Start-up record firm revising business plan

Editor’s Note: The Business Report is following Playground Records in its efforts to launch a non-profit enterprise. This is the second in the series. Please see Oct. 8, 1999, pg. 5A, or visit www.bcbr.com/oct0899/nonpro.htm.

BOULDER — Starting a business requires enormous patience, and often the entrepreneur must rewrite the business plan over and over to mesh with reality. Whit Faulconer’s reality is that he has no money and no deals in writing, yet he persists with his idea to create a company that will successfully sell alternative music CDs with profits going to educate underprivileged kids through the arts.

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Boulder’s Faulconer and his partner John Guy, based in Charleston, S.C., first talked with The Business Report about their start-up non-profit venture Playground Records in October. Faulconer was just starting a cross-country trip to try to sign up well-known musicians, such as Vince Gill and John Mellencamp, to record songs for the Playground label. The profits are to go directly to needy organizations in Playground’s registry of charities.

During his two-month fund-raising trip, Faulconer found it difficult to make the contacts he needed. But he persevered.

After being turned away from Vince Gill’s and other artist’s offices, his e-mail from Nashville said: “I told myself I would go to John Mellencamp’s home in Indiana and stand around in his driveway until I could leave info, try something, and hope to not get arrested. I just have a good feeling about him and I have come this far.” But instead he rethought his approach and decided to contact the University of Indiana, which receives support from Mellencamp.

They gave him a good lead. “I only get one swing with these guys, so I have to be sure what I’m asking before taking their time.”

Faulconer’s trip was positive overall, with exhilarating moments along the way. “I talked with so many people about what I’m doing, got tons of advice and a few leads,” he wrote from Virginia. “I’ve learned so much about people and charities and how to build my organization.”

For example, “At Ben & Jerry’s, I found someone who would head up the project to sell Playground CDs in all of their stores,” Faulconer says. “It’s so ideal, as this fits their corporate image of being socially responsible.”

“Distributing CDs through Ben & Jerry’s is a great opportunity for us,” maintains Playground’s John Guy. “They have a customer profile that we could use to choose what to record on the CDs. If we get the go-ahead from them, we’ll go for the artists that fit the customer profile.” An agreement with Ben & Jerry’s, however, has not materialized to date, and the recent announcement that Vermont-based premium ice cream maker is up for sale may further delay an agreement.

Last month, during Faulconer’s stay in Virginia, an attorney worked pro bono to help Playground get their 501 (c) 3 status, which enables them to start CD production with IRS legitimacy. Pat Read, executive director of Denver’s Colorado Association of Nonprofit Organizations, CANPO, says “now the real work begins.

“They have to write as careful a business plan as for-profit companies do. Most non-profits make the mistake of not thinking through their plan; how they will get money. The hardest thing is getting the first investors. Non-profits are asking people to invest in a dream, but investors want to know how long before they see results.”

As a result of a meeting in New York, Playground recently received an investment from a well-known philanthropist, Kathy Schwartz, to cover the $6,000 in travel expenses Faulconer accumulated.

“I’m interested in Playground because it helps children’s charities. What they’re doing has a wide appeal and a lot of potential, but starting out is difficult, so I gave them a boost,” Schwartz notes.

Additionally, as Read advised, Playground revised its business plan. Instead of going for big recording artists, “our avenue for music has changed,” Faulconer says. In mid-December, he’s returning to New York to approach Sessions at West 54th Street (an E-Townlike television show in New York) and Austin City Limits to produce a series called “Undiscovered.” “We’ll record the most talented unknown musicians in different cities, distribute the CDs through local franchises and on the Web, and send profits to our registry members.”

Joe Pezzillo, founder of Boulder-based Eclectic Radio, an international Web station, says Playground might have a good chance.

“Web stations are more flexible in the playlists than traditional stations. We play artists who are unknown, for example, and if it’s for a socially responsible cause, we’ll mention it. It’s easier to make it in a local market through Web distribution, although the whole distribution angle may be tough because of competition,” Pezzillo contends.

“Most CDs are sold through record chains and retailers like Wal-Mart. But now people can download music or buy CDs online. Playground can directly distribute through sites like MP3.com, which are leaders in digital distribution,” Pezzillo explains. Market Tracking International estimates that 3 million tracks are downloaded daily from digital distribution sites.

Mike Stowe, consultant for Broomfield-based Moonlight Over the Rockies, agrees. “CDs are certainly popular. But Playground might be able to get a product to market faster, with less overhead, by starting with digital music tracks that customers can download over the Internet – a growing business with the advent of music formats like MP3. And an Internet delivery channel might attract more investors.”

Playground Records is building an e-commerce Web site detailing its mission. Not only will consumers be able to purchase the CDs, the site will link to various Web radio stations and encourage corporate investment and donations.

What is Playground’s next step? Guy claims they’ll produce two CDs per quarter. “It’s not that expensive to press a disc.” If they sell the disc for $15, for instance, they can make $5 per disc after all the associated costs. If they sell 10,000, they could make $50,000 per release, or a 30 percent margin.

According to Pezzillo, “They have to do what they love to do. If they combine their passion and skills with socially responsible work, it’s a leg up.”