Creative industries face ‘mixed’ outlook for year ahead
With the new financial year expected to bring both opportunities and challenges for creative industries, accountants can play a valuable role with financial management, says a specialist accounting firm.
The rising cost of living will be one of the biggest threats to businesses operating in the creative industries over the next 12 months, according to specialist accounting firm Darkwave.
The firm, which specialises in the music, entertainment, TV and film, and performance and arts industries said while sales are still strong for much of the industry, in some cases difficult decisions are having to be made creators and businesses.
“For artists that are creating content online that’s more subscription based, that’s definitely not going away but by the same token, people are also cautious of making sure there’s enough interest in shows before they go ahead,” said Darkwave director Meredith Fannin.
Ms Fannin said evaluating the level of interest in events is an important element in the work the firm does with its clients in planning tour budgets or performance budgets.
“We might be working with producers, artists or managers depending on whether it’s a theatrical show or music group and we’ll look at whether there’s enough interest to go forward, knowing that they might make a loss,” she said.
“In some cases they might be okay with breaking even if they’re promoting a new album for example and they have income coming in from other areas. At other times if it’s not looking great and they don’t have any funding coming through from regional touring grants or other areas such as tour support from record labels and distributors then sometimes they’ll decide it’s easier to cancel.”
The other big threat to the industry is advancements lies in artificial intelligence (AI) and how it’s impacting content creation.
“[There’s some concern] that some businesses may turn to AI to write scripts or write a song,” said Ms Fannin.
“However, I think a lot of the reason why people listen to music and go to shows is that it has that personal element which AI can’t reproduce. So from that perspective I think they’ll be fine. They may even be able to embrace the changes in technology in their favour to a certain extent as well.”
How accounting firms can provide value to the creative industries
Accountants working with creators or businesses within the creative industries can provide a lot of value by helping them with cash flow planning, creating detailed budgets, general financial management and grant applications, according to Ms Fannin.
“One of the main things we do is a lot of cash flow management. For example, how are you going to fund your tour, how are you going to fund your next recording, your merchandise, props and costumes, advertising and promotion? All of these advancing costs from a tour before you actually generate any income from those avenues.” she stated.
“There’s a lot of cash flow management around that and that essentially involves working with the artist’s team or the artist directly to work out detailed budgets and determining what the costs are likely to be and the timing of when payments are going to be.”
Accountants can also provide a useful role in helping clients lodge grant applications, grant acquittals and assisting them with the taxation aspects.
Ms Fannin said while grants are incredibly helpful, the firm usually advises clients to avoid relying on them as their sole income.
“You want it to be in addition to generating income so that it boosts that income up to the next level,” she said.
“Grants are great at giving creators certainty that they’re not going to actually lose money on doing something so they can be a great help, particularly for touring artists and independent labels and certainly in the film industry. There are a lot of grants available through development funding and production funding through Screen Australia.”
For grants, income tax is often spread over the life of the grant depending on what the terms of it are, said Ms Fannin.
“That’s the case for contracts as well, it depends on what has to be delivered for that advance money,” she said.
Managing royalties is another area where accountants can provide a lot of value.
“With royalties, a lot of it is to do with the timing of those payments and when they’re going to come through. If they’re getting an advance, for example, what that means in terms of how long that income has to last before they can an either get another advance or what the likelihood is of them recouping within a certain period of time,” said Ms Fannin.
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