Monday, February 18, 2008
Imeem Swirls Around Snocap, Acquisition Possible
from digital music news:
Imeem may be acquiring Snocap, according to an early report bubbling Wednesday. TechCrunch confidently pointed to the purchase, though neither party has confirmed a buyout. Imeem, a media-focused social networking destination, has been pushing aggressively into music though licensing deals and acquisitions. Snocap allows bands to easily sell their content online through a widget-based approach, though the company has experienced difficulty ramping revenues.
Borders Digital Music Arrives; Blends Into Physical
Border Books & Music is now layering digital aspects into its physical shopping experience, part of an interior overhaul starting this week. Alongside books, cafes, and comfy chairs, Borders will position computer kiosks that enable book downloading, self-publishing, genealogy research, and the construction of photo albums. The ambitious effort is being piloted this Friday in Ann Arbor, Michigan, home base for the company.
The digital push also includes Borders Digital Music, a concept that features custom CD mixing and burning. Borders has amassed a collection of several million tracks, according to information shared late last week. Customers can also transfer their downloads to portable MP3 players, but not the iPod. Borders will bring the concept to a total of 14 stores by the end of this year.
Online, Borders is also preparing its own music launch, according to information revealed in January. Currently, Borders outsources its music initiative to Amazon, and splits the revenues. That relationship ends in April, at which point Borders is planning an independent initiative.Teenagers Profess Copyright Cluelessness, Nonchalance
A recent Microsoft study revealed that most teenagers carry little knowledge of copyright law, an unsurprising finding. The study showed that roughly one-half of teenagers have little knowledge related to digital media copyright, and just 11 percent carry a strong understanding. The small, knowledgeable subset credited their parents, TV, magazine or newspaper articles, or websites for their understanding, according to the published report.
Other aspects of the survey showed that teenagers are largely disinterested in digital copyright enforcement. Just 48 percent felt that digital copyright violations should be punished, while 90 percent felt that theft of a physical item - like a bicycle - should carry penalties. Of the knowledgeable group, 80 percent agreed with punishment of some kind. "This survey provides more insight into the disparity between IP awareness and young people today and highlights the opportunity for schools to help prepare their students to be good online citizens," explained Sherri Erickson, global manager of the Genuine Software Initiative at Microsoft.
infighting stirs bigger questions; Where are my Royalties?
Industry executives reacted strongly on Thursday to a major, class action lawsuit against MediaNet Digital. One major label vice president pointed to a broadening level of discord, one that now involves a contentious publishing bloc. "So far the battle has been between labels and kids, but now it's also between labels and publishers," the executive noted, pointing to a new theater of legal infighting. "Publishers have been the sleeping giant."
Others wondered where their digital mechanical payments have been hiding. "I can't remember the last time we received a mechanical check from digital," one manager of a superstar-level band told Digital Music News. "We still sell records, and merchandising is through the roof, but digital don't mean s**t!"
Another prominent manager echoed the sentiment, and pointed to irregular payments at best. Part of the problem may lie in tepid consumer demand across various subscription and download services. But a payment structure that consolidates master recording and publishing licenses into one check - deliverable to major labels for subsequent redistribution - could be generating accounting problems. "That's where the hang up is," the second manager relayed, "because the labels seldom pass through these payments."
MP3 Unplugged: Rethinking The Digital Music Future
"We have to rethink how we sell music, throw the rule book out the window, and open ourselves up to entirely new possibilities," says media analyst Paul Verna.
By Alice LaPlante, InformationWeek
Jan. 31, 2008
Michael Bracy has a file on his Windows desktop labeled "solutions." In it, he's collected the many dozens of suggestions that have come to him over the years as policy director of the Future of Music Coalition on how to fix the music business. He occasionally reads through them with wry amusement.
"It's very sweet of people," said Bracy, who founded the nonprofit think tank that advocates for musical artists trying to make it in an increasingly technological world, "but the current business model has been completely shattered, and there is no single one-size-fits-all solution." However, he believes that despite all the industry negativity about this fact, "we're seeing unprecedented creativity and innovation that in the end will benefit both artists and consumers alike."
As evidence, Bracy points to all the technology-spurred experimentation with new business models. From the advertising-supported free music downloads offered by Spiral Frog, to subscription-based services such as Rhapsody, to Amazon engaging Apple in a head-to-head competition in the music download space, some of the best and brightest minds in both the technological and music fields are testing the waters to see how to make money from music, now that physical recorded media is going the way of the buffalo. "All the chaos actually spells incredibly good news," said Bracy.
Indeed, in the December issue of Wired, the musician David Byrne wrote a feature naming six different models that artists were pursuing to profitably get their music to consumers. These ranged from the traditional relationship with labels all the way to a do-it-yourself model in which the artist handles everything from recording to marketing to distribution.
One of the biggest music business news stories of 2007 was Radiohead releasing its latest album in digital form and giving music consumers the option of paying what they liked for it. But although Fortune magazine called the move one of the "dumbest business moments" of the year, citing comScore numbers indicating that only 40% of consumers paid for it -- and only paid a meager $6 each. Yet band member Thom Yorke pointed out that it netted the band $3 million. And others say that trying out new business models, and learning from failures as well as successes, is exactly what the industry should be doing. "The industry shouldn't be searching for the answer, but should be pursuing all the very many possible ways there are for monetizing music," said Peter Faber, professor of marketing at the Wharton School of Business at the University of Pennsylvania.
"We have to rethink how we sell music, throw the rule book out the window, and open ourselves up to entirely new possibilities," agreed Paul Verna, senior analyst for media and entertainment for eMarketer.
Independent musicians, labels, and, increasingly, Web sites, are doing this. Some are trying the subscription model; others are attempting to market value-added services and products that are tied to sales of conventional albums; still others are blending digital downloads and physical media. "Unfortunately, there's a very strong herd mentality among the major labels, and the lack of variety in their practices is quite shocking given all the opportunities that are out there," said Faber.
"Everyone is both hopeful and uncertain about what we need to do to transform the music industry," said Samantha Murphy, a singer/songwriter and founder of samanthamurphy.com. Like a growing number of musicians, Murphy believes that the only way to evolve as an artist as well as a businessperson is to pursue a more populist business model based on using technology to cultivate more intimate relationships with consumers. "I'm convinced that people, when given the opportunity, will be willing to pay for the music they love," she said. "With so many smart and creative people working on this challenge, I'm sure we will succeed."
From Service To Product And Back Again
Until 130 years ago, music was a service -- an entertainment experience provided by musicians to the public in a live venue. But with the invention of the phonograph, it was transformed, practically overnight, into a physical product: the record.
Colin Brumelle, a San Francisco-based musician and developer of software for musicians and record labels, pointed out that when the phonograph was invented in 1877, it was a radical invention able to, in Thomas Edison's own words, "annihilate time and space."
The response from the music business was immediate and alarmist. John Philip Sousa wrote an essay titled "The Menace of Mechanical Music" that warned how recorded music would cause the entire music industry to go into a disastrous decline. "Of course, much of the subtext of this was economic," said Brumelle. "Musicians were understandably worried that recorded music would undercut their ability to command fees for performance."
Later, in the 1930s, radio caused the same upheaval, as the recorded music industry worried its business would be destroyed. Much later, the tape cassette, the first easily recordable media, caused widespread consternation. Indeed, the slogan of the British Phonographic Industry from a 1980s-era anti-piracy campaign was "Home Taping is Killing Music." MP3 provoked the same outcry, as evidenced by the reaction to, and effective killing of Napster by the industry, in the early 2000s.
Once music was turned into a product, the business model for producing it was straightforward: record companies would invest in artists by paying them money upfront for the right to record and sell their music, and by spending the necessary funds on recording, marketing, and distribution of the physical disks that held that music. This investment was then recouped -- and, under optimal circumstances, exceeded -- by sales of the records. "In effect, the record labels acted simultaneously as investment banks and as marketing and distribution companies," said David Kusek, coauthor of The Future of Music and a VP at the Berklee College of Music.
But that model, everyone agrees, is now broken, largely due to the advent of the Internet, digital downloads, and other technological advances which have turned the physical product back into a service. Although major labels are still selling hundreds of millions of CDs, those numbers have been declining rapidly and precipitously -- largely due to the escalating popularity of digital downloads.
Between 2006 and 2007 revenues from CD sales plummeted from $14 billion to $9 billion, according to James McQuivey, VP and principal analyst of consumer media technology for Forrester. And according to Nielsen SoundScan, in 2007 CD sales were down 5% over 2006, whereas digital track sales increased by a full 65% and digital album sales more than doubled to 33 million.
Moreover, the profit margins of the recorded music industry, which in the 1980s were 15% to 20%, have declined to less than 5% today, according to Plunkett Research's "Entertainment and Media Industry Trends and Statistics 2007."
"For years, people were willing to compensate the music labels for going to the hassle of finding the artists, organizing their best stuff in shiny plastic disks called albums, and promoting them," said McQuivey. But now that the Internet is providing consumers with another way to discover music, and there's no longer a need for the actual physical product, "consumers are suddenly much less willing to do this. They have the Internet and friends sending links, and all sorts of ways to listen to new songs. Suddenly, there's no role left for the labels."
Music Consumption, However, Is Growing
Yet despite all the woeful sounds tolling the death of the music business, in fact it is growing overall at a healthy rate. It is arguably only recorded music that is in trouble. eMarketer estimates that the worldwide market for recorded music, live music, and music publishing will exceed $67 billion by 2011, compared to $62 billion in 2007. But this 2.2% growth will come largely from online and mobile music, live concerts -- where revenues are growing rapidly -- and licensing of music for public performances, commercials, TV shows, films, and video games.
Indeed, overall music consumption seems to be dramatically on its way up. Bridge Ratings, which tracks the percentage of the U.S. population that consumes music, has seen dramatic increases. In 1980, only 20% of the population was actively consuming music; in 1990, it was 21%; in 2000 it was 26%; and in 2006 it was 32%. "On the face of it, that's impressive," said Verna. "But if you plot those figures against per capita music expenditure, you see a drastic decline." In other words, said Verna, more people listen to music, but they spend a lot less money while doing so.
"We live in an age where music is all around us. Music has proliferated across all these channels -- commercials, video games, television shows, movies, amusement park rides -- it's part of what's in the air and it accompanies us no matter where we are or what we are doing," said Verna. "We expect to have our collections with us at all times, and in many ways, music is now taken for granted." Part of the problem is that people -- especially younger people -- simply don't believe they owe anyone anything for the privilege of listening to music, especially when that music exists in digital form. "It's not that they don't value it, just that they don't feel they need to pay for it," said Verna. "They simply don't think of this in moral terms. They've always gotten their music for free, and they don't see why that should change."
Thus although online music might seem to offer a "lifeline" to the major music labels, it's hard to say whether the escalating growth in digital downloads will fill the hole left by the disappearance of so much physical sales revenues, according to Dan Cryan, a music analyst with Screen Digest, a London-based media analyst firm.
"Yes, the Internet is facilitating discovery of new music and new artists by consumers," said Cryan, "but discovery on its own is pointless. Discovery that drives sales is what matters to the labels. And the underlying deal infrastructure that facilitates the sharing of revenues between the online services and traditional broadcast and recorded media players is not yet in place."
Telecom: The New Music Scouts?
In the mobile space, there is growing talk of how handset makers and carriers might be in the best position to do exactly that. Because they already have the infrastructure in place to deliver music, it makes sense for them to charge users for music -- the subscription model is generally perceived as the one that would work in this scenario -- and return some of those revenues to the artists.
Whether these companies will want to do the upfront work of investing in artists' recording costs is another matter. "It's very unclear who would do the investing in new artists, and how the money would be split between them, and distributors, and the artists themselves," said Kusek.
In the past, radio was the primary way that people discovered music. Now that is moving toward social networking and the word of mouth that social networking enables. "Quite a few bands have broken through as a result of word of mouth on MySpace and Facebook," said Kusek. The way Kusek envisions it, $2 would be added to your ISP or phone bill that would go into a pool to be shared by everyone involved.
A Flip-Flopped Business Model
Artists have always received royalties based on a percentage of sales of their recordings. Under the traditional model, according to Bracy, artists would then go on tour and perform live to sell more records. "Now it's almost flipped, where people are selling the records and the digital downloads to promote their tours and ability to sell merchandise," he said. "And it's unclear whether musicians will be able to shift back to gaining the majority of their revenues from recordings under any of the new business models."
Indeed, the live performance industry is booming. According to Screen Digest, a full 50% of all music revenues in 2007 came from live performances. "Look at the Stones. Look at Springsteen. They're all making a killing from their tours," said Kusek. No wonder, then, with revenues from CD sales dwindling and revenues from online downloads not adding up to significant sums, the big question -- especially from newer artists' perspectives -- is how to leverage technology to reap monies from a broad range of activities, not just recordings.
"Everyone is asking how digital downloads can make up for the loss in physical recordings," said eMarketer's Verna. "The far more urgent question is: How can people -- whether artists or labels -- monetize all their assets?" Kelli Richards, president and CEO of the All Access Group, an established veteran in the digital music/media arena, believes that any viable business model incorporates the full range of artist activities into the revenue stream. She is especially interested in what she calls "the concert of the future," in which savvy artists will use technology to extend their relationship with their fans in a live concert experience.
For example, prior to playing a concert in a particular location, a band could push messages to fans in an e-mail blast based on zip code; at the concert itself, fans could vote for the set list using their cell phones. Leaving the show, the band could send songs to fans' cell phones, send follow up e-mail messages thanking them for coming to the show, and offer them discounted merchandise that they could purchase from an online store.
"Concerts are the No. 1 category in on-demand television," pointed out Richards. "People are willing to pay top dollar for live performances, and technology is a great enabler of turning these events into opportunities to draw fans closer and generate even more revenue."
Musician Samantha Morton provides a case in point. Like most independent artists, she makes most of her money by touring. Although she does record and make the CDs available at her concerts, as well as digital downloads available through iTunes, she uses recorded music sales primarily as vehicles to promote her live appearances. Each CD she presses costs her $1.60; she routinely hands them out to fans and tells them to pay her whatever they think they are worth. Rather than the $1 she gets if one of her songs sells on iTunes, she gets an average of $10 per CD, which leaves her with a net profit of more than $8.
Still, she sees this less as a significant revenue stream and more as a way to increase her fan base. She encourages people to burn copies of her CDs and give them out to friends. She has even provided blank CDs to concert goers to facilitate this way of spreading the word about her music and advocates free file sharing of her music over the Internet for the same reason.
Is Online Popularity Translating To Revenue For Artists?
But is Internet popularity translating into actual revenue for artists? This is the million-dollar question. "It's very nascent, but I don't believe that sales generated on MySpace or YouTube or Facebook are adding up to very much," said Richards. Like others, she believes that online tracks will promote sales of what she calls "value added content": backstage or behind the scenes footage, outtakes, interviews, or opportunities to interact with the musicians more intimately.
Faber is also a big believer in this value-added concept that piggybacks onto digital downloads. Under this scenario, the digital downloads are both a discovery mechanism and advertisement for the album, just as radio used to be. "By getting tracks out there as broadly as possible, and making them as accessible as possible, you can drive demand for the album and all the value-added content that's on there," said Faber.
Faber, who was an expert witness for Napster, calls the summer of 2000, before Napster was shut down, "the golden age of music." "I absolutely believe that Napster would have been the greatest thing to happen to the music industry. People were far more engaged than they ever were before or have been since in discovering music and passing it along to others." Indeed, surveys showed that Napster was associated with greater album purchasing, he said.
"Who needs major labels, and Rolling Stone, and MTV? You've got friends, and ways of communicating and talking about bands," said Bracy. "Hundreds of bands, not a single superstar among them, all have significant followings and fan bases thanks to technology."
The online music site Pitchfork has turned out to be incredibly influential at promoting discovery of relatively unknown bands. After a rave review on Pitchfork, Arcade Fire immediately began selling out venues all across the country, pointed out Bob Lefsetz, an independent music producer in Santa Monica and author of the Leftsetz Letter. "There will be the Google of the music business, and it will happen," said Lefsetz. "Someone will create the MTV, the Rolling Stone of the online music business -- the place to go for the online filter that tells you what you need to be listening to."
"A lot of people who had lost faith in the industry are very excited about all the possibilities -- the potential of finding out about new artists who have been flying under the radar," said Verna. "Clearly, there's terrific music out there, it's online, and an open field for companies to develop really great technology for filtering through the drek and finding the gold, and getting people to actually pay money for it."David Byrne's Survival Strategies for Emerging Artists — and Megastars
Full disclosure: I used to own a record label. That label, Luaka Bop, still exists, though I'm no longer involved in running it. My last record came out through Nonesuch, a subsidiary of the Warner Music Group empire. I have also released music through indie labels like Thrill Jockey, and I have pressed up CDs and sold them on tour. I tour every few years, and I don't see it as simply a loss leader for CD sales. So I have seen this business from both sides. I've made money, and I've been ripped off. I've had creative freedom, and I've been pressured to make hits. I have dealt with diva behavior from crazy musicians, and I have seen genius records by wonderful artists get completely ignored. I love music. I always will. It saved my life, and I bet I'm not the only one who can say that.
"Here's the 'cover' I did of the Fiery Furnaces tune — the words in the first half are theirs and in the last two verses they are mine. Kind of a new way to collaborate."
— David Byrne
Courtesy Thrill Jockey Records
What is called the music business today, however, is not the business of producing music. At some point it became the business of selling CDs in plastic cases, and that business will soon be over. But that's not bad news for music, and it's certainly not bad news for musicians. Indeed, with all the ways to reach an audience, there have never been more opportunities for artists.
have never been more opportunities for artists.Where are things going? Well, some people's charts look like this:
Some see this picture as a dire trend. The fact that Radiohead debuted its latest album online and Madonna defected from Warner Bros. to Live Nation, a concert promoter, is held to signal the end of the music business as we know it. Actually, these are just two examples of how musicians are increasingly able to work outside of the traditional label relationship. There is no one single way of doing business these days. There are, in fact, six viable models by my count. That variety is good for artists; it gives them more ways to get paid and make a living. And it's good for audiences, too, who will have more — and more interesting — music to listen to. Let's step back and get some perspective.
What is music?
First, a definition of terms. What is it we're talking about here? What exactly is being bought and sold? In the past, music was something you heard and experienced — it was as much a social event as a purely musical one. Before recording technology existed, you could not separate music from its social context. Epic songs and ballads, troubadours, courtly entertainments, church music, shamanic chants, pub sing-alongs, ceremonial music, military music, dance music — it was pretty much all tied to specific social functions. It was communal and often utilitarian. You couldn't take it home, copy it, sell it as a commodity (except as sheet music, but that's not music), or even hear it again. Music was an experience, intimately married to your life. You could pay to hear music, but after you did, it was over, gone — a memory.
Technology changed all that in the 20th century. Music — or its recorded artifact, at least — became a product, a thing that could be bought, sold, traded, and replayed endlessly in any context. This upended the economics of music, but our human instincts remained intact. I spend plenty of time with buds in my ears listening to recorded music, but I still get out to stand in a crowd with an audience. I sing to myself, and, yes, I play an instrument (not always well).
We'll always want to use music as part of our social fabric: to congregate at concerts and in bars, even if the sound sucks; to pass music from hand to hand (or via the Internet) as a form of social currency; to build temples where only "our kind of people" can hear music (opera houses and symphony halls); to want to know more about our favorite bards — their love lives, their clothes, their political beliefs. This betrays an eternal urge to have a larger context beyond a piece of plastic. One might say this urge is part of our genetic makeup.
All this is what we talk about when we talk about music.
All of it.
What do record companies do?
Or, more precisely, what did they do?
- Fund recording sessions
- Manufacture product
- Distribute product
- Market product
- Loan and advance money for expenses (tours, videos, hair and makeup)
- Advise and guide artists on their careers and recordings
- Handle the accounting
This was the system that evolved over the past century to market the product, which is to say the container — vinyl, tape, or disc — that carried the music. (Calling the product music is like selling a shopping cart and calling it groceries.) But many things have changed in the past decade that reduce the value of these services to artists.
For example:
Recording costs have declined to almost zero. Artists used to need the labels to bankroll their recordings. Most simply didn't have the $15,000 (minimum) necessary to rent a professional studio and pay an engineer and a producer. For many artists — maybe even most — this is no longer the case. Now an album can be made on the same laptop you use to check email.
Manufacturing and distribution costs are approaching zero. There used to be a break-even point below which it was impractical to distribute a recording. With LPs and CDs, there were base manufacturing costs, printing costs, shipping, and so on. It paid — in fact, it was essential — to sell in volume, because that's how many of those costs got amortized. No more: Digital distribution is pretty much free. It's no cheaper per unit to distribute a million copies than a hundred.
Touring is not just promotion. Live performances used to be seen as essentially a way to publicize a new release — a means to an end, not an end in itself. Bands would go into debt in order to tour, anticipating that they'd recover their losses later through increased record sales. This, to be blunt, is all wrong. It's backward. Performing is a thing in itself, a distinct skill, different from making recordings. And for those who can do it, it's a way to make a living.
So with all these changes, what happens to the labels? Some will survive. Nonesuch, where I've done several albums, has thrived under Warner Music Group ownership by operating with a lean staff of 12 and staying focused on talent. "Artists like Wilco, Philip Glass, k.d. lang, and others have sold more here than when they were at so-called major labels," Bob Hurwitz, president of Nonesuch, told me, "even during a time of decline."
David Byrne in Conversation with Brian Eno
"How the f--k can we get out of this?""Cool Tools"
"The people who know how to do this are the ones you fired ..."
"When was the last time you had dealings with a record company?"
But some labels will disappear, as the roles they used to play get chopped up and delivered by more thrifty services. In a recent conversation I had with Brian Eno (who is producing the next Coldplay album and writing with U2), he was enthusiastic about I Think Music — an online network of indie bands, fans, and stores — and pessimistic about the future of traditional labels. "Structurally, they're much too large," Eno said. "And they're entirely on the defensive now. The only idea they have is that they can give you a big advance — which is still attractive to a lot of young bands just starting out. But that's all they represent now: capital."
So where do artists fit into this changing landscape? We find new options, new models.
The six possibilities
Where there was one, now there are six: Six possible music distribution models, ranging from one in which the artist is pretty much hands-off to one where the artist does nearly everything. Not surprisingly, the more involved the artist is, the more he or she can often make per unit sold. The totally DIY model is certainly not for everyone — but that's the point. Now there's choice.
1. At one end of the scale is the 360, or equity, deal, where every aspect of the artist's career is handled by producers, promoters, marketing people, and managers. The idea is that you can achieve wide saturation and sales, boosted by a hardworking machine that stands to benefit from everything you do. The artist becomes a brand, owned and operated by the label, and in theory this gives the company a long-term perspective and interest in nurturing that artist's career.
Pussycat Dolls, Korn, and Robbie Williams have made arrangements like this, selling equity in everything they touch. The T-shirts, the records, the concerts, the videos, the BBQ sauce. The artist often gets a lot of money up front. But I doubt that creative decisions will be left in the artist's hands. As a general rule, as the cash comes in, creative control goes out. The equity partner simply has too much at stake.
This is the kind of deal Madonna just made with Live Nation. For a reported $120 million, the company — which until now has mainly produced and promoted concerts — will get a piece of both her concert revenue and her music sales. I, for one, would not want to be beholden to Live Nation — a spinoff of Clear Channel, the radio conglomerate that turned the US airwaves into pabulum. But Madge is a smart cookie; she's always been adept at controlling her own stuff, so we'll see.
2. Next is what I'll call the standard distribution deal. This is more or less what I lived with for many years as a member of the Talking Heads. The record company bankrolls the recording and handles the manufacturing, distribution, press, and promotion. The artist gets a royalty percentage after all those other costs are repaid. The label, in this scenario, owns the copyright to the recording. Forever.
There's another catch with this kind of arrangement: The typical pop star often lives in debt to their record company and a host of other entities, and if they hit a dry spell they can go broke. Michael Jackson, MC Hammer, TLC — the danger of debt and overextension is an old story.
Obviously, the cost of these services, along with the record company's overhead, accounts for a big part of CD prices. You, the buyer, are paying for all those trucks, those CD plants, those warehouses, and all that plastic. Theoretically, as many of these costs go away, they should no longer be charged to the consumer — or the artist.
Sure, many of the services traditionally provided by record labels under the standard deal are now being farmed out. Press and publicity, digital marketing, graphic design — all are often handled by smaller, independent firms. But he who pays the piper calls the tune. If the record company pays the subcontractors, then the record company ultimately decides who or what has priority. If they "don't hear a single," they can tell you your record isn't coming out.
So what happens when online sales eliminate many of these expenses? Look at iTunes: $10 for a "CD" download reflects the cost savings of digital distribution, which seems fair — at first. It's certainly better for consumers. But after Apple takes its 30 percent, the royalty percentage is applied and the artist — surprise! — is no better off.
Not coincidentally, the issues here are similar to those in the recent Hollywood writers' strike. Will recording artists band together and go on strike?
3. The license deal is similar to the standard deal, except in this case the artist retains the copyrights and ownership of the master recording. The right to exploit that property is granted to a label for a limited period of time — usually seven years. After that, the rights to license to TV shows, commercials, and the like revert to the artist. If the members of the Talking Heads held the master rights to our catalog today, we'd earn twice as much in licensing as we do now — and that's where artists like me derive much of our income. If a band has made a record itself and doesn't need creative or financial help, this model is worth looking at. It allows for a little more creative freedom, since you get less interference from the guys in the big suits. The flip side is that because the label doesn't own the master, it may invest less in making the release a success.
David Byrne in conversation with Mac McCaughan from Merge Records.
"How could an indie label handle a release the size of Arcade Fire's second record?""How do emerging acts survive?"
"Major labels aren't doing well because they put out terrible records for years and years and kept raising the price of those terrible records and finally people were like, 'Screw you.'"
But with the right label, the license deal can be a great way to go. This is the relationship Arcade Fire has with Merge Records, an indie label that's done great for its band by avoiding the big-spending, big-label approach. "Part of it is just being realistic and not putting yourself in the hole," Merge cofounder Mac McCaughan says. "The bands we work with, we never recommend that they make videos. I like videos, but they don't sell a lot of records. What really sells records is touring — and artists can actually make money on the tour itself if they keep their budgets down."
4. Then there's the profit-sharing deal. I did something like this with my album Lead Us Not Into Temptation in 2003. I got a minimal advance from the label, Thrill Jockey, since the recording costs were covered by a movie soundtrack budget, and we shared the profits from day one. I retained ownership of the master. Thrill Jockey does some marketing and press. I may or may not have sold as many records as I would have with a larger company, but in the end I took home a greater share of each unit sold.
5. In the manufacturing and distribution deal, the artist does everything except, well, manufacture and distribute the product. Often the companies that do these kinds of deals also offer other services, like marketing. But given the numbers, they don't stand to make as much, so their incentive here is limited. Big record labels traditionally don't make M&D deals.
David Byrne in conversation with Michael Hausman.
"We weren't competing with Madonna, Beyonce or Springsteen, because they weren't doing it.""There's a way for music to have a life of its own and turn into something bigger ..."
"The labels aren't set up for enlightened, long-range thinking. That's what a good manager should be doing."
In this scenario, the artist gets absolute creative control, but it's a bigger gamble. Aimee Mann does this, and it works really well for her. "A lot of artists don't realize how much more money they could make by retaining ownership and licensing directly," Mann's manager, Michael Hausman, told me. "If it's done properly, you get paid quickly, and you get paid again and again. That's a great source of income."
6. Finally, at the far end of the scale, is the self-distribution model, where the music is self-produced, self-written, self-played, and self-marketed. CDs are sold at gigs and through a Web site. Promotion is a MySpace page. The band buys or leases a server to handle download sales. Within the limits of what they can afford, the artists have complete creative control. In practice, especially for emerging artists, that can mean freedom without resources — a pretty abstract sort of independence. For those who plan to take their material on the road and play it live, the financial constraints cut even deeper. Backup orchestras, massive video screens and sets, and weird high tech lights don't come cheap.
David Byrne in conversation with Radiohead's managers, Bryce Edge and Chris Hufford (Courtyard Management).
"... how it proliferated around the world with such ridiculous speed""You've had years of experience with the press ... missing the point."
"It actually physically blew up and we had to replace it ..."
"It's just an art band from Oxford having a bit of a laugh."
"Johnny’s doing his gay boy sort of pretty look"
Radiohead adopted this DIY model to sell In Rainbows online — and then went a step further by letting fans name their own price for the download. They weren't the first to do this — Issa (formerly known as Jane Siberry) pioneered the pay-what-you-will model a few years ago — but Radiohead's move was much higher profile. It may be less risky for them, but it's a clear sign of real changes afoot. As one of Radiohead's managers, Bryce Edge, told me, "The industry reacted like the end was nigh. They've devalued music, giving it away for nothing.' Which wasn't true: We asked people to value it, which is very different semantics to me."
At this end of the spectrum, the artist stands to receive the largest percentage of income from sales per unit — sales of anything. A larger percentage of fewer sales, most likely, but not always. Artists doing it for themselves can actually make more money than the massive pop star, even though the sales numbers may seem minuscule by comparison. Of course, not everyone is as smart as those nerdy Radiohead boys. Pete Doherty probably should not be handed the steering wheel.
Freedom versus pragmatism
These models are not absolute. They can morph and evolve. Hausman and Mann took the total DIY route at first, getting money orders and sending out CDs in Express Mail envelopes; later on they licensed the records to distributors. And things change over time. In the future, we will see more artists take up these various models or mix and match versions of them. For existing and emerging artists — who read about the music business going down the drain — this is actually a great time, full of options and possibilities. The future of music as a career is wide open.
Many who take the cash up front will never know that long-range thinking might have been wiser. Mega pop artists will still need that mighty push and marketing effort for a new release that only traditional record companies can provide. For others, what we now call a record label could be replaced by a small company that funnels income and invoices from the various entities and keeps the accounts in order. A consortium of midlevel artists could make this model work. United Musicians, the company that Hausman founded, is one such example.
I would personally advise artists to hold on to their publishing rights (well, as much of them as they can). Publishing royalties are how you get paid if someone covers, samples, or licenses your song for a movie or commercial. This, for a songwriter, is your pension plan.
Increasingly, it's possible for artists to hold on to the copyrights for their recordings as well. This guarantees them another lucrative piece of the licensing pie and also gives them the right to exploit their work in mediums to be invented in the future — musical brain implants and the like.
No single model will work for everyone. There's room for all of us. Some artists are the Coke and Pepsi of music, while others are the fine wine — or the funky home-brewed moonshine. And that's fine. I like Rihanna's "Umbrella" and Christina Aguilera's "Ain't No Other Man." Sometimes a corporate soft drink is what you want — just not at the expense of the other thing. In the recent past, it often seemed like all or nothing, but maybe now we won't be forced to choose.
Ultimately, all these scenarios have to satisfy the same human urges: What do we need music to do? How do we visit the land in our head and the place in our heart that music takes us to? Can I get a round-trip ticket?
Really, isn't that what we want to buy, sell, trade, or download?
David Byrne is currently collaborating with Fatboy Slim and Brian Eno. Separately.
Chart Sources: Jupiter Research, Recording Industry Association of America, Almighty Institute of Music Retail, Wired Research
