There is a key distinction in the law that differentiates between an employee and an independent contractor. Employees are entitled to certain benefits and protections that contractors are not; chief amongst them, wage protection (minimum wage requirements and overtime benefits etc.), health insurance and paid time off. Contractors, on the other hand, are viewed as hired guns that can be paid lump sums, do not qualify for overtime and are not eligible for insurance coverage offered to employees. The music industry is dominated by contractor relationships. Think of studio musicians, managers, dancers, producers, writers, roadies, back up singers etc. All of which, until recently, fell squarely in the independent contractor category.
California, the largest hub for the entertainment industry in the world, took a different take on the employee versus contractor feud. In recent legislation signed by Governor Newsom, CA AB5, Californians will be considered employees unless and until their employer can show that the work that they perform falls under a specific set of criteria. Specifically, a worker is an employee under AB5 if his or her job forms part of a company’s core business, if the bosses direct the way the work is done or if the worker has not established an independent trade or business.
While the law was a direct result of the so-called “app” industry (e.g. Uber, Lyft, Postmates etc.), the repercussions could clearly spread across other industries. So what does this mean for musicians and the industry as a whole in California?
As written, AB5 would arguably classify a recording artist as an employer and her manager, tour manager, guest artists, choreographer etc. would all be her employees. This would require the artist to set up a payroll system, withhold taxes, set hourly wages, pay for overtime, potentially offer insurance and everything else that a normal company would provide to an employee. Anyone in this industry knows that this shift would be a monumental change and frankly, is just not practical.
Unlike other industries, music industry organizations (RIAA, A2IM and others) lobbied to ban the legislation altogether rather than seek an exemption. Doctors, accountants, travel agents, real estate agents, cosmetologists and other sought and achieved carve outs so as to not fall under the new qualifications of AB5. Alleged in-fighting amongst music industry leaders resulted in full inclusion under the law rather than a potentially helpful exemption.
The fear that AB5 will gut the entertainment industry in California is real. Other states are already looking to capitalize by attempting to lure “contractors” to within their borders. Still other states are looking to model their own laws after the California law and touting their own version of employee protection.
The law does not go into effect until January 1, 2010. Until then there will most likely be litigation that may delay its start date. We will continue to monitor the situation and provide updates.
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.
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
Websites that serve as independent fund raisers for artists are not new. Over the past decade several sites using the fan funded model have popped up (some have subsequently disappeared). The sites are natural offspring of some entrepreneurial and creative musicians and film makers realizing that the label/studio system probably is not going to work form them.
The basic premise is that you offer your friends, family and fans (the 3f’s) an opportunity to participate in the creation of your new album or film. In exchange for buying a piece of the project the 3f’s will get extras that the general public will not get. Examples of the extras that participants get are: exclusive tracks, t-shirts, signed copies of vinyls, screenings with the cast and crew, etc.
Some models have tried to take it to the next step and share income with the 3f’s who go from participants to investors when they provide money to a project. Sellaband.com is probably the most well known band investment models (now in bankruptcy, this concept obviously has some issues to figure out still). On the film side of things sites like kickstarter.com and indiegogo.com have had success in getting independent movies with fairly small budgets into production via fan participation.
But what happens when you want to raise more than $5,000 or even $50,000? I guess it depends on how wealthy your 3f’s are. For most of our clients we are trying to raise money in the several hundred thousands or millions for their projects. Their 3f’s are typically not looking to get a t-shirt or dvd out of their participation when they are putting that much money into a project. In most scenarios a participant becomes an investor and will want to see a monetary return on his investment.
Equally as important, the method for raising money with the promise of a financial return on investment follows very strict rules and regulations. When you try to raise significant funds for your project you are essentially selling securities or stock in your product. The Securities and Exchange Commission governs these type of transactions and you must follow their guidelines or risk serious consequences. Unfortunately, the legal fees for setting up an Offering (offering of a financial interest in your project) are high and you definitely cannot create an Offering on your own (even if you find an example on line). Oftentimes, musicians and film makers must go to their 3f’s just to get the money to pay for the Offering.
So with all of these barriers why to musicians and film makers go through the trouble? Several reasons. First, the old days of being discovered are over. The quantity of product is simply too high and the methods for finding talent are too vast. A&R departments are decimated and studio budgets are tighter than ever. Risks are averted on all levels. It is now a necessity for the independent to truly be independent and make their own way in the industry. Further, most musicians and film makers feel that if they get their first project produced and into commerce, the sky is the limit. This sentiment is justifiable. Film makers who are able to get a movie made and actually distributed immediately create a brand for themselves and their production company. It is far easier to sell the second feature as compared to the first. Same for musicians. A musician who has released countless EP’s and singles may not be interesting to an investor until she produces and distributes a full length album.
So as the annoying saying goes, you have to spend money to make money. Whether it is strictly as a participant structure or through an Offering, a lot of work, time and money goes into the process.
I am interested to hear from those of you have used this method; whether it is through a website or on your own door to door fund raising effort. Here are some of my friends who are using the participant method. Check out and if you like them, PARTICIPATE!
Film maker Carey Bruce and Road’s End Films are producing Forests of Mystery and using Kickstarter.com:
Talented Singer/Songwriter Levi Weaver has funded his own projects through 3f participation. Check him out here:
Ever since Napster and its sinister brethren appeared on the scene a lot of my peers (even those with the purest of hearts) have added to their music collection without spending a dollar. In addition to getting music for free, the actual method of creating and distributing music has fundamentally shifted. Threats of lawsuits from the RIAA may have slowed the free music exchange sites, but social websites, blogs and China have continued to make music available to the masses au gratis (that’s french for free or with cheese, not so good with the franscais).
It is far from original to state that the way the public obtains, shops for or even listens to music has changed over the past decade. Countless reporters, bloggers, industry experts and politicians have noted the fundamental shift in the music industry. Your humble author has also contributed to the rhetoric. But now it is time for musicians and their respecitve teams to stop talking about the change and adjust their own business models in order to succeed in this “all-access-all-the-time” era of music. Here’s my roadmap:
THE NEW TEAM MODEL FOR MUSICIANS AND THEIR MUSIC
1. Amazingly good music. If you don’t have number 1, there is no point in reading past this point. Because of the ease of getting music out to the public without the cost restrictive hurdles of cd manufacturing, warehouse and transportation costs there is more music available to the public than at any time in history. While the digital shift has seen many positives, the overhwelming result is an overly saturated market full of average music. No one likes to think of their music as average, so I’m assuming that you are still reading to see what else you need for your team. I don’t want to belabor the point, but seriously, if your music isn’t good, you are not going to get far (except for the aboritions of people like Lady Gaga, Soulja Boy and Nickleback). It all boils down to the music; and that’s a good thing.
2. Hire A Lawyer. Yeah, yeah, I know, I’m a lawyer and I’m telling you to hire an attorney. But it doesn’t have to me. As you will see in steps 3 and 4, you will be consistently entering into contracts. Hand shakes are cool, especially funky ones with fist bumps included, but they are not cool for agreements that will involve money and your career. A lawyer who understands new media, intellectual property protection and more importantly contract interpretation and law is essential. The new music model involves, digital distribution of music, corporate partnerships, website policies, copyright and trademark protection, royalty collection, license deal, etc. etc. A lawyer who you trust should be step number 2. (If a lawyer tells you she will “get you a deal”, you need to politely excuse yourself from her office and never look back. This old school model is as dead as Chris Brown’s Drink Milk ad campaign.)
3. Hire a Manager. Your buddy might be a fun guy and is good at working a guest list, but you need a professional that will not only manage your day to day career but find new opportunities for your music. The manager needs to think as creatively as the musician, but instead of making music, they should be making deals with new partnership opportunities, tour deals and promotions. A manager should get a percentage of the money that the musician makes for the work that the manager actually does. DO NOT sign a manager agreement that blindly gives your manager 20% of everything you make unless that manager used to work for U2 or Jay Z. Another old school tactic, managers should get paid for what they bring to the table and not just feast on all of the opportunities that come to the band without the managers’ help. Your agreement with your manager should spell this out in great detail (NOTE, having a written agreement with your manager is a mus. See point #2).
4. Get a PR/Marketing Firm. A firm that understands the music business is obviously important. But what is more important is a marketing team that understands your music and your niche. If you are trying to cross over from a hip hop audience to a more mainstream pop market, look for a PR firm that has both clients on its roster. PR firms can be expensive but if you have a budget to spend they can typically tailor their efforts to match it (see point #2, again). Posting your music on popular blogs and on social sites is definitely worthwhile. However, if you want to take it to the next level, you need the network and reach of a competent PR/marketing firm. Yes Fakeshoredrive.com is cool, but spin.com is better.
If you have the “new team” assembled you are in a good spot. This team should be able to act in much the same way as the archaic labels once did. One remaining step is physical cd distribution. While the CD is dying it still makes up a large percentage of music sales. However, unlike the old days, your team can approach physical distributors after you have enough buzz and digital sales racked up. If a distributor sees good numbers, a deal can be inked for small distribution of physical copies of your album.
The DIY artist has a lot of opportunities now. But like many experts have noted, (click here for a great article on the perils of a DIY artist) just because an artist can produce and publish her work for the public to hear, does not mean that she will succeed. If your music is good (and your mom thinking it is good does not count), start building this team and you just may be able to achieve success in the music industry.
SHAMELESS SELF PROMOTION OF THE WEEK: FRENCH HORN REBELLION
Speaking of a DIY band, check out French Horn Rebellion. Originally from Milwaukee, now embedded in Brooklyn, these guys have made their own opportunities and have worked hard to get a foot hold on the indie electro pop scene. Good music and a sense of humor make them a popular band with cross over appeal. Now with a good TEAM behind them, you are undoubtedly going to hear a lot more french horn in your music.
Due diligence is a phrase that is thrown around the legal world on a daily basis. “Is that borrower credit worthy? We’ll have to do our due diligence.” “Do we want to purchase that gas station? We will only know after we complete our due diligence.” Does the concept of completing due diligence in the music world ever come into play?
The answer is that it should. Just like a business looking to buy out its competitor or a bank trying to figure out if it should issue a credit line to a borrower, a musician should always complete due diligence before making any decision related to his career.
In my quest to get musicians treat their music like a business, I have often compared a music career to any other type of business. However, even though being a musician is similar to being a manufacturer of tires or a having a shoe store, there are different rules and procedures in the music industry. These different rules and standards are due partially because of the slick talkers and stereotypical music industry professionals but mostly from a successful system that has been in place for decades. If it ain’t broke, don’t fix it has been the mantra of the major label music industry for years. In this system, the typical scenario played out as follows: a musician breaks onto the scene or discovered by an A&R rep, the musician blindly signs a multi-album record deal, a manager is provided by the label and the label would control the musicians career for the length of the contract and beyond. As we all know, this system is no longer the norm. Due to the failures of the record industry over the last several years, the system has changed and the process for building a career as a musician has changed along with it.
While a musician was happy to sign the first contract that came from a “reputable” label in the past, that musician now has the ability to conduct her own due diligence. For a musician his or her music is her work product. Today, when that work product gets to a level where it is ready to share with the public and the public wants to hear it, several doors may open for the musician. Behind every door, however, is another business who wants to make money off of the musician’s work product. A manager, business manager, lawyer, label, publicist, publishing company, etc. etc. are all examples of businesses who make money off of your work product. But just like a business owner who is looking to hire a new CEO, a musician must conduct diligence before making a long term committment which may direct the musicians career and check book for the next several years.
So what should you look for as a musician who is looking to sign with a third party (a label, producer, manager, etc.)? How does a musician conduct his own due diligence? First, conduct your own research: google the hell out of the company or individual that is looking to work with you; talk to people in the industry to see what their experience has been with that company or individual; and spend a lot of time talking and observing what that individual or company is really like to work with. A label might have a good reputation, but that reputation could have been built on a success 10 years ago; what have they done lately? Ask for a specific plan for you and your band. How will the label help you get tours? How will the manager deal with finances? How will the lawyer bill you? We know that Sub-Pop has been successful with many of thier artists, but how do their contracts work? Will they enter into a license deal or maybe they are only a 360 deal label? Just because a label or management company has a good name doesn’t mean that they are a good fit for you.
It is always exciting to have someone interested in working with you and in some cases offer you money to work for them. But in today’s music world, you have to ask: is it worth it? Maybe you can do it on your own. Maybe you make your own start and then go with a label. Maybe your best friend is ok to work as your manager for a regional tour. All of these things must be thought about before signing on the dotted line. In the business world if one business is looking at buying out another business, the due diligence period may take months (years even). Lawyer pour over the existing contracts, the amount of money coming in and out of the company, the people working at the company, the systems in place that are working or need to be fixed. Why should your music career be any different?
Musicians should focus on music. That is what they are inherently good at and why they have the exciting prospect of people paying them for what they create. However, saying that “I only want to make music” and ingorning the decisions that effect your career as a musician can have devastating results. Do your due diligence before you make decisions that will effect your ability to continue to make music for a living. Once you have made smart decisions on who makes up your professional team, you can go back to what you are truly meant to be doing: making music.
Recently I was asked to write an article about anything currently happening in the new music industry. Not really an exciting proposition for most, but for me, my heart went a flutter. Should I write about fair use, the death of the CD (again), the exploitation of copyrights (again) or current trends in the indie scene? I decided to write about something that is current and personal to me and my clients. A new model (which is not so new) for a band/label contract.
Using a combination of the current 360 deals and traditional investments into start-up companies, a fair, equitable and potentially lucrative partnership can be formed. Realizing that the industry is not what it used to be and that the old model is “old” for a reason, there is a potential to do something new that will benefit the artist as much as the investor or label.
The playing field has leveled to a certain degree. If a band has done much of the hard work to start out and has a competent management team and lawyer on its side, the need for the old school label is not as necessary as it once was. Using the same model that many start-up companies use, a band can attract investors and forge a partnership that will allow the band to reach new heights and the investor to realize attractive financial returns.
SHAMELESS SELF PROMOTION(S) OF THE WEEK
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