Monday, July 11, 2011

Omnia Vanitas: The New Gate Keepers

About a month ago I attended a music festival where several friends of mine were performing. The festival was one of hundreds that focuses on one type of instrument, for example: didgeridoo, shakuhachi, drum, flute, banjo, dulcimer, harmonica, kazoo, harp, piano and guitar. Piano and guitar festivals are very popular, held in cities throughout the country like Dallas, L.A., Seattle, Portland Washington, D.C., Long Island, Boston, Tennessee and more all over the world. These festivals usually consist of performances by name acts, competitions, workshops, private lessons and booths set up by vendors.

Another thing that I see a lot of at these festivals is DIY CDs made by people that want to break into the music business. At the latest festival I attended there were dozens of CDs for sale by people who had recorded one trying to get some exposure, or just for family and friends. So called vanity albums. With the rise of inexpensive home recording equipment it has become pretty easy to make one's own CD. And with the growing influence of the Internet, especially Facebook and Twitter, an artist can attempt to promote their recording directly to their audience.

In part due to the rise of these social sites it is now considered possible to market your own recordings. The traditional Gate Keepers for the music industry: labels, managers and promoters are, supposedly, no longer needed. Once upon a time these gate keepers held the keys to a career in popular music. They had people that listened to acts, went to shows and gauged the strength of an artist's or a band’s appeal. This weeded out those artists that supposedly were not making good music and groomed the ones that were for success. Was this a perfect system? No. Would I be a working recording artist if I had to go through the filter of a record label? I’m thinking, “not so much”.

So who are the new Gate Keepers? And what, if any, stake do they have in your music career? And does this mean that every person that can make an album should?

For a DIY artist, especially one without a physical distributor, the new gate keepers are the digital distributors who promise they can get your recordings on iTunes, Amazon.com, Pandora, Napster, Rhapsody and Last.fm. This is not a false claim. It is true, they can get your music on these sites. For a price. Will you get any sales just because your tunes are on iTunes and similar outlets? The sad truth is that studies now show that the odds are against it.

Before we get into that let’s be honest about the market we’re talking about: Indie-DIY music. In my case, as I’ve stated before, the music I produce is in a sub genre of New Age. Now let’s face the fact that in the larger New Age category, with the possible exception of Enya, odds are you will never see a New Age artist perform on the Tonight Show or any late night programs. You also won’t hear any gossip about David Lanz, George Winston, or Will Ackerman on the entertainment shows, like Access Hollywood or TMZ. The market is not that big. The audience is not that large. The artists that you do hear about are making Pop, Rock, R&B, Country and maybe Rap/Hip Hop. And all of these artists are signed to a major label. They are not Indie artists trying to make a go at it using just Facebook, Twitter and iTunes. They do use these new tools, but they still have the resources that a large label can bring to bear in creating buzz.

Like any Indie artist, you choose the genre you want to work in because you like the music, and are inspired by the artists, in that genre. But it is important not to get carried away and conflate the sales and income of big name-major label artists, with small genre independent DIY artists.

For many music fans and aspiring artists there seems to be a misconception, a musical disconnect if you will, that if an artist has any fame, no matter how small, they must be rich and famous. That just like Lady Gaga, Beyonce and Justin Timberlake, if Enya, George Winston or David Lanz, much less Jon Schmidt, Jeff Gold and Chuck Wilde walked into a convenience store they’d all be instantly recognized and mobbed. (Don’t know the last three names? They’ve all had albums in the top 10 of amazon.com’s New Age Chart within the past month of writing this post.)

But, just for kicks, before you start thinking, “I’m doing pop (or rock), and that’s huge market, so I’ll be fine”, lets take a look at how a major super-star does in the world of internet based sales. One of the most talked about stories in music news recently was that after having her smash hit "Poker Face" streamed over 1 million times on Spotify, Lady Gaga earned the grand total of $167. That's right, one hundred sixty seven dollars.1 Spotify has claimed that this number is misleading and out of date, but so far I have not read any statement from them stating what she really was paid. And from the looks of what I make per stream, this seems about right.

Obviously Lady Gaga is making money. And so are other artists at her level. Somehow, but certainly not from streaming. However, when we start looking at smaller and smaller genres the audiences/markets get progressively smaller, as well as the ability to realistically pull in super star numbers. So an Indie artist has to ask themselves, "Is this really doable for a DIY artist?" much less a super star? The answer would seem to be a a resounding, No.

In the post an Average Album we saw how back in 2002, before the music industry lost half its wealth to slumping sales and piracy, the average sales per year of an album released on an independent label was around 500 units. Sure Michael Jackson's "Thriller" and The Eagles "Greatest Hits" have sold more than 29 million copies, but average sales were only 500 units per year.

How has this changed in the age of iTunes and other download and streaming sites? As we saw in the post The Digital Domain: 1's and 0's or just zeros? albums don't sell anymore, songs do. So how's that working out, especially for Indie artists? Not so well it seems.

A study conducted by PRS for Music, a nonprofit royalty collection agency, discovered that of the 13 million song available online for purchase, 10 million, or 77%, never found a single buyer, and of the 23% that were purchased at least one time, 80% of that revenue came from only 52,000 songs, the "hits". Less than 1% of all available songs.2

The Study, when looked at in terms of album sales, showed that of the 1.23 million albums available only 173,000 ever sold once. That's 85% of available albums never selling even one copy. Will Page, one of the researchers who help compile the study, stated that, "The relative size of the dormant 'zero sellers' tail was truly jaw-dropping."3

How does this work out if you are one of the main digital distributors, one of the new (non) gate keepers? For CD Baby who now charges $39 to process some of those albums, even the ones that never sell, it must be pretty good. Let's say that they processed 250,000 albums at their old $35 price, that's $8,750,000 in gross income. Since we know that 85% of online albums never sell even once, that means that 212,500 of the albums CD Baby processed, to the tune of $7,437,500, never returned a dime for the artist's investment.

What about Tunecore who doesn't take any fees from royalties paid out, but instead charges an annual fee of $49.99? Once again, to be fair we should look at their old rate of $20 per year, which they only changed this year. Again, let's say they have 250,000 albums titles. At $20 per album per year, that would be $5,000,000 a year. Taking out the 85% of albums that never sell, even one time, would leave 212,500 albums that never found a buyer. So theoretically, at their old price structure, Tunecore would be making $4,250,000 every year on albums that never sell even one copy. Along with this they would never have to make a single payment to these artists and deal with the costs that go with that. And keep in mind their annual price has gone up more than 50%. Artists have to pay every year regardless of whether their recordings are selling, or more likely, not.

At least the old gate keepers, the record labels, managers and promoters invested money in artists. The new gate keepers make money regardless of whether an artist ever sells one copy of anything. A song or an album.

Full disclosure, I use CD Baby. And to be fair I have no idea how many albums either of these companies are distributing and just because an album is not selling doesn't mean that a few songs from that album aren't. An artist may have sold some songs, but recall that the percentage of unsold songs is also very high. iTunes and other digital music stores seem to be mostly a long term parking lot for music. You pay to have your music parked there.

But don't tell that to the new gate keepers. They market their services to every one that has ever picked up an instrument thinking they were going to be a rock star. (And isn't that pretty much everyone in the whole wide world under the age of 60?) They want you to think that just because you can get your album on iTunes, along with the other 12 million songs up there, that somehow yours will be a hit and make you gobs of money.4 They don't tell you how many of the albums and songs that they manage never sell even one copy. Why? They want your money. As J.J. Gittes from Chinatown said, "I’m not in business to be loved, but I am in business." The same could be said about the online retail outlets and streaming services. They only really care about the less than 1% of their catalog, the hits, that make up the majority of their business, and even then, like the "Poker Face" example, they don't pay enough money for a DIY artist or any artist to earn a living.

So what is the take away from this? Well, if you just left a music festival, got inspired, went home and made your own CD thinking that you’ll get rich and famous by signing up with CD Baby, Tunecore or Reverbnation and promoting it on Facebook and Twitter, maybe, rather than playing a musical instrument, you might be better off playing the lottery...

...of course that didn't stop me. Omnia Vanitas.

Sources
1 http://www.guardian.co.uk/music/2010/apr/18/sam-leith-downloading-money-spotify

2 http://www.nytimes.com/2009/08/01/opinion/01blow.html?_r=3

3 http://www.guardian.co.uk/music/2008/dec/23/music-sell-sales

4 http://www.apple.com/pr/library/2010/02/25iTunes-Store-Tops-10-Billion-Songs-Sold.html

© The Musical Disconnect (TMD)

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