Some bankers have a song in their hearts and pep in their step.
They work at financial institutions that specialize in the music industry, with clients ranging from artists and bands to firms that handle concert lighting and studio sounds. It can be a profitable and at times glamorous business, particularly for banks that are eager to diversify and pad profit by focusing on professional industries and fee-generating operations.
Like many musical accompaniments, it can also be a complex business. An ear for music helps, but bankers also need extensive expertise in areas such as royalties and copyrights. At the same time, connections are critical to developing a list of clients.
“You can’t get into this business just because you like music and going to concerts,” said Ashleigh Overly, managing director of sports and entertainment at SunTrust Banks in Atlanta.
“There’s a lot of hours you have to dedicate,” Overly said. “But once you get into the business and you’re working with clients, you get to see someone who started off as a songwriter then they get a recording deal. All of a sudden they’re out on tour. It’s amazing to see them achieve their dream.”
Music is a vibrant part of the economy in several cities, where individuals can make a decent living. In Los Angeles, pay for a music industry job was 67% higher than the median U.S. job in 2012, based on the most recent data from EMSI. New York’s musicians earn 37% more, while the upshot is 12% in Nashville.
A need exists for specialized services. Music executives, artists and songwriters often require wealth management services, mortgages or personal credit cards. Businesses borrow to buy equipment or real estate, purchase a catalog of songs or organize a music festival.
Few lenders have meaningful scale in the music industry. They include SunTrust, City National and Pinnacle Financial Partners. Pinnacle gained heft last year when it bought Avenue Financial Holdings, where the country music star Kix Brooks and music executives Joe Galante and Ken Robold were founding directors.
Nonbank lenders, such as Lyric Financial, also provide financing.
Other banks are looking for their big break in the business.
First Tennessee Bank, a unit of First Horizon National in Memphis, Tenn., formed a music industry group last year after sensing a chance “to create a business that has nice returns,” said Andrew Kintz, an executive vice president in charge of the Nashville-based division.
“We do it for personal and business reasons,” said Kintz, who had been the managing director of SunTrust’s entertainment and sports division. “It is highly rewarding work and has a lot of purpose. … You’re helping to facilitate the creation of music.”
There is still room for midsize banks to compete, said John Frankenheimer, chairman emeritus at Loeb & Loeb and chair of the law firm’s music industry business.
“We all like to talk about the $100 million deals but there [is a lot of business] in the $5 million to $10 million range,” Frankenheimer said. “It isn’t just transactional work. It is the ongoing fundamental banking relationship you forge with the client. It is a great relationship for the bank.”
There are a number of reasons to consider the music industry.
For starters, the business can be extremely profitable when managed properly. Look no further than Nashville, which is booming partly due to the music industry and the absence of a state income tax.
Pinnacle’s music-related credits earn 100 basis points more, on average, than traditional commercial loans, said Andy Moats, the company’s director of music and entertainment.
Musicians also tend to be sticky relationships for the bankers who discovered them.
“We work hard to develop relationships with a songwriter or performing artist early in their careers, before they have attained success,” said Bryan Bolton, who works in First Tennessee’s music industry group. “There’s so much loyalty from an artist to the first bank who believes in them and their music. Once they attain success, they ask their business manager to remain with their first banker.”
“Everyone is chasing real estate loans,” said Tom Hall, president and CEO of the consulting firm Resurgent Performance. “I think good banks will look at areas like the music industry and think about ways to get into it and garner market share.”
Courting musicians can also be a lot of fun.
Bankers attend parties to network and to celebrate clients’ successes. Attending concerts and other industry events is also a necessity to discover new talent and future clients.
“Everyone is always looking for new artists,” Moats said. “We’re at music showcases and if we hear something we like, then we invest our time in them. That may mean a small checking account but it can be very high service.”
Many of the bankers also have interesting backgrounds and contacts.
Moats, who started playing drums when he was 10, is friends with the drummer for the 1980s heavy metal band Cinderella. He has joined the group on tour.
Bolton initially moved to Nashville to pursue a career as a singer/songwriter.
To be sure, risks loom for banks operating in the music industry, which is in a state of transition as streaming services erode record sales and reshape the revenue model for artists and labels. Touring, often a big money maker for artists, also exposes clients who lack the proper insurance to cover cancellations.
The Fyre Festival, billed as a luxury music festival in the Bahamas, received negative press after it was canceled at the last minute. And there were terrorist attacks at overseas concerts by Ariana Grande and the Eagles of Death Metal.
Legal know-how is required when dealing with copyrights, which often serve as collateral. Cash flows can be uneven based on an artist’s touring schedule or recording output.
“The music industry is very specialized,” said Kamal Moo, who runs his own entertainment law firm in Los Angeles. “It has its own quirks. Half of what I do is explain to my clients where their money is coming from. It is not necessarily intuitive.”
A final challenge is the high-touch nature of banking musicians. An artist touring in Europe, for instance, might call his or her bank in the wee hours of the morning if an issue emerges with a credit card.
“You don’t want to just look at the sizzle,” said Derek Crownover, a lawyer at Dickinson Wright who has helped banks navigate music industry pitfalls. “You need to look at the meat, too.”