Note 6/29: With Britain’s exit from the EU last week and the concern throughout Europe of short and long-term ramifications, see how AFEX can help you understand currency risk and how it applies to the music industry!
It is important to understand the risks involved when performing outside of your country. Currency risk is a very real thing that if handled properly can be less of a burden and in some cases be molded to your benefit. We asked AFEX, an international payment and risk management company a few questions about currency risk and how it applies to the music industry. Check out their answers.
Q. I’m booking a European tour this summer, and I’ll be in Tenerife, Split, and the UK. It’s very confusing because the venues won’t pay me in US Dollars. How can I be sure I’m being paid properly?
A. In today’s volatile currency markets, exchange rates can fluctuate dramatically in a matter of days (or even minutes). Even though you know your schedule in advance, it’s impossible to know what the exchange rates will be once you get there! There are a couple of different ways to hedge so you manage risk.
AFEX can help you to set your rates in the local currencies, based on the fees you usually command in USD. And to hedge your risk, you can book a Forward Contract for the euros and the pounds that locks in the exchange rate for future delivery.
Q. I have a label in Berlin that’s distributing my music in Europe, but they want to pay me in euros, not USD. The rate’s always different, so I’m never sure I’m getting the right amount.
A. The label can pay euros into your AFEX account as the royalty payments come due. While a bank would immediately exchange the incoming euros for US dollars, you can hold the euros at AFEX until you need to make a payment (for instance, to pay for your hotel in Tenerife).
Q. I have a label in Berlin that’s distributing my music in Europe, but they want to pay me in Euros, not USD. The rate’s always different so I’m never sure I’m getting the right amount.
A. The label can pay Euros into your AFEX account as the royalty payments come due. While a bank would immediately exchange the incoming Euros for US Dollars, you can hold the Euros in the account until the rate improves or against a future payment (for instance, to pay for your hotel in Tenerife). We’ll keep an eye on the rate for you so you can decide when to convert it.
Q. My music was licensed for a film produced by a Canadian production company. How do I ensure that I’m getting the right amount of royalties? When they wire money to my bank, it’s always a lot less than I’m expecting, and I wind up paying for my own money. The bank charges me an incoming wire fee and then a transaction fee.
A. The Canadian dollar has been declining for a while which makes it a bargain to shoot there. But having a payout over a long period of time can expose you to volatility. The Canadian production company can send CAD to your AFEX account and you can hold them until the rate improves.
A forward contract on a portion of the expected royalties would also help mitigate risk.
Q. I’m going to be in Australia, New Zealand and Goa this winter. I know the Australian dollar is cheap right now, so I’d like to buy some before I go. But I wind up paying ridiculous fees when I go to my bank or to a bureau de change—and I know it’s even worse at the airport.
A. AFEX is one of the largest independent holders of banknotes in the US—and we offer exceptional exchange rates with no additional transaction fees. We can even ship banknotes to most states across the US for a small fee.
Q. I’ll be hiring some local guys for my gigs in Asia. How will I know what to budget to pay them, and even more importantly, how do I pay them?
A. There are a couple of ways to do this—you can buy AUD, NZD and Indian rupees in advance of your trip and hold them in your AFEX account until you need to pay the crews. Or, if you can’t estimate in advance, you can use our secure on-line platform, AFEXDirect, to do the transactions and send the payments to their banks. All you’ll need is an AFEX Account and an internet connection. We’ll help you set up the beneficiaries—just email us the information, and you can make the payments as you go.
For more information regarding AFEX and their services: https://www.afex.com/unitedstates/index.php
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