we’ve known since day one. But how to sell it and market it and work the industry and understand how retail works — we didn’t know that early on.”

Since then, Manchester Craftsmen’s Guild, a community arts organization, has worked hard to transform its record label from an interesting sideline into a full-fledged business that can earn money to support its jazz concerts and educational programs. “The goal is to have the music help support itself, so that we’re more in control of our own destiny, and we’re not only as good as our last grant,” says Mr. Ashby.

While the label has yet to turn a profit, the organization has spent the last several years learning more about the ins and outs of the recording industry, and has negotiated distribution partnerships and marketing ventures that have started to pay off.

Wal-Mart to Sell CD’s

Just last month, MCG Jazz persuaded Wal-Mart to start selling three of its sampler CD’s in more than 1,000 stores as part of a new jazz category in the stores’ music section.

In addition to the sales opportunity the deal offers MCG Jazz, Mr. Ashby believes the creation of a jazz category at Wal-Mart will benefit the jazz industry as a whole. “It’s not rocket science,” he says. “You get jazz in Wal-Mart in a meaningful way, you necessarily increase your opportunity for larger market share.”

MCG Jazz also has issued four international releases, with three more set for this summer, through a distribution deal with Telarc International, a large independent record company with a catalog of more than 600 classical, jazz, and blues recordings.

The label’s current business plan recently earned it a slot as one of 20 finalists — out of a pool of 551 applicants — in the second annual National Business Plan Competition for Nonprofit Organizations, sponsored by the Yale School of Management, the Goldman Sachs Foundation, and the Pew Charitable Trusts.

The contest, which concluded in New York this month, honors the best business ventures by nonprofit groups to supplement charitable contributions and other sources of revenue.

The record label is just one of several business ventures started by Manchester Craftsmen’s Guild and its sister organization, the Bidwell Training Center, which offers vocational training for adults. Together the two groups form the Manchester Bidwell Corporation.

The Manchester Bidwell Corporation oversees a 40,000-square-foot greenhouse where adults in its horticulture-training program learn about plant sciences and grow orchids for wholesale distribution. And the University of Pittsburgh Medical Center leases space in the charity’s office building.

The organization’s culinary-training program used to run a for-profit catering service, but the group pulled the plug on that venture in 2001 because it wasn’t bringing in enough money.

In all, business income accounts for 10 to 15 percent of Manchester Bidwell Corporation’s $7.5-million annual budget, a figure the organization hopes to increase to 40 percent in the next three to five years.

For MCG Jazz to start contributing to the organization’s bottom line, it will have to overcome the tough economics of the record business. Eight years after its first release, the charity’s record label has yet to turn a profit, in part because of the time it takes for an album to recoup its costs. MCG Jazz’s biggest seller to date — A Nancy Wilson Christmas, which was the fifth best-selling jazz record in 2001, according to Billboard Magazine — took two years to earn back expenses. For most jazz releases, says Mr. Ashby, it takes at least three years to break even.

“You pay all the upfront costs for the record and all the marketing and the artists’ fees and the mastering and the photos,” says Mr. Ashby. “And then eight months to nine months later, sometimes a year later, that’s when you see the first returns. You’ve got to have your cash flow together to make that work.”

Seeking $350,000

With that in mind, MCG Jazz uses special concert events to create titles with a long shelf life. For example, last year’s Spirit of the Horn was the first time the trombonist Slide Hampton had recorded with The World of Trombones, an ensemble of 12 trombone players, in more than 20 years.

With time and a deep-enough catalog, says Mr. Ashby, every CD sold after a title has covered its expenses is money that can be used to finance additional releases and support the overall jazz program.

MCG Jazz hopes to raise $350,000 for the venture so that it can move ahead with the release and marketing schedule it has laid out in its business plan.

At the end of its three-year plan, MCG Jazz expects to produce a profit of $175,000 a year, which would be used to support Manchester’s jazz program. The program has an annual budget of roughly $1.2-million.

Such a goal could be hard to meet, given the turbulence in the record industry. Companies have been consolidating, and although some record lablels say business is picking up in 2004, CD sales have been down over the previous four years. Still, MCG Jazz sees cause for optimism in the niche it is carving out for itself.

“Right now is the perfect time, because there has been such change in the record industry,” says Renée J. Govanucci, associate producer at MCG Jazz. “The major record labels have either eliminated or reduced their jazz divisions, and so the door is wide open for a smaller independent to come in and fill the gap that the majors have left behind.”

Even so, Mr. Ashby says the business has taught him to be conservative in his projections.

“I now know that nothing is a given,” he says. “I don’t care if you’re a major label or a little independent like MCG Jazz. There’s nothing that’s a given when it comes to the publicity side, consumer response, what the reviewers say, and whether or not the radio jocks around the country will play your record. I’d like to say there’s a rhyme or reason, but there isn’t.”

That the Manchester Craftsmen’s Guild is in the jazz business at all is something of a fluke.

After rioting swept through Pittsburgh in 1968, Bill Strickland founded the organization to offer after-school arts courses in ceramics and other visual arts as a way to reach youth in the troubled neighborhood in which he grew up. A few years later, he was asked to take over the Bidwell Training Center, an adult vocational-training organization also in the Manchester neighborhood.

When a capital campaign to raise money for a new building to house the two organizations in the same location brought in more money than expected, Mr. Strickland decided to include a 350-seat jazz concert hall, largely because of his own love of the music.

“I always wanted to hear jazz in a quiet, dignified setting,” says Mr. Strickland.

The hall was built. But after its official opening, the stage stood dark for six months, until Mr. Ashby was hired.

A jazz guitarist in his own right, Mr. Ashby had experience producing music festivals and at the time was running the Pittsburgh Symphony’s telemarketing program. He jumped at the chance to start Manchester’s jazz program, and took a 60-percent pay cut to do it.

Tapping his contacts in the jazz world, as well as those of his brother, Jay, a trombonist, Mr. Ashby was soon booking legends like Dizzy Gillespie, Max Roach, Billy Taylor, and Carmen McCrae. From 1992 until 1995, National Public Radio carried a syndicated series, “Jazz at the Manchester Craftsmen’s Guild,” which was broadcast on more than 120 stations.

Manchester had been recording performances from its opening day, and Mr. Strickland says he’d always hoped to be able to share the music with a larger audience some day by releasing compact discs. But the catalyst for the record label ended up coming from an unlikely source.

Mr. Strickland says he was touring a plant owned by the Bayer Corporation, a science and technology company in Pittsburgh and one of his organization’s corporate donors, when he happened to notice a machine in the corner pressing out wafers.

It turned out that Bayer held the patent for the plastic used to make compact discs. “Hmmm, you’ve got the CD’s,” Mr. Strickland recalls saying that day. “We’ve got the music. There’s got to be a deal here.”

There was. For the first three MCG Jazz releases, Bayer supplied the plastic, and brought in Sony Disc Manufacturing, which agreed to press the CD’s free, and International Packaging Corporation, which donated the jewel cases and packaging. Meanwhile, Mellon Financial Corporation, a longtime supporter of the jazz series, made a grant and donated the artwork and printing for the first three CD’s.

Some of the artists who record albums with MCG Jazz still donate their services — either fully or partially. But after those first three CD’s, the label has been on its own for the cost of materials.

Lessons for Charities

MCG Jazz’s successes and struggles provide important lessons for charities that want to start businesses, says J. Gregory Dees, faculty director of the Center for the Advancement of Social Entrepreneurship at Duke University. He has worked with Mr. Strickland on several training programs to teach charity leaders how to start commercial ventures.

Most important, he says, is to recognize how hard it has been to make a go of the label, even eight years after winning its first Grammy.

“A good product alone is not enough,” says Mr. Dees. “Anyone starting a small business with the aspiration of getting their product in mainstream stores faces some enormous hurdles. You’re competing against other major players that have very strong relationships with these outlets, and aren’t usually very welcoming to smaller, new parties getting shelf space.”

MCG Jazz’s efforts to try to strengthen its business operations have triggered some changes at the charity’s jazz program. One example: The organization has started to select in advance which concerts it plans to release on CD, a move that can affect negotiations with artists, the pieces they choose to play, and even the way the organization records the concert, says Mr. Ashby. Made ahead of time, those decisions improve the quality of the raw recordings and save money when it comes time to produce a record.

But Mr. Ashby is on guard that commercial considerations don’t prevail at the expense of the music. The tension, he says, between potential profit and creative integrity plays out every day when he and other producers are in the studio. Should they take out a solo so a track will be a radio-friendly four minutes, or does the tenor of the piece demand that it stay?

“What we try to do is be sensitive to what will help make it a success within the confines of the existing industry — radio, records, and media — and still be true to the creative spirit of the artists,” says Mr. Ashby.

It is a balance that MCG Jazz struggles to maintain. But says Mr. Ashby: “In the long run, the music is what’s going to get us home.”