A music studio can go bankrupt if it does not have an adequate engineer. The engineer is the most important employee at any studio, and an unreliable or unqualified person in this position can cause great financial harm to a studio.
Studios need to plan for unexpected expenses, including repairs to recording and mixing equipment, microphones, amplifiers, updates to software or new computer systems. Studios that do not prepare for these expenses can often go bankrupt due to a lack of liquidity.
Studios depend on a steady flow of both commercial and private customers to survive. Studios that focus too closely on recording ads and soundtracks, or just bands or musicians, can go bankrupt if the demand in one of these markets subsides.
Studios may go bankrupt due to a larger change in the economic climate, such as the recession of 2008 to 2009, which slowed demand for all music-related products and services.
A studio may close due to there being too many studios in a given market; therefore, there is more supply and not enough demand. In this case, studios with good marketing tools, competitive prices and solid management usually survive.