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:
The L4M Showcase is popping up all over the music radar. We are getting great looks from music fans of all types. Be sure to check it out.
Check out the mentions by
For press or further info about the event please contact Tonia Kim at email@example.com.
I am heading east next week to take part in the madness that is the CMJ Music Marathon. New York’s music scene is always great, but during this five day stretch there is no better place in the world to see and hear some of today’s best independent music. For us on the business side of the music scene it also a great opportunity to network, schmooze and drop names without trying to hurt one’s toes.
Last year at this time the word was that the major labels were in serious trouble. That obviously played out to be accurate. While the labels are definitely hurting, I have noticed that they are no longer the slow moving mass that they once were. Sure there is still the old guard pulling the stings of the A&R and creative departments at the majors, but I think it has finally registered that making money off of physical record sales is just not going to buy the CEO his 2nd jet anytime soon.
360 deals are being pushed hard by some labels and industry giants (eg. Madonna and Jay-z with Live Nation). Companies are taking a piece of everything an artist touches from album sales to touring to merchandise. In return the artist is promised national and international marketing and promotion by a label who still has the connections and manpower to launch such a campaign. I am still not sure if this model can be mutually beneficial. Judging by the insistence of some labels to only use 360 deals, I have a feeling they tend to skew in favor of the labels a bit more than the artist. Just a hunch though.
If a band is looking for a more traditional deal, they are still available. A one and five deal (one album with the option for five more) is still commonplace with many of the lables who are still around. These are typically too long of a time period and too onerous on the artist (transfer of ownership your music is the norm), but have been around for so long that they have become the “industry standard”. In the past a label would convince an artist that a long term recording agreement was the way to go and would sweeten the deal with a phat or fat advance. Not so much these days.
Bottom line, an indpendent band that kills it at CMJ next week will probably get an offer from one of the many lurking label execs present at its showcase. Whichever type of deal is offered, rest assured there will be a teeny tiny advance attached. Labels do not have any money. Its gone. The days of six figure advances and seven figure recording budgets are history. The labels’ belt has gotten tighter just like every industry in America. On top of that, we are in the final quarter of the year so any coin that the labels had has most likely been committed to an earlier project.
So what’s my point? Don’t wait for a killer deal. It just isn’t going to happen. Musicians should definitely listen to any offer and be courteous while doing so. Then they should think about this: can they do the same thing the label is offering on their own? If the answer is yes, and a band can forge strong relationships with strategic management companies, booking agents, merchandise companies and lawyers, they may not need a label. If a band can do all of that, they definitely do not want to give up ownership of their music or have someones hands in their pocket during a performance, at the merchandise tent and at the record store.
Lots to think about. Perhaps we should wait to think about it all until after next week when we have completed the music marathon.
SHAMELESS PLUG(S) OF THE WEEK:
Toki is getting well deserved press. Click her wicked cool necklace above for more info.
You may have already seen this, but I think its awesome:
Bobby Buscher (aka the Waterboy) really just wanted a friend other than his momma and their family horse. Bobby, like you, knows the value of friendship. I’m hear to tell you how right you are.
I don’t know the cold hard numbers of how many people under the age of 30 have some sort of virtual community profile, but I do know that amongst my peers it is about 90% (it would be higher but some people can’t log on to Facebook from work). Whether its MySpace, Facebook or LinkedIn people are “virtually” expressing themselves. As in the past, music is a normal way for any individual to express himself. Now instead of blasting music from your dorm room or dressing like your favorite hair band, people are including their favorite music on their homepage. MySpace profiles are laced with personal media players and Facebook allows you to become fans of your favorite band. So when a friend invites someone to view their page or to become their friend they are not just passing their pictures from their wedding or their latest vacation pics, they are also “virally” passing along their favorite music.
Smart musicians or their management team will allow their music to be added to profiles, but in a streaming only format (don’t want to give it all away without being able to track it). The minute your one fan passes or shares their profile with your music to their network of friends your audience has just increased exponentially (depending on how popular the fan is).
I have written about the viral loop effect of music before (see https://lawyer4musicians.com/2008/06/19/turn-your-music-into-a-virus/), but it is definitely worth writing about again. As our economy suffers and pirated music continues to run rampant, musicians need to capitalize on all of their available resources. One seemingly obvious resource that is consistently overlooked is a musicians friends and colleagues.
Case in point: here in Chicago there has been a huge burst in the “underground” hip hop scene. With the help of the mainstream rappers like Kanye West and Common, other windy city acts have been able to jump on the scene. The Cool Kids, Kid Sister, and Kidz in the Hall have been able to capitalize on the attention Chicago hip hop has garnered over the past several months and launch their own careers. Using the buzz of a growing music scene, brilliant use of community websites, the success of their colleagues, oh yeah, and good music, these once obscure artists have attained national and international recognition.
Now the next generation is climbing on board. The Cool Kids were helped out by Flosstradamus, so in turn they lent a hand to Mickey Factz, Hollywood Holt and Mic Terror. Collaborating on tracks, producing beats, appearing on stage, or hyping each other on their own community webpage, one artist helps out the other. This isn’t just hippy pay it forward crap, this is good business. The buzz becomes tangible and concerts with more recognizable lineups are packed, merchandise is moved and careers are launched.
Check out friendship in action: http://blog.myspace.com/index.cfmfuseaction=blog.view&friendID=7240921&blogID=425195126
As Tenacious D brilliantly crooned: “Friendship is rare. Do you know what I’m saying to you? Friendship is Rare.” Think of your friends as friends first and your potentially viral network second and things may go a.o.k. for you and your music.