Category Archives: Music Economics

Radio Royalties Fight Heats Up Again By BEN SISARIO

A bitter fight between radio and the record industry that has lasted decades is flaring up again.

The dispute is over the royalties that broadcasters pay to play music on the air. By a quirk in United States copyright law, radio stations pay songwriters and publishers but not record companies or a song’s performers.

In other words, if your band has a hit with a Beatles cover, the Beatles and their publishing company get paid when the song is played on the radio, but you don’t. (This royalty, known as a performance right, is paid in most countries around the world, and in the United States for satellite radio and digital streams, but not terrestrial radio.)

Record companies and performers have been trying for years to change the law to accommodate the performance right — Frank Sinatra was an outspoken voice on the issue — but always without success. A renewed push nearly succeeded in summer 2010, but the deal fell apart in negotiations.

The issue has sat mostly dormant since then, but after lobbying last week by the organization behind the Grammy Awards, it appears to be catching fire again. Two congressmen, Darrell Issa, a Republican of California, and Mike Quigley, a Democrat of Illinois, wrote a letter to the Government Accountability Office asking for an investigation into whether broadcasters violated lobbying rules by running on-air statements intended to influence legislation, like their characterization of the proposed royalty as a “performance tax.”

Jerrold Nadler, a Democrat from New York, gave the keynote speech for the Grammy event, put on by the National Academy of Recording Arts and Sciences. “This issue of performance rights is not over,” he said. “This issue isn’t over, and it won’t be over until we have a performance right enshrined in law.  If the parties can’t solve the problem, Congress will.”

Dennis Wharton, a spokesman for the National Association of Broadcasters, which represents radio stations, said in a statement: “N.A.B. believes appropriate disclosures were made on these messages. When free and local broadcasting is threatened by bad public policy proposals, we have a First Amendment right and responsibility to educate our millions of listeners and viewers.”

Mr. Wharton also referred to an affidavit by a radio station employee in Washington stating that the National Association of Broadcasters paid for its spots and that the MusicFirst Coalition, the label and musicians’ group, declined an offer to advertise on the air.

SOURCE:
Radio Royalties Fight Heats Up Again

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Today’s music industry – bridges and barriers by Robin Whittle

Today’s music industry – bridges and barriers

The recorded music industry has for a hundred years delivered its product to consumers on pre-pressed discs, and since the 1930’s has relied on radio, film and television to enable consumers to discover fresh music.

The two primary activities – discovery and sale/delivery are shown on the diagram below.  Four major types of industry participant form the necessary bridges between artist and listener.  Discovery is shown in black because it only after music is discovered will it be purchased.  The bottlenecks in discovery in the traditional industry structure are arguably more significant than those involved in production, distribution and sale of the CDs themselves.

Record companies, distributors and retails form the three span bridge between the artist and listener for the sale/delivery process.  Radio, and to a lesser extent the printed press, television and film, is an essential element in the discovery process.  Live performance and magazine articles are also an important discovery process.

The diagram depicts direct artist to listener communication for discovery and purchase of music via the Web.  In fact it is likely that many artists don’t want to run their own web sites – but will leave some or all of their web presence to intermediaries.  These intermediaries will have lower costs, lower risks and fewer stylist restrictions and limitations on the number of artists they can handle compared to traditional record companies.  The low-cost two-way nature of Internet communication facilitates direct communication between artists and fans – which is vital for many reasons, such as building trusting relationships with listeners, for giving feedback and inspiration to the artists, and for helping the process resemble a community.

The traditional industry participants all face high costs, high risks and significant delays in profiting from their activities.  This contrasts with an artist who runs their own web site, or who works closely with a web intermediary – they can be earning money directly from sales within hours of recording their music. They face no significant risk or cost if they place hundreds of their tracks on the site.

The costs and risks of the traditional music industry mean that most of the money which finances it goes into such mundane activities as transport, warehousing, sales tax, retail rental and staff costs, and into financing whatever means are available to promote the product into the popular style feeding frenzy in the hope that its sales will rise, for a time, above the “noise floor” and the participants will actually make a profit.

A second diagram shows quantitatively the flow of money from the listeners towards the artists.  Dotted lines represent intermittent or nonexistent flows.


Like the book industry (and the multimedia CD-ROM industry) the CD based music industry has great difficulty matching the proliferation of product with the enormously varied and unpredictable demand of consumers.  There is high investment and significant time delays in producing large quantities of discs, packages and promotional material – with little reliable information about how many will be sold.

The risks, delays, costs and multi-layered nature of the traditional recorded music industry structure mean that only a fraction of the money spent by listeners flows to artists. The true industry structure is more complex – for instance collection societies (not shown) collect money from radio stations, and many public places such as shops and entertainment venues (not shown) and distribute an ideally large proportion to the composersof the music.  Music industry copyright and commercial relationships are complex and cannot be shown fully here.

While it may be true that certain industry participants are rapacious or way out of touch with the true needs of artists and listeners, the existing industry structure does follow naturally from the technological limitations of mass-produced CDs and uni-directional mass media for promotion and discovery.

The Internet part of the model assumes that listeners have Internet-connected computers with significant hard disk capacity and a CD-R writer – this is becoming common.  It also assumes that music at the quality which they want to purchase can be delivered via the Internet conveniently and with relatively low costs.  We are yet to really arrive at this point. MP3 at 128 kbps may sound like the original 44.1 kHz 16 stereo recording in most situations, and at a Megabyte a minute, this is about one seventh of the file size of a losslessly compressed version. Still, a 33.6 kbps modem can only download about 10 megabytes an hour – so to gain an hour of music at 128 kbps will take about six hours.  There are serious convenience and cost issues for most users at present with this arrangement, but they can be expected to be reduced over the next few years with lower Internet costs, and especially the widespread use of HFC cable modems, ADSL and other broadband local-access technologies.

Assuming this does happen, a listener can discover music by searching and listening in real-time.  They can then pay for an hour or so of music, and spend only about USD$5 to download it into their machine. (That is 60 Megabytes of MP3 or around 360 Megabytes for music which can be compressed losslessly to 60% of its normal size.)  The CD-R writing can be largely automated, and the cost of the disc is just a dollar or so.  This leaves quite a few dollars to go to the artist (to cover their costs and to create profit from their music), whilst still being cost-competitive and a lot more immediate, personal and personalised than the traditional approach of buying music on mass-produced pre-pressed discs at a shop.

These lower costs, lower risks (listener chooses exactly what they want, rather than having to choose between album packages) greater immediacy and absence of stylistic and geographical barriers can be expected to lead to a net increase in the amount of music purchased, with a resultant increase in the funds remaining with artists – even if the total listener expenditure remains the same as it is with the traditional industry model.  Considering the many benefits of the electronic delivery model, it would not be surprising if (in the absence of CD-R and Net-based copying) that total expenditure would rise – because there is a vast unmet demand for music which would be translated into more action with a more efficient and friendly business model.

However the effects of the ability of users to copy music are hard to predict.  In the current atmosphere of rebellion against the record companies – often held in low regard by listeners and artists – copying seems to be all the rage.  I am optimistic that the two-way, low risk, low-cost, immediate, personal communications of the Net will facilitate artists and listeners building trusting, lasting relationships which are conducive to the artistic development and financial viability of music development in a vast range of styles, and especially for artists who are just developing their work and are yet to attain widespread recognition.

The current industry places many stylistic restrictions on the music which can be discovered via commercial radio.  These are more fully discussed in the paper.

There is a vast range of music and an equally (or potentially) large range of interests amongst listeners.  This goes far beyond the straight jacket of the kind of music which is compatible with commercial radio.

There is an immense  potential for an explosion of diversity – in new styles of music as well as the rediscovery (or the fresh discovery for most listeners) of fields of music which have existed for decades or centuries but which have never yet been discovered by an individual simply because no radio station in their area plays it.  For instance, a single 1 1/2 hour Indian classical music program on a community radio station here in Melbourne (3 MBS) has opened my ears to a wide range of music (which to my ears is less formal and more varied and lyrical than Western classical music) which I would never have otherwise become attuned to.

SOURCE:
Today’s music industry – bridges and barriers


Real Talk: It’s time to reevaluate the way we engage music consumers

 

French anti-P2P law cuts back pirating, but music sales still decline.  France has one of the strictest anti-piracy laws in the world, with a 3 strike and you are out model, it is a heavy deterrent to stay away from P2P sites and Torrent sites.  Despite the success and cracking down on illegal downloading music sales continue to decline.  Is this simply a “give it time” factor or is there something deeper and more basic reason why music sales continue to decline?

I believe that this is proof that piracy is not the only reason for music sales declining. I believe music consumers now feel that there is less value in music today. As a music business community I believe we now have to find ways to once again add value to music and engage fans on a more personal level. Piracy absolutely added to the music sales decline BUT I believe the quality of the music and way music consumers are engaged needs to be reevaluated.

Some music consumers I have spoken with feel that the music industry indeed is saturated with bands and new artists, yet do not feel they have an opportunity to get to know the artist or band.  Some music consumers feel that the quality of the music being presented and released is too “cookie cutter”, no innovative sounds or artists are being given an opportunity or marketed (yet alone developed) as the emphasis has been placed on “product development”.

I feel the music realm is saturated but it is mainly due to the increase of independent musicians, bands and artists – good and bad, and the easy of reaching the music consumer through technology.  I agree with music consumers that we the consumer do not know who the artists are, not enough time has been invested in making the artist a household name and something the consumer can relate to, which is bad because besides wanting to be entertained by the music the music consumer wants to be engaged and given a more personal connection as well.

In an era in which is easy to reach music consumer through a variety of mediums the record companies need to remember that artist development isn’t only about perfecting a diamond in the rough but ensuring that the diamond absolutely shines in every way in order to get deep rooted fans to follow and support the artist, a/k/a the product and brand.

According to a recent Neilsen Sound Scan report, sales are up in 2011, but in digital format as physical forms of music continue to slide in decline.  In the mix of trying to keep up with technology and social media trends and music deliveries the concept of providing value to physical sales has been sidelined, and this is a terrible idea.  Sure record companies and artists are no longer seeing physical sales as their bread and butter, with 100,000 -to- 200,000 physical record sales being considered good according to today’s standards versus 500,000+ physical sales in yesterday’s music industry.  Has the music industry just given up on trying to bring prominence to physical sales in lieu of taking the easy way out of low to no cost manufacturing of digital music in hopes that it will eventually replace physical products and generate enough revenue to compensate the loss of CD sales?

What do you think? I’m interested in hearing your perspective as a music consumer, as a music industry person and just as a spectator in general. DO you purchase physical product – i.e. CD’s, t-shirts, posters and other merchandise or do you solely purchase (I hope you do) digital music? Do you feel you are missing out on anything by purchasing music in digital format – i.e. liner notes, physical tangible CD and etc?

SOURCE:
French anti-P2P law cuts back pirating, but music sales still decline.

U.S. Music Sales Down Just 1.3% In First Quarter, According to SoundScan

Nielsen SoundScan 2011 midyear report: Music sales up for a change

SoundScan Releases Complete Report On 2011 Music Sales

Music’s lost decade: Sales cut in half



Making New Music Distribution Models Work

In this clip Interscope Records head Jimmy Iovine talks about what a new business model for the music industry would look like from a business and consumer perspective, and what changes need to happen if record companies are to successfully make the switch.

http://youtu.be/HrOorem5q6k


There’s More to a Free Music Campaign than Free Music…

You’ve done it again. You’ve given away a free track from your latest album. It’s on your website. You’ve talked about it on Facebook. Job done, you think. Well think again.

There’s no doubt about it. Free music is a powerful marketing tool. However, the music industry has become so over-saturated with free music that we’ve become desensitized to the process of consuming, promoting, and thinking about the importance of free music. This age-old debate has become, well, old.

I was lucky enough to revitalize my thoughts on the topic recently when I met the artist Derrick N. Ashong who launched the “Million Downloads Campaign” earlier this year. The aim of the campaign is simple – To give away one million downloads of songs and remixes from the new album AFropolitan by Derrick N. Ashong & Soulfège by Christmas 2012. So far the campaign has been such a success that Derrick witnessed over 20,000 downloads in one month.

“How?” I hear you ask. Well, Derrick did something a lot of artists are forgetting to do – he planned, strategized and philosophized over the process beforehand. So take a step backwards, and consider the following….

Define Your Purpose

Before you even contemplate giving your music away for free, you need to define your goals. We know you want to increase your fan base and drive awareness to your latest musical offering, but you need to be MORE SPECIFIC. How many downloads would you like to achieve? By what date? If your fans know your goal and timeline they may be more willing to help you spread the word. Use your previous download statistics as a benchmark. You can also try something like “If I achieved 5,000 downloads by my 30th Birthday it would be the best b-day present ever!!” You’ll be surprised by how specifics motivate people.

Your goals don’t have to be just physical either. Philosophical and creative goals are just as important. Derrick N Ashong’s goal is to create a movement that connects people around the world; to create a grassroots campaign that will break a band without a corporate label; and to make a statement in the music industry. He explains “We wanted to show that a committed group of creative people can put the power of music back in the hands of artists and fans where it belongs. In the end, we’ve said from the time we started this band that this is about more than just music…it’s a movement.”

Have a Story

Fans aren’t going to listen to your music just because it’s free. You need to attract attention. Nothing grabs people’s attention more than an intriguing and authentic story. Communicate the story behind your music to your fans and you’ll witness more of a reaction – what’s the inspiration behind the giveaway, and why is it important to you? Utilize all of your marketing platforms to do this – feature the exact details in a blog post or on your website and link to it in your newsletter and social networking sites.

Derrick’s story is both political and creative. “It was an election year.” He said “We’d heard a lot of heated rhetoric and some very poor ideas from a number of candidates. A number of us have worked in the political arena in the past and we wanted to leverage our skills not necessarily to sanction a given candidate, but to promote the ideas we believe in. Principles of freedom, creativity, community & empowerment. So we decided to launch a grassroots political-style campaign to “elect a band.”

Derrick had both a PURPOSE and a STORY behind his music. Most importantly he focused on what he could give rather than what he could get “ We reached out to people who had a profound & abiding belief in who we are and what we do – who feel like we are an extension of their own values & interests in the world. So by promoting our success, they are in fact promoting their own, because we articulate what they believe in, in a way they cannot necessarily do by themselves. In short, we offered them an opportunity to be a part of something that advanced their own interests by aligning those interests with ours.”

Harness Your SuperFans

Your social media platforms aren’t always enough to promote your free music. You need to move beyond your own marketing tools and harness the power of others. You can do this by enlisting the help of your superfans, who may just be a small group of close friends and family. This is where Derrick began. “We started by recruiting a small group of campaign “organizers,” each of whom committed to recruiting a team of 10 advocates.” He explains: “Every week we give a campaign action to our organizers who after taking that action engage their team of advocates in doing so too. Using this method, we took a small group of people and rapidly amplified their voices to reach many more.”

Derrick’s superfans are rewarded with exclusive access to the band. Most importantly, however, he has made them feel like they are part of something bigger – a grassroots movement that aims to break a band without a corporate label.

Think big, start small.

Get Something in Return

Free music should never be totally free. Derrick obviously wants to spread the word about his latest album but he has a broader purpose too. You don’t have to be as political or far-reaching as Derrick but you do need to identify exactly what you want in return for your music. An email address? A zip code? To increase your google ranking?

Identify what you want and do you best to quantify it. You need to be able to build on this free music campaign in the future.

The Take-Away

Realistically, your free music strategy can’t always be as ambitious as Derrick N Ashong’s “One Million Downloads” campaign. However, there are things you can learn from his story that should revitalize the way you think about your free music giveaways. In short:

    • Be specific about your goals.
    • Give yourself a timeline to measure your success.
    • Always make sure you are getting something in return.
    • Communicate a story to your fans to inspire an emotional connection.
    • Create memorable branding that will attract the attention of new fans.
    • Be strategic about harnessing the power of your superfan.

Remember. There’s more to a free music campaign than free music!

SOURCE:
There’s More to a Free Music Campaign than Free Music…


How Do Musicians Really Earn Their Living? by Hisham Dahud

Screen shot 2012-03-26 at 12.06.16 AM

The Future of Music Coalition has released data from its Artist Revenue Streamsresearch project, where financial case studies drawing from 4-12 years of accounting data provide information about how musicians are making a living today. These five case studies provide a financial profile of different types of full-time musicians. Each case study graphs and explains the musician-based sources of income over time, and the results tell a lot about the state of today’s music industry.

(click on chart above to enlarge)

The case studies reflect the working lives and income streams of five different types of full-time musicians:

  1. Jazz Bandleader-Composer
  2. Indie Rock Composer-Performer
  3. Jazz Sideman-Bandleader
  4. Professional Orchestra Player
  5. Contemporary Chamber Ensemble

The reports include annual revenue pies, a look at income versus expenses, and net profit over time. Some case studies also include more detailed breakdowns, such as PRO royalties by territory, or session work by bandleader. Using data compiled from individual artists’ tax returns, Quicken files and PRO royalty statements, the case studies offer a deep look into how real musicians and composers earn their living.

Key Findings

For musicians that perform (which the majority of those studied consisted of), live performance is the essential revenue stream. In nearly every instance, a performing musician’s annual income is highly dependent on the number of shows they played. Live performance is not only important because it is a creative choice (all of the subjects indicated that they enjoy playing music for live audiences), but because it is also a controllable source of income.

That income, however, comes with significant expenses attached, as touring expenses can often exceed touring income. Moreover, these expenses are not scalable, and as the more active a band becomes, the more money must be spent on travel, promotion, sidemen, etc… Other revenue streams that the case studies incorporate, such as teaching and session work, appear much more stable in the sense that they have fewer expenses attached.

Another finding was that label advances and grants do not indicate direct revenue. Two of the case study artists have received significant grants or advances related to recording projects. In both of those cases, all of the money was spent to make their records. Some of the records even cost more than the advances or grants provided, meaning that the artist needed to invest income earned through other means to complete the recording project.

More findings showed that performers leverage their performances to earn money in other ways. With live performances being the main platform for artists, all of the case study artists who make recordings sell their CDs to audiences after their shows. For the indie rock composer-sideman for instance, selling CDs on the road was nine percent of his income in 2010, and 22 percent in 2011.

One more significant finding was that some revenue streams are time delayed, but pay off year after year. Unlike live performance fees that are incurred typically right away, income earned by compositions pay off over time. For instance, the indie rock composer-sideman earned public performance royalties for songs he composed with MainBand #1 steadily, even four or five years after the recordings were released. The jazz sideman has continued to receive PRO royalties for a song he composed for a film in 2001. Compositions have a life of their own and once it’s published, it can be licensed or performed repeatedly all over the world, resulting in income over time.

Why Study Musician Revenue?

These studies are significant because they help paint a “real world” picture of what it is like to earn a living as a musician in an industry dramatically transformed from what it once was only a decade ago. While technological breakthroughs such as the emergence of the digital music store, the rise of social media, and music streaming services have certainly made it easier for musicians to distribute their music and connect with their fans, sources of revenue have seemed to funnel to only a select few key areas.

For aspiring musicians, it’s important that they get a firm financial understanding of what it really means to make a living in today’s music business, and to plan accordingly. The information can help tomorrow’s artists get a clearer idea of what they will have to do, the lifestyles they need to plan ahead for, and the sacrifices they need to endure in order to make ends meet through their music. For more seasoned musicians, these case studies can only affirm how the industry has changed in regards to primary revenue sources, and how they must continue to adapt in order to not be left behind.

SOURCE:
How Do Musicians Really Earn Their Living?


Income Solutions for Independent and Major Label Artists

Owen Husney, a manager, talks about income streams for artists. He explains that while artists may not receive money from record labels, there are other methods to get paid. Touring and merchandising are major areas. Also, if the artist writes their own songs, they can make publishing monies. The performers can also make record royalties. Husney mentions licensing monies as well, which are from licensing songs for film and television. Also in this segment, Husney discusses the common monetary trap of artists. Many artists overlook the fact that they have to pay the record label back.


Music Industry Survival Manual: 13 Different Ways To Make Money From Your Songs

FREE .PDF Download of the TuneCore Music Industry Survival Manual. Everyone needs this vital information.

Click to download Volume 2.1 WAYS TO MAKE MONEY

SOURCE:
http://blog.tunecore.com/wp-content/uploads/2012/03/13ways-booklet.pdf


The Most Important Members of a Successful Artist Team by Paul Resnikoff

Everyone is always talking about the artists’ team, the critical support structure that helps spread the music and manage fanbases. But when it comes to successful artists, the most important and well-paid members are lawyers and accountants – then the webmaster, booking agent, manager, and everyone else.

The Future of Music Coalition recently interviewed thousands of artists about the composition of their team, and this is what a few hundred, high-earning artists said.  These are full-time artists making more than $100,000 a year with over 90% of that coming directly from their music.  And outside of the band members themselves, these were the roles designated most (in terms of the percentage of respondents indicating that these people were members of their team).

 

SOURCE:
Accountants & Attorneys: The Most Important Members of a Successful Artist Team…

 


Importance of Touring, Musical cycles & Authenticity w/ Music

Skepta & @Amarudontv talk about the importance of perfoming as a artists, not being concerned about musical trends on the radio & authenticity in the music you create to keep the connection with your fans + more.


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