The Musical Disconnect

Google Announces 'Ads Free, Just Buy a Tee' Program

2012-01-16T12:42:00.000-08:00

January 16, 2012
-Palo Alto, CA (TMD News)
In a surprising move, Google, (NASDAQ:GOOG) the country's largest generator of ad revenue, (their earnings for Q3 2011 were $9.72 billion) announced today that it would no longer be charging for ads through their successful "ad sense" and "adwords" programs, but would instead be giving away ad space for free and looking to Tee Shirt sales to generate all future income.

A spokesperson for Google, Hans Vet Allt, explained the change, "This is the business model that has been so successful for the music industry for a number of years now, and our marketing data indicates that individual consumers, small business and corporations would rather pay for Tee Shirts over any other good or service.” The statement released by Google also noted that the company believes that Tee Shirt sales are, “The future of all monetary transactions."

Vet Allt went on to announce that after Google finishes destroying SOPA and PIPA it would lobby Washington D.C. hard to abolish the Federal Reserve and replace it with Old Navy, turning the U.S into a merch based economy.

Break It Down. Music Sales in 2011

2012-01-05T13:17:00.001-08:00

Soundscan released their 2011 numbers for music sales. As we saw earlier, the first two quarters of the year saw a boom in music purchases and although sales lost some of their momentum during the last half of the year, 2011 was the first year since 2004 to see growth in album purchases from the previous year.

Before we go through the numbers, it is worth restating that TMD is primarily written for musicians and listeners of smaller genre categories. Independent music. As we will see, the major labels always claim the top prizes and determine the direction that the rest of us follow, if we can. A big IF.

The Good News: Barely
The good news is that album sales in the US grew a whooping 1.3%. Not much, but better than the landslide that has been happening for most of the 2000’s.

As always, the main forces behind these numbers are due to a handful of albums. This year there were only 13 albums that sold 1 million units or more. Led by Adele’s “21”. Those 13 albums make up only 0.0169% of the 78,875 newly released albums Soundscan counted for 2011. So for Independent musicians the story is pretty much the same. Only artists on labels can make it big, and realistically, even for those artists, the odds are still slim to none.

This percentage of top selling artists seems eerily similar to the amount of super, super rich people in the US.

It should be noted that Adele is on a small label, XL Recordings, whose list of artists include The White Stripes, Radiohead, Gil Scott-Heron and Sigur Rós. The term “small” being relative. Nevertheless, Adele's "21" seems to have been the main engine for increased sales in 2011.

The other interesting thing in these numbers is that the #2 best selling album of the year was Michael Bublé’s Christmas album. It reached that spot with only three months worth of sales. Some analysts have speculated that many of these were bought as gifts and people don’t like to give, or get, a digital file as a gift. Perhaps... I would suggest that more likely the demographic of his audience are not big iTunes users. That is to say they are older.

Lastly, 2011 was the first full year since the widely popular, but illegal site, Limewire was driven out of business by the courts. Illegal downloads dropped almost 20% when the site was shut down. This gap may have convinced some people to go legit to make music purchases. (Piracy continues to be a major problem and the debate over how to deal with it has gotten nasty, and remains unsolved.)

The Mixed News: Disemboweling the Music
As we noted in the post The Digital Domain: 1's and 0's or just zeros? many people are disemboweling albums by purchasing only a few songs. Cherry Picking. This is so common that the purchase of 10 individual tracks is now call a “Track Equivalent Album", or TEA. ¹ 2011 marks the first year when the combination of digital albums and TEA sales passed the 50% mark of total sales. 50.3% to be precise.

However, when music buyers decide to buy an album in its entirety, the majority still purchased that album as a physical CD. Yes, the shinny discs! If fact, 68.7% of album sales in 2011 were CDs! This is similar, albeit weaker, to what happened in the UK in 2011 where, according to BPI, the main British PRO, 76.1% of total music sales were CDs.

Geoff Taylor, the chief executive of the BPI, said that "Digital developments grab the headlines, but the CD remains hugely popular with consumers, accounting for three-quarters of album sales.

"Physical ownership is important to many fans and the CD will be a key element of the market for years to come."

Let's hope he is right.

That said, CD sales still fell 5.7%, but this is a major gain from the 18-20% losses that have been happening each year for the last four to five years. Many analysts are saying that the music business has turned a corner. That would seem to be premature given the volatile nature of the changes brought about by digitizing music for the consumer.

The Bad News: Lambs or Lemmings?
Part of why over all CD sales improved is that the major labels began heavily discounting their catalog (Older recordings). Many big box stores like Wal-Mart, Target and others sold CDs for as little as $5.99. This is a perfect example of the major labels heading off in a direction that the rest of us can’t afford to follow.

If you are a large label with a catalog of thousand of recordings you can make up the extremely discounted price through quantity. However if you are a Indie musician with, at most, a half dozen recordings, there is no way you could make a living wage selling your CDs so low. (Some executives at the major labels even questioned this practice, where it was heading and how small the margin at these prices is, even for the majors.)

Similar to the 13 best selling titles of this year, only a relative handful of albums sell enough to cover the such a low price. And we would guess most of these albums were the top sellers of their time.

Another way that the big labels are heading in a direction that the rest of us can’t follow is streaming, especially with Spotify. All the major labels are investment partners in Spotify, allowing them to make money from revenue that artists, whether signed to a label or independent, can not. This would include money from ad revenue and subscriptions. Spotify doesn’t pay “per-stream”, so they can parcel out payments anyway they see fit. However, the artists are stuck with the “average” payments of $0.0033 to $0.0013 per stream.

Getting back to Soundscan’s numbers, is worth noting that, as we have mentioned in previous posts, smaller genres don’t really measure up to the most popular ones. In fact while rock was up 1.9%, R&B, country, latin, christian/gospel all declined. Hidden inside the 4.2% decline of R&B is rap, which grew 3.3%. Other hidden numbers, jazz grew a whooping 26.1% Why jazz? Because Michael Bublé’s Christmas album was put in that genre.

The bottom line is that over all this is good news. But there are still a lot of issues out there that need to be addressed, especially for independent musicians: low payments; making a living; productions costs; the cost of touring and promotion; the rising cost of living; pirates, sharks, and Google; illegal copies; dealing with DMCA takedowns and a lack of basic information for the listening public.

1. TMD likes tea, but we don't like TEA...

A Pointless Debate

2011-11-28T22:44:00.000-08:00

Recently David Touve, an Assistant Professor of Business at Washing & Lee University posted a blog asking “Is a stream on Spotify (or any music service) really worth less than an iTune sale?”

His attempt to show that an iTune sale or a Spotify stream are basically worth the same, in terms of payment to the artist, is arrived at by fuzzy math that assumes a listener will play a song purchased from iTunes 250 times. (Where he gets this number is anyone's guess. A quick look at your iTunes app will show that most songs get played far less.) By prorating the cost of the song by 250 plays, he would have us believe that the price per play is $0.0028, which he believes compares favorably to the urban myth of Spotify's $0.0033 per stream payments.

Spotify has stated many times that it does not pay per play. They don't say what their payments are based on. This allows them to pocket money for themselves and their investment partners (which include the major record labels). TMD has posted several articles on our ITN page about how small labels and Indie artists are pulling their catalogs off of Spotify due to their small payments. Some, like Projekt records, have stated they were being paid much smaller amounts. Projekt stated its payments came out to $0.0013 per stream (they prorated the number themselves, since conveniently, Spotify, doesn't pay by stream).

So Touve's assertion starts with two erroneous numbers: the total number of plays a purchased song will receive, and that Spotify always pays $0.0033 per stream.

When TMD left a comment on Touve's post pointing out these basic errors, he tried to justify his numbers, but claimed he didn't have the information about Spotify's $0.0033 payments handy. Several other comments questioned his assertion that all songs are played 250 times, as most of the these individuals found that number to be highly over stated. In the end Touve tried to side step all of this by stating that in his opinion, regardless of the numbers, his “value debate” of whether a iTunes purchase was equal to a Spotify stream, was a “good debate to be having”.

I couldn’t disagree more.

You can read his post for the details of his argument, but as for his so called “value debate” being a “good debate to be having”, for most musicians this is a arcane and useless debate as any discussion about whether iTunes or Spotify payments are equal ignores the fact that, in truth, both hurt recording artists. Especially Indie musicians. One just takes longer. Furthermore, if, as his twisted numbers attempt to show, the two payments are equal, his argument does less to bolster Spotify than it does to vilify iTunes, bringing it down into the slightly-better-than-pirate muck. As I don't buy Touve's argument I don't believe this is where Apple is. They are slightly better. If they would allow bundled album sales, that would put them near the top of the heap.

LETS USE REAL NUMBERS
Right now physical CDs still outsell digital downloads, and all indicators show that while downloads are growing they are not doing so fast enough to make up for declining CD sales. So for the time being, artists still generate more income from CDs.

Because of this, Indie artists still have to manufacture CDs. Putting aside the costs of producing an album (which are high) let’s just look at the costs of manufacturing the first run of CDs for a new release and the initial marketing that is needed to promote the recording.

As with most products, the more you buy the more you save, and that is true of the cost of manufacturing CDs as well. The first significant price break usually happens when you press at least 2,000 units. Since the cost varies, mostly due to printing, I’ll take the price from my own projects.

Right now I pay $1.50 per disc. This price also includes the six panel 4/4 color booklet, the case wrap and marketing sticker, and the cost, per disc, of shipping the discs to me from the pressing plant.

2,000 CDs $3,000

As we all know, exposure is the name of the game. Streaming sites and online music retailers like to claim they are perfect for that, but the odds of having a listener find your recording out of the millions of songs on these sites is like playing the lottery. The odds are not in your favor. So, as it has been for years, it is still necessary to hire a radio promoter to get your new album heard on the radio. Radio promoters are not cheap.

Radio promoter $4,000

Many people still find new albums through reviews, both print and online, rather than by hearing it. Reviews are also good if some one hears a song and goes to look for reviews before they decide to buy it. Getting your album reviewed is very tough. A PR person is needed to best navigate this obstacle course.

PR person $2,500

Between these two, the artist (or label) will have to “give away” about 500 units of the 2,000 discs that were printed for promotional use. They will be sent to the radio stations and the reviewers your promoters have on their lists. This is money that is not recoupable by selling the CDs, so I’m going to add it to my expenses.

Promotional copies $750

Accompanying these discs will be promotional material. At the very least a Sell Sheet. These have to be professionally printed.

Sell Sheet printing $250

Each of these promo copies will need to be mailed. Postage for each CD runs about $2 and the padded envelope cost about $0.30. I’ll lump these together.

Postage and mailing costs $1,150

So let’s add all this up:
2,000 discs $3,000
Radio promoter $4,000
PR person $2,500
Promotional copies $750
Sell Sheet printing $250
Postage $1,150
TOTAL $11,650

In order to break even, to cover the costs listed above, I would have to sell the following:

1,140 CDs (based on a sale from my website at the net price of $11.20 after disc pressing and mailing costs,)
1,618 CDs (based on sales through a distributor)
19,417 songs downloaded on iTunes (based on $0.60 net)
35,330,303 streams on Spotify (based on the urban myth of $0.0033 per stream)

Remember this does not cover the cost of producing/recording the album, or the costs of supporting yourself while producing the album.

Having been a professional musician for over twenty years, and owning my own small label for over ten, I can say with confidence that selling 1,140 or 1,618 CDs is very doable. Selling 19,417 song downloads on iTunes...well I have not had that pleasure. As for receiving over 35 million streams on Spotify, or any similar streaming site, just to recoup my costs... I don’t need to waste my time thinking about it.

This is why I don’t believe there is any merit to Touve's "value debate" of whether iTunes (individually purchased songs) or Spotify (streams) payments are equal. It is a distraction from the real challenge. The ability of a recording artist to earn a living wage from their music. Neither iTunes or Spotify is going to even begin to generate enough income to recoup the costs of manufacturing a batch of CDs, let alone produce enough income for a Indie artist to live on. Much like thinking about which would take longer, a trip to Saturn or a trip to the farthest star in the galaxy...as neither are even remotely possible, both are just mindless musings.

As a working, Indie, recording artist, I’d rather concern myself with what is possible.

The Takedown-Why the DMCA has failed

2011-11-27T22:05:00.000-08:00

A few weeks ago I received an email from a friend letting me know that my music was being used on a website as background music. On the site there was no mention of my name, the titles of the song or my record company. My friend, being smart, figured that I would never have allowed my music to be used by the site, much less without any link back to me or my record label.

Since I had found other sites in the past using my music, or my writing, without my permission, I took this seriously. Sure enough, when I checked out the website in question, they had illegally embeded the song of mine. As I continued to poke around the site I discovered that they were using two additional songs of mine, all without permission, and the first song was used on two pages. So four cases of blatant copyright infringement.

Suddenly all of my work plans for that day came to a grinding halt as I now had to spend time searching online for who owned the website and who they used to host it. Then I had to start writing the email letter to notify the owner of the website that they were illegally using copyrighted material.

In the letter I included all the information I needed to let them know they were using my music illegally, including the fact that, under current law, the company that hosts the website would be required to take down the site unless my copyrighted material was removed, and further more, that if it was not removed in a timely manner I would have my attorney begin legal proceedings. I emailed the notice off. By the end of the day I received a reply from the owner of the site saying that my music had been removed.

How often do I have to have my music removed from someplace it is being used illegally? At least a couple times a month. How disruptive is this? Very.

From the beginning the Mission Statement of The Musical Disconnect has been to reveal what it is really like to be a working, independent musician today in the post MP3, iPod, file swapping world.

One of the changes has have occurred over the last decade that the average music fan is not aware of is that Indie musicians (along with major record label, film studios, writers, newspapers and publishers) have had to become their own online police force. Strange, since usually when a crime is committed most individuals and companies can call the police. But not independent musicians, writers, artists, and film makers. We have to wear our own badges. The law is actually set up this way. But how did this come to be and what’s involved?

Back in the 1998, while the country was running a nice budget surplus and the internet was mostly just used by universities, an addition to the copyright laws was passed in congress and signed into law by that master of triangulation, President Bill Clinton. (This is the guy who signed the laws deregulating the banks, which started the ball rolling to our current financial crisis, but I digress.)

The law, called the Digital Millennium Copyright Act (DMCA), was intended to prevent future abuse of Intellectual Property as it pertained to the internet, both the copying of works and the circumvention of technology to protect copyrighted works, called Digital Rights Management (DRM). It was an amendment of Title 17 of the United States Copyright code and part of two treaties of the World Intellectual Property Organization (WIPO). It also added protection to boat hull designs...

The part that became the big snafu for content creators was Title II, the Online Copyright Infringement Liability Limitation Act. What is this and what does it mean? Well, first a little back story.

At the time this was all coming into being the online service providers and ISPs were worried that if one of their users posted something that violated current copyright laws, say on a website hosted by an ISP, the owner of the copyrighted work could sue the ISP for it being there. The ISPs obviously didn’t want that to happen and made a pretty compelling case that there was no way they could know everything that users posted and be able to identify if it was illegally posted. So the DMCA [Online Copyright Infringement Liability Limitation Act] created a so-called safe harbor for these companies provided that they removed any infringing material once they were notified of an infringement by a copyright owner or the copyright holder’s representative. This was done through what is call a Takedown Notice, or just a Takedown.

Title II also offers a safe harbor if the user that posted the copyrighted material claims they were not acting illegally. In other words the hosting companies, at first the ISPs, later tech companies and individual online business that allow user content, had no liability in this from either side. They did, however, have to act on subpoenas that requested a user’s identity.

At the time this may have seemed reasonable. But then the web changed and companies started websites whose business model was based on the unlicensed use of copyrighted material. Srinandan Kasi, the general counsel for the Associated Press says that “Every business since the DMCA has been designed to take advantage of the DMCA, which means it’s about aggregating user-generated content and relying on the DMCA as a vehicle to take things down.” ¹ The best known, and one of the biggest, is YouTube.

Although YouTube promoted itself as a place for people to post videos of their family, pets and friends by saying “Broadcast Yourself”, those videos didn’t attract many views. What did attract the most viewers was unlicensed copies of TV programs, film clips, and music videos. In fact music videos, whether posted by the copyright owners or not, ruled the top ten most watched YouTube videos. Seven of the top ten YouTube videos were music videos. The list includes “two by Eminem and one each by Justin Bieber, Lady Gaga, Shakira, Pitbull, and Miley Cyrus.” ² Under the safe harbor requirements of the DMCA , if any of these were posted by someone other than the copyright owner, YouTube did not have to remove this material until the copyright owner sent them a Takedown Notice. Even if they actually knew that the material was there illegally before they were notified.

YouTube claimed that it had no way of know that videos call “Friends” or “Poker Face” were not in fact posted by the content creators, the copyright owners, and even if they did know, they had no way of filtering that stuff out. Odd since they were very good at filtering out porn.

The truth of the matter is that, like many websites claiming ”safe harbor” under the DMCA, YouTube did in fact know that three quarters of the content posted on their site was there illegally. According to a lawsuit brought against YouTube by Viacom, YouTube cofounder Steve Chen and their product manager Maryrose Duntton both estimated that three-quarters or more of their views was driven by copyrighted material illegally posted by their users. Court documents in the case show Chen, in an email, stated that if YouTube removed all the copyrighted material from their site they would drop from “100,000 views a day to about 20,000 views or maybe even lower.” While Duntton wrote in an instant message that “probably 75-80% of our views come from copyrighted material”. ³

YouTube, in other emails brought to light by the Viacom case, chose to turn a “blind eye” when it came to removing videos they knew were posted illegally. There were internal discussions about ways to catch videos with titles like “The Simpsons” for closer review, or ways to let viewers flag a video that contained copyrighted work, but YouTube put that on a back burner. All they would do is remove videos on a one-by-one basis when they received a Takedown notice from the copyright owner. Until such time they would work under the premise that the copyright owner had posted it in the first place, even when it was obvious the owner had not. ⁴

YouTube used the content, all created by others, and which (at the time) they were not paying for, to drive viewers to their site, create a dominate market share and to generate ad revenue. As their emails show, the majority of the videos on YouTube were posted illegally and since the DMCA allowed them to ignore it until the copyright owner issued a Takedown, they left it up on the site because they knew they didn’t have anything worth watching if they removed it.

In the meantime YouTube got wildly popular, made lots of money off ad revenue and in less than two years sold the site to Google for 1.65 billion dollars. But none of this money went to the creators who produced the content that drove viewers to their site. The videos posted illegally.

All of this was made possible by Congress through the DMCA.

Viacom claims it spends $100,000 each month policing online infringement of its copyrights. ⁵. It goes without saying that Indie artists, writers, bloggers, Indie film makers and other content creators don’t have that kind of money.

And it is not just YouTube that has profited from a the DMCA. Another noted example is The Huffington Post, which posted blogs by individual without paying them and filled its site with ”news and videos aggregated from other sources”. The Huffington Post let those other sources foot the bill for researching those stories and producing those videos but then turned around and sold itself to yahoo.com for $315 billion. ⁶

There are other examples that are best left for another post. Some of them I try not to mention for fear that readers will snap their heads to the left and, like Doug the Dog spotting a squirrel, shout out ”Free Music!”. Because those two words seem to cause people to lose all sense of right and wrong. In truth the music is not really free. It is online illegally, without the creator’s permission, yet its being there costs the creator money. Money in lost sales income and money spent to have the material removed. All of this because congress, demonstrating their usual buffoonery, caved to the allure of the internet and forced individual musicians, writers, cartoonists, journalists and photographers to take up the law, instead of the DOJ and local law enforcement agencies, who’s job it is to enforce the law, and have the resources to do so.

Even the person the Clinton administration put in charge of steering the DMCA into law, Bruce Lehman, has expressed disappointment that, in the end, the DMCA did not protect the creators of copyrighted works. “Unfortunately, at least in some areas, our policies haven’t worked out too well,” Lehman admitted. “Our intention was not that the music business would be flat on its back and many of the other industries we wanted to promote would be in trouble.” At the time of its creation, the DMCA was seen the protector for the U.S. culture businesses of music, film, television and software, which account for about 6.5 percent of U.S. GDP, according to a report by the economist Stephen E. Siwek. ⁷

Rewind...
So going back to the website that was using my music illegally, do I think that the owner of that site understood anything about the DMCA? Probably not. (My best guess is that he knew it was illegal but hoped I would never notice that he was stealing my music.) Did the DMCA make using my music without my permission more or less illegal? No, copyright infringement is still illegal. What the DMCA did do was force me to become my own police force and provide immunity to the site’s hosting service.

The owner of the site was never punished for stealing my content, which he used to set a mood for his customers, hoping they would spend money on his products. Obviously he believed having my music on the site helped his sales on some level, otherwise, why else use it? Did I receive any of the money that he made from selling his products on his site, which my music helped to promote? Not a dime.

But, hey, at least I get to spend (waste) an entire day, every few weeks, to deal with similar copyright infringements like this...

1. Free Ride Robert Levine 2011

2. Readwriteweb.com, December 7, 2010 (quoted from Free Ride Robert Levine 2011)

3. Free Ride Robert Levine 2011

3. Ibid (It has not helped Viacom’s lawsuit that they had several employees post their content, but that does not negate the fact that that if you don’t own it the copyright, or have (written) permission or a license from the copyright owner it is illegal to post material online.

4. Ibid

5. Ibid

6. http://www.usatoday.com/money/media/2011-02-07-aol-huffington-post_N.htm

7. Free Ride Robert Levine 2011

Coldplay sets a Digital Record without Streaming

2011-11-03T01:29:00.000-07:00

-This post has been updated-

A few weeks ago Coldplay announced that it was not going to post its new album Mylo Xyloto on streaming sites like Spotify. To date they are one of the larger acts to publicly not allow their music to be streamed. At the time Coldplay's decision reportedly embarrassed their record label, EMI, who has a licensing deal with Spotify. But EMI may be singing a different tune now after Coldplay's new album Mylo Xyloto hit a "one week digital sales record" in the UK. According to a report by Digital Music News of the 208,343 units sold in the UK over 40%, or 83,000 were digital. U.S. sales figures from Soundscan are pending. In terms of percentage, digital album sales are still growing rapidly and Coldplay seems to be benefiting from this.

Over the course of the last several months there has been a lot of buzz about streaming, specifically Spotify, but since their U.S. deput four large independent labels have pulled their music from the site. These include Century Media, Prosthetic Records and Projekt. All of these labels have stated that their reason for pulling their music from Spotify was due to extremely low payments. Typically 1/3 of a penny or less per song. Or as the UK based folk band Uniform Motion blogged, they make only $0.0041 per play, saying, "If you listen to [our] album 1,000 times (once a day for 3 years!) we'll get $40.50!"

If that weren't enough a hyperbot.com poll of readers found that 75% of those who participated in the poll did not believe that Spotify was a good choice for musicians.

The sales of Mylo Xyloto proves that, despite all of the buzz regarding Spotify from the media tech reporters, bands don't need streaming to have a best selling album. Bands, at least well-known acts, can do just fine without streaming services and this news might encourage other bands at Coldplay's level to begin rethinking streaming entirely. While some might argue that smaller bands need streaming sites to be discovered, so far no artists can claim that any streaming site has helped their careers in any way. And as the Hypebot poll show, most Indie artist are skeptical. This point of view seems to be gaining traction. As one publisher told Digital Music News, "getting played is nice, getting paid is better."

UPDATE:
U.S. sales figures for the first week of Colplay's new album Mylo Xyloto have been released. The album, which went on sale on Oct 24, has sold more than 500,000 copies on the iTunes store worldwide breaking a sales record for the iTunes.

As mentioned above, Coldplay's decision to not put Mylo Xyloto on streaming sites seems to be part of a strategy to encourage listeners to buy downloads of the album or on CD. Given the strong showing this decision seems to be working.

Mylo Xyloto is the third album by the band that has topped the Billboard 200 chart. However, following the over all trend of the last decade the sales show a marked decline from previous releases. Here is how first week sales for Coldplay's last three albums breaks out:¹

Mylo Xyloto 447,000
Viva La Vida 721,00
X&Y 737,00
Numbers from Nielsen SoundScan reflect U.S. sales only. The iTunes sales amount above are worldwide.

1. http://www.billboard.biz/bbbiz/industry/digital-and-mobile/coldplay-s-digital-strategy-pays-off-group-1005474142.story

Digital Royalties at Risk

2011-11-02T23:39:00.000-07:00

Sirius/XM is considering doing direct licensing deals with the labels. In plain terms this means that royalties would no longer be paid through SoundExchange, the government PRO that currently pays royalties for digital music. Last quarter they paid $88 million to artists and publishers.

Under direct licensing deals that money would instead go to the labels, who would then pay the artists. And we all know how good labels are at paying artists...

There is also the unknown about how small independent labels, like artist owned labels, would get paid. For example YouTube just negotiated direct licenses with the major labels to pay royalties, but the label that TMD owns was not part of that, and no avenue has been set up for small artist owned labels. (Note: after this this post was published a way was announced) So we aren't paid any monies from YouTube while the big labels are... No surprise there... Also no surprise that the royalties that are paid are small. Helienne Lindval writes in The Guardian that YouTube royalties are less that Spoitfy.

Of all the new things to come about during the digital music revolution Sirius/XM and the other digital radio stations have been a good thing for artists. They pay decent royalties (the rates, like over the air radio, are set by the government) and they have great exposure. Two ideas that don't normally work together in most new music biz models.

Here is a complete article about this issue and what artists can do to protect their digital royalties. If you are an artist I high recommend you read this and take action.

Pete Townshend's Lecture to the BBC

2011-11-01T12:12:00.000-07:00

Pete Townshend was asked to give a lecture in honor of the legendary radio DJ John Peel. Townshend touched on a lot of topics, most of them about the world of music as it exists today. He had some very provocative things to say, such as calling iTunes a Vampire, thoughts about fans "sharing" music and that artist should be paid when people listen to their work. Payments to artists was a constant thread in his talk. He also gave a glimpse of the "Inner" Pete Townshend.

Here are some of the take-away quotes:

"Music publishing has always been a form of banking in many ways, but – in cooperation with record labels – active artists have always received from the music industry banking system more than banking. They’ve gotten: 1. editorial guidance; 2. financial support; 3. creative nurture; 4. manufacturing; 5. publishing; 6. marketing; 7. distribution; 8. payment of royalties – the banking.

Today, if we look solely at iTunes, we see a publishing model that offers only the last two items as a guarantee – distribution and banking – with some marketing thrown in sometimes at the whim of the folks at Apple."

He asks why iTunes, like records labels, can't provide some of the the "services to the artists whose work it bleeds like a digital vampire Northern Rock for its enormous commission?"

He then goes on to list 8 things that Apple should to to improve iTunes, number 8 being

"Payment. Stop insisting on aggregators to deal with small artists – because you can’t be bothered with the expense of accounting for the numerous small amounts of money you’ve collected on their behalf – and pay direct. Why should an artist pay even more commission to an aggregator merely to get paid? For the uninformed, an aggregator in the iTunes world is a company who stands between the artist and iTunes and thus prevents Apple having to deal with artists directly. Some of these aggregators provide some of the resources I’ve pleaded for above, but they are really just another form of punitive banking."

Regarding that euphemism of euphemisms "sharing" he says

"I once suggested on a forum that people who download my music without paying for it may as well come and steal my son’s bike while they’re at it. One woman was so incensed that she tried to argue that she was still supporting me as an artist by “sharing” – my parentheses – music with others who would eventually filter down some cash in some form or other to me, that would pay for my son’s bike – and she was not, in any sense, a thief or a criminal. I think she was in a kind of denial. Cutting the body to fit the cloth rather than the correct way around."

Townshend then gets into talking about being paid as a creative musician:

"We now live in a digital world in which the only absolute is work by the hour. Lawyers, accountants, doctors, nurses, plumbers, painters, truck drivers, farmers, pilots, cleaners, actors, musicians – they all get paid for work done as a clock ticks.

Creative work is not like that."

"However, if someone pretends to be me, or pretends that something I have created should be available to them free – because creativity has less value than an hour’s work by me as a musician in a pub – I wonder what has gone wrong with human morality and social justice."

Asking the same question most musicians do, Townshend says

"...it would be better if music lovers treated music like food, and paid for every helping, rather than only when it suited them. Why can’t music lovers just pay for music rather than steal it?"

In an compelling look at radio verses streaming and how artists get paid, Townshend makes the logical point that:

"Radio is not like Internet radio, or torrent sites. Radio pays musicians a fee when music is aired. Radio does not take the position that the public has a right to decide after hearing the music played whether to pay for it or not. Radio stations pay, and the public pay directly or indirectly in order to listen and make the judgment.

Suppose you asked a painter to paint your house on condition that if you didn’t like the color you had chosen, thinking it would work, you wouldn’t pay him?"

Townshend claims to like streaming but ends his lecture speaking directly to the unsustainably low payments to artists by streaming companies,

"If the BBC were to start a website like Spotify, one thing would be certain – the musicians who were featured would get paid."

If you would like to read the full lecture you can do so here.

Peer2Peer Pressure: How to Support Your Favorite Indie Artist

2011-09-15T00:32:00.000-07:00

10 Simple Steps to Support your Favorite Artists

When The Musical Disconnect first started I had several readers ask me to provide some suggestions about what they could do to support their favorite DIY or Indie musicians. Now that we have looked at some of the challenges facing artists in today's music environment, this might be a good time to look at what you can do to help. Most of these suggestions will seem pretty obvious, because they are. As with many things, the best answers to a problem are the most obvious.

The following suggestions are not complete by any means, but they touch on the most important things you can do as a music fan to help your favorite artists.

#1. Buy Directly From the Artist
Whenever possible, buy directly from the artist, either in person or through their website. This is the #1 way you can support an artist. The artist gets a higher percentage of the sale, which they will use beyond covering the cost of manufacturing the CD, but towards living expenses, like paying rent or a mortgage, buying food, car payments, gas, heating and cooling, etc. As an added benefit they get to see who is buying their music and where their buyers are from. This comes in handy when they decide to plan a tour for example. The more buyers in your area, the higher the chances they will set up performances and workshops in your area. Buying directly from an artist pays major dividends.

#2. Buy Physical Products
Usually this means buying a CD, a video, a book and nowadays it could even mean buying vinyl. Artists always make a better margin on physical product. Digital Downloads, while having less costs associated their distribution, still generate less income than physical product.

I know that for some people this is hard to do. We live in a culture of instant gratification which iTunes and other digital retail outlets cater to, but this happens at the expense of the artist.

#3. Don’t “Share” Music by Copying It
Making copies of your CDs, or legally purchased downloads, for friends literally takes sales, and therefore income, away from that artist whose music you are sharing. Selling music is still the main way an artist generates income and makes a living. At worst “sharing” is just a euphemism for something else.

Don’t believe the hype. Musicians, especially Indie musicians, make most of their income through music sales. Not touring, or selling merchandise. Most small genre musicians can’t afford the personnel, time and capital to put together a large tour (not to mention their audience is most likely small) and they certainly don’t make any money from selling Tee Shirts. This is even more true of artists that do not work in the four most popular styles of Rock, Pop, Hip Hop and Country. The more esoteric the genre, the less likely the audience is buying merchandise.

How do you know if it is legal, and therefore won’t hurt the artist, to make a copy of music you have purchased for yourself? There is a very simple guideline you can follow:

If the copy is for yourself that’s okay.
If the copy is for someone else, that’s not okay.

#4. Don’t Accept Copies of Music From Other People
If some one offers to make you a copy of a CD or some downloaded songs just say “No thanks”. Tell them, “That is not cool!”, and let them know that you respect the artist and the all the effort that they put in to making the music to accept an illegal copy.

If You Just Have to Buy Digital
I realize that a lot of people only buy digital now. There are many different reasons, but whatever they, how you choose to buy digital music still makes a big difference.

#5. Buy Digitally Direct
If the artist sells downloads on their site purchase it directly from them. True you might have to do a little more work to get it into iTunes but who would you rather give your money to? The artist or Steve Jobs? (Even if he's not running Apple he's still making money from the company.) In case you don’t know, iTunes takes 30% off the top of any money you spend in the iTunes store. Then the digital distributor takes their cut. Then if the artist is signed to a label they take their cut. It is only after all this that the artist gets what’s left over. Trust me, it isn’t much.

#6. Buy the Album, Not Just Individual Songs
Allow for the distinct possibility that just because a song does not grab you right away doesn’t mean it won’t later. Plus you like this artist, right? Then support their entire effort, and trust that they put a lot of time and energy into creating an album and making it a transforming experience. Sure there might be songs that never grab you, but nowadays you can easily skip a song or not include it in a playlist.

Albums, whether in physical or digital form, cost less money than a meal at a non fast-food restaurant. People don't think twice about spending $20 on a meal they can only enjoy once, but quibble over the cost of an album that they will enjoy for years. A Musical Disconnect.

The bottom line is that artists cannot earn a living from selling individual songs.

#7. iTunes verses Other Online Music Stores
If the artist doesn’t sell digital downloads directly from their own website then TMD recommends you buy from iTunes. For regular readers of this blog this might come as a surprise. We are not usually very supportive of Apple. Nevertheless they are who we recommend, and here is why:

You know they are operating legally.
They generally sell for the fixed price of $9.99 per album, which means the artist will get a better payment. (Other discount sites don’t pay full price to the artist and may, in fact, not be licensed [legal] and in truth pay the artist nothing.) Logically, the less you pay, the less the artist makes.

Remember that just because you purchase your music in a digital format you still should not make copies for others nor should you accept copies from others. This doesn’t change just because the delivery system is different.

#8. What about Internet Radio and Streaming?
If you have followed our posts about streaming, then you know that we do not like streaming services. The payments to artists are just too low. Each individual stream pays the right holder of a song 1/3 of a penny.

TMD discourages the use of streaming sites. Radio sites like Pandora pay roughly the same even though the payments are set up by statute.

Here Are Some Secondary Ways You Can Help

#9. Join the Club
An easy way to support your favorite artists to sign up for their mailing list, go to their gigs, tell your friends about them and post positive reviews of their stuff on sites like Amazon.

People value the opinion of their friends, family and co-workers. If they see you being passionate about an artist they’ll want to check out that artist and see what all the fuss is about. Your word of mouth is the best advertising any artist could ask for.

#10. Peer2Peer Pressure
New Music Gurus love to say that the world is changing and there is a new paradigm for music now. Any quick review of history will show how this kind of talk is nothing new and in fact hurts rational thinking.

Think about some past so-called paradigms. For instance, when I was a kid, smoking was considered healthy and relaxing, almost a tonic. Drunk driving was just “one of those things...” As recently as a few generations ago children worked in sweat shops in the U.S. (they still do in other countries). Cities in the western U.S were lawless and much more dangerous than they are today. Pirate ships at one time plied the coast of the eastern sea board and the Gulf of Mexico. Worst of all for the majority of the time that people of European descent have been living in North America slavery was practiced in the U.S.

While these and other things aren’t equal in how bad they were, they were (are) all bad. However, they are also no longer socially acceptable or legal. But just how did these “cats” get back into the bag? Over time attitudes toward these things have changed to the point where they are no longer acceptable to our society. The things themselves didn’t change, people’s minds did. At first just one person spoke out. Then two people spoke out. They grew to a small group, which grew to a larger segment of society. Finally enough people said “No more!” to these things and laws were passed prohibiting these actions. Beyond the law, the majority of society no longer tolerates these practices.

If someone started suggesting that we should reenact slavery, or that smoking was good and even children should do it, or that drunk driving was an individual choice and okay to do, or that children should go back to working in sweat shops in this country, or that gun fights on the streets of Tucson, Phoenix, Los Angeles and Durango are not a bad thing, or that piracy on the high seas is just fine, they would not be tolerated in our society and would be considered a psychopath.

I'm sure there are people that believe we should go back to doing these types of behavior, but they don't generally talk about it in the open. Why? Peer Pressure.

While most people think of peer pressure as a bad thing that kids do to other kids, the truth is we all either do it, or are influenced by it, everyday. The entire advertising industry is based on it.

So don’t fool yourself into thinking that we live in a new paradigm, or a new era, which suddenly makes the theft of music, books, videos, movies and all other intellectual property an acceptable practice. This type of behavior has always been against the foundation of all human civilization.

The toll is not just on the artists. It’s on their families, the companies that provide support services to them, the places that sell their products, the festivals, the clubs, the graphic artists, the promoters, the distributors, the music review writers. An entire industry. The pirates of the Caribbean and the eastern seaboard were shut down because of the economic toll that they inflicted on the U.S. Today digital pirates are taking a toll on the main copyright businesses of music, film, television, computer software and newspapers. The first four industries in that list account for 6.5% of the U.S. GDP.¹ That's 6.5% of our economy! Artists create jobs, encourage trade and unify our culture. In today’s economic climate we need to create more jobs, grow our economy and produce something that is bought overseas -our culture, not lose entire industries to piracy.

So speak up. Let people know your views. Stand your ground. Be a role model for your family, kids, friends and co-workers. Show by example that you believe artists deserve to be paid for their work, just like anybody else.

It is just common sense.

1. Stephen I Siwek, Copyright Industries in the U.S. Economy: The 2003-2007 Report. Prepared for the International Intellectual Property Alliance, June 2009.

The Serpent's Fruit

2011-08-23T12:18:00.000-07:00

I posted a link to a news article in the TMD ITN page but thought that it deserved a closer look. It’s not about music per se, but it is about digital distribution, which is definitely something that musicians have to deal with nowadays.

However, this time it is books that are in the news, specifically e-books and how they are priced.

A class action antitrust lawsuit has been filed in a US District Court by the Hagens Berman litigation group alleging that five major publishers conspired to raise the price of e-books and force Amazon to drop its $9.99 e-book pricing.¹

According to the lawsuit they didn’t act alone. They conspired with Apple, Inc.

Way back in 2007 Amazon had beat Apple to the e-book market with its popular Kindle reader. As the lone player in the game, Amazon had decided to price, and promote, most e-books for just $9.99. In order to do this, Amazon was buying the e-books at prices set by the publishers but then selling them for the $9.99 price, even if that meant taking a loss. This was, by all accounts, very popular with readers, but according to the lawsuit, not with the publishers, or Apple, who was about to get into the e-book game with their iPad.

The lawsuit alleges that Apple, along with HarperCollins, Hachette Book Group, Macmillan, Penguin Group Inc., and Simon & Schuster Inc wanted to, “neutralize Amazon's Kindle before its popularity could challenge the upcoming introduction of the iPad, a device Apple intended to compete as an e-reader." ¹

The lawsuit also accuses the publishers and Apple of agreeing to adopt a so called “agency model” in which Apple, acting as an “agent” for the publishers agreed to sell their e-books for a price set by the publishers, taking 30% of the sale. Similar to the 70/30 split that Apple is taking through their App store and iTunes. The publishers then agreed not to sell to any other online retailer at prices lower than what Apple was selling the titles for. A “most favored nation” agreement. At that point the publishers, starting with Macmillan, forced Amazon to raise their prices by threatening to withhold their titles from the giant online bookstore.

Amazon had no choice but to give in. (As a Kindle owner I remember that during the time that all this is allegedly occurred, many e-books were not available through Amazon. It created a big hole in Amazon’s e-book inventory.)

Since Amazon capitulated to the publisher's demands the price of e-books has increased dramatically. Some cost more than their physical counterparts. And Amazon now puts the caveat “This price was set by the publisher” on all of its e-book pages.

So Amazon, being the first to the e-book market, wanted to establish a consistent, low price. And, according to the lawsuit, Apple didn’t like that.

Wait a minute, isn’t Apple the same company that went to the music labels and demanded that they sell albums and single songs for a set price, $9.99 and $0.99 respectively? The same company that wouldn’t let the labels set their own prices, or sell bundled albums? Yet, according to the lawsuit, when someone else beats them to their own game they turn around and cry “foul”?

Do I hear the word hypocrites?

So originally Amazon was paying the publishers their asking price, but would sell the e-book at $9.99. Even if it meant Amazon lost money.

Wow, that is so weird, because, unlike Apple’s iTunes, Amazon changes the price of DIY and Indie digital albums all the time (mostly down). The artist, or label, has no say in the pricing. If Amazon decides to sell for less, the artist gets paid less. Sometimes much less. A DIY artist has no say in the pricing of their own product. (We are mostly talking about DD albums. Most songs still usually sell for $0.99.)

This policy doesn't apply to all digital albums Amazon sells. Power and influence still talk.

So let's get this straight, Amazon is willing to pay full price for e-books but not for music? What’s up with that? Oh, that's right, with music it is Amazon trying to play “catch up” to Apple. Whereas with e-books they were trying to establish market dominance and willing to pay the price to make that happen.

I think I hear that word again... Yes, there it is, hypocrites!

In the mean time how did that supposed dirty deal between the publishers and Apple work out? If you are a publisher, it would appear not so well. Apple is taking on the publishing industry by default by adopting a new policy, now fully implemented, of taking a 30% cut of every e-book sale that takes place from an App running on one of their iOS devices, no matter whether the buyer purchases the e-book from Amazon, Barnes & Noble, Google or any other non Apple App. This also applies to music apps as well...

But before we look at that first a little back story:
Apple has sold so many iPads (15 million as of February, 2011) that Amazon, Barnes & Nobles and Google now all have Apps to allow users to read their e-book formats on the iPad, in addition to Apple’s built in iBook reader. Originally the owner of the iPad could buy an e-book from the Kindle bookstore directly from the Kindle app. But now Apple, flexing its power, will not allow any of these companies to sell directly to their customers through these apps, or else Apple wants 30% of the sale. (You can still read what you have, and buy e-book from their website stores, just not through the app itself.)

Or to look at it from the seller’s side, if you are Amazon and you buy an e-book from the publisher at the wholesale price and then sell it to someone through the Kindle App on the iPad, your profit pretty much goes straight to Apple.

Rather than pay Apple the 30% fee, most companies, like Amazon, have decided to remove any links on their apps that allowed users to even get to their online stores from an iPad or iPhone. So you can’t buy a book through your Kindle App, on your iPad, even if you wanted to. ^{2 & 2b}

So how do the publishers feel about this? In a LA Times article about the publishing world’s reaction to Apple’s plans one quote summed it up best,

"If you're a print publisher, whether it's books, magazines or newspapers, you've seen what Apple did to the music industry — they decimated it," said Porter Bibb, a consultant at Mediatech Capital Partners and the first publisher of Rolling Stone magazine. "Apple owns the music industry now, and publishers are loath to have that happen to them." ³

It almost sounds like the publishers are starting to chafe under the thumb of Apple. The same company they allegedly conspired with to break Amazon’s e-book pricing.

There’s that word again...

1. http://arstechnica.com/tech-policy/news/2011/08/class-action-suit-targets-apple-and-five-publishers-for-price-fixing.ars

2. http://www.hypebot.com/hypebot/2011/08/music-services-raise-prices-drop-buy-links-to-keep-apple-happy.html

2b. http://www.theregister.co.uk/2011/07/25/apple_bookseller_online_sales_ban/

3. http://articles.latimes.com/2011/feb/16/business/la-fi-apple-publishing-20110217

Land of the Free?

2011-08-16T00:08:00.000-07:00

I was working on another post when two music news items caught my eye. Both about the same thing. Labels who are removing themselves from the streaming service Spotify because the streaming payments are so small it makes it not worthwhile having their catalog available.

One of the reasons that streaming services, and new music gurus, give to justify low payments, are that the labels and artists, due to piracy, now have to complete with free. And we are talking payments below 1/3 of a penny or lower with streaming services.

It is interesting to note that the labels in question couldn’t be farther apart in musical style.

The first one to to pull out was a collection of labels owned by Century Media, a “heavy metal and hardcore” group that includes at least six labels. The company issued a statement saying, "Spotify in its present shape and form isn't the way forward"... "Physical sales are dropping drastically in all countries where Spotify is active."

They went on to say, "The income streams to the artists are affected massively and therefore that accelerates the downward spiral, which eventually will lead to artists not being able to record music the way it should be recorded..." and “Ultimately, in some cases, it will completely kill a lot of smaller bands that are already struggling to make ends meet.”

Echoing what this blog has been saying all along, “This is about survival, nothing less and it is time that fans and consumers realize that for artists it is essential to sell music to keep their heads above water." Similar to our last post, "There needs to be awareness...that how you will consume your music has direct consequences for the artists, who we are all trying to support." ¹

The other label was an Indie classical and jazz label. Yeah, they still exist! Who knew?

The label is called Mode Records and their owner and operator, Brian Brandt issued a statement saying, "New streaming services like Spotify… have the promise to squeeze smaller labels out of the picture.” Brandt cited “low payments again as an issue.”

He goes on to state, "On a typical CD sold through a distributor (yes, still the bulk of our sales are wholesale), we may make a profit of $3-4 a unit. Already that is not much considering the total sales of a typical niche CD. Sales through iTunes or similar service can yield a similar profit. But this all gets turned on its head with the Spotify model. For example, in June 2011, Mode had a total of 11,335 streams through Spotify; our income was a whopping $36.98! A big individual seller that month, by composer Luciano Berio, was streamed 1,326 times through Spotify; our income $4.18. So, we earn about 1/3 of a penny per stream. And these meager amounts should be split with the artists and composers." ²

As long as we are talking about Spotify we should include Rhapsody, Last.fm, Napster and all the other streaming services in this discussion. All their payments to artists directly, or through an artist’s label, are all so small as to be ludicrous and downright insulting. As always, they justify these low rates as the music industry needs to compete with piracy, e.g. free.

Let’s take a moment here to talk about the drum beat in the music world today, by everyone except the artists who are trying to make a living off their music, which is that we need to compete with free.

This is just crazy. What other industry is being told to complete with free? Auto manufacturers? Food companies? Big oil? Big pharmaceutical companies? Taxi companies? Airline companies? Shipping companies? Computer and other electronic companies?

Just because something can be stolen it should priced to compete with free? Cars are stolen everyday, so I should get a new car for next to nothing? I’m sure there is a large black market for drugs, so Walgreens, CVS and the others should practically give away my medicine? While we are at it, we can get medical advice from Webmd.com, so shouldn’t visits to the doctor be just a few dollars? And of course siphoning gas is as old as the oil business itself, so Exxon, Shell and Chevron and all the other oil companies siphoning us at the pump everyday should sell a gallon of gas for less than a penny? Or books by a certain NY Times tech columnist who is hip to streaming? I’m sure his books get shoplifted. So said columnist will just need to start competing with all those free books.

During the recent riots in London, looters carried off all sorts of stuff, so all of the people and companies that make, distribute and sell all that stuff better wake up and realize that they are competing with free from now on. Clothing, Plasma TVs and other electronics, food, toiletries, basically everything that is sold can be stolen, so that’s now the new competition for everything made in the world, free.

Crazy, right? But that’s what the music industry, and its artists, are being told. This is a load of crap and if you don’t understand that you don’t understand how society works.

When someone steals something, say a car, or robs a store, or breaks into a house, or smashes a window during a looting spree we expect the police and other law enforcement agencies to catch, prosecute and, if convicted, throw them in jail. If the police don’t do their job and protect people’s and companies property, as in the case of the recent London riots, people get, understandably, upset. ³

So who does a musician or label call when their product, the music they have worked so hard to make, is stolen? The police? The FBI? The DOJ? Not so much.

When someone posts my music illegally on a website somewhere, when I call my congress person, all I hear crickets from their end of the phone call. The silence is deafening.

Congress has enacted laws to deal with piracy. One of them, the DMCA, forces right holders to be our own police surveillance team. Other laws allow for the prosecution of the pirates, but when someone, e.g. the RIAA, actually brings lawsuits against these thieves, the RIAA becomes the bad guy. They didn’t write The Copyright Act (which allows for penalties ranging from $750 to $150,000 per infringement, all at the jury’s discretion), which are crazy IMHO, but those are the laws on the books. ⁴

So I guess in London the shopkeepers and other retailers who lost merchandise will be the heavies if they prosecute the punks that robbed them?

But I’ve gone off track here. The point is having to price your goods and services against free, illegal copies. How would that all look in a free country.

For one thing that $40,000 Lexus you want, now that it’s priced like a streaming payment, will finally be affordable for a mere $126.00.
And the $4.00 gallon of gas? That will be very user friendly at $0.0126 per gallon.
And you’ll want a new iPod, those are now only $ 0.789
While driving that nice new car, why pay $0.0031185 for a drive-thru fast food burger when you can get a lobster dinner for $0.19?
And that new plasma TV, that will only set you back $2.20185.
Don’t forget to buy a Kindle, and why not spring for the 3G version, it is only $0.50. Then you can download that Missing Manual you need for only $0.0787185
And $ 2.20185 for a top of the line iPad? What a steal! (Pun intended...)
Dairy farmers will be fine when their milk is competing with the price shoplifters pay, or $0.011025 for a half gallon. I’m sure they’ll be able to feed their cows and their families. (As long as someone starts stealing dairy feed.)
Do you have homeless and squatters in your city? Most urban areas do. So now your $300,000 home is only worth $945.00. Hmmm, that’s not good is it?

Oh, that reminds me.

We keep hearing about how other countries are stealing US jobs. The median income for a single US household is about $50,221.00,⁵ but since jobs are stolen, your $50K a year job, when priced like a streaming payment to compete with free, is now only paying $158.19615.

Maybe you cannot afford to buy that Lexus after all...

1. http://www.hypebot.com/hypebot/2011/08/century-media-pulls-all-labels-from-spotify-to-protect-artists.html

2. http://www.billboard.biz/bbbiz/industry/digital-and-mobile/another-indie-slams-spotify-1005312482.story

3. http://www.latimes.com/news/nationworld/world/la-fg-britain-riots-20110813,0,3919647.story

4.http://www.copyright.gov/title17/

5. http://quickfacts.census.gov/qfd/states/00000.html

Share, But Not All Sharing is Alike

2011-08-10T23:05:00.000-07:00

I have put off writing this post for a long time. While this is a difficult and touchy subject, it is also one which I am very passionate about. I believe that most people want to do the right thing when it comes to sharing music, and would not willingly do things that might cause harm to an artist whose music they enjoy. I know this to be true about my fans and the fans of my peers.

I have the best fans any artist could ask for. Some of them travel hundreds of miles just to see me perform. They help me set up for gigs, sell CDs at shows, carry my gear, pack up my gear, and share my music with their friends and family by buying copies of my CDs as gifts for them.

In today’s world, however, it is easy to spread the word about one’s favorite artist, yet hurt them at the same time. Not everyone realizes the consequences regarding some types of sharing, and if no one tells them which types help and which hurt, how would they know? That is what this post is about. That spreading the word and sharing is great, but how a listener shares is as important too.

Music has always been a social glue. Wherever and whenever people gather to celebrate or commemorate an event, there is music. You hear music at events like parties, weddings, funerals, graduations, as well as in social locations like restaurants, night clubs, bars, concert halls, and jams on the beach.

Music gives people a sense of “Identity”, and people want to turn their friends and family on to their music, both to share their love of it, as well as to say something about themselves and their tastes.

Friends bond over music and music becomes part of the glue that can define a friendship. A group of friends think that the music they listen to is “cool”, while other styles of music, and by extension the people that like that style, are not cool.

Beyond a small circle of friends each generation identifies itself with the music of its era. The 20’s had jazz, the 30’s and 40’s big band and swing, the 50’s early rock-n-roll and singers like Sinatra and Martin, the 60’s had the British invasion and folk and then later the psychedelic styles of music which helped fuel the cultural revolution. It would be almost impossible to think of the 60’s without thinking about the music that accompanied that decade.

Every style of music immediately brings to mind the time and culture in which it was popular and bonds those people that lived through each era.

It used to be that people could only share music while experiencing it performed live. That alone helped to create the strong social bonds that are tied to music. In the last hundred years of music, the experience no longer has to be tied to a live performance. Friends began to gather around a radio, a record player, a CD player, a computer, or share music over the internet without even being in the same location.

Today, with new technologies at our disposal, sharing is wandering into areas that were never possible before, and people might not be aware of how their sharing is really affecting the artists whose music they love.

Many people have told me with some pride, “I’m helping your career. I made copies of all your CDs for my friends!” They think that I’ll be happy and thankful about this, that they are helping spread the word about my music. Am I happy? Well, yes...but really no. There is a difference sharing music and making copies of it.

I am always extremely happy when people tell their friends about me and play some of my music for them. However, when they burn a copy for their friend I’m not thrilled at all. Why? Well, who in their right mind would purchase something they already possess? No one! Not once have I ever had any customer tell me, “My friend made me a CD copy of your music, and I like it so much I want to buy a (real) copy of it from you”. It is just never going to happen.

The same is true for music that I have chosen to post on sites like YouTube or Vimeo. Those same songs are available for purchase on my website, but when compared with the number of plays the videos get, the amount of purchases only comes to 0.12%. Again, why would I expect it to be any other way? If it is available for viewing on the internet, for free, no one is going to bother buying it. The difference is that when I decide to upload a song to one of these sites, I’m doing so as the owner of the copyright. I, and my label, are the only entities that are legally allow to do so.

It’s even possible nowadays to share (a euphemism if there ever was one) music with the world. Through social sites and some internet streaming sites listeners can, illegally, post their favorite tracks online for the world to hear. Not only does this cause the artist to lose sales, but it also costs artist time, effort, and sometimes money in the form of lawyer fees, to track down these illegal posts and have them removed. The problem is so extensive that companies like Muso.com have sprung up to help artists and labels deal with the problem...for a fee of course. (We’ll take a closer look at this particular problem in a later post.)

It is how you share that matters.

While it is always great when people turn their friends on to the music they like, making copies stops those friends from being potential customers of the artist. Compared to a CD that might have been purchased directly from me, at a concert or festival for example, every copy someone makes for one of their friend takes $15.00 out of my pocket. If that copy prevented your friend from going to my website, to purchase that CD they were turned on to, then that copy just took $14.99 out of my pocket. And this is true not just for me, but all artists!

Consider for a moment how you would feel if every time you made a copy of a CD for someone the artist, or artists, got to take $15.00 out of your bank account? Sound absurd? Well that’s exactly what you are doing to the artists whose music you love if you make copies of CDs for someone other than yourself. Instead of helping the artist earn a living, allowing them to make the music you like, you are taking that money away from them. You are instead preventing them from making the music you enjoy.

Then there are those folks who knowingly, and willfully, make copies of music so they don’t have to pay for it. More than once I’ve had someone purchase a CD from me at a concert and, in the middle of the transaction, tell their friend standing next to them, “You don’t need to buy one, I’ll make you a copy.” If you think it is just young people that do this, you’d be surprised, or at least I was when once an elderly woman, while buying a CD from me, told her friend not to buy a copy, she'd burn a copy from her's for the friend. When I protested that she was taking money away from me she replied, “Oh, I shouldn’t have said that in front of you." As if saying it behind my back and making the copy without my knowledge was okay...

Taking something without paying for it, is theft. Plain and simple.

Other artists have told me that people have asked the them when they are going to post their songs to a BitTorent site so they can be downloaded for free! Again, if you think this is just something young people do, it is not. I’ve had people in their 70s admit to me that they have illegally downloaded music from pirate sites. Pirate sites are taking a huge toll on the entertainment industry, causing huge losses in revenue and throwing thousands of people out of work. A recent study from the UK found that 76% of all music downloads in the UK in 2010 were illegal. ¹ Not only does the artist lose, but so do all the people that help get the music to the marketplace. Think about it, when was the last time you saw a small independent music store? They're all gone.

Pirates are in it for the money. They are counterfeiting criminals and have no emotional connection to what they steal. But even though fans make copies of music for the completely opposite reason, the net result is the same. A major loss of income for artists. And fans are the very people who have an emotional stake in the career of those artists.

You may not realize it, but many artists I know, including myself at times, have considered not making recordings any more. Artists are frustrated by the huge amount of illegal copies being made by not just pirates, but by music fans. Some people justify stealing music because they would never buy it under any circumstances anyway. (The next time they steal something from a store, I am sure the judge will go easy on them when their defense is, "It is not theft because I would never have bought it anyway.") Artists are frustrated by watching our incomes drop by 20% year after year. During the last five years, along with the entire music industry, our incomes have dropped more than 50%, while the cost of making recordings and earning a living have gone up. Most people would howl bloody murder if their employers cut their salaries by 20% year after year, but they seem to have no problem doing the same to the people that make the music that fills and fulfills their lives.

Here are some of the basic things that an artist has to buy with the money they make from selling their music, stuff that we all need:

Rent
Food
Kitchen supplies
Toiletries
Electricity
Gas for heating and cooking
Water
Car insurance
Car maintenance
Internet hookup
Medical expenses

Here is a partial list of some of the things an artist needs to buy to make music with.

Musical instruments
Equipment
Equipment repairs
Computers
Computer repairs
Recording software
External drives
Microphones
Cables
Sound library software
Web hosting
Equipment insurance
Manufacturing CDs
Promotion
Shipping
Digital distribution fees
Printing
Travel expenses for getting to performances
Lodging while on tour

I don’t know if this is true for all musicians, but the amount of money needed to produce recordings and tour is more than we spend on living expenses, except for perhaps rent or a mortgage. All musicians are small companies and, like any company, they need capital/money to stay in business. What seems to be lost in most of the discussions about earning a living through music, music news articles, and advice from "new music" gurus, that I come across is that without the artists there would be no music industry. All artists, from the biggest acts to the smallest, are job creators! That's right, just like Exxon, Apple, Amazon, Wal Mart, Target, we create jobs.

To make and sell a DIY CD generates money not only for the artist, but the clerks that sell the sound recording gear, the company that makes that gear and the instruments used, the people that make and package the CDs, the graphic artist who does the cover, the sound engineer who helps with the recording or mastering, the the people that work for the distributors, the clerks in the store where the album is sold, the owner(s) of the store, any sales tax revenue from the sale... The list goes on and on. Even if an album never sells a single unit, and remember most do not, a lot of money is put out into the economy to make that album.

So please, share your passion for the music you love. Tell your friends, family and co workers. Let them listen to some songs. But please do not make them copies. You are only making it harder for that artist to produce that new album you are waiting for us to make.

1. http://www.theregister.co.uk/2010/12/16/bpi_digital_music_survey/ Luckily most people don’t download music, in any way, at all, a fact which makes some people try to spin the study as saying that 2/3 to 3/4 of the UK population doesn’t engage in illegal downloads. However that would be like comparing the percentage of plane crashes caused by pilot error to the entire population of the UK, not just the number of pilots in that country...

The Dinosaur is Dead, Long Live the Dinosaur

2011-08-03T22:39:00.000-07:00

It seems like every time I read an article about music and the music industry the topics seem to have the same underlying current. Whether it is about streaming, the cloud, owning verses access or the financial viability of subscription models, the media is constantly buzzing about the death of buying music. Even downloading is now considered passé as we are told daily that nobody wants to buy music any longer. It is now all about access and the cloud is king. Of all music industry articles, 90% are about some kind of digital services, ¹ and most of these seem to be about the latest services that the big boys like Apple, Amazon, and Google are pushing. These companies hope to make a lot of money from these new services and the media seems content to regurgitate their press releases. The truth, it turns out, is that most people aren’t buying it...

The dirty little secret that none of the these stories rarely discuss is that is the dinosaur of buying music is not dead, it is still alive and we, the music buyers are the dinosaurs. Recent studies have shown that despite the deluge of promotions and media blitz regarding music streaming, access and cloud services, people are still buying music.

According to Nielsen SoundScan, album sales for 2011 are up 1.6%. This is the first time album sales have increased since 2004, and only the second time since 1999 that a year-on-year growth has occurred. ²

While CD sales are still in decline, the plastic discs are still the most popular way for Americans to get their music, accounting for half of all U.S. music delivery. In the UK 4 out of 5, or 82.2%, of all music sales un 2010 were still CDs, according to a study by the BPI. ¹ No your eyes are not playing tricks on you, CDs still roam the earth.

The recent increase in music sales was fueled by growth in the digital music sector. Individual digital track sales rose 11% and, very encouraging, digital album sales rose 19%. ⁴ Even the cephalopod of vinyl is rising from the deep. Sales of vinyl for 2011 are up 55% ¹ or 37% ² depending on who you believe.

For now it seems that you can forget all the buzz about Rhapsody, Last.fm, Spotify and all those other streaming services. They account for an insignificant 3% off all recorded music. Despite all the buzz about streaming and the cloud, an RIAA chart depicting music sales from 1998 through 2010 shows that subscription revenue has actually fallen by 14% since 2007! ⁵ Most music fans, it turns out, still prefer to buy their music rather than just have access to it.

Click to enlarge

While all these numbers are good, analysts are not sure if this is just a temporary increase, as was seen in 2004, or part of a bigger, long term, growth. No one is even sure of what is driving the increase in sales.

A lot of the credit is due to strong showings by artists such as Adele, Lady Gaga, Katy Perry, and Mumford & Sons. Adele’s album, “21”, was the number one selling album for the first half of 2011, with 2.5 million units sold. Lady Gaga’s “Born This Way” was second with 1.5 million in sales. ⁴ Others point to The Beatles catalog finally being available for digital download. ²

Another factor is retailers slashing prices. The most extreme was amazon.com who sold the “Born This Way” album for just $0.99 in an effort to lure buyers away from iTunes and promote their new cloud service. The sale crashed amazon’s servers, selling 1.1 million copies in the first week. While this stragtey did bring the majority of digital buyers to amazon, their lose due to the sale prices was in excess of $3 million. This is because they paid Gag’s label full price for each album sold. ⁶

The Amazon “Born this Way” sale once again illustrates just how little power DIY and Independent artists have in the digital world. Normally when Amazon lowers the price of a Indie or DIY digital album the label or artist receives less income, because the payment is tied to the selling price of the album. So if you have a digital album in the amazon.com mp3 store and they decide to lower the price for it to less than 50% of their normal $8.99 price, you lose 50%, not Amazon. They get to decide what to put it on sale, but it comes out the artist's, pocket. Their mark-up is a fixed percentage, but your income is not. However, as the “Born this Way” sale points out, if you are a major artist, signed to a major label, your label still has the clout to make Amazon pay them (and you) the full wholesale price, regardless of what amount they decide to sell it for. Unlike the rest of us, Lady Gaga didn't take the hit, Amazon did. I'm sure they'll be fine.

Some analysts believe that the death of LimeWire, after it, and founder Mark Gorton, lost a copyright infringement law suit to the major labels, is also helping to drive up music sales this year. The research firm NPD Group reported that 56% of all peer to peer illegal file downloading for the 3rd quarter of last year was done over LimeWire. By the 4th quarter, after LimeWire was shut down, all internet P2P downloading had dropped to 9%, down from 16% three years earlier. "Limewire was so popular for music file trading, and for so long, that its closure has had a powerful and immediate effect on the number of people downloading music files from peer-to-peer services and curtailed the amount being swapped," said MPD's entertainment industry analyst Russ Crupnick. ³ Gorton ended up paying RIAA members $105 million in damages. ⁴

In what seems to be the most encouraging news emerging from all of this, NPD senior industry analyst Russ Crupnick said, is that younger music fans are buying music, “We talk about young people and the lost generation but some of these younger music buyers are telling us 'I want that thing I can hold, the liner notes and album cover and the other ancillary materials that come with physical products." ⁴

Not everyone seems to have gotten the memo that buying music is still the way to go however, as I witnessed today. While standing in line at a Starbucks I spied a hipster, sitting at a table, listening to Spotify on his computer, through a pair of headphone, and tweeting about what he was finding. He didn’t have any Starbucks products on the table either, so I assumed that purchasing in general was not his “thing”.

There is even talk that the decade long drop in music sales is over and that people are interested in music again. However, logic should tell us that predicting the end of a ten year trend, on just six months of data, is not the wisest decision.

How any of this will affect DIY artist is yet to be determined . As we’ve seen in an earlier post, "of the 13 million songs 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." Rock is still the most popular genre accounting for 32% of albums shares, while Pop accounts for 40% of all individual digital tracks purchased. ² Small genres, like World, New Age, Classical, Bluegrass, and Folk really don’t make a dent in the numbers we’ve been talking about.

Keep in mind that in general the amount of income from music sales drops exponentially as a buyer moves from compact disc purchases to the other types of music delivery. From CD to digital album, to individual song, to streaming. Artists still need to sell way more digital product to generate the same about of income that they can get from CD sales direct, or from their website. ⁷

But still, it is some good news for a change.

Now, back to being a dinosaur...

1. http://www.guardian.co.uk/music/2011/jul/08/us-album-sales-rise

2. http://blog.nielsen.com/nielsenwire/consumer/cue-the-music-driven-by-digital-music-sales-up-in-2011

3. http://www.npd.com/press/releases/press_110323.html

4. http://news.cnet.com/8301-31001_3-20077981-261/whats-driving-rise-in-music-sales/?tag=mncol;txt

5. http://news.cnet.com/8301-31001_3-20078411-261/riaas-sales-numbers-a-closer-look/

6. http://nymag.com/daily/entertainment/2011/06/guess_how_much_money_amazon_lo.html

7. http://themusicaldisconnect.blogspot.com/2011/06/digital-domain-1s-and-0s-or-just-zeros_11.html

Hit the Road Jack

2011-07-20T22:10:00.000-07:00

One of the most common suggestions I hear as a way for musicians to combat declining sales and increasing piracy is, “You need to play live more!”. To be honest, I’m never sure what this will accomplish. If someone has no problem with getting music illegally then attending one of your concerts will not suddenly make them see the error of their ways and start throwing cash at your CD table. At best they’ll say, “Great band, I’ll download their stuff when I get home.” If they’re not buying music already, they’re just not buying music.

The truth is that, for a long time now, recording artists have already been touring as a way to make money, since they tend not to make any from royalties.

In a traditional record deal, most bands have to spend years paying back their record label the money used for their advance, (which pays for the cost of making their album, and the marketing and other promotional costs associated with it the album), before they ever see a dime. This “up front” money from the label was really a loan, which the labels pay back to themselves by taking money out of the artist’s royalties. The labels, however, couldn’t touch any of the money the band made at concerts, including income from ticket sales, tee shirts, mugs, caps, stickers, posters, programs, and any other merchandise that gets sold at a concert. Also known as merch. Thus bands have always gone on the road, performing. Both to promote their recordings and make money they could actually keep.

So at best, the suggestion that musicians need to tour more frequently to make a living is somewhat redundant. We’re already doing it.

Obviously it is not just the artists that have been feeling the pinch of declining sales, the record labels have as well. To combat this problem record deals are now set up differently. Called a 360 deal, these contracts allow the labels to get a piece of the live sales pie, sometimes up to 50% ¹. Under this type of deal, labels get a percentage of all an artist’s income from any revenue source, including, but not limited to, ticket sales, tee shirt sales and any other type of income derived from a band playing live. ² So even those artists signed to a major label do not necessarily generate more income by doing more concerts and gigs. They are already doing it, but now they’re making less. Nor does increasing the number of gigs that a band does every year do anything to address the problem of illegally obtained music.

To make matters worse, concerts themselves aren’t doing that well. Attendance is down and revenue is dropping. Recently, big name acts like Bon Jovi and Paul McCartney have not been selling out arenas. Live music revenue dropped by 6.7% in the UK according to PRS for Music, the rights collecting organization. ³ Pop star Rhianna, who grabbed tons of free publicity regarding her stormy relationship with Chris Brown, had such bad attendance during her “Loud” tour this spring that her manager advised her to cancel her tour. A source connected with the tour told the New York Post that, “ticket sales in big US cities like Boston are so bad, they will barely cover basics like the lighting and other arena costs.” ⁴ This also extends to Live Nation, who owns several venues, including 13 House of Blues locations. Many concerts at Live Nation venues are dropping their prices, along with some long time, hard touring, artists like ZZ Top who this year will be dropping the average price of a ticket to $10, an 80% drop. “We’ll find other ways to make money,” says ZZ Top’s manager Carl Stubner. ⁴

I'm sorry, what did he say? They'll find "other ways" to make money? Don't the experts of the new music paradigm repeatedly tell us that touring, and more of it, is the "other way" to make money? I did miss a memo?

We've looked at how this theory really isn't working for mainstream acts, now let’s look at this from the perspective of an artist in a smaller genre. As we’ve already seen, the smaller the genre, the smaller everything gets: market share, product sales, audience size, support team and income. This has a huge impact on playing live.

Let’s first look at the costs, the money that gets paid out before any comes in. Here are the main costs that can be found on any tour:

Car or Van: Gas; Repairs and maintenance, or Plane: Tickets; Luggage fees; Shuttle or Taxi; Rental car
Lodging: Hotel - Motel
Food: 3 meals per day; Water and snacks for car or plane travel
Equipment Maintenance touring is very hard on your equipment
Shipping Costs Anything that you can’t fit in your vehicle or if you are flying, needs to be shipped ahead. Sometimes it has to be shipped home. This includes product, signage, equipment and anything else for your set up and CD table.

As anybody with a family knows, being on the road is not cheap. Even if you aren’t flying, an average day spent on the road will cost anywhere between $100 to $200 once you factor in lodging, gas and food.

So where does all but the most famous New Age artist perform? For most of us that is a very good question. It certainly won’t be Madison Square Gardens or Staple’s Center.

In my conversations with dozens of artists working in small genres, the biggest complaint about playing live is that there are so few venues to perform in. Unless you are working in pop, rock, country, or some from of R&B, venues for other types of music are slim to none. In the genre I work in, New Age, the average venues for an artist to perform in is the corner of a bookstore, house concerts, and sometimes cultural centers, like a museum or a parks & recreation auditorium. Not the kind of places for a money making concert tour.

Bookstores generally do not pay you to perform, including covering your transportation, or the cost of lugging around and setting up your sound system. Some bookstores will let you sell your CDs directly to the customer, but most want you to sell through them and they take a cut. House concerts are typically set up the same. Sometimes you get the added income of a “donation” fee at the door, but it is a donation, not a fixed fee, so you can’t estimate the number of seats and how much potential ticket sales there might be. Some house concert hosts give you all the money, some want a cut. Cultural centers rarely charge admission. If they pay it’s a small honorarium, so you might make $100 for your performance, plus CD sales.

We have to be realistic and understand that none of these venues are set up to pay musicians to come perform. Just like the artists, they are struggling to make money, and cultural centers have a government budget they have to work within. There is no income from ticket sales, parking fees, and food and beverage sales to be able to pay an artist and make a profit.

The logistics of setting up a tour at these types of locations can be a nightmare. First a many of them just don’t understand what it takes to promote a concert. Then many locations have specific days set aside for events and the artist might find themselves with a gap of several days, even a week, without an open venue to perform at. Every day on the road costs money, so everyday you are not performing you are losing money.

Quite often I’ve also experienced what I call the “something to do effect” at these venues. This is especially true of cultural centers that have a weekly, or monthly calendar of performances. People come because it is a free concert and it is, “something to do”. For several years I’ve performed at a culture center as part of their weekly concert series. A large portion of the audience are seniors, bussed in from local assisted living homes, and students fulfilling some course requirement to attend a concert. Neither one of these groups are part of my fan demographic, so the overwhelming majority of them do not buy any product, while the students snatch up all the programs as proof of their attendance...

Those people who attend because they have heard of me or my music, i.e. my fans, who usually already have all of my recordings, so I don’t tend to sell a lot of product to them. Also, not being teenagers they tend to be more conservative in their spending habits. They don’t need any more tee-shirts, posters, mugs, stickers, or hoodies with their favorite artist’s name on it. In other words, they don’t buy Merch, one of the driving forces in the suggestion to tour more.

This is not limited to my experiences. Most of the artists I talk to in my genre experience the same challenges: Small venues with limited days for events, little or no ticket income, a loyal, but small, fan base that already has all their recordings, and a lack of strong merchandise sales. In many ways, for the smaller genre artist, touring turns into being more about promotion than hard sales. You get your name and face out there, but you don’t make much, if any, money. And unlike the big markets of rock, pop, a small genre artist can’t work their way up from the smaller venues to the bigger ones by “paying their dues”. There are no bigger venues to work up to.

Because of the lack of venues and the costs associated with touring on their own, a very popular way to get performances is at a music festival. As was mentioned in the post Omnia Vanitas, there are a lot of these festivals for all sorts of different musical styles or instruments. Fans of a certain style of music, or a particular instrument, will come from all over the country to attend these events. Of the ones that I participate in four don’t pay the artists, three do. Some pay transportation costs, which now days really goes a long way. At least the artist doesn’t lose money just trying to get to the gig.

For the festivals that don’t pay, an artist’s total income is generated by CD sales, giving workshops and lessons, and, if they have them, any product endorsements. Keep in mind that, just like at the smaller venues, a lot of the people who attend these festivals do so because they are already fans of the acts performing and, unless the band has a new CD, these fans most likely already have all their recordings. These festivals also tend to rotate the acts that perform from year to year, so an artist can’t count on income every year from every festival. Competition to get stage time is very fierce, since festivals are one of the few places where the audience is bigger than 50 people sitting in a bookstore.

While hitting the road and touring maybe an essential requirement for the over all career of any recording artist, does that mean it is the best way to deal with declining sales, low streaming royalties and music piracy? Of course not. The suggestion that it will is just another red herring to distract us by those that think music should be free and musicians don't need to be paid for their work and imagination. Getting on a stage doesn't change the buying behavior of the audience. There will always be those in the crowd who aren't leaving with a CD they just purchased of the music they just heard, they intend to get it another way...

1. http://www.guardian.co.uk/music/musicblog/2008/jun/11/costoftouring

2. http://lawyer4musicians.com/2008/03/16/360-dealsits-gonna-be-a-great-year/ also see http://lawyer4musicians.com/2009/03/22/you-spin-me-right-round-like-a-360-record-deal/

3. http://www.guardian.co.uk/music/2011/may/15/live-concerts-audiences-stay-home

http://www.nypost.com/p/pagesix/slow_going_for_rihanna_tour_7mP3MdUhYJQQKzKQQnHMrN

4. http://concerttour.org/concert-tickets-to-get-cheaper-in-2011.php

Who Are They Fooling?

2011-07-15T01:20:00.002-07:00

So, after years of waiting, Spotify is here in the U.S. What does this mean for artists? Already the contradictions have started. Sean Parker, who is on Spotify’s board, is giddy over the fact that the service will enable “music to be shared freely across the world -- all the while empowering artists to reap the economic benefits of selling their music". ¹ Am I the only one that sees the contradiction in this statement? There is no income from shared music.

As we all know, when the milk is free, you don’t buy the cow. The idea that a Spotify user, especially one that is paying $9.99 to be on the top of Spoitfy’s three tiered system, will go out and buy music they already have access to is absurd on its face.

Parker, who was an early employee of Napster, back when it was a file stealing service that was sued by several top artists, producers and labels eventually went bankrupt in 2002, ² goes on to claim that Spotify in the U.S. will reverse the decade long “downward trend” in music sales and there will be a “return to growth” for the music business. And how is this going to happen? “Spotify is removing the barriers to sharing[sic] music with friends” Parker wrote on his Facebook page. Again, where is the income for artists regarding shared music?

Let's be honest here. The only one that is going to make any real money from Spotify...is Spotify. Either through ad revenue, from the free tier of their three tiered "freemium" set up, (which in their European version has 6 million users), or through paid subscriptions, (which in Europe has 1 million users). ³ As for serious, living wage, payments to artists, don't hold your breath. Remember this is the company that paid Lady Gaga $167.00 for a million streams of her hit song Poker Face. ⁴

As shown in an earlier post an artist needs to have 70,139 songs streamed per month on Napster to pay the rhetorical rent of $1,300 a month. On Rhapsody they would need 142,857 streams. The Lady Gaga story bleakly illustrates how Spotify is known for smaller payments for artists than other streaming sites, so the assumption is that the number of streams needed to make a living will be even higher through them. Of course given the absurd number of streams need to make any serious, living wage, income from any streaming service, Spotify is just another dead end for working musicians and bands.

If you are a DIY artist and you think you are going to get rich, much less pay your rent, through payments from Spotify, think again.

Seriously, who are they fooling? From the buzz, it would seem like a lot of folks...

1. http://latimesblogs.latimes.com/technology/2011/07/spotify-launches-now-playing-in-the-us.html

2. http://abcnews.go.com/Technology/story?id=119627&page=1

3. http://www.guardian.co.uk/technology/2011/mar/08/spotify-hits-1-million-paying-subscribers

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

Omnia Vanitas: The New Gate Keepers

2011-07-11T23:41:00.000-07:00

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)

An Average Album

2011-06-22T23:12:00.000-07:00

In the post The Façade we looked at how in order to compete with major and indie labels and their artists, I set out to make my, artist owned, label look as professional as possible. This had some unintended consequences. People really thought that my label was a big deal and, along with that, I must be super rich.

The idea that musicians are all rich and famous has been around for decades. It’s part of the dream that the music industry pushes every year in their giant commercial, The Grammys.

Each spring the music industry puts on a star-studded spectacular award show featuring that year's most popular artists. The top acts in the world of Pop, Rock, R&B and County perform their hits and take home their awards, all in an effort to generate more interest and sales in their albums and songs. The Grammys want you to live vicariously through the lives of these stars, and give the impression that everything about music is glamorous, exciting and super-rich. (We also see this slight-of-hand at the Oscars. Glitz, glamor, fame and money.) They are selling the dream.

What you don’t see are performances by artists in the smaller genres and, in fact, several categories were cut from the Grammys all together this year. As for an Indie artist, the truth of the matter is that they will never attain the kind of success that is needed to perform at the Grammys without a (major) label backing them, and even then it’s a long shot. Given how many albums come out each year only a few can make the top of the charts.

Obviously the vast majority of musicians will never reach the level of rock-star, so what does it really mean for a musician to be a success? The answer for a musician will vary depending upon where we are in relationship to other musicians and whether or not we can pay our bills making music. But aside from that we can at least find the lowest common denominator by knowing how many copies the average album sells per year. Given that the music industry loves to tout how many millions of copies the best-selling albums have sold, you’d think it would be easy to find out what the average number of album sales per year is. That information, unlike the success stories, is not readily available however.

After multiple Google searches the only hard numbers I could dig up date back to 2002. At that time Billboard magazine estimated that in 2002 the average number of copies sold of an album released by a major label was 11,253, while Nielsen SoundScan tallied an average of only 6,216 units sold per album. SoundScan theoretically counts only those albums that have really sold.

For independent labels Billboard’s number dropped to 1,712, while SoundScan counted only 500 copies sold per album! For an Indie artist, without the backing of even a small label, the average number that year must have been below 500, although admittedly this is just a guess on my part.¹

In the post Let's Get Physical: The Real Price of CDs we discovered that in order to make the monthly U.S. Minimum wage of $1,160 an Indie artist would have to sell 85 CDs each month priced at $15 each.* To reach SoundScan’s 2002 average of 500 CDs sold per album, an Indie artist would have to sell 42 CDs each month. That’s only $561.12 in sales per month. Well below the U.S. Minimum wage. Just to sell the average number of albums each year.

It stands to reason that in order to be a working musician your sales would have to be well above average, otherwise your income would be far below the poverty line. If an artist only sold (at $15) the average number of albums by 2002 figures their yearly gross income would only be $6,733.44!

Keep in mind that, according to the music industry, sales of CDs have been falling about 20% per year since 2002. In fact the music business is now worth half of what it was in 1999, down from $14.6 billion to 6.3 billion.² And so far purchased downloads have only made up a small portion of lost CD sales. According to BigChampagne Media Measurement, an online tracking company, the amount of illegal, unauthorized downloads continues to represent about 90% of the download market.²

This brings into sharp focus the problem of illegal copies and Indie recording artists trying to make a living. For those of us that have been fortunate to be able sell more than the average amount of albums per year, making just enough to pay our bills, that luck and hard work are being eroded by unauthorized downloads and illegal copies of CDs. Yes, everyone blames someone else for the problem of pirated music, (usually the major labels) but in the end we all get to chose to either support the artists whose work we enjoy, or take money out of their pockets.

* These numbers are calculated by first removing the cost of manufacturing the disc.

(1) http://books.google.com/books?id=jQ0EAAAAMBAJ&lpg=PA9&ots=_JqPPAz0ny&dq=average%20sales%20per%20album&pg=PA9#v=onepage&q=average%20sales%20per%20album&f=true

(2) http://money.cnn.com/2010/02/02/news/companies/napster_music_industry/

For a full list of posts see TMD TOC

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© The Musical Disconnect (TMD)

The Digital Domain: 1's and 0's or just zeros?

2011-06-11T15:14:00.000-07:00

In the last several posts we've looked at how many recordings an Indie musician would have to sell to make a couple of economic target goals: the U.S. minimum wage, and rent, specifically mine, which is a little more than $1,300. Up till now we've only looked at physical product, CD's, comparing sales on an artist's website, at a gig, and through retail stores. We have seen that the farther away the artist got from the customer the more units they have to sell to make our target goals. For example, if an artist sold a CD at a gig for $15 they would be able to apply more of the income from that sale to their rent than if their recording was sold through a retail store via a distributor, both of whom would take their cut.

Below is what this looks like on a graph.

Click image to enlarge

Now we're going to enter the mysterious world of digital downloads. I use the word "mysterious" because some of the of the definitions of that word, such as "difficult or impossible to understand", "having an atmosphere of strangeness or secrecy" and "deliberately enigmatic" are perfectly suited to the digital download world.

Before we delve into this strange and forbidding landscape I should explain that one of the reasons I decided to start my own label and publishing company were the horror stories I heard from fellow musicians that had deals with record labels. Without going into too much detail or naming names I met two recording artists (separately), each of whom had record deals with a well known, but comparatively small, label. They both had recordings that had at one time been at the top of the Billboard New Age charts and when I asked how much something like paid, they both said, in disgust, almost the same thing, "I haven't seen a dime..."

A quick glance through any book about the music industry will give you an idea why this is. Simply put, from the moment you sign a deal with a label you are in debt to them. Any money they give you as an advance in order to make and promote your recording they get back by taking it out of the royalties (income) you earn from your sales until they say you've paid them back. Most of the time, however, it seemed like the artists never sold enough to pay back the money.

THE GOLDEN AGE
Once upon a time, in the beginning of the internet, there was a golden age when artists working in a small genre (like New Age) could start their own label, sell CDs on their website, through amazon.com and small New Age stores. They didn't have to deal with record labels and their fuzzy bookkeeping. The artist controlled the costs of running the label, knew where the product was going, and how much they were owed for it, and most important, when they sold a CD how much gross income they were going to make.

However, with the rise of digital downloaded music, Indie artists lost all that control.

APPLE TO THE RESCUE?
In the early part of the last decade Napster was ravaging the sales of the major record labels by making it possible for people to download music, illegally, for free. The major record labels reacted to Napster like a deer in the headlights and did nothing but whine and stomp their feet. Then Apple came along with an offer that was going to save the music industry. During this time Apple was launching their iPod and the main reason to buy an iPod was to listen to music. So Apple bought an App called Sound Jam and turned it into iTunes and then the iTunes store. Since the major labels couldn't get their act together to save their own industry by legally selling digital downloads, Apple convinced the labels to sign an agreement with them allowing Apple to sell digital download (DD) albums on their iTunes store for $9.99 and individual songs for $0.99. This agreement was supposed to save the music industry but now it's beginning to look like it just made it's death legitimate and legal.

At first glance Apple's plan seems reasonable, but over time it is has proven to be anything but. For one thing the agreement took away from the record labels the ability to decide what amount to sell their products for and how it would be packaged. It was all decided by Apple, the retailer. For Apple the iTunes store has been a huge success. In a recent report from the NPD Group, Apple sells 25% of all music in the U.S. and 69% of all digital music (1). Quick on the heels of iTunes came amazon.com, who soon after entered the digital download game. Since Apple already had the lion's share of the market, amazon.com tried to lure buyers to them by selling digital albums for less than iTunes, $8.99. That might work for amazon (although it doesn't look like it has), but for the artist it's DOA.

So just how does this all affect the Indie artist? First off, Indie artists have even less clout than the major labels, so if the big guys reach a deal with Apple and Amazon the rest of us pretty much have to go along with that. This means that in the digital world we don't determine the price that our work is sold for, the retailer does. When a sale is made the retailer (Apple or Amazon) gives us a percentage of the price they've set. If you are selling an album on iTunes this at least is somewhat fixed. The vast majority of digital albums are priced at $9.99. However I've seen amazon.com's prices for digital albums vary from more than $8.99 to less than $2.99! They decide based on some undisclosed formula and the artist has no say in the matter. Zero. Remember, the artist is being paid a percentage of the price the retailer dictates. So if Amazon decides to lower the price of a particular digital album the artist ends up making less money.

Just like working with distributors to sell into retail stores, Indie artists have to use a distributor, in this case a digital distributor, to get their music on iTunes or amazon.com. The two digital biggest distributors are Tune Core and CD Baby. (Just for the record, I use CD Baby). So the retailer sets the price and then takes their cut. Then they pay the digital distributor who takes their cut and the artist (or label) gets the rest. So how much is this?

If I sell a digital download of one of my albums on iTunes, after everyone takes their cut I receive $6.37. Depending on the price that Amazon decides to sell my digital download albums for, I have received either $5.92 or $4.46. Again they don't say how they determine their prices. As I said, this is a mysterious world.

Let's see how this all stacks up compared to selling physical CDs based on the target goal of my rent. I have removed all costs for manufacturing, shipping and credit card processing, but I have not removed the one time fee CD Baby charges to process each CD.

Type of Sale	# of Albums (CD/DD)
Concert $15 CD	92
Artist Website CD	112
Artist website Members CD	131
Concert CD (2 for $10)	134
Artist Website DD Album	153
iTunes DD Album	204
Amazon Hi DD Album	220
Distributor to Retail CD	236
Amazon Low DD Album	291

Let's look at this in graphic form

Click image to enlarge

The first thing I notice is that I have to sell 222% more albums through iTunes to make my rent, and at amazon.com's lower payout 316% more. What's also interesting, and a little depressing, is that the number of physical CDs sold at wholesale is stuck way down between amazon.com's two different prices. With this information you could say that digital download sales of albums are on par with selling physical CDs.

The problem is that albums are not what's selling when it comes to digital music purchases. Songs are.

HOW SONGS ARE KILLING MUSIC
Songs account for most of the sales of digital music. This is true for all artists. iTunes policy requires that all songs be made available separately, regardless of what the artist's intent was when making an album. In a recent Wall Street Journal article Aram Sinnreich, a media professor an NYU, stated that the ability to buy individual songs "is a last gasp for the album format". The same article noted that Katy Perry sold 2.2 million downloads of her song "I Kissed a Girl" in the U.S. compared to only 282,000 copies of the album that had the song. According to Nieleson SoundScan data, the Rolling Stones sold 6 million individual songs digitally verses only 1.8 million albums between 2006-08 (2).

Not to compare myself with these major acts, but my sales through iTunes also reflect this trend: 89% of my sales through iTunes have been individual songs.

How does this affect my ability to pay my rent? Songs on iTunes and amazon.com cost $0.99. Once Apple and CD Baby take their shares, Indie artists, me included, received $0.64. That means I would have to sell 2,031 each month just to pay my rent! To pay my rent for a year I'd have to sell 24,372 songs every year.

Some artists are deciding not to sell their music through iTunes for this very reason. Some of those acts include Kid Rock, Estelle, AC/DC, and The Eagles, a band whom Steve Jobs personally appealed to for their participation in the launch of the iTunes store, telling their manager, Irving Azoff, "he couldn't imagine launching a music store without his favorite rock group." The Eagles now feel that their royalties have been far lower than expected (2). Once again I don't want to put myself in the same league as these artists, but it is my intention to not release my next recording digitally on iTunes or amazon.com. The ROI does not seem to justify it.

Let's stack this up again. To see this better we'll look at the three main types of sale: a CD sold by the artist at a concert, a DD album on iTunes, or a song on iTunes

Type of Sale	# of Albums or Songs
Concert $15 CD	92
iTunes DD Album	204
iTunes DD Song	2,031

When displayed as a graph you can clearly see the jump from albums to songs needed to be sold is exponential to make our rent payment!

Click image to enlarge

STREAMING
Just when you thought it couldn't be any weirder we enter the world of streaming. If you don't know what streaming is, think of it as a juke-box on your computer. You pay a subscription fee to a streaming company and in exchange get to listen to songs on demand through a player. Theoretically you never get a copy of the song on your computer. Each time the listener plays a specific song the streaming company charts a stream payment for that artist. When they go to pay they first take their cut, then the digital distributor takes their cut and the Indie artist gets the rest. How much is that? That's a good question...and not an easy one to answer.

Here are some of the numbers I've pulled from my statements. Remember a stream equals one song play, and yes, the numbers are real.

Streaming Service	$ Amount per Stream
Rhapsody	$0.0091
Last.fm	$0.0000318500
...or	$0.0009271962
...or	$0.0000391300
...or	$0.0000163800
These Last.fm amounts were all paid to me for the same song, off an album that won a major award. Why are they different? I have no clue. Who knows? (Seriously, does anyone know?)
Lala	$0.000115570009
...or	$0.000179270000
...or	$0.006370000000
Lala, is a streaming company that Apple now owns. Similar to the Last.fm payment, these payments were for the same song.
Napster	$0.01853445
That's right, Napster, the company that started the slippery slope of illegal peer-to-peer file stealing but was forced to go legit, pays the most revenue per stream.

Even at Napster's rate, I would have to receive 58,000 streams of my songs each month to pay my rent. On Rhapsody I would have to have 116,000 streams each month, just to pay my rent! As for Last.fm and Lala, the numbers are so small I'm not sure how to do the math...

Now let's compare how many sales are needed to pay our monthly rent example of $1,300.

Type of Sale	# of Sale
CDs at Concert ($15)	92
Albums iTunes	204
Songs iTunes	2,031
Streams Napster	70,139
Streams Rhapsody	142,857

Let's look at this in graphic form below. Notice how on this graph the 92 CDs sold for $15 looks like zero due to the ginormous leap to 142,857 streams needed each month to pay the rent. That's over 155,279% more in sales!

Click image to enlarge

Aside from the absurd idea that an Indie artist can make a living off from this, what kind of numbers are $0.0000391300 or $0.0000163800 anyway? Does anyone at any of these streaming companies really think an artist can make a living this way? Do the labels? I assume most artists don't even think about it... I would hope that if they did think about it they might consider a streaming boycott.

(Like many artists and labels I've requested my digital distributor to remove me from all streaming sites. As the 149 streams from the month of December 2009 shown below illustrate, I could barely take the money I make and buy something at Starbucks.)

Click image to enlarge

Like all companies I keep a database with all my transactions to track the financials of my business. But these numbers are so small I can't even enter them into my database. They end up being displayed like this: 5.7863e-4 and won't conform with the rest of the data. In truth I really have no idea what I'm getting paid per stream or if the payments accurately reflect the correct number of streams that my music receives. I get statements, but how do I track these sales? (Or any digital sales for that matter, streams or downloads.) The companies state what they have sold, usually months before, and I have no way of verifying the sales or not. I assume the statements are true, but how would I know otherwise? On top of that, the amounts that are paid per stream change randomly. I warned you it was mysterious.

It seems that for those of us who started our own labels to avoid the troubles of weird accounting by a record label, we've now run into the same issues with downloading companies. They call the shots and they dictate the price and the terms. They tell us if our products have sold (or not), and we have to blindly believe them since they generate copies of the product on demand. We, the creators, are not involved.

The bottom line is that when it comes to the world of digital downloads, if people bought albums instead of songs, artists might be able to struggle along. But that's not what's happening and in the end song-only purchases and streaming will kill music. Both for the artists and the fans.

So what got us to this place..?

If you want to look at all of this from another POV I highly recommend you read The Paradise That Should Have Been from The Cynical Musician blog. His numbers are even more bleak than mine. Personally I think you should read all of his posts. They are thoughtful, well written and inspiring.

NOTES
1. http://arstechnica.com/apple/news/2009/08/itunes-sells-25-of-all-music-in-the-us-69-of-digital.ars

2. http://online.wsj.com/article/SB121987440206377643.html

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The Tale of Retail

2011-06-07T01:05:00.001-07:00

In the last post we saw how a recording artist needed to sell 85 CDs each month to make U.S. minimum wage, $1,160. Not every Indie musician can do that. We are competing for sales with a lot of very heavy hitters, the two biggest being iTunes and Amazon. And to make things worse, hopefully they are selling our stuff too, which means our own websites and performances are competing with two of the largest marketplaces in the world.

One of the ways that an Indie artist used to be able to do to get their music out in stores was get their recordings carried by independent distributors. This was especially true for New Age artists, or its off shoot genres, Celtic, Native, Flamenco, Chill... At one time there were a lot of little stores out there that mostly sold books, crystals, incense, wind chimes, and music. They had recordings that the big box music stores did not.

Many of these small independent distributors still exist, but a lot of the stores that they sold into are gone or don't carry music any more. (We'll get to that at another time.) The stores liked dealing with distributors because they could make one phone call and get all of their music and or books, and not have to deal with a bunch of artists and authors. One order, one payment. Plus the distributors were gate keepers. Product that they didn't feel was going to sell, or for which the artist couldn't prove a sales history were not picked to be in the catalog and this, hopefully, weeded out a bunch of bad music. So not everyone with one CD and no sales to show for it would be picked up for distribution.

This presented a challenging "Catch 22": retail stores wouldn't sell your recordings if you weren't carried by a distributor and distributors wouldn't carry you if you weren't in stores...

The main benefits of being in a distributors catalog were they had the accounts with the stores and they had a sales team and would talk about new product. Simply put, they had way more places to sell a recording than an artist did. The artist didn't have to be there to make the sale, didn't have to get the product to the end customer and being in the catalog meant they'd passed the gate keeper and were somehow more worthy of attention, by both the store buyer and the final customer.

The artist did have to give something up for this access-- 55% of the retail price of their CD to be exact.

In the last post we looked at how many $15 CDs an artist had to sell to earn U.S. minimum wage, or in my case, pay rent. Let's go back to that $15 CD because it is your listed price. What this means is that you, as the artist, label, or both, would state that your CD's sell for $15. This would be the price on your website, your concerts and any other place you could make a sale. A distributor, if they accepted your title(s) would only pay you a wholesale price of $6.75 for every CD they bought from you to be resold to one of their accounts.

While this seems like a lot to lose, remember that the hope is your recording will be seen and purchased in little stores all across the country Stores that you didn't have to call directly (if you even knew they existed) and therefore you would make way more sales that way than you would on your own, More sales mean more money. Hopefully more than an artist could make directly through performances or their websites.

It should be noted that distributors do not promote titles, they just make them available. The artist still has to promote their title so that the stores want to carry them. This is done through buying ads in trade magazines, in the distributors catalogs, touring, getting reviews, getting interviews, getting radio play so that the store customers want a copy. There are many ways to promote a title. They all cost the Indie artist money.

So let's crunch some numbers. Just to make this easier let's say the wholesale price is $7.00 instead of $6.75. First we need to remove the cost of manufacturing the CD. That leaves us at $5.65. At that price, instead of having to sell 85 CDs to make minimum wage you'd have to sell 205. For me to pay my $1,300.00 rent I have to sell 230 units instead of 96. Oh, but wait, I have to ship those CDs to the distributor and they don't pay for that. The average ground shipping price via UPS is about $0.14 per CD, so now the wholesale price comes down to $5.51 per disc. So I really have to sell 236 CDs per month just to pay my rent. (BTW anybody want to buy a CD?). If I'm living on $2,500.00 a month then I have to sell 454 CDs each month to pay my bills, eat, buy gas for my car, toothpaste, have a website, run an ad, keep my gear running, buy shampoo... BTW the monthly living expense number of $2,500 does not include the cost of having to make more CDs. That adds quite a bit more as we saw in "Let's Get Physical: The Real Price of CDs"

Another thing to remember is that most distributors pay 60 or 90 days, end of month (EOM). That means that I won't see a check until after 60 days from when I get them the product, plus to the end of the month. So if they order at the beginning of the month in a worst case scenario I won't get paid for 4 months. Others, like Amazon, work on consignment. They don't pay you until they sell it. That makes you a de facto bank.

When I'm performing at a music festival and have to tell instrument makers I can't afford to buy one of their instruments they usually look at me like I'm crazy, saying "How is that possible, you're one of the headline acts!" Well that $275 instrument they're trying to sell me means I have to sell 43 CDs through a distributor, after I sell the ones I need to pay my bills first...

To finish this up, in my experience I have done very well with some distributors and not so well with others. I place a very high value on what my distributors do for me and my recordings, but this post is ultimately not about distributors being good or bad for an artist, it is about pulling back the curtain on what goes into a musician making or not making money. The disconnect between the amount of money that the music fan thinks an artist makes, and what that reality is. As you've seen, just because you spent $15 on that CD you just purchased doesn't means the artist is making anything close to $15. Far from it.

For a true Indie artist, like myself, who is covering the costs of everything and needs to sell their work at a wholesale prices to get it out in the world, including Amazon.com, the profit margin per CD is very low. And just like that instrument an artist can't afford to purchase because of that low margin, so they can't afford a tube of toothpaste, a box of breakfast cereal, and a couple gallons of gas to get to that gig, if their fans are copying their CDs for their friends or accepting copies from others...

Next up Digital Downloads

© The Musical Disconnect (TMD)

As always H/T to Faza at The Cynical Musician for the info on the minimum wage and his great insights.

Let's Get Physical: The Real Price of CDs

2011-05-31T14:57:00.001-07:00

For me, like many, if not most recording artists, my main source of income is selling my recordings. A lot of people look at a CD and question the price associated with it. They figure that since a blank CD-R they can buy at their local office supply store costs just pennies, so should an audio CD with an artist's music on it.

On it's face this thought is misguided. It is not the CD you are paying for, it is the music that is on it. So the cost of the CD does not reflect the price of an empty disc, but the months or years that go into the production of the music on the disc.

How can a price be put on that? The short answer is it can't. For me as a DIY artist I look at how much money I need to live on and what my competitors are charging. Then I make adjustments. Either to my price or my expenses.

So what goes into the price of a CD? Just like the cost of running a restaurant goes into the price of a meal, so the price of running a label, making recordings, paying the artist, studio time, touring costs, administrative costs, manufacturing and shipping costs, and more, go into the price of a disc. While there might be a lot of waste in the big labels, if you are a DIY artist you have to watch your money closely. There's not enough to be cavalier about it. For example my label (me) does not throw big "launch" parties when I release a new album. I also can't make a lot of giveaways to promote the recordings either.

The bottom line is trying to make a living. And I'm not talking about getting rich. Far from it. So just what is meant by "making a living" in the U.S today?

The minimum wage in the U.S is $7.25 per hour. That amount, based on a 40 hour work week, means the monthly minimum wage is $1,160. For me it generally takes two years, or 730 days, to create and produce a CD. If I sell someone a CD directly at a concert for $15.00 then after we take out the cost of manufacturing the disc it means that for those 730 days the sale of that disc contributes $0.01869 to my income for each day during that time period.

A better way to look at this is that after removing the cost of manufacturing I need to sell 85 CDs a month, directly to a buyer, at $15 each, to make the $1,160 monthly minimum wage.

85 CDs might not seem like that high an amount, but if you've ever sold something, like say Girl Scout cookies, imagine having to sell 85 boxes a month, every month, just to make the minimum wage of $1,160 a month.

BTW, my rent controlled apartment costs a little more than $1,300.00 a month, so I need to sell 96 CDs a month at $15 just to pay my rent.

I know this may be hard to believe, and even harder to admit, but I don't sell 96 CDs a month directly to buyers. Not even close. Average monthly sales from my website, since 2007 run about 37 units. Those CDs are sold for $14.99. If you're on my Emailing List and take advantage of the discount offered to you as part of that the price drops to $13.49. My charge for shipping 1 CD is $4.00, but most people take advantage of my free shipping. When you take out the cost of manufacturing the CD, the cost of free shipping, and the cost of processing the transaction via Paypal my income on a Member's price CDs is $9.60. On regular priced CDs with free shipping the income is $11.10.

Obviously I do make some money off of charging for S&H, but most people order 2 CDs to take advantage of the free shipping. I offer free shipping because I'm in competition with amazon.com for sales of my recordings and since they offer free shipping I have to as well.

Based on a regular priced CD purchased from my website with free shipping I need to sell 119 CDs a month to pay my rent.
Based on Member's priced CD purchased from my website with free shipping I need to sell 137 CDs a month to pay my rent. Just my rent. If I want to eat I need to sell more CDs. To power lights and other electronic gear I need to sell even more. To cover the cost of manufacturing more CDs to sell when I run out of stock I need to sell a lot more.

This is just sales from my website. For live performances I used to sell my recordings priced at 1 for $15 and each addition recording for $10. (e.g. two for $25.00, three for $35.00) After the 2008 crash, and the rise of iTunes, I started lowering my prices. Sometimes going as low as 1 for $15 - 2 or more for $10 each. Since this price has fluctuated I don't have a way to pin down hard data, but over all the gross on a live sale was close to that of one off my website at the old price structure. At the lower price I'm experimenting with lately, I'm making less. Especially when you factor in the costs of getting to gigs, some of which are far away.

For this whole post I keep talking about removing the cost of manufacturing from the price. Let's quickly look at the costs of manufacturing the CDs to sell. To save some money I order 2,000 discs, print and packaging of any one of my recordings at a time. This costs me just over $2,400. In direct sales I need to sell 162 copies at $15 each to pay off the cost of the manufacturing. If I'm selling to a distributor then I have to sell 337 to 405 units to pay off the cost of manufacturing, depending on the agreement I have with them.

If I'm manufacturing a new recording then about 500 units will be given away as promo copies to radio stations, retail outlets, periodicals for review, etc. So for the first pressing of a title I have to sell much more to make up for those promotional copies.

To wind this up, my expenses, both personal and business related, but not counting CD manufacturing, are about $2,000 to $2,500 per month. This means I need to sell between 180 to 200 CDs a month to pay the bills. We've seen that I don't sell that many CDs directly on my own. So the next way to sell recordings is through a distributor. In the next post we'll talk about how distributors can sell a lot more CDs than an artist can, but the trade-off is that the artist makes a lot less money per CD. And, as you many have already guessed, pirated copies of CDs makes it that much harder for a recording artist to pay their rent, buy food, and pay the bills.

(H/T to Faza at The Cynical Musician for the info on the minimum wage, and more.)

Next up, we'll look at the other options recording artists have to sell their music (CDs) and how that play/pays out...

© The Musical Disconnect (TMD)

The Façade

2011-05-28T16:33:00.001-07:00

When I first started my label one of the things that I wanted to do was to look as professional as possible. I knew I was competing with real labels and if it didn't have the same look then I would not be taken seriously.

This worked the way I hoped, but it also had consequences that I never expected. In trying to create the façade of a big record label many of my listeners figured that there was more to my little label than there is.

I can't tell you how many times people have confessed to me that they think that my label is located in a really big building---that I have a staff and of course am selling enough recordings to pay for all of this.

The truth is much different...

My label is not located a big building, it is my 800 sq foot apartment. It only has one employee, me. (Sometimes I'll ask a friend of mine to answer emails and help with order fulfillment, but most of the time he's out of the country backpacking in western Europe... [sic])

My label is an artist owned label. All that means is that the artist, in this case me, owns the record company. And with that comes all the work of running any company. Not only am I the sole artist on the label, I am also the order taker, order processor, stock person, complaint department, driver, agent, tour manager, roadie, customer service, web designer, cleaning crew (I suck at this part), accountant, purchasing department, and a bunch of other things I can't remember right now. But most important I also pay the bills: rent, electric bills, heating or cooling bills in the studio, maintaining my recording equipment, gasoline during touring, shipping product, website hosting, equipment for live gigs, and, the most costly, paying to have my recordings manufactured so I can sell them.

This doesn't include food, and all the other day to day stuff we all have to pay for

There are many artists out there nowadays who own and run their own record company. In fact in the world of New Age music and its sub genres, most of the artists are doing it themselves. Which means they, too, are paying the same bills.

In order to make money to pay the bills we have to get out and make footprints. Performing, giving workshops, lessons, whatever it takes to get our music out there. But mostly we try and sell our recordings.

Now I realize that a lot of people don't want to hear this, but the truth is that every time you make a copy of your favorite artist's CD to "share" with a friend or family member, that "copy" you just made is a sale that we won't make. It is income that we lose. The loss of which will make it harder for us to pay the bills that need to be paid to make the music you like in the first place. This is especially true for Indie artists as we have to come up with the capitol in the first place to make it all happen. We are not using the resources of a record label.

For those of you that will point to the low costs associated with the manufacturing of digitally downloaded music, in later posts we'll look at how that way of selling music, even without the associated costs of manufacturing physical product, is in truth making it harder and harder for all recording artists to make a living.

The Disconnect

2011-05-25T09:49:00.000-07:00

This blog will, randomly, explore the disconnect between the music fan's perception of being a working musician and the reality. To look behind the façde at what it really takes to be a working, independent musician today in the new digital music age.

Some of this will be anecdotal, and subjective. Some will not.

The objective of this blog will be to inform music fans as to what is happening in the music industry today, the profound changes that are occurring, and how their actions can help, or hurt, the artists whose work they enjoy.