Front Row Entertainment
Cam Mosley and Anna Newton met during their freshman year of college as they were standing in line to buy tickets to a concert. Over the next several hours, the two shared various aspects of their lives. Cam, whose father was an executive at a major record label, was raised in New York. Some of his favorite memories were meeting popular musical artists—from the Rolling Stones to the Black Eyed Peas—as he accompanied his father on business trips. Anna, on the other hand, was born and raised in a small, rural town in southern Georgia. Her fondest childhood memories involved singing with her family, who often performed at county fairs and other small events. Even though they had different backgrounds, they felt an instant bond through their shared passion for music. Over the course of the next couple of years, this friendship strengthened as they attended numerous concerts and other events together. While on a road trip to see a new band during their senior year, Cam and Anna started discussing their future career plans. Both had an entrepreneurial spirit and were seeking a way to combine their majors in business with their passion for music. Cam had recently overheard his father discussing how many artists were unhappy with the current concert promoters. Anna had heard similar complaints from her cousin, whose band recently had their first top 25 hit. When Cam suggested that he and Anna form a concert promotion business, they both knew they had found the perfect careers. Concert promoters sign artists, usually through the artists’ agents, to contracts in which the promoter is responsible for organizing live concert tours. Typically, this includes booking the venue, pricing the tour, advertising the tour, and negotiating other services from local vendors. In general, the barriers to entry in the concert promotion industry are relatively low, with one of the more important items being forming a relationship with the various artists. Through their industry contacts (Cam’s father, Anna’s cousin), they felt that they could develop a client list relatively easily. A second major barrier would be to obtain the up-front cash necessary to promote the tour properly. Since their friendship had started many years ago as they were trying to get front row seats, they decided to name their business Front Row Entertainment. With their first big decision made, it was time to get to work.
Required:
1. Discuss some of the typical business activities (financing, investing, and operating) that a business like Front Row Entertainment is likely to have. (Hint: You may want to perform an Internet search for concert promoters to obtain a better understanding of the industry.) Be sure to list some of the specific account names for assets, liabilities, stockholders’ equity, revenues, and expenses that may arise from these activities.
2. Explain the advantages and disadvantages of the forms of business organization that Cam and Anna might choose for Front Row Entertainment. Which form would you recommend?
3. Cam and Anna will need to prepare financial statements to report company performance. What type of information does each financial statement provide? Be sure to describe the insights that each financial statement provides to users.