Recently I was on a panel at Northwestern Law School with another lawyer, a musician (who happens to ba lawyer too) and an ASCAP representative. Our topic was the effect that cloud or subscription based music services will have on performers and songwriters. While I definitely had my own opinions on the topic, it was ear/eye opening to hear from my fellow panelists.
Most music lovers seem to have their own private way to listen and enjoy their music. While there is a lot of overlap amongst listeners (iPods, satellite radio, pandora, car radios, home stereos) everyone has their own unique method to purchase, stream, listen and (now most importantly )travel with their collection. In the past we would break out our record collection and play records in the family room. Then came the cassette and the walkman. Our record collections became somewhat mobile and we could grab our favorite tapes and walk around or drive while listening to our collection of music. Technology allowed for better sounding recordings to travel along with us with the invention of the CD. However, like one of my panel compatriots aptly pointed out, a music fan was a prisoner to his cd collection; still rather bulky and highly scratchable, you would have to lug a box/book of cds with you on each road trip and hope that they did not fall between the seats or get scratched on the dashboard.
Enter the MP3. A computer file that is quickly dowloaded and containes cd quality sound. The digital album revolutionized the way we consume music. As with most revolutions, the infrastructure that existed prior to the revolution (the big music label system) fell. Brilliant entrepreneurs and crafty opportunists from Apple to Napster entered the fray and came out making billions of dollars from the shift. For the everyday consumer of music, it became easier to listen to music wherever you wanted to do so. Your entire record collection can now fit into the palm of your hand, be programmed to your car’s stereo or be shared with people in your office with a click of a button.
Now that the digital age of music is over a decade old, there is yet another shift occurring. Technology again is making it easier for people to listen to their music collection regardless of where they are. The clouds have come rolling in.
Pandora has already helped put the cloud on the map with approximately 80 million users (1 new user every second per the www.digitalmusicnews.com). But services such as Spotify, Sony’s Qriocity and Google’s delayed cloud service will take it one step further. While Pandora allows you to listen to music based on bands or songs you tell it you like, the cloud subscription services allow you to pick all of your music. Essentially, you will no longer have to actually purchase a song, let alone an album. Rather, you will pay a monthly fee that will allow you to pick your favorite songs, categorize them, rank them, etc. and, most importantly, take them with you. Whether you are listening on your hand-held device (smart phone or iPod type device), on your computer, in your car or listening to your home stereo system, your music will be there waiting for you. As long as you keep paying the monthly fee, that music will be with you.
As a consumer, I think cloud based systems are the bees knees. Technology should make things easier and better. Allowing me to go from my office to my car without missing a beat of the song I was just listening to (I’m very fast) and without plugging anything in, is amazing. As a lawyer who represents musicians and songwriters, I’m worried. For interactive internet based music providers (where the user gets to select the songs he/she wants to listen to) the royalty rates are negotiated between the labels/publishers and the cloud provider. This means that the labels and big publishers negotiate pre-determined revenue shares for each stream of a song; typically a teeny tiny fraction of a dollar (in England the rate is thought to be around 0.00085 pound). A famous example of how potentially horrible these rates can be is the report that Lady Gaga who had over one million streams of Poker Face on Spotify in the UK earned $167.00 (click here for more on that).
The labels and publishers in the US are fighting for more per stream. But don’t go rooting for them quite yet. They are negotiating deals so that they actually get an equity or ownership stake in the cloud based service. So while it appears as though they are fighting for the artists (which some of them might actually be doing), they are also positioning themselves to make as much money as they can in the process. If the clouds make it unnecessary to ever download and actually own a song, how are the songwriters and artists going to recapture that lost income? As of now, the songwriter lobbyists are doing a good job of asking that question and fighting to establish fair payments for musicians.
The laws in place that cover interactive internet radio and subscription services did not imagine the day when streaming would eclipse downloads. That day has clearly arrived: “Streams of music are eclipsing everything,” Universal Music Group UK chief David Joseph recently told the Guardian. “It’s a different digital currency to downloading. You’re dealing with 175 million single tracks bought a year compared to 7 billion streams of music.” (from The Digital Music News). Just as technology has adjusted, the laws dealing with fair payments to the providers of content need to be modified.
The bottom line is that just as the cassette replaced the record, the cd replaced the tape and the mp3 replaced the cd, the cloud is going to replace the downloaded mp3. The clouds are rolling in and the artists may be left in the impending dark.
Lately we’ve noticed a growing trend in the independent music scene. Specifically in the businesses that work with independent musicians. Many companies and individuals who used to have a job or a business that covered one specific element of the music scene are now presenting themselves as the “one stop shop” for musicians. As you know, we like to dissect things around here, especially when catch phrases or “industry” speak is thrown around as if it has one universal meaning.
To me, a one stop shop conjures up images of a major highway gas station where you can get gas for your car, a slim jim, bait for your fishing trip, a slice of pie and possibly take a shower (I would not recommend the last one). Basically a one stop shop should give a consumer an option to purchase all that he or she needs in one location. Transfer the phrase to the music industry and it is not quite as clear what a one stop shop is or should be.
We know that in the past a label was supposed to be a one stop shop, with a massive amount of employees handling everything from A&R to press to accounting for its signed musicians. With the decline of the label system the number of employees at labels feel as dramatically as the number of records sold at Tower Records. Thus, the services once offered by a label were no longer present. The displaced label personnel did not simply bury their heads in the sand. Rather, they started showing up as specialty boutiques offering the specific services they once provided to labels direct to the musicians or independent labels. Because the music industry is still based on who you knew, these boutiques served a pretty powerful purpose for quite some time. For example a boutique full of ex-Warner Brothers PR experts could utilize all of the same contacts it once had at a label directly to musicians for a discounted price (lower overhead).
Still, as the economy worsened, the boutiques had a difficult road ahead of them. Boutique employees were cast off too. So now you have a bunch of skilled and connected music industry folks milling about and looking for a new way of doing what they used to get paid to do by the labels and the speciality boutiques. A PR executive befriends a merchandising expert who then befriends a music web designer and so on and so on. The displaced experts then form a “one stop shop” for musicians. Essentially becoming a lean-mean label which, ideally, avoids the red-tape and bureaucracy of the traditional label system.
However, each one of these self-proclaimed one stop shops must be examined a bit more closely prior to agreeing to work with them. Here are some questions you should ask: Do you have distribution (usually digital is enough, but physical, think vinyl, is still important)? Do you have press contacts and the ability to do an actual push to garner the attention you need (in the markets that make sense) for the release of your music? Do they have connections with booking agents? Do they have connections to a legal team that understands music and corporate law? Have they managed a band before or do they have a management team in place? What type of connections do they have to other musicians, producers and studios?
All of these questions are important when choosing to work with any business out there purporting to be a one stop shop. Oh yes, there is also that little issue of money. All the connections in the world don’t matter if you don’t have the money to fund the project. Typically, a one stop shop is not going to operate with the budgets of the labels or the indie boutiques. The shop will be more of a facilitator, a connector of the dots, rather than a bank roll. As a musician, you will want to make sure you have your music production ready to roll (whether it’s an EP or an album) before agreeing to work with a one stop shop. Otherwise, you may be stuck at their shop without the cash to buy the goods.
The model for these shops is similar to the license arrangements indie labels used to enter into (some still do) back in the day. You bring your finished product to the shop, they market it and sell it to the masses. But the shops go one step farther by attempting to manage your band, book you shows, protect you legally and sometimes keep your corporate books and records. That is why it is so important to know what you are getting into before signing anything.
The one stop shop idea can work. Due your diligence, ask the right questions, demand everything in writing (and have it reviewed in writing) and continue to do your own job as a musician: make great music.
We are constantly writing about the pitfalls of the music industry, the changes in the music scene today and the problem with the overal label system. Let’s focus on some of the positives of today’s music industry (there are more than you may expect, especially if you read our content regularly).
It has never been easier to get music recorded, produced and distributed to the masses. With today’s software, the home studio has become a reality for a ton of musicians. That means that the prohibitive costs of a studio, a producer and studio musicians can be avoided. While sound quality may not be as amazing as it would be if you spent the money to record at Abbey Road or Paisley Park, decent recordings can be done with equipment you can pick up at Best Buy.
Once the recordings are complete, the plethora of web sites and web based software that offers digital distribution is pretty amazing. Whether it is through www.tunecore.com, www.cdbaby.com or one of the hundreds of other sites out there, your music can be on the world wide web in a matter of minutes for little to no cost. The question then is: NOW WHAT??????
Getting noticed in today’s music industry has become the biggest obstacle for bands. The quality of music that is out there hasn’t necessarily dropped, there is just so much music on the web that trying to find something worth while is near impossible. In speaking to some industry experts, including major music supervisors and licensing agents, trying to get noticed by posting your music on myspace, facebook, bandcamp,etc. or by submitting unsolicited discs to supervisors and labels is pretty much a waste of time. The ease of production and manufacturing has left everyone in the music industry drowning in its own cash crop: music.
In the past, spending money on a radio campaign could help break a band. However, terrestrial radio has lost millions of listeners to the internet and satellite radio, so paying to get your music on the radio doesn’t even work anymore. If you can’t get noticed by creating a wicked cool website, submitting your music to supervisors/labels or paying to get your music on the radio, what is a band to do?
Fear not our loyal minions, we think we have some viable options. We’ll explore one at a time over the span of several posts. Here’s the first way:
1. The missing link in today’s independent music scene is competent, affordable and effective PR. As discussed above, a band can produce its own music, package that music in a brilliant way, promote the music to its own fans in its own region and send the music out to anyone it sees fit. However, without the right contacts and knowing where to send the music or the link or the super sweet low budget video that your cousin shot last night, your project, just like so many before you, will fall into a black hole.
In the old days labels had scores of PR/Marketing employees who got paid to promote their clients to radio stations, concert promoters, magazines, television stations etc. Now, those employees are looking for jobs and the labels have either cut way back on in house PR or outsource PR just like independent bands need to do.
Today, there are some really solid PR/Marketing companies out there servicing both major and independent labels. While a healthy budget is still required, we have worked with some PR companies by getting creative with budgets. Check out Riot Act, Flower, and Big Hassle to get some ideas. If you can scrounge together enough money to pay one of these companies to help you get your music in the right places, it will be one of the smartest investments your band can make.
What if you have a budget of $500 or less? Time to hire interns! Get your friends, class mates or family members together. Figure out which one understands your music and where you want your music heard. Make sure they have a computer and access to the internet and then…start posting! Smart teens and 20 somethings know where they go for new music (usually free). Figure out submission policies and be relentless. Finding the right blogs (the “tastemaker sites”) and getting your band’s music, or better yet your band itself featured on such a site can be a huge boost. If your music finds its way onto HypeMachine or Allhiphop or even Pitchfork, more doors will open. We’ve seen bands featured on these sites end up with sponsors or even tours. After that, if capitalized correctly, the added exposure can actually lead to money, which in turn, may lead to the ability to hire a PR company to expand the reach.
Obviously everything that a band does is predicated on actually having a playlist of high quality music. If your music is bad, eventually, the public will reject it (regardless of your budget). Speaking of good music, here’s our SHAMELESS PROMOTION OF THE MONTH: CHECK OUT ELEPHANT STONE. Our Canadian friends are on tour and will be hitting up CMJ. Find out more about them here: ELEPHANT STONE
Music is everywhere. You turn on your tv, see a youtube video or turn on the radio and hear a famous artist performing a song. But who makes money when the public hears or sees a performance?
It is a common misperception to think that the artist you see or hear is making all of the money from that song. In the pop world, especially, this is not true. Don’t get me wrong, the famous artist probably has more money than you or I could ever dream of. However, the main revenue streams come from songwriting. Oftentimes, pop stars do not write their own songs. Songwriting for bands or artists can bring in huge amounts of money. The main areas of revenue from songwriting come from mechanical royalties, performance royalties and synchronization licenses.
Suppose you write a song and a major artist (for this post let’s use Justin Timberlake) decides he wants to record your song and put in on his next album. If your song has never been released to the public his label will have to pay you a First Use Mechanical License. This gives Mr. Timberlake the right to be the first person to reproduce and distribute your song. The rate for a First Use is negotiable and varies widely. You have to weigh the exposure of being on Justin Timberlake’s next album vs. your leverage in getting paid. But, keep in mind; this will not be your only source of revenue. Let’s say you and Timberlake’s label settle on $15,000 for the First Use right (this could be and probably is higher or lower).
So, you now have $15,000 in your pocket but cannot be the first one to record and release your own song. That tradeoff is up to you. Let’s assume you think it is worth it. What other sources of revenue streams can you now expect from this song?
First off, for every copy of the song reproduced you should receive 9.1 cents. Usually, this is only paid on each copy sold (digital or physical). So, for every album sold you should received 9.1 cents. If your song happens to be the single or a hit, chances are your song will sell digitally as a single more than the entire album. So, for every 99 cent download you should receive 9.1 cents. If the single or single and album combined sell 1,000,000 you should receive $91,000. Not bad. Not bad at all. Keep in mind that label contracts and tricky accounting can lower these numbers. However, the 9.1 cent rate is set by the government.
Another lucrative source of revenue is from synchronization licenses. Every time a song is placed with a visual (think on a tv show, in a video game or in a movie) the writer and publisher must grant a synchronization license. This is a negotiated rate. A hit movie can pay in the hundreds of thousands of dollars for a theme song or a song that plays in the climax of a movie. A television show will pay less but this difference can be made up in performance royalties.
Did someone say performance royalties? Yes. In addition to getting paid to have your song in a movie or television show you will also receive money each time the tv show airs, the movie is shown outside the U.S. or shown on tv. Lastly, if your song is a single and receives radio airplay or is played on the internet you will receive performance royalties. All of these performance royalties are collected and distributed by performance rights organizations. In the U.S. we have three; ASCAP, BMI and SESAC.
As you can see being a songwriter can be a very lucrative business. You will have access to multiple revenue streams. Think of the writers of the song “Toxic” by Britney Spears. She did not write that song. However, every time it aired on MTV or radio the writers received performance royalties; every time her album sold or someone bought “Toxic” the writers received a mechanical royalty. If anyone wanted to use the song in a video game, movie or tv show , the writers would get paid multiple times. Also, if any cover versions are done the writers would receive mechanical royalties. I really wish I wrote that song.
Protecting yourself as a songwriter is not an easy proposition. Seek counsel if anyone wants to buy your song or if you are going start publishing your own material.
SHAMELESS SELF PROMOTION OF THE WEEK:
Come check out L4M and a ton of other experts on music and advertising at the Billboard Music and Advertising Fall seminar on September 15-16, 2010 at the Westin on Michigan Avenue right here in Chicago. We are on a panel and will be floating around all weekend. Follow up the seminar on the 16th with a L4M sponsored show at Bottom Lounge featuring Blah Blah Blah. More info coming soon.
Band plus budget (The Deal Magazine). CLICK LINK FOR STORY
It is good to know that certain labels and certain industry experts understand the new model for musicians. “The 360 deal” does not have to have a negative connotation. Finding the right partners and the right team for your project has been our focus from the jump.
What are the requirements of owning and operating your own music label? Apparently having a recognizable name and a healthy checkbook and/or ego are prerequisites. Recently, Perez Hilton announced the launch of his label Perezcious Music, then David Letterman through his hat into the ring with Clear Entertainment and just this week, the most qualified American Idol judge, Ellen DeGeneres, joined the fracas by forming ElevenEleven Music.
So these media moguls who have worked very hard for a long time to reach their respective level of celebrity recognized the same thing that we have been writing about for the past few years: Major Labels are dying. There is a wide gap in the industry where well funded and well publicized projects can have a real impact and make real money.
The independent model (self funded, self produced, self released) has fizzled a bit over the best year or so. The glut of content and ease of production has made it harder to get noticed. But the labels remain in disarray and the old multi-album record agreements are not coming back. So is the only way to get your music out and actually noticed partnering with a celebrity?!? We’re here to say…not necessarily.
What do these new Celables (I want credit for this new moniker) s have that attracts musicians? 1. Money (in Letterman’s case, a whole lot of it); 2. Celebrity/Fame/Recognizability and 3. Easy Access to the Public.
Each one of the above three examples has enough money (or access to money) to fund a “major label” like push for an artist. (Notice that they are starting modestly with one or two artists evidently learning from the failed major label model of signing every artist and hoping one hits) That means that they can afford to pay for the production and recording of an album, pay for the marketing and advertising prior to and during the release of the album (including paying to get music in the right places, on the radio, on MTV, etc.), pay for a distribution agreement and pay tour support to get the artist out on the road in front of his newly purchased fan base. The obvious HUGE plus with being part of a Celeb label is the instant recognizability that it gives to the artist. Any piece of press that talks about Ellen’s new label will inevitably mention her new artist as well. Finally, what better way to push the artist in front of an enormous audience than to promote him or her on your own show or website. The Celables will push (as all of them already have on their own shows, websites, and other appearances) their artists to their previously established enormous fan base. Think how hard it is to get to perform on Letterman. Now think how easy it is to perform on Letterman, in front of millions of potential purchasers of music, if you are on Mr. Letterman’s label.
So how can an indie compete with a Celable? Well, there really is no replacement for the first requirement: Money. However, as we have consistently written here on L4M, if you push your music to the level where an investor may be intrigued enough to partner with you, you may be able to get a regular old rich guy to take care of this need. Now, your rich guy is probably not David Letterman, but with the rich guy’s best asset, money, you can purchase a lot of what the Celables have. Buying the right marketing, or better yet, partnering with the right marketing and public relations firm can get you the placements you need, the buzz you deserve and even land you on the Ellen show. Paying for an experienced management team can also get you that access as well as get you bookings at big shows or on legit tours.
The point, the model of a musician investor partnership can work. Does it work better if that investor is uber famous? Probably. But, putting the right team together and using money in a smart and creative way can get you to the same point as Runner Runner (never heard of them? they are Letterman’s band).
SELF-PROMOTION OF THE MONTH: NEW ARTISTS
As the L4M family grows, so does our client base. Check out this talented dude:
THE SHOW is about to start. Nasser THE SHOW Goins is what’s next in hip hop. You just might know it yet. Letting everyone know that Uncool is the New Cool this Hip Hop Rock Star has all the tricks. Check it: