BMB 515 Module 6 Milestone Two Example

Revenue Diversification Strategy, 2026-2028

[Student Name]

Southern New Hampshire University

BMB 515: Music Business Structure and Strategies

Milestone Two

[Instructor Name]

[Date]

The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.

Revenue Diversification Strategy, 2026-2028

Introduction

Milestone One found three weaknesses in the company's business model: three streaming services supply 81 percent of streaming income, two artists produce 44 percent of total revenue and operating margins are about 5 percent. This milestone proposes a revenue strategy for 2026 through 2028 that addresses each weakness while keeping the company's strengths: ownership of masters and publishing, a strong reputation with artists and close relationships with music supervisors. Five initiatives are sized, costed and assessed for risk, and a target revenue mix for 2028 is set. Some initiatives deepen what the company already sells, while others reach buyers and rights it has not yet served, in keeping with the broader move from selling copies to managing access and rights (Wikström, 2020).

Initiative One: Licensing

The Module Five placement showed how much a single sync license can earn. Today, the company pitches songs informally, through the founders' relationships. A dedicated sync manager, whose salary and benefits would come to roughly $95,000 annually, would tag the catalog by mood, tempo, theme and instrumentation, maintain relationships with supervisors beyond the current forty and respond to briefs within a day. Industry experience suggests that consistent pitching to a well-tagged catalog raises placements substantially. The target is to grow licensing income from about $610,000 in 2025 to about $1.1 million by 2028, which would raise it from 9 to 15 percent of revenue.

Initiative Two: Direct to Fan

The company's online store sold to about 22,000 people in 2025. A membership program priced at $8 a month or $80 a year would offer early access to releases, a members-only vinyl pressing each quarter and recordings from the vault. If 5 percent of buyers joined, about 1,100 members would produce roughly $90,000 a year, and member vinyl and bundles would add more. The program also gives the company direct contact with fans, which reduces its dependence on platforms for reaching them. The main cost is staff time and manufacturing, estimated at $45,000 a year.

Initiative Three: Neighboring Rights

In the United States, digital radio services pay for performances of sound recordings through SoundExchange, and many other countries pay broadcast and public performance royalties for recordings through local collecting societies. The company registered only its most recent releases. A full audit and registration of all eligible masters, through a neighboring rights administrator taking about 15 percent, could add an estimated $120,000 a year at minimal cost. This initiative is low risk and should come first.

Initiative Four: Catalog Acquisition

Buying small catalogs of roots and Americana recordings from retiring independent labels or artists would add predictable streaming income outside the current roster. Two candidate catalogs generate about $175,000 a year together and are available for about $1.4 million, roughly eight times annual income. Financing could come from a catalog-backed loan using the company's own masters as collateral. Teece (2010) argues that business model innovation often comes from recombining existing resources, and here the company's administration capability would serve acquired catalogs at little extra cost.

Initiative Five: Lower-Cost Artist Development

The two leading artists will remain essential, but the company can reduce its dependence on them by signing two developing artists a year on smaller budgets: singles-first releases, lower advances and recording costs under $40,000 each. Hesmondhalgh (2021) notes that streaming income is highly concentrated, which means most developing artists will earn little, so the strategy depends on keeping the cost of each bet small.

Effects on Artists

Each initiative touches the artists differently, and the company's reputation with them is one of its key resources. More sync pitching benefits artists directly, since they receive half of master licensing income and most of the publishing income on their songs, but some artists object to their music in advertising, so the company will maintain a written list of each artist's restrictions and respect it. The membership program will need the artists' cooperation for vault releases and member pressings, and the company will pay the same royalty on these as on regular releases. Catalog acquisitions may worry current artists that the company is shifting attention from them, so the founders will explain that acquired catalogs require little staff time and that their income helps fund new releases.

The developing artist model carries the greatest risk to reputation. Lower budgets could be seen as a lesser commitment, so the company will offer developing artists shorter initial terms and a clear path to a full album deal if singles perform, rather than long contracts with small advances.

Sequencing and Capacity

An eleven-person company cannot start five initiatives in the same quarter. Neighboring rights registration requires mainly an outside administrator and data the company already holds, so it begins in early 2026. The sync manager should be hired in the first half of 2026, because licensing revenue takes six to twelve months to build. The membership program follows in late 2026, once the store platform supports subscriptions. Catalog acquisitions depend on financing and due diligence and are planned for 2027. The developing artist model starts with one signing in 2026 and a second in 2027, scaling up only if the first performs. This sequence spreads management attention and allows each initiative's early results to inform the next.

Summary, Risks and Priorities

Revenue initiatives, estimated 2028 effect, in thousands of dollars

If all five succeed, revenue would rise to about $7.8 million in 2028 at current core growth, and the share from the three main streaming services would fall from about 47 percent of total revenue to 41 percent, while the two leading artists' share would fall from 44 to about 35 percent.

Conclusion

The strategy addresses each weakness from Milestone One: neighboring rights and licensing use assets the company already owns, the membership program builds a direct relationship with fans, catalog purchases and developing artists reduce concentration. Milestone Three will model these initiatives over three years and test the risks.

References

Hesmondhalgh, D. (2021). Is music streaming bad for musicians? Problems of evidence and argument. New Media & Society, 23(12), 3593-3615. https://doi.org/10.1177/1461444820953541

Teece, D. J. (2010). Business models, business strategy and innovation. Long Range Planning, 43(2-3), 172-194. https://doi.org/10.1016/j.lrp.2009.07.003

Wikström, P. (2020). The music industry: Music in the cloud (3rd ed.). Polity Press.