January 11, 2017

Could Music-Industry Tax Incentives Help Georgia Compete With Nashville?

Photo Credit: Austin Steele

David Barbe, director of UGA Music Business Program, says tax incentives could help his students stay in Georgia after graduating.

The Athens economy is “football, it’s music,” 40 Watt Club booker Velena Vego recently told a group of Georgia legislators. “That’s what it’s about.” But while the state channels hundreds of millions of dollars to the University of Georgia—and offers tax breaks to dozens of industries—it does next to nothing for the music scene that, along with the Bulldogs, put Athens on the map.

A joint House-Senate study committee—which includes Rep. Spencer Frye (D-Athens) and David Barbe, head of the UGA music business program—is looking to change that.

The committee took testimony from music-industry professionals last month prior to UGA’s Biennial Institute, a weekend-long seminar for newly elected lawmakers, and presented preliminary findings to legislators and other political insiders. Georgia has a rich musical heritage and produces thousands of talented professionals, committee members and professionals who offered testimony said, but too often they have to leave the state to make it in the business.

Growth and Potential

The music business program started with 22 students, but has now grown to include more than 500 students in 10 classes, according to Barbe, who’s also a noted producer and former member of ’90s alt-rockers Sugar. Some of them stay in Georgia, but others are forced to leave for New York, Los Angeles, Nashville or Austin, TX to work, he said.

“We’d like them to have more opportunity to build their careers here at home,” Barbe said.

The music industry employs 20,000 people in Georgia and has a $3.7 billion economic impact, according to Lisa Love, director of music marketing and development at the Georgia Department of Economic Development. But Love believes that’s just a song’s first riff—it’s fine by itself, but can grow into something bigger and better with a little work. The committee’s job, she said, is “to figure out how we can grow the music industry at a time when a lot of change is going on with digital technology.”

Georgia’s music industry pales in comparison to one nearby city alone—Nashville—where music is a $10 billion industry employing 56,000 people, according to Love. A $1 million grant recently helped convince Warner Bros. to bring 500 jobs there, and CBS Radio is bringing another 200, she said. “Their city gets it all day long, and they’ve aggressively invested in that identity as Nashville, the Music City,” she said.

Georgia's Edge

Georgia does have its advantages, though. Whereas Nashville is known solely for country, Georgia boasts what Michele Caplinger, director of the Atlanta chapter of The Recording Academy, which puts on the GRAMMYs, calls a “lush diversity” of artists in a variety of genres—Ma Rainey, Johnny Mercer, James Brown, Little Richard, Otis Redding, Ray Charles, the Allman Brothers, Widespread Panic, Usher, OutKast, Future, Janelle Monae and Sugarland, just to name a few. Not to mention Athens’ indie scene, still going strong almost 40 years after R.E.M. and the B-52s got their start. Love specifically mentioned Monsoon, which earned a good bit of exposure when it licensed a song for a Toyota commercial last year. “More and more, we’re seeing brands use music to connect with their customers,” she said.

Quality of life is a selling point, too, said R.E.M.’s longtime business manager, Bertis Downs. After the band signed to IRS records in 1981, they briefly considered moving to Los Angeles, but ultimately decided that they were more comfortable staying in Athens, Downs said. “It’s simple inertia,” he said. “They were here. They liked it here. They didn’t want to leave.” (Three of the four members still live in Athens at least part-time.) And Barbe said he knows music-industry professionals who’ve left New York or L.A. for smaller cities like Nashville because they’re cheaper and better places to raise a family.

Vego—who books shows for Atlanta’s Buckhead Theatre in addition to the 40 Watt and is married to Cracker and Camper Van Beethoven frontman David Lowery—is another industry veteran who put down roots in Athens. “It was just way cheaper to live out here than Atlanta at the time” when she started her career, she said. Now, “we could live anywhere we want. We have a home in Virginia. But everything is based here.”

Technology allows artists to live and work anywhere. It’s also changing the way musicians make a living—touring is now a more important source of income than record sales. “Live music is huge, and it continues to grow because people want experiences,” Love said.

That’s led to a flattening of the business. As Barbe put it, the industry has gone from having a few home-run hitters (major artists with multi-million-dollar recording budgets) to a bunch of singles hitters (who record albums in the five-figure range). Barbe is the go-to producer for the Drive-By Truckers, and they fall “smack dab in the middle,” he said. “These are middle-class small businesses, essentially,” he said.

The Business Side of Music

Downs explained to the committee all the mundane things that go into running a band like a business: booking the right venues, arranging travel, reserving hotels, setting up and breaking down stages, marketing and promotion, buying insurance, paying taxes, workers’ comp. “We tried to develop ourselves as a business, not just a band,” Downs said. Even though the band’s been broken up for years, someone still has to oversee reissues, sell merchandise and license music for films, TV shows and commercials.

Then there are all the people who aren’t musicians but benefit from the music industry nonetheless—manufacturers like Gretsch Guitars in Savannah, venues, hotels, bartenders, caterers, journalists, even masseuses for the band and the drivers who pick them up from the airport. “If the music industry is successful, a lot of people are successful,” she said. “That’s why it’s so important.”

In that respect, music is not so different from the film and television industries. A tax credit for movies and TV shows filmed in Georgia has vaulted the industry to third-largest in the U.S., behind California and New York. Georgia also certifies communities (including Athens) as “camera ready,” with one point of contact for producers looking for locations, and Love suggested a similar “music-ready community” designation.

But committee members caution that, because Hollywood might spend hundreds of millions of dollars on one blockbuster, the music industry is powered by thousands of much smaller concerts and recordings. “One thing that needs to be understood is the economies of scale for music and film are decidedly different,” Love said.

Ideas for Incentives

Still, tax incentives could work for music. Louisiana, for example, offers an 18 percent rebate for projects that spend more than $15,000, Love said. Other states with tax incentives for music include New York, Pennsylvania, Ohio, Indiana, Texas, Alabama, South Carolina, Tennessee and Virginia, according to Caplinger. “Our talent boosts their economies,” Caplinger said.

The tax break “might only be a few hundred dollars,” Barbe said, “but it shows we value them.”

Tennessee also has no state income tax, giving it an edge, especially for songwriters and others who own publishing rights. They rely on residuals and licensing fees for income, and every time one of their songs is played or recorded, they pay tax. Some committee members suggested they get an income-tax break to encourage them to live in Georgia.

“Once [music is] made here, we want to keep it here,” said the committee’s co-chairman, Rep. Matt Dollar (R-Atlanta), endorsing the income tax break.

Another idea is a “tour origination” tax incentive for artists to start tours in Georgia. Bands congregate in the first city on a tour for several weeks to rehearse and play warm-up shows, Vego said—often at smaller venues like the 40 Watt, which because of its history has drawn artists, like Kenny Chesney, who usually play to much larger crowds, she said. Bloodkin, of Montreal and the Truckers’ annual homecoming stint at the 40 Watt are other examples.

“They do a three-day run with a three-day rehearsal,” Vego said. “All the hotels are booked… They like to come and play these underplays, and do it during the holidays when the kids aren’t here.”

Spending more on marketing would help, too, said Love, who told the committee she has “no budget.” Her department worked with Oxford American, an influential literary magazine, on a special issue promoting Georgia music last year (which featured an essay by Barbe on Athens). An annual festival featuring Georgia artists—perhaps a revamped Georgia Music Hall of Fame induction ceremony—could also help cement the state’s musical heritage in the public mind, she said.

The committee has yet to issue a final report, leaving in doubt whether the legislature will take action this year. A previous House-only committee that met in 2013 merely recommended further study.

This time, though, the committee has a powerful proponent in co-chairman Sen. Jeff Mullis (R-Chickamauga), one of the most influential lawmakers under the Gold Dome. And Gov. Nathan Deal “very much wants to support the music industry,” Love said. “He’s very interested in this committee and its findings and recommendations.”