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.
Welcome back to my multiple part series on how to make money as a musician: Volume 2, Licensing.
No point dwelling on the past, making money selling records has gone the way of the 8 track, the ferbie and the Hummer SUV. The antiquated system of big advances and platinum record sales has died (or is at least on life support) along with the major labels. So while it is harder to make money the old fashion way, there are new and, more importantly, more ways of making money as a musician.
Performing live at concerts is still the best way to make money. It used to be that bands would perform to sell albums, now the musicians give away their music to sell concert tickets. However, not everyone can sell out stadiums, concert halls, or even high school proms. So, what is another great way for musicians to make significant income or supplement their concert income? Licensing!
Think of how many commercials you heard or saw today? Consumer Reports estimates that the average American is exposed to 247 commercial messages a day. The vast majority of the radio and television ads, as well as a growing number of internet and new media ads, are accompanied by music. Whether its Budweiser, which spends approximately $90 million a year on advertisements, playing the newest Dodo’s or Santigold (See Above) song or Apple promoting the newest IPhone with Feist, music is an integral part of advertising all over the world. Musicians can lay their claim to the billions of dollars spent on advertisements each year.
Licensing does not end with advertisements. One of the most common terms of art used in license agreements drafted by folks like me is describing the use of a song in “any medium now know or hereafter discovered”. This industry phrase means that a song can be used or synched to movies, television shows, internet programming, video games, radio programs, or any other programming or format which hasn’t even been discovered yet. Think about, when is the last time you watched a movie that didn’t have a sound track, a television show that didn’t have a theme song, or a video game that didn’t have background music? Watching old silent movies does not count.
As satellite and cable television expands and internet programming continues to grow the opportunities for music licensing grow proportionally. Budgets may vary, but mechanical royalties (the statutory rate that must be paid every time a song is broadcasted) must be paid. Licensing music can be a quick substantial pay day or a long term and consistent money maker.
The dollar figures for global music licensing are staggering. According to a 2007 report by eMarketer, the projected budget for music licensing in 2010 will reach $4.4 billion! How many artists would be happy with just a teeny tiny percentage of that huge pot?
Just knowing that the licensing money is out there does not make it a reality for most independent artists (I’m anticipating your questions). For independent artists who are not signed to a publisher, it is still difficult to get your music in front of the licensing decision makers. There are several services out there via the web which offer solutions: Pump Audio, Taxi and my favorite (bias added) Music Dealers. These sites allow artists to upload their music to catalogs with the hope that a music supervisor seeking independent music visits the site and selects their song. Some sites are non-exclusive, meaning you can upload your music to more than one, while other require exclusivity. Always read the contract (even the click through contracts)!
Other options for getting your music licensed is to attend music seminars, panels, events, conventions. Research where the industry people are going to be. Buy a badge to CMJ, SXSW, Midem, etc. Music supervisors and a&r types are always at these types of events networking and trying to find the right sound for their project. If you don’t run into the right folks there you can start networking on your own to find managers, lawyers or other independent licensing reps of music. A lot of times these types have the inside track (which is usually a coveted list of contact info for music supervisors in all types of media like movies, tv, and video games) to the decision makers. For a split on the fee, independent reps will submit your music for your. While there is no guaranty, your chances of having a supervisor actually listen to your music is much higher when it is submitted by someone like this.
Just like everything else in your career as a musician, you will only go as far as you and your talent take you. Having great music alone is not enough. You have to treat it like a business. Licensing opportunities will not just come to you. Go out there and sell it. Network, meet the right people, create a buzz and capitalize on every opportunity (no matter how small) that is presented to you.
I had a lengthy internal debate over whether to join the endless number of blogs, articles, tributes and montages in honor of Michael Jackson. Even though I was big fan of MJ and I did rock the moon-walk on numerous occassions during bar and bat mitzvahs and family weddings during the 80’s, I decided that for purposes of my posts, we should learn from Michael rather than add to the endless fluff pieces circulating our globe at the moment.
So, what can we in the independent music industry learn from the King of Pop? One glove is better than two, Emmanuel Lewis (aka Webster) is cool, living on a ranch with children, monkeys, and an amusement park will definitely get you noticed. All joking aside, Michael Jackson was one of the biggest grossing artists of all time. He single-handedly changed the way music was marketed to the masses. He was one of the first truly international (Asia to Africa to Australia) superstars. Along the way, he purchased the Beatles catalog.
That purchase, along with some of his other buisness decisions is what I can’t help but focus on when thinking about MJ’s legacy. Michael and/or his management team had the foresight to purchase a large chunk of the greatest rock and roll band’s publishing catalog of all time. In 1985 he puchased ATV Music Publishing for $47.5 Million. ATV controlled around 200 Beatles songs. This investment, at a time where the value of music publishing was still unknown, was one of the best investments anyone could make.
Every time one of the Beatles’ songs was played on the radio, which is virtually every minute of every day, Michael was earning money as the publisher. For every song that was licensed in advertisements, tv shows, movies, greeting cards, etc. Michael got a check. At the time of his death, the Beatles catalog would have been one of his most valuable assets. Think about that; Michael Jackson albums sold in the 100’s of millions but he had more earning potential from another artist’s songs.
Obviously when we discuss the Beatles and Michael Jackson we are looking at musicians who are in a different stratosphere when compared to most indie musicians or even most major label acts. However, the lesson that any musician can learn from both the Beatles and MJ is that control of publishing, control over who owns your music and how it is maintained, can be the life-blood for your retirement, and even for future generations.
When you sign to a label you need to think about what you are signing away. If you choose not to sign with a label but pursue a publishing deal, the same rule applies. Most major label deals will come with a publishing deal wherein the label or a division of the label will get the right to publish your music. While this is not always a bad thing, just remember what you are giving up and what the financial repercussions may be. A good warning flag that indicates that a musician may be giving away her music forever is an offer of an advance. Typically, publishing deals, like label deals, come with an advance. BE WEARY OF ADVANCES. If you are getting money up front, it usually means that you are leaving something behind. The length of publishing deals can be for the life of the copyright (95+ years in some cases) or can even be perpetual (never ending). Is a $50,000 advance worth the value that publisher is going to bring to your music for the next 100 years? Maybe…
Publishers are ideally supposed to act as your world-wide agent. They are supposed to help advertise your music to the world and seek money making opportunities for that music. Also, publishers are there to collect the money that is earned for music which is actually “published”. The typical split with most publishers is 50/50. The even split looks better than it is (of course). Many artists need sub-publishers to reach different markets around the world. A sub-publisher will take its percentage which in turn reduces your percentage.
The easy argument to make in favor of publishers is that without them: are you going to get your music out to the public en masse and more importantly are you going to collect once that music has been published? While the new music industry has seemingly endless opportunities to get your music out to the public, the publisher still plays an important role. Several new bands and even labels have either formed their own publishing company or partnered with a publisher. The partnership or the self-publisher model will reduce the endless percentages that go out to people and companies who are not in the band. But, just like everything else in the D-I-Y music model, it takes a lot of work and a strong team to accomplish what established publishers can already provide.
God willing your catalog of music will be worth as much as Michael’s or the Beatles. Realistically, you might not get to that level. That does not mean that you should not think about the value of your music before you hastily sign it over to a publisher. A quick advance from a publishing company may look great now, but as I have ranted on several occassions, advances are simply loans which must be paid back. Look at all your options first and go with the one that is best for you and your band. Think before you ink.
SHAMELESS SELF PROMOTION OF THE WEEK: NALEDGE’S (AKA MR. BRAIN) CHICAGO PICASSO
In the old days (about 10 years ago), artists would get fat advances from labels who would cash in on the traditional sale of music. Bands with one hit song could sometimes even afford to pay back the advance and make even more money from the royalties earned via record sales throughout the world. Labels would give away small fortunes to successful bands with the security that they would make far more money than the band ever made through lopsided royalty rates.
Today; not so much. Labels have crumbled under this model (thus the 360 deal). Royalties today account for a very small percentage of the total earning potential of a successful band. Don’t take it from me, here’s what Irving Azoff said in his Business Week interview with Jon Fine: Today, ‘recorded music is down to less than 6%’ of major musical acts’ revenues. 6%! that’s it. Think about that; a big name band like Coldplay or Greenday who still sell hundreds of thousands of albums still make about 94% of their income from sources outside of royalties.
So where is the rest of that income coming from? Number one is still touring. The concert scene seems to be recession proof as thousands are still packing arenas, clubs and festivals. Europe, Asia, and Austrailia continue to pay top dollar/euro/etc. to see popular acts. Corporate partnerships and sponsorships are also huge money makers. Corporations realize the marketing value that music can bring. Partnering a popular band with a product is nothing new it is just more prevelant today. Christinia Aguilera, Gwen Stefani, Madonna, Britney, P-diddy, J-lo all have fragrances in partnership with established cosmetic companies. Even Weezer just recently announced that they are going to partner with Snuggle (the fabric softner). Redbull consistently sponsors up and coming artists across the country.
Merchandise is also still a big money maker. The web makes it easier to sell more stuff to more fans in more areas. Cheap manufacturing and easy distribution create high profit margins for everything from hats and t-shirts to ipod cases and cell phone apps.
Finally, licensing takes up another chunk of that 94%. Licensing can go hand in hand with corporate partnerships, but also expands to movie, tv and commercials.
You cannot wait for your music to sell itself. More importantly, you cannot to sustain your career through the strenght of traditional record sales. Remember, you create your own market. Just like a savy investor, you have to diversify and look for all possible money making avenues for the business that is your music.
SHAMELESS SELF-PROMOTION OF THE WEEK: LEBRON V. KOBE COMMERCIAL FEATURING THE COOL KIDS
The Cool Kids are one of the best examples of the new music business model. Their plan of primarily giving their music away for free has paid off. Great music, working hard and creating a good team have led to incredible opportunities. One of those opportunities was to have their music featured in the most recent version of the Nike commercial series featuring the puppet version of Lebron and Kobe. Check it out: