Holiday music sales were down this year in comparison to 2011. And music startup investment hit $600 million in 2012, bringing to light several music startups to watch in the coming year. Also, Billboard.biz reported that reversion rights might significantly change the music landscape in 2013.

 

 

2012 Holiday Music Struggling to Sell

 

Holiday music sales are down this year, according to Billboard.biz. Without a best-selling album like Adele’s 21 or a definitive Christmas hit like Michael Buble’s Christmas, the usually-busy music sales season has been slow. Compared to the period between November 12 and December 23 with weeks 46-51 of last year’s SoundScan calendar year, unit sales dropped 10 percent to 54.9 million from 61 million copies scanned last year. However, digital album sales were up 5.3 percent, while CD sales went down 15.4 percent.   

 

Even though year’s 51^st week on the SoundScan calendar included December 24 – a huge shopping day – analysts say the 52^nd week of 2012 will not likely add much extra to the year’s sales. Last year’s holiday season boasted Drake’s Take Care, Buble’s Christmas, Nickelback’s Here and Now, the Black Keys’ El Camino, Adele’s 21, Young Jeezy’s TM 103:  Hustler Ambition and Justin Bieber’s Under the Mistletoe, which combined offered weekly sales of more than 200,000 units on 12 different occasions during the holidays. This year, sales only hit the 200,000-unit mark four times with One Direction’s Take Me Home, Taylor Swift’s Red (which hit the 200,000-unit mark twice) and Rihanna’s Unapologetic (which sold 238,000 in the period around Black Friday).  

 

While many music merchandisers complained of lackluster music sales, others said that business was not down for those not relying on music. For example, Newbury Comics, which has branched out into fashion merchandise, experienced a sales boost this year because of its shift in focus. And Super D’s CD online sales and online fulfillment company’s VP of retail sales Tim Hinsley said he believes there was significant sales growth this year, even though VP of wholesale sales Bobby Miranda took a slightly different view:  “Some were up a little, and some were down a little … Retail saw a last minute rush … There weren’t a lot of releases that made an impact. There wasn’t a blockbuster release that sold throughout.”

 

Newbury Comics’ chain director of purchasing Carl Mello said that Red sold well, but there was a lot to make up for with the lack of “200k deltas” in 2012. But there were “a lot of albums that did what you hoped.” There was Bruno Mars’ Unorthodox Jukebox, Alicia Keys’ Girl On Fire and several other new heritage artist titles like Led Zeppelin’s Celebration Day DVD and the vinyl versions of Beatles’ catalog albums:  “At the end of the day, there was a lot of decent records, but with less demand.”

 

Music Startup Investment Hitting Big Numbers

 

Music startups raised record dollar amounts in 2012, according to a recent post in Digital Music News. This year, investors shelled out $619 million to music startups. And much less money was invested in companies attached to music, with even less being given to businesses that license music.  

 

Despite the over $600 million raised by startups in recent months – which represented a 34-percent increase in funding among startups compared to funding in 2011 – Billboard asserted that the dollar amounts are a bit skewed, as not all are strictly music companies. For example, Gumroad, which got $7 million, has an online direct-to-fan solution for musicians and labels, but is not only a music service. And Backplane, which got $4,500,000 is an online social network that has been pushed by Troy Carter and Lady Gaga but is not any more music related than Twitter or Foursquare. And there are many others that do deal in music, but only because they help build brands, offer software, hardware and media or provide ticketing solutions for people in all industries.

 

With all the companies that are not exclusively music related removed, $398 million was raised by companies rooted solely in music. And of that amount, $230 million went to on-demand, licensed services like Spotify and Deezer, thus proving what many have said is impossible:  Some companies that require negotiated licenses can actually raise millions of dollars.

 

And Spotify and Deezer are major points of focus for those who are hoping for evolution away from the current digital market that is heavily focused on Amazon, Apple and Google. This $230 million is invested in changing the way people listen to music and will probably bring about the most revenue and the biggest mergers, acquisitions and IPOs.

 

Investors also spread out $168 million among music startups not concerned with licensing issues. Radio services like Senzari, TuneIn and the social radio service attached to Spotify Soundrop collectively took in $20 million.

 

Analysts do not expect digital music services other than Spotify and Deezer to raise huge amounts of money in 2013. However, more money could come into the industry as a result of those services. Other companies like Soundrop will likely establish themselves as streaming companies grow.

 

And who among the startups funded in 2012 will make it big? Billboard reported there are several to watch in 2013, including audio hosting site SoundCloud, e-commerce and Twitter hybrid Chirpify, e-commerce tool Tictail, crowdfunding site PledgeMusic and music recommendation platform The Echo Nest.

 

Will Reversion Rights Change the Music Landscape?

 

2013 is officially the year that the copyright licenses or many master sound recordings will expire for many albums. And this will put many albums released in 1978 in line for potential reversion of ownership from labels back to the artists. Still, the only artists to file notice of termination with the U.S. Copyright Office have been artists including Pat Benetar, Journey, Devo and Billy Joel. And even experts and analysts are unsure of exactly how reversion rights will impact the industry, said an article on Billboard.biz.  

 

Some artist supporters have said that reversion rights will be “cataclysmic” for the industry and could be the beginning of a major and fast evolution. Still, label executives maintain that their companies will not see any significant change, and that it could just be an “overhyped potential disaster” in line with the Y2K non-event of 1999/2000.  

 

There was no federal copyright law for master recordings before 1972, so discussions of what will happen have been surrounding albums released after that year. After 1978, there is a 35-year copyright period, which will expire for artists that file a termination notice. Master recordings that were made between January 2, 1972 and December 31, 1977 are protected for 56 years. Artists have five years to file their notices. Those with 1978 recordings needed to file their notices between 2003 and 2011 to get back recordings in 2013, but can still file until 2016 to get them back in 2018.

 

Although artists like Pat Benetar, Journey, Billy Joel, Kool & the Gang, Lipps Inc., Roberta Flack and Peabo Bryson have filed their notices, major labels and artists alike have been ignoring these filings. And which albums the notices of termination cover has been confusing.  

 

To make matters even more confusing, artists and the RIAA have been fighting over the provision in a 1,740-page bill from 1999 that stated that sound recordings are considered “work-for-hire” and thus potentially can never belong to artists who were technically employees of a label.

 

Elliott Resnick, an associate with the firm of Shukat Arrow Hafer Weber & Herbsman said, “The issue is a complex one, and ultimately, this is an area where case law and business practices are still developing.”

 

An unnamed artist manager reinforced this uncertainty:  “It’s kind of a jump ball at this moment … [While artists have sent termination notices to their labels], there is a complete wall of silence from the labels.”

 

Some artist lawyers are confident that all lawsuits related to reversion rights will be sure victories for them and are choosing high-profile locations for the proceedings in hopes of setting legal precedent. But these legal proceedings will likely be expensive and take a long time.

 

Eric German, an entertainment lawyer from the firm of Mitchell Silverberg & Knupp said, “If you look at these past artist-label negotiations from a neutral perspective, the parties to these agreements always intended sound recordings to be considered a work-for-hire … that’s why the agreements use that language.”  

 

One area where copyright terminations might not be relevant is in films. Because a movie is a collaborative project with many “creators,” it is seen as a collective work, ineligible for termination. Some have claimed that albums also fall into this category, because there is a band, a producer and often songwriters and musicians involved in its creation.

 

But lawyer Bob Donnelly, who was a part of the initial 1999-2000 work-for-hire battle said, “It’s a stretch if they will be able to squeeze a typical recording into a collective work. Collective works were created to cover things like an encyclopedia. It strains credulity to try and say sound recordings are collective works.”    

 

When it comes to publishers, there is no work-for-hire provision, so the songwriter frequently gets ownership restored once paperwork is done. And most publishers are keeping their works, even if they see lower profits. One publisher agreed, “It’s hard to get pole position over the publisher in place.” And even though individual songs are up for termination and reversions, these songs will likely not be reclaimed unless part of entire albums, because the revenue from single songs will not support this type of lawsuit.

 

And will record labels continue their “ostrich strategy,” or will they eventually fight termination notices? Chris Castle of Christan L. Castle Attorneys said, “The whole issue is definitely not settled, and I don’t think anybody wants to have a lawsuit about this … I don’t think either side wants to take a chance and lose. The labels and artists will settle this on a case-by-case basis.”   

 

Many major label executives argue that artists are better off keeping their recordings in house. One unnamed executive said, “There are a lot of levers at our disposal that the record labels can employ in a negotiated settlement in order to retain those rights … We can offer a higher royalty rate for the expiring copyright, and we can sweeten the pot by offering to pay a higher royalty rate for albums that have not yet hit the 35-year point, and we can offer a higher royalty rate on records outside the U.S. Sure profit margins will be less, but record companies will likely end up keeping those rights because of the leverage they can bring to negotiations.”  

 

The executive added that he believes only the top 5% of artists will pursue the reversion process, in great part because of the expense involved.

 

Another major-label executive said, “Ultimately, this issue will wind up making for a really interesting couple of years.”

Last week, Variety laid out the impact of some of the key music industry events of 2012. Also, Nielsen announced it would be acquiring Arbitron to help better track the performance of radio and streaming services. Also, The Next Web announced the 30 music startups that will be at this year’s Midem conference that could be making an impact on the business in 2013.  

 

 

The Year in Music, 2012

 

2012 was another year for huge change in the new music business, according to an article in Variety. Large music companies consolidated, digital distribution and streaming exploded, and people flocked to court and Congress.  

 

One of the biggest events in music was the further consolidation of the major record labels. The auction process alone took almost a year, but Citigroup finally sold EMI Music’s publishing side to Sony/ATV in July for $2.1 billion and the recorded music half to Universal Music Group (UMG) for $1.9 billion in September. Universal’s absorption of the label was the first major music merger since Sony took BMG in 2004. EMI will continue to be run as an entity separate from UMG, run by former co-chairman/COO of Columbia Records, Steve Barnett. And Martin Bandier, former EMI Publishing head will move to Sony/ATV and continue to run the new entity that still houses the copyrights for huge artists like the Beatles and Taylor Swift.    

 

Warner Music Group (WMG)’s reorganization this past year represented another major shift in the industry. Ex-CEO Edgar Bronfman, Jr. who orchestrated the label’s purchase from Time Warner in 2004 stepped down, and Stephen Cooper took over. And in November, WMG was rearranged into three different factions, with Warner/Chappell Music chairman-CEO Cameron Strang taking over publishing and the recorded music division. Earlier this month, he also took over Warner Bros. Records when Todd Moscowitz resigned.  

 

Another industry change that made waves in 2012 was the unexpected “For Sale” sign put on Anschutz Entertainment Group (AEG), held by Denver billionaire Philip Anschutz. The sports and entertainment entity owns professional teams like the Los Angeles Lakers, Kings and Galaxy and many venues, such as Staples Center and other L.A. Live properties. AEG Live holds Goldenvoice and pushes the yearly Coachella festival, Stagecoach and other music events that earn big bucks for musicians, labels and other companies alike. AEG is the second-biggest live events company, next to Live Nation entertainment and is predicted to be sold for anywhere between $8 billion and $12 billion. The sale is expected to make major waves in the already very competitive concert market.   

 

Internet radio royalties were also big news of 2012. Pandora continued to push for Congress to pass the Internet Radio Fairness Act in order to decrease licensing royalties for Web radio. Pandora joined ClearChannel (operator of iHeartRadio) at a House hearing in favor of the bill in November. Pandora is also trying to get its listeners to write to their congressman in support of the company’s suit against ASCAP, filed in November. Of course, artists, music publishers and labels pushed from the other side to keep current Web rates and also to get royalties for their plays on traditional radio. ClearChannel made news when it agreed to individual revenue-sharing deals with some indie labels, including Big Machine, Glassnote and Naxos, which started a new war that will likely be a major focus of 2013.     

 

EMI’s Capitol Records filed a lawsuit in January against the Massachusetts-based company ReDigi over whether or not digital music files could be sold as “used.” The case is still pending, but Capitol says the company is just a hotbed for copyright infringement, completely based on unauthorized music copying. If the case comes out in support of ReDigi, it could set a precedent that would impact labels negatively; they would get no revenue from these re-sold products.

 

UMG v. Aftermath Records was another huge court case in 2012. The suit was filed by Eminem’s early-career producers and sued over royalties for downloads and ringtones. In September 2010, an appellate court ruled that royalties for downloads and ringtones should be set at a higher rate granted for licenses and not as “sales.” The ruling has already been used as precedent in over 12 class action suit and individual suits filed against UMG and other major labels by artists like James Taylor and Kenny Rogers as heritage acts try to get higher digital royalty payments. Whether or not the landmark Eminem case will offer any help for artists going forward or will just produce more lawsuits by other artists will likely continue to be decided in the coming years.

 

The RIAA revealed that digital shipment of music had hit 50% of the market in 2011, for the first time in history. And this brought about new and unexpected partnerships this past year. UMG sold Fontana Distribution to digital wholesaler INgrooves in March, and the company became a full-service digital and physical distributor. At the same time, Orchard and Ioda merged. 2013 will likely see many new partnerships as similar companies join forces.

 

Spotify is now worth $3 billion, and 2012 was a big year for its growth. It got $100 million in new money from companies like Coca-Cola, Goldman Sacchs and Fidelity Investments in November. And in early December it hit 20 million users and 5 million paid subscribers (1 million in the U.S.). Critics are not convinced that a business based on 25% paid subscribers will work long term for a company that gets most of its users through its free, ad-supported arm. But others feel that streaming music is still establishing itself as a real force in the industry.

 

Electronic dance music (EDM) continued to be a huge money maker in the live sector last year. “Mega-raves” drew hordes of fans to huge outdoor venues in the U.S. and overseas. And the music business seems to have caught on. Live Nation purchased British EDM promoter Cream Holdings in May and L.A.-based Hard Events in June. But Insomniac Events’ Pasquale Rotella and Go Ventures ‘ Reza Gerami, promoters in charge of Electric Daisy Carnival and Together as One got indicted in March in a bribery and embezzlement case that also involved Los Angeles Coliseum and officials there. Although no decisions have been made, the dance music business has shifted cities in recent months, from L.A. to Las Vegas.  

 

Will Nielsen Reignite Radio?

 

Nielsen announced on December 18 that it would be acquiring the major radio ratings company Arbitron, including all the outstanding common stock for $48/share. The sale has already been approved by the boards of both sides.

 

Nielsen CEO David Calhoun explained, “U.S. consumers spend almost two hours a day with radio. It is and will continue to be a vibrant and important advertising medium … Arbitron will help Nielsen better solve for unmeasured areas of media consumption, including streaming audio and out-of-home. The high level of engagement with radio and TV among rapidly growing multicultural audiences makes this central to Nielsen’s priorities.”

 

Nielsen will use Arbitron’s asset to grow its “Watch” segment’s audience. Nielsen President of Global Media Products and Advertiser Solutions said, “These integrated, innovative capabilities will enable broader measurement of consumer media behavior in more markets around the world … We will also bring local clients greater visibility to empower more precise advertising placement and campaign effectiveness.”  

 

William T. Kerr, President/CEO of Arbitron agreed that the merger would provide more insight about listening behaviors and potentially help turn radio into an even more powerful medium than it already is:  “Radio reaches more than 92 percent of all American teens and adults because they love to listen to music, talk, news and information while at home, at work and in their cars … By combining Nielsen’s global capabilities and scale with Arbitron’s unique radio measurement and listening information, advertisers and media clients will have better insights into consumer behavior and the return on marketing investments.”

 

30 Influential Music Startups to Descend on Midem

 

The annual Midem conference will take place in January in Cannes, France and will be attended by even more innovative tech startups than ever before, according to a piece in The Next Web. The conference has been steadily growing over the years into a major event for music technologists. This year’s Midemlab competition, a competition for startups and apps developers that showcases “the most innovative startups operating in the entertainment field and proposing the latest digital innovations that help music executives, artists and brands to engage and monetize audiences” features 30 finalists. Midemlab highlights the most game-changing technological solutions to major music business problems, including artist-fan engagement and new revenue streams.

 

2012 winners included radio discovery app MPme, video stream service Crowdsuft and the guitar tutor game Wildchords.

 

This year’s 30 nominees are broken down into three categories:  “Music Discovery, Recommendation and Creation;” “Marketing and Social Engagement;” “Direct to Consumer Sales and Content Monetization.”

 

Midem takes place January 26-29, 2013.

Last week, the British Phonographic Institute (BPI) prepared to sue a pirate proxy service. Also, a collection of music industry stats pointed to exactly how the music industry is evolving. And media writer Sharmin Kent examined why creating a real community will be critical to rebuilding the music industry.

 

 

BPI vs. the Pirate Party

 

Britain’s music industry trade association the BPI announced it is making moves to sue the Pirate Party UK for providing access to The Pirate Bay, which was banned by the High Court in April. The Pirate Party extends across a number of European countries and is opposed to entities that prevent information from being exchanged freely via the Internet. The group created a proxy late last spring that bypasses the government’s ban; almost immediately, this website became one of the 150 most-frequented sites in the region.

 

A music industry representative told the BBC that the BPI has tried to settle with the Pirate Party outside the courtroom without success. The organization asked the Pirates to shut down the proxy website, but was met with threats. Pirate Party head Loz Kaye said the group will not acquiesce:  ““It is clear that we are facing a significant threat, and we will have to fight it. And fight it well, not just for the sake of the Pirate Party, but because of the principles at stake. I have always believed that it is not just enough to have principles, you need to act on them too, even if it gets difficult … I joined the Pirate Party because I passionately believe these are political issues. For every new person who starts to ask questions about digital rights, that’s a win. For every new person who stands up and gets involved, that’s a victory,”

 

Kaye added, “Geoff Taylor of the BPI has written to me to say we should expect a letter from their solicitors.” Kaye also told TorrentFreak that the Party is fully prepared for an expensive fight in court.

 

However, Kaye shared with TorrentFreak that there was still no legal paperwork:  “As of Saturday [December 10], if paperwork has been filed then we are unaware of it. If the BPI chose to file a lawsuit then we will deal with it as we become aware of it. We would have thought they would have preferred to talk to us first, but it is their choice as to what they do.”  

 

Kaye and the Pirate Party also highlighted the damage that can be done by government website blocks:  “Blocks now seem to have been used against services like Promo Bay, with the BPI being given significant power on deciding what they think should and shouldn’t be blocked. I would add that up until last week we had not been contacted by any party to ask us to take it down.”   

 

Despite threats to fight against the proxy being taken down, the Pirate Party lacks the funds to engage in a lengthy court battle. It runs through donations from the public and is also currently engaged in a fundraiser to deal with this potential legal issue. The BPI is funded in part by major music labels.

 

“13 Interesting Stats about the Music Industry”

 

The website Pigeons & Planes outlined the 13 most fascinating effects of the music industry’s on-going and rapid evolution this past week. The stats below paint a realistic – and surprisingly optimistic – picture of the current music business and where it is headed.  

 

#1:  Streaming plays beat out radio spins 132 to 1 in 2011. Radio has not been rendered completely powerless, as it still helps break superstar artists, but it has weakened significantly as a music delivery method. In 2011, radio spins hit 158 million, whereas streaming plays were 21 billion. The numbers don’t tell the whole story in and of themselves, but they do point to the fact that the streaming music is still growing rapidly and companies like Shazam could soon be capable of taking over.  

 

#2:  Justin Bieber’s YouTube play count > the population of China and India put together. The population of China and India together is 2.6 billion. Justin Bieber’s VEVO account has earned 3,169,095,027 views. Adding the number of collaborative videos between Bieber and artists like Chris Brown, etc., the number is closer to 4 billion. This number is also 4/7 of the earth’s current population.

 

#3:  Digital music revenue will top $8 billion worldwide in 2012. Despite grim pictures painted of the declining music industry, digital music sales and options for listening and distributing music online have experienced rapid and steady growth over the past five years. Projected digital sales for 2012 are $8.6 billion, with $5 billion of that coming directly from the U.S. Strategy Analytics reported, “Streaming revenues will increase 40 percent in 2012 – to $1.1 billion – whilst download revenues will increase by 8.5 percent to $3.9 billion … Therefore, streaming services will take over as the leading revenue growth engine for the music industry in 2012 …”  

 

#4:  The cast of Glee has been on the Billboard Hot 100 more times than any other artist. The Beatles, Aretha Franklin, Elvis, James Brown, Ray Charles, Stevie Wonder, Elton John, Frank Sinatra, the Rolling Stones, Lil Wayne are some of the artists that have most frequently charted on Billboard. However, none can match the charting power of the cast of Glee.

 

#5:  The four major labels are responsible for 88% of album sales. In June, Nielsen announced that Sony, Universal, Warner and EMI still accounted for almost 88% of album sales. Thus, the “old school” industry is still in control of sales, despite all the new methods that have emerged for listening to music.

 

#6:  Spotify is responsible for streaming 1,500 years-worth of music.  While artists may not be seeing significant revenue from this outlet yet, there is no questioning that Spotify has exploded and will continue to grow.

 

#7:  VEVO has paid $200 million in royalties to artists since 2009. This means it has paid brought more royalties to artists than any other music video service. Of course, the entirety of the payments may not have gone to artists yet (some go partially to labels, etc. or may still be stuck in the SoundExchange distribution system), but it still represents additional income.

 

#8:  U2’s 360° Tour raked in $736 million. Starting in 2009, this two-year tour brought in $200 million more than the Rolling Stones’ giant A Bigger Bang Tour.  

 

#9:  Rihanna’s Man Down cost $1 million. The cost for producers, studio time, radio and publicity on Rihanna’s latest album really added up. Marketing was a huge percentage of this amount. However, Man Down shows how expensive and unwieldy it can be for major labels to try to “guarantee” a hit record. It also shows what these labels are willing to do in order to ensure their continued success.     

 

#10:  The entertainment industry has spent more than $1 billion on lobbying since 1996. Major corporations within the music, film and television industries spend millions trying to come up with fair policies for artists, listeners and employees. The RIAA alone has spent $30 million on lobbying since 2007.

 

#11:  Clear channel will have $10.1 billion-worth of debt by 2016. Half of Clear Channel’s revenue comes from the over 800 domestic radio stations and 5,800 syndicated affiliates. Clear Channel’s performance could pick up naturally if it embraces partnerships with digital radio and other music services.   

 

#12:  Physical full album sales in 2012 will be lower than they have ever been in the past 18 years. However, physical copies still make up half of all albums sold. These figures point to the fact that technology has made singles easier to sell.  

 

#13 Vinyl sales are growing.  Despite the decline of CD sales, vinyl has become more and more popular during the past six years. 3.2 million records were sold in 2012, a 16.2% increase over last year.  

 

Community and the Music Industry

 

An article written by media writer and music industry analyst Sharmin Kent “New Marketing Songbook:  How the Music Industry is Building Community” explored the different ways the music business has been rebuilt around the idea of community, and the many existing channels that will continue to bring artists, fans and other music industry players closer together.  

 

Last week, Metallica drummer Lars Ulrich publicly gave Spotify his blessing by offering up the entire Metallica catalog and reconciled with Napster co-creator Sean Parker. He admitted that the original battle was not about money, rather “just about control.”

 

Of course, P2P file sharing has been a hotly-contested debate since the 1990s and has sparked billions of dollars-worth of lawsuits. Above all, it offered up a new business model that gave the old order the choice to either adapt or fall. And P2P networks put the control of music listening and discovery back into the hands of the fans.    

 

More than a decade later, labels have learned to work with the Internet and its many channels, including YouTube, personal social media accounts, etc. And artists are more connected to their fans – and thus their fans’ money – than they ever have before. The Internet has created the opportunity for artists and fans to build thriving online communities and for labels to satisfy music fans more readily with massive catalogs.

 

It took 10 years of kicking and screaming and millions in lost revenue for record companies to finally decide to come find their audiences where they were – on the Internet and streaming music. According to Kent, Spotify in particular shows that a balance can be struck between variety and control and potentially still make money for artists and record labels.   

 

And sharing through social media platforms – aka, sharing through interactive online communities – is what has really helped services like Spotify, Pandora and Last.fm thrive. Social networking channels have proven themselves to be as powerful as some of the online channels artists and labels once feared – ones that previously leaked tracks and other information. They create an opportunity for musicians to get feedback from fans and keep these fans happy by offering them special experiences like free merchandise, live performances and concert tickets that draw music lovers close to them.     

 

Many marketing experts are discovering that online music services are great tools because they not only allow musicians to share their music or favorite songs, but they allow the fans of these musicians to connect with users and draw in even more listeners.

Spotify topped five million paid subscribers worldwide and announced plans to expand as a music discovery platform. Also, artists and music industry experts shared what legacy artists are really doing to supplement their income in the ever-evolving music industry.

 

 

Will Spotify Corner the Music Discovery Market?

 

Spotify’s chief executive Daniel Ek announced recently that the streaming platform now has five million paying subscribers (and 15 million active users) worldwide and will add a more “human” touch to its offering in early 2013. And alongside this news came word that as of December 6, Spotify now offers the entire Metallica catalog, according to Billboard.biz.

 

Since its U.S. launch one year ago, Spotify has convinced a million U.S.-based users of the benefits of its paid offering. Ek also revealed that his company has paid out $500 million in royalties to artists and labels and that this number is growing as more people sign up for the service.

 

Ek, who has previously declared that his goal is to have all the music in the world available to Spotify listeners made the announcement about Metallica finally getting on board at a New York press conference. He mentioned that a suite of new features will be rolled out early next year that will help music fans more easily connect with bands, each other and discover the new music that is most aligned to their tastes.

 

Ek admitted, “Spotify is great when you know what you want to listen to, but not so great when you don’t.” He said that enhancements to the service will include a new page that suggests music (similar to Pinterest), photos and information about recommended artists.

 

Spotify also plans to add album reviews and Songkick concert details so users can get more real-world information about recommendations and their favorite artists:  “We want to make discovery even more seamless and intuitive … How do you do that? You make it truly human, and you make it personal. We want discovery on Spotify to give users the context that’s been missing.”

 

Spotify has already begun to reach out to celebrities and industry experts who will create playlists to connect to their fans and help them find new music. At the press conference, Ek displayed a playlist that Bruno Mars developed. Thanks to the new features, users will be able to follow not only artists but also other music fans that share the same interests.

 

The press conference also showed how much the digital music landscape has evolved since Napster days, as it reunited Lars Ulrich and former Napster co-creator Sean Parker, who were engaged in a well-publicized battle in the late 1990s that damaged both of their public profiles. Ulrich has continued to make headlines for fighting tooth and nail against having any of Metallica’s music on peer-to-peer sites or music streaming services. Ek brought the former foes on stage to “bury the hatchet.” Parker admitted that he and Ulrich were “more alike than different,” while Ulrich praised Napster for being “smart,” before announcing the entire Metallica catalog would now be accessible to Spotify users.

 

Ulrich said that after his band recently reclaimed rights to its music, “We wanted to see what were the best options out there … Spotify has really solidified itself as not only the leading streaming service, but pretty much the only one. We were reay to jump as soon as we took control of our own masters.”

 

Ek said that the philosophy that will inform his company’s growth is simple:  “It’s not just about having a big catalog. It’s about finding great music.”

 

Legacy Artists Adjusting to Industry Shifts

 

The music industry continues to grow and shift, leaving even the most established artists scrambling to find new revenue sources, despite some positive evolutionary signs in the past few years. And according to Phil Rosenthal of the Chicago Tribune, even major acts like Elton John and the Rolling Stones are concerned about the future. And while some are upping their touring frequency and the price of tickets to make up for revenue losses brought about by digital music, others are reluctant to overcharge. Thirty-seven years ago, John admitted to Playboy, the cost to fans for tickets should be based on the value of the experience being offered:   “I’m very anti putting the price (of tickets) beyond eight-fifty … To see a Sinatra, to see a Piaf if she were still alive, to see a Dietrich, yes, I would say charge what you like, because you’re only going to see these people once in a life time, or you’re the Rolling Stones … Now it’s rather macabre:  ‘Should we see them ‘cause they might not be around next year?”

 

But the Stones have endured, and are celebrating their 50^th year as a band with a series of shows. And they will in fact be asking for $831.90 – including Ticketmaster fees –from fans for front-of-the-house general admission and reserved floor seats at their upcoming show at Brooklyn’s Barclays Center. Fans that want to invest in premium packages and merchandise will pay more.

 

While the costs to fans of experiencing the Stones live are on the highest end of the spectrum, the willingness for bands like this to charge as much as they can get is more proof that since the music industry completedly changed years ago, performers have had to get really creative about ways to earn money. Many established artists have gone on the road and invested huge chunks of their budget in marketing back catalogs, merchandise and more personalized experiences with their super-fans.

 

Still, said Rosenthal, others have turned to seeking out live shows at personal residences and any other venue – no matter how big or small – in order to earn a living, using the Internet as a way to get the word out and create a new community of fans who are willing to support them financially and otherwise. Amanda Palmer, of course, has become a poster child for the new entrepreneurial spirit within the music industry. She made history last summer when she reached her $100,000 album project goal on the crowdfunding site Kickstarter in just seven hours, eventually hitting a record-breaking $1.2 million.

 

Hard-working singer/songwriter Dan Navarro plays 80 shows per year, showing up for fans on ocean cruises and playing shows at people’s homes. Originally a part of the signed duo Lowen & Navarro, he started to reach out to his audience for support when the group was dropped in 2003:  “The new revenue stream choice – if there is a choice – comes down to deciding between new things to sell or new ways to sell the old thing, or more likely combos of both … Demand for music hasn’t gone down one iota. It’s actually increased. But it’s been effectively devalued … To make it viable [has meant] a return to an old system, the oldest part of which is to do it yourself.”

 

And musician, producer and director of programs for the advocacy group Future of Music Coalition said that the “DIY artist” spirit has been around for a long time; reaching out to fans directly is not a novel phenomenon:  “Fan funding is something that’s gotten a lot of attention, especially because of Amanda Palmer … But it’s something that’s existed a really long time if you go back to patronage and classical music 100 years ago.”

 

The Future of Music Coalition recently conducted a multi-year study on artist revenue streams that showed there are 42 potential music revenue sources, though no artist can use all of them at once. A singer/songwriter might use 25, whereas a classical or session musician might only have access to a few. Some of the less considered sources of income include ring tones, YouTube partnerships, persona licensing, speaking engagements and teaching.

 

But Rosenthal points out that because some revenue streams have become more valuable, the value of others has diminished. For example, because TV shows and films have started to license more music from bands in recent years, those that once made their living composing and performing scores might be seeing less opportunity.

 

Of course, the impact that digital music has had on traditional radio has also been hotly debated. Traditional radio stations and streaming radio companies continue to fight over royalties as up-and-coming acts find their opportunities for radio exposure dwindling. Kurt Hanson, chief executive of the Chicago-based Internet radio operation AccuRadio said, “The big three [recording] labels each want to [continue to] receive $100 million checks each year … All of us who are webcasters are fully supportive of paying reasonable royalties to musicians. [But] I think it’s important to recognize that the potential value to those musicians of radio airplay, and of building their fan bases, is far greater.”

 

Rosenthal points out that in the modern market, “exposure” can still make a sizable impact on an artist’s success, at any stage in that artist’s career. U2 gauged the market in 2004 and decided that it could reach the most new fans by attaching itself to Apple’s marketing.  In 2005, Bono told the Chicago Tribune, “We piggy-backed this phenomenon to get ourselves to a new younger audience.”

 

And David Bowie seemed to be predicting the demise of the old music industry order when he made $55 million in January, 1997 selling “ Bowie Bonds,” a security attached to 10 years of royalties to 287 of his songs across 25 of the albums he recorded prior to 1990.

 

Navarro explained that artists that want to make it need to prepare to work much more proactively than artists 20 years ago:  “The old passive way was you make a record, you put it on the radio, you generate income from record sales as an artist or radio play as a songwriter, and there’s your nut … Now you have to go out there and grab it.” But he added, the payoff for hard work now can be much greater for artists that are willing to go for it, play some of the much smaller or creative venues (like churches, etc.) and take out the middle man. “All the money goes to the artist, everything they take in, unlike a proper venue that has to take a percentage for overhead and their own profit.”

 

Even Elton John, who at one point put touring third on his list of revenue sources, will play 120 shows in 2012, including many at smaller cities like Kalamazoo, Mich. and Evansville, Ind.

 

As Navarro concluded, you have to get out there. “If you don’t get out there live, there are very few opportunities to hit the well … That seems to be key to a lot of people who have survived in the new paradigm.”

This past week, Berklee College of Music released the results of a study that revealed salary ranges within areas of the music business. Vevo also announced that it has grown into the highest-money-generating music platform in the industry since its inception in 2009. And Mary Bonney of LA Music Blog explored the positives of social media for artists that want to grow their fan base and take charge of their careers.

 

 

Where’s the Money in the Music Business?

 

Berklee College of Music in Boston released a brand new study last week outlining the salary ranges for musicians, audio engineers, A&R executives, writers, entrepreneurs, music educators and music therapists and many others. According to Billboard.biz, the study, conducted by the college’s Career Development Center is an update on the a 2010 report and is designed to provide a guide for those just starting out in the music industry so they have insight into the reality of an industry in flux and can financially plan their career moves.

 

The study, which involved 5,000 working musicians, presented very mixed results:  The salaries of those working in PR and as orchestral musicians went up overall, but commercial jingle composers and session players saw a decline. Only those working in teaching saw a significant raise in their average salaries. The average music income for the past five years was estimated at $34,000.

 

Peter Spellman, director of Berklee’s Career Development Center said, “There is downward pressure on many music performance salaries right now due to the slowing global economic recovery, changing perceptions of music’s value, and hyper competition.” He added that this information points to the need for musicians to diversify and “expand their repertoire of both musical and professional skills” as the industry continues to shift and grow.

 

The study also explored some industry areas that could grow considerably as the industry evolves, including social media, digital marketing, branding and sponsorships, mobile music and streaming music. New York and California saw the highest number of employed musicians, and Florida, Texas and Tennessee were also in the top 5 states with the most working musicians.

 

The Music Careers In Dollars and Cents 2012 Edition also presents a flowchart to help those new to the industry field job offers, along with a list of organizations and associations designed to help artists and others that aspire to work in music.

 

Vevo Puts Money Back into Music

 

Premium music video platform Vevo announced that it has put $200 million in royalties back into the music industry since the company’s launch in 2009. In an age where artists and labels are complaining about wavering revenues, this could be promising news for artists, labels, publishers and others. The company also paid out more in royalty revenues in 2012 than in 2009 and 2010 combined.

 

These stats were announced by Vevo president and CEO Rio Caraeff at the Business Insider Ignition Conference held in New York City on November 27-28. He also stated that the platform brings in more money for the music industry than any other music video service.

 

Caraeff said he believes it is Vevo’s commitment to showcasing high-quality videos and a strong focus on the needs of music fans that has helped make it such a successful platform for artists:  “The audience that loves music should be treated and valued the same way as the audience that loves the Super Bowl, and revenue should flow as such.”

 

The Pros and Cons of Social Media for Artists

 

With all the marketing tools that are available to artists in the modern music industry, how powerful is social media? Last week, Mary Bonney of LA Music Blog explored the pros and cons for musicians of using Facebook, Twitter, YouTube and other social networking environments and how these tools have really impacted the music landscape.

 

As Bonney pointed out, the Internet has completely transformed the music business, bringing Rolling Stone fans real-time blogs and a direct connection to their favorite bands. But she asked, “How has this affected the music industry and what will they do about it?”

 

While MySpace has become less prominent as a destination for music in recent years, it was the first place that gave bands a forum for sharing music, writing blog posts, sharing live show details and communicating personally with fans in a way that made them feel valuable and special. And major acts such as Lily Allen, Colbie Caillat, Soulja Boy, Sean Kingston managed to significantly expand their brand through the site.

 

Of course, since MySpace, many more options have become available, and the possibilities the Internet provides for musicians and music fans have become even more limitless. Similarly, being a working musician without a label has not only become more possible, but cheaper than it has ever been before. Sites like Bandcamp and SoundCloud have replaced MySpace as a destination for listening to music and Tumblr has offered a blogging space for bands. And Twitter now provides artists with quick ways to give away tickets and merchandise to loyal fans to promote themselves or simply communicate regularly with a potentially global audience. And Spotify, Pandora and Last.fm have provided a rich space for music discovery.

 

Of course, Facebook has popped up as a huge marketing opportunity for artists. Josh Williams of the Atlanta band Ocean Is Theory said he believes there are both pros and cons to the platform, but its promotional power cannot be overlooked:  “People are less centralized these days. MySpace helped us grow tremendously. Facebook certainly has brought new challenges. It’s not as easy, but we have to adapt and run with it … We’ve been using a lot of everything to promote.”

 

David Haynes of SoundCloud explained today’s social networking capabilities further as a natural outgrowth of a shrinking yet more connected music industry. “In the past, there were just a few gatekeepers to music, and you had a powerful network of labels, A&R men, radio and TV executives, and magazine who decided what you should be listening to. Now it’s so much easier to find out what your friends are listening to or what other people who like the same music on the other side of the world are recommending.”

 

YouTube star Julie Nunes said that she uses social networking more often than anything else in order to share and market her music. She also sees each platform as serving a very different purpose:  “It’s a way to connect with people and show more sides of yourself. I use Facebook, Tumblr, Instagram, YouTube, and Twitter all in very different ways.”

 

Video sites, including Vimeo and YouTube as well as services like Stageit and even Google+ that allow artists to communicate and perform face-to-face via private concerts are also becoming huge opportunities. Bonney even won an online contest back in 2007 to sing back-up vocals on Paramore’s RIOT! album by submitting a YouTube video and sharing the band’s link on all her social networking sites. And she admitted, it made her a fan for life. Other bands are finding similarly devoted fans the more they provide opportunities to connect and give fans unique and memorable experiences that go far beyond the music.

 

But Bonney and artists point out there are some downsides to increased connectivity. Before there was social networking, agents and publicists took charge of artists and made them “ready to sell” to their fans. Music magazines used to be almost entirely responsible for revealing personal details about artists. Now, there is almost no filter. But after the very public Kanye West/Taylor Swift incident at the 2009 MTV Video Music Awards, West defended himself on Twitter and claimed that traditional interviews did not give him final approval, giving all interpretive control to reporters.

 

However, because everyone can get access to celebrities, fans think they know them personally, causing many artists to feel their fans are invasive. And these feelings are showing up in lyrics. Brand New’s Jesse Lacey wrote, “I am not your friend, I’m just a man who knows how to feel.” Of course, fans can provide the artists they are passionate about with a great deal of support. However, many artists feel they would like more privacy than the Internet affords.

 

And of course, it has been well documented what the Internet has done to sharply drive down the price of CDs and digital downloads. Sites like iTunes have managed to help musicians earn back some of the money lost through Napster, LimeWire and Kazaa. But it has taken away the power of record labels and put many artists and their fans in control of distribution and sales. SoundScan reported recently that physical album sales have dropped 50 percent since 1996, while digital sales have increased 1900%.

 

The Chicago Tribune’s music critic Greg Kot argued in Ripped:  How the Wired Generation Revolutionized Music that at this moment, more people are listening to music from more sources than at any other time ever. He said that the “grassroots music industry” that has been created that has fans and bands in control rather than the corporations is actually a huge positive.

 

In terms of the privacy issues that social networking is causing for artists, Bonney said that bands have to make lines between what is public and what is private very clear. They should make sure not to overuse any one social media platform and censor the type of information they share:  “Promoting a contest or showcasing new merchandise for the tour? Awesome. The lead singer’s girlfriend when they’re on a date? Not so much.”

Last week was marked by music catalog deals as Google added access to 5.5 musical works across 35 countries, and Universal prepared to sell off EMI assets. Also, L.A. Weekly’s annual “Music Issue” spotlighted innovative DIY artists and entrepreneurs.

 

 

Google Granted Access to Millions of Tracks

 

Google, Inc. signed a new licensing agreement with Armonia a Spanish/French/Italian collection of European publishers, artists and composers that will give the company’s customers the rights to listen to 5.5 million musical works in 35 countries from artists such as Lady Gaga and Rihanna. The new license will allow music fans in Europe to use Google Play and its other music-related features.

 

The deal’s terms are “in line with industry standards involving Google rivals like Amazon and Apple’s iTunes,” SACEM representative Catherine Kerr-Vignale reported to The Associated Press. Kerr-Vignale added that Amazon and Apple have European licensing agreements that vary by country, whereas Google has a uniform agreement that is the same in the 35 countries it will serve in Europe and also includes UK and American sections of Universal Music’s publishing library and Sony’s Latin arm.

 

Armonia is the pan-European organization for online licensing and comprises the Italian Society of Authors and Publishersm its French and Spanish sister organizations SACEM and SAGE and Universal Music Publishing International. New access to tracks by major artists will make it more competitive with other major digital music providers.

 

TechCrunch writer Darrel Etherington noted that because Google Play still features a great deal of content only available in the U.S., many outside the U.S. have had to use workarounds, like those detailed in a recent blog entry on the Geniusgeeks site.

 

Of course, this deal is also important to getting more royalties into creators’ hands and encouraging music fans to engage in legal online music consumption. Sami Valkonen, head of music licensing at Google said, “Licenses such as this are important in ensuring that artists and rights-holders are rewarded fairly for their creative endeavors, and digital service provides are able to bring innovative services to market for the benefit of European consumers … Armonia is a welcome development in the ongoing reform of pan-territorial licensing in Europe in helping simplify and speed up the music-licensing process, which is crucial in fostering ongoing rapid innovation by digital music service providers.”

 

Over Nine Industry Players Vying for EMI Assets

 

Major music industry companies and executives including Warner Music, Simon Fuller and Island Records founder Chris Blackwell expressed interest in buying pieces of EMI from Universal Music Group, as reported by an article on November 14 in the Financial Times. Universal has been forced into selling some EMI assets in order to satisfy the misgivings of regulators as part of the $1.9 billion deal it made to buy EMI’s recorded music division.

 

However, as auctions loomed, Billboard reported that John Rudolph, formerly the CEO of Bug Music as well as Lava Records founder Jason Flom will be partnering up to bid for pieces of the pie. Sources continued to report last week that UMG’s bankers were still getting signatures together for non-disclosure agreements and will likely not likely start to make deals until this coming week.   

 

The European Commission agreement stipulates that EMI’s assets have to be sold to buyers with deep experience running and managing a music company. However, some have said that becoming a qualified buyer could be as simple as a company with money hiring a former label president to work with them.

 

Flom was a high-level A&R executive at Atlantic prior to founding Lava Records in the 1990s and has worked with Kid Rock, Tori Amos, Skid Row, Matchbox 20 and many others before moving onto Virgin in 2005 and eventually becoming the CEO of Capitol Records Group.  

 

Rudolph left the large independent publisher Bug Music in 2011 when it was sold to BMG Rights Management for over $300 million. When he was CEO of Bug, he managed over 35 acquisitions, including the acquisition of the Windswept catalog and a deal with Kara DioGuardi’s Talenthouse company.

 

BMG Rights Management will likely also join Fuller, Flom, Rudolph, Blackwell and Warner in the EMI bidding process.

 

L.A. Weekly Spotlighting How to Make It in the Music Industry

 

L.A. Weekly’s 2012 Music Issue addresses how to make it in the music business, with a spotlight on notable DIY artists and groundbreaking executives who have learned how to make a living and find an audience in the modern industry climate.

 

The Issue points out that being a successful musician and music entrepreneur in 2012 means not only having deep talent, but also being willing to work hard and being able to employ innovating marketing techniques. L.A. Weekly highlighted indie artists including Stolen Babies, Jhene Aiko and Spaceships, label owner Leeor Brown and party promoter Perish Dignam as examples of those who are succeeding thanks to “passion and unique branding.”

 

As just one example, Philadelphia-born Perish Dignam is a party promoter who has traveled nationwide, studying industrial design, engineering and psychology. On his own since age 15, he developed a big social-media following before starting up his regular “Swoon” parties, which are much like steam-punk carnivals and feature women in bikinis with power tools, fire dancers, etc. Those music fans who show up with elaborate costumes and professional photographers are granted free admission.  He funds the parties almost entirely on his own, then puts profits back into more parties to allow him total creative control. He designs all the sets, manages performances, hires staff and sells tickets.   

 

And the EDM juggernauts the Flemming Brothers run a dance-party “enterprise,” Do Lab. Together, Jesse and Dede and Josh created the huge Do Lab movement in Southern California through multiple marketing techniques and will soon head to Egypt to tour. Youngest brother Dede said he believes the business works, because the brothers each accept responsibility for very specific aspects of creativity, development and business management. His brothers shape the vision and he takes care of the “logistics:”  “We have these roles … so we can support each other.”

 

And as L.A. Weekly pointed out, the “DIY movement” is not a new phenomenon. Artists like Dr. Dre and others have been going their own way for decades. Dre’s album The Chronic was released 20 years ago. Before being picked up by Interscope, it was a self-funded project:  “It took nontraditional sales tactics and the deep pockets of an incarcerated drug dealer to make it famous. Then as now, the do-it-yourself spirit was critical.”

Last week, well-known artists went up against the Pandora to debate over the Internet Radio Fairness Act. And the RIAA reacted to statistics that show illegal downloaders buy more music than other listeners. Also, BandPage announced a new tool for artists, which helps them better manage their online presence across platforms.

 

 

Pandora’s Royalty Complaints Criticized by Artists

 

On Wednesday, over 100 artists spoke out by signing an open letter criticizing Pandora Media and its Internet Radio Fairness Act, which, if passed, would change the way royalty rates are set for many online radio services. Artists have, until now, remained relatively silent about their opinions about Internet radio royalties as the debate among broadcasters, technology and major music companies and record labels has raged, according to a blog post on The New York Times website.

 

The letter was signed by many stars and music legends, including Billy Joel, Jackson Browne, Rihanna, Sheryl Crow, CeeLo Green and Don Henley. It pointed out that all those who work with artists are partners in their careers and should treat them accordingly:  “Pandora’s principal asset is the music … Why is the company asking Congress once again to step in and gut the royalties that thousands of musicians rely upon? That’s not fair and that’s not how partners work together.”

 

Music industry group representing record companies, a major musicians’ union and others, the MusicFirst Coaltion first published the letter. It will also appear as an ad – paid for by MusicFirst and SoundExchange – in the next issue of Billboard.

 

Pandora’s founder Tim Westergren responded to the artists’ letter, saying that in order for the Internet radio industry to continue, a “permanent fix” needs to be implemented. Pandora has been complaining about royalties since 2007, when the Copyright Royalty Board set new rates, then agreed to a temporary discount for the company, which will be good until 2015.

 

Westergren added, “Passage of the I.R.F.A. will mean more jobs in a sustainable industry, more choices for listeners, and more opportunities and revenue for working artists and their record labels … When the digital music sector is allowed to grow and innovate, everybody wins.”

 

The N.A.A.C.P. sent a similar letter to members of Congress earlier in November, which put public pressure on Pandora to make right with the music industry. Until the letter sent this past week, Pandora – which has 175 million users – has enjoyed an amicable relationship with musicians. Even the letter starts with the statements, “We are big fans of Pandora. That’s why we helped give the company a discount on rates for the past decade.”

 

However, the I.R.F.A. has divided the music industry. As the letter points out, the industry feels the current rates enjoyed are fair and that Congress should not be asked to intervene. Pandora contests this idea, stating the rate-setting process is overly complicated, and that licensing fees are more damaging to Internet radio than other companies.

 

The House Judiciary Committee will hold hearings on this royalties issue at the end of the month.

 

Are Music Pirates the Most Rabid Fans?

 

Illegal file sharers spend more money on music than those who abide by Copyright Law, according to a recent study conducted by the American Assembly, associated with Columbia University. Researchers discovered that U.S. file sharers buy 30% more music than those who purchase it solely through legal channels.

 

The RIAA responded to these findings by saying that the news reports are “misleading” and that there is a very simple reason why P2P users buy more:  They are better engaged music fans than regular music consumers. And the organization decided to bring in the research firm NPD to prove its assessment, said TorrentFreak. NPD’s Russ Crupnick found that there were many different variables involved in the “30 percent” statistic.

 

RIAA’s VP of Research and Strategic Analysis Joshua Friedlander announced earlier this week in the RIAA blog that music pirates do not buy more music because they download music illegally and showed readers how to “properly” analyze metrics:  “Some commentary has misleadingly reported that people who use P2P services like BitTorrent buy more music than non-users, implying that there’s some sort of causation.” And he added that the numbers simply prove that music pirates are just more interested and engaged than average music consumers:  “In reality, the comparison is unfair – what it’s comparing is people who are interested in music with people who might not be interested at all. Of course people interested in music buy more.”

 

The RIAA also attempted to back up this conclusion by linking to data from NPD, who uncovered that those age 18-35 who use P2P spend 40% more than those who don’t share. Music pirates spent $267 per capita, while non-sharers spent $191. NPD concluded, “What it says is that the people who download music illegally are generally more engaged in music, so they go to shows and they wear their favorite artists on their shirts.”

 

This conclusion is the same that BitTorrent arrived at when analyzing the original study conducted by American Assembly:  “A likely explanation for these results is that true music enthusiasts simply want to consume, sample and discover as much new music as they possibly can, and the most straightforward and convenient way to do this is through file-sharing networks.”

 

However the NPD study disagrees about the link between engagement and file sharing. NPD and the RIAA characterize it as a “one way street;” they claim it is ridiculous to argue that people go to more shows because they discovered artists through file sharing. Crupnick said, “Are we saying that P2P file sharing promotes T-shirt sales, or show attendance? Of course not; that would be silly.”
However, TorrentFreak argues that this idea might not be that ridiculous:  It might be that some file sharers become more rabid music fans because they get music they would not normally be able to afford, and that they might go to a particular concert for a band they would not have discovered if not for illegal downloading.

 

And when the NPD stated that piracy is likely the reason for dwindling revenues, because a typical P2P user spends $42 on music in 2012, compared to $90 in 2004, their statement is misleading. Because today, most P2P users are actually sharing video; the percentage of music buyers in the P2P-users category is much lower than it once was.

 

Regardless of the study examined, results from both indicate that the music industry should take a closer look at why illegal downloaders use file-sharing networks to find out how they can better satisfy them, rather than simply dismissing them as “thieves.” TorrentFreak explains, “… [T]hese people are also the music industry’s most engaged customers, and there’s nothing misleading about that.”

 

BandPage’s BandPage Connect Helping Artists Engage and Market Music

 

BandPage’s new tool, BandPage Connect will help power musician profiles across the Web and create better brand management capabilities by expanding all the platforms on which artists can manage their presence. The tool allows musicians to instantly integrate their BandPage profiles into all the major social and music platforms across the Internet, free of charge. Launch partners include WordPress, Guitar Center, Midem Music Festival, PledgeMusic, Conduit Mobile, Earbits, StoryAmp, Tixie, Music XRay, Local Music Vibe, WeDemand and The Social Radio. The BandPage Connect API is also open to all developers, so they can sign up and use it immediately through the BandPage Developer Portal.

 

BandPage also launched BandPage Everywhere in early 2012, a service that lets musicians update content from one location and publish to their website and blogs. BandPage Connect expands this offering by making it easy for musicians to implement all their content from any online or mobile platform. For example, if a band adds a new tour date, profile picture or updates a bio, the change is automatically reflected on every site to which their BandPage profile is connected.

 

Digital Manager for Maroon 5, Sara Bareilles, Gavin DeGraw and Eve 6, Ryan Kavontrka said, “There are a lot of platforms out there that have our bio, photos and videos, but the info they have about us is out of date and we don’t have a way to change it. [BandPage Connect] makes it so any member of a band or their manager/label can update the content, not just the guy who knows HTML.”

 

BandPage Founder and CEO J. Sider shared, “There’s a need for a better infrastructure for musicians across the Web and we’re laying the pipes to do it … With BandPage Connect, external sites win because they get up-to-date rich content from musicians, and musicians win because it takes a fragmented ecosystem of sites to manage and pulls it all together.”

 

Artists can explore BandPage Connect and all its functionalities at the BandPage Connect Center.

This past week, Pandora sued the American Society of Composers, Authors and Publishers in order to lower the royalty rate it pays to music publishers and songwriters. And in the days after the election, analysts discussed how the exit of pro-music representatives in the House could affect the industry. Also, Rolling Stone laid out the challenges former major label artists face when they go the DIY route.

 

 

Pandora Will Continue to Fight a Royalty War

 

Pandora Media is continuing to fight royalty rates for streaming music online and Internet radio. Last week, the company added another target to its attacks on performance rights by suing the American Society of Composers, Authors and Publishers (ASCAP).

 

The music service has joined a battle that has been fought for more than a decade, recently rejuvenated by a bill presented to Congress – the Internet Radio Fairness Act – that could change the way royalty rates are set. Ever since Pandora went public and streaming music sites like Spotify have started to cut into its revenue, which is largely based on the size of the royalties it pays out, it has been lashing out at all those who make money off music and accuse the radio service of trying to get a break at their expense.

 

The Internet Radio Fairness Act was introduced in September and, if passed, would potentially lower the royalties Internet radio services pay to record companies. Pandora, Clear Channel Communications and many other technology groups are in support of it, because they feel the change it offers would finally align its royalty payments with other digital services like satellite radio that pay less. However, the music industry was disagreed.

 

Pandora sued the American Society of Composers, Authors and Publishers – one of the U.S.’s major performing rights organizations – on November 5 in an effort to decrease rates for itself yet again, this time the rates it pays to publishers and songwriters. Pandora’s license with the PRO ASCAP expired nearly two years ago. And in this most recent suit filed in the U.S. District Court in Manhattan, Pandora asked the court to grant it a new licensing deal that had “reasonable rates and terms.”
Once again, Pandora is asking for fair treatment, comparing itself to regular broadcast radio. Radio stations pay 1.7 percent of their revenue in publishing royalties, less the amount they pay for advertising commissions. But Pandora pays 4 percent without deductions.    

 

A Pandora spokeswoman said, “ASCAP continues to seek rates higher than the current rates and above the agreement that they reached earlier this year with all of the major radio groups, which covers both broadcast and Internet radio usage for the majority of our competitors … As a results, we are initiating the process that has been in place for decades to resolve royalty disputes with ASCAP.”

 

While ASCAP did not weigh in, David Israelite, president of the National Music Publishers Association, was critical:  “It’s outrageous Pandora would try to reduce the already nominal amount they pay songwriters and music publishers, when Pandora’s business model is based entirely on the creative contributions of those songwriters.”

 

The recently-filed suit is also tied up with the controversial issue of direct licensing. ASCAP provides blanket licenses that cover the material it represents. But because some publishers, like EMI, have decided to work with PROs to manage their digital catalog, Pandora wants to be able to “carve out” the cost of licenses it has to negotiate directly from that fee.

 

These “carve-out” deals have been proven to be sound by two recent court decisions in favor of DMX, a company that provides music in retail stores and restaurants. Those who support the deals feel that publishers can make more money if they are able to negotiate for themselves. But those against them feel this undercuts the strength of collective bargaining through organizations and diminishes the worth of music licenses, which hurts artists.  

 

Did the Election Hurt the Music Industry?

 

The big news on November 6 was the re-election of President Obama, but the day also brought about the loss of one of two major music-business supporters, according to an article on Billboard.biz. Howard Berman lost his seat in the House after 30 years in office, and Mary Bono Mack, widow of Sonny Bono, was ousted after serving 14 years.

 

However, there were other friends of the music industry and those working on laws impacting webcasting royalties who were reelected and those that were already going to be in Washington in 2013. And the music industry could have pro-music-industry politicians acting as the chairs of judiciary committees in the House and the Senate, which will be important to continuing the conversation about copyright issues.  

 

Berman’s loss was the result of redistricting and a top-two primary system when he was pitted against another popular Democrat, Rep. Brad Sherman and lost, only earning 39.5 percent of the vote. Berman has been a longtime advocate for content owners, supporting anti-piracy legislation and co-sponsoring the Copyright Royalty and Distribution Reform Act. He also co-sponsored the Stop Online Piracy Act (SOPA) and was in favor of the Anti-Counterfeiting Trade Agreement (ACTA). He is also on the Subcommittee on Intellectual Property, Competition and the Internet.

 

RIAA chairman and EO Cary Sherman said, “In his 30 years in Congress, Congressman Berman has been a shining example of leadership and public service … His ability to legislate and his keen intellect have left an important legacy that will benefit creators and the country at large for many, many years.”

 

Many in the music industry feel that the loss of Bono Mack will be felt by artists and the larger music business, especially since she is co-chair of the Recording Arts and Sciences Congressional Caucus and, being a copyright holder herself through her late husband’s works, understands many of the issues faced by artists, publishers and songwriters.    

 

However, the music industry will still have friends chairing Judiciary committees in the House and the Senate. Sen. Leahy will be heading up the Senate Judiciary Committee because Democrats kept their hold. Although Republicans kept control of the House, the current chairman of the House Judiciary Committee Lamar Smith will run into term limits. And Rep. Bob Goodlatte, chairman of the Subcommittee on Intellectual Property, Competition, and the Internet is expected to take over chairmanship of the House Judiciary Committee in 2013.   

 

On the state level, music industry proponents in Tennessee – Bob Corker, Jim Cooper and Marsha Blacburn – were re-elected. And Utah Sen. Orrin Hatch, a songwriter and member of the Senate Judiciary Committee was re-elected for a seventh Senate term.  

 

Politicians at the heart of the raging war over digital performance royalties will also be in office next year. Jason Chaffetz and Jared Polis, who sponsored the Internet Radio Fairness Act, were re-elected to the House. And the author of a competing bill, the Nadler Bill, Jerrold Nadler also won his reelection to the 8^th District of New York. His bill is backed by SoundExchange and the RIAA.  

 

President Obama’s reelection also means that the two biggest people working on intellectual property law enforcement, Victoria Espinel (IP Enforcement Coordinator for the White House) and Director of I.C.E. John Morton will remain.  

 

Major Label, to DIY:  What Are the Real Challenges?

 

What happens when major label artists decide to go DIY? According to Rolling Stone, they face the same challenges as anyone else, and sometimes find the landscape of the music business more challenging than they expected.

 

Garbage is an example of a major label band that got a “crash course” in the new realities of the music business as they were recording their latest album Not Your Kind of People. After the members left Geffen, they started to investigate their options. Front woman Shirley Manson revealed, “We’re used to the old system … so we thought, ‘Let’s see what’s out there’ …” She and her band mates had been out of the game for so long that she admits they had little familiarity with the possibilities.

 

Because none of them wanted to sign with another major label, Garbage members decided to take a cue from Radiohead and Nine Inch Nails and release an album on their own. However, they quickly discovered how expensive the process of recording and making videos can be. Manson said, “The freedom it affords you is so amazing … but it’s nerve-wracking. We’ve put our own money into it. Bringing the record out on our own label poses some problems for us.”

 

Bands like Garbage that came to life in the music business’ profitable ‘90s as well as new bands that do not realize it has changed are learning the hard way that the industry is not even what it was five years ago, let alone 20. In the past, bands enjoyed sizable cash advances from labels to help them record albums and videos. And after their records were released, they would tour for anywhere up to a year. Mass outlets like MTV would promote them, and then the band would be able to take a break before starting the same cycle again.   

 

But in the Digital Age, recordings and touring just are not making money for labels or for artists. CD revenue has declined, and to compensate, musicians have to go on exhaustingly-long tours, then find multiple ways – from licensing songs to TV shows or video games, to asking fans directly to contribute to their recording costs – to put together a modest living.  

 

Dan Reed, music director of NPR’s World Café sees a lot of artists come through his studio. He stated, “I used to hear the word ‘overexposure’ more than I do now … In this crowded media market, I don’t think there’s such a thing anymore. Bands are vying for any spot they can where they can reach a sizable number of people. We’re all working harder. The music business is no different.”    

 

And musicians have to keep pushing out new material at breakneck speed in order to keep apace of the rabid music fans that are used to the bounty the Internet provides. The band Tennis decided to release its second album Young & Old just 13 months after its first in 2011. Singer and keyboardist Alaina Moore shared, “The demand for music and output is so high … If you stop altogether, which bands used to be able to do, people will assume the worst and move on and forget about you.” She added that the band’s management will even call asking for new tracks when they are out working on the road.    

 

The band’s manager, Rob Stevenson said that while Twitter and Facebook certainly brings about closer relationships between bands and their supporters, they provide an unfortunate distraction for artists that can take time away from honing their craft:  “Fans expect things to come directly from the artist … You have to get yourself to the next gig and do a good gig and do all your social media stuff. And there are still only 24 hours in a day.”

 

Amanda Palmer echoed the ridiculousness she feels sometimes trying to connect to her fans via social media. She tweeted with fans while sitting at her piano and writing a new song for her latest solo album. She said, “I felt kind of silly, and my superego was saying, ‘Really, Amanda?’ But hundreds of people were writing, ‘I can’t wait to hear the song.’”

 

Of course, to get around shrinking recording budgets and the need for record labels, some artists have started using crowdfunding platforms like Kickstarter. Fans contribute, on average, $25 apiece to music projects. And some bands often raise around $20,000, giving contributors autographed records, concert tickets and other items in return for their support.  

 

So, how do musicians really make money? Amanda Palmer made news when she raised over $1 million via Kickstarter to pay for and promote Theater Is Evil. While this seemed like a lot to many critics, she said she actually ended up with less than $100,000 after expenses:  “People say, ‘Don’t you feel awful begging your fans for money?’ And I say, ‘You don’t get it – I’m doing my job.’ Musicians used to think if they worked hard, they’d be a star like Madonna. Hopefully we’re seeing a new understanding of what it means to be a working-class musician. It’s a job.”

 

The truth is record sales have never brought in major income for artists. The cost of creating and promoting albums was simply charged against their accounts. Today, artists can count on album sales even less than ever before. And digital streaming has not yet settled in as a lucrative channel for artists. 

 

Touring is how a lot of bands are making ends meet, but making a living at it means spending huge stretches of time on the road. Party band Fitz and the Tantrums and the band Dawes each left home to promote their albums in the wake of dismal sales, and stayed out for almost three years, playing multiple shows per day at clubs and for online outlets. Lead singer of Fitz Michael Fitzpatrick said, “It’s really exhausting. You’re doing a performance for a website and you know they have almost no readership, but you do it anyway. You’re in somebody’s garage doing a taping and you know no one will see it, but you think, ‘OK, five more fans here or 10 more there.’” The band has to earn $3,000 per night just to earn its overhead. And it only consistently hit this amount after touring for two years.

 

Despite all the heartache, musicians say that the music business is giving them huge opportunities they never had before such as incredible creative freedom. Manson said that after enduring huge creative debates with Geffen, “We were immensely relieved not to have any major label influence whatsoever … I turned in some songs and they were met with unbelievable contempt. They were telling me that because they weren’t pop songs they were worthless, and I should make a record like Duffy.”

 

And selling music and tickets has become easier thanks to social media. The band Dispatch cut a deal with Facebook recently to sell tickets to shows at Madison Square Garden. The band spent no money and sold 58,000 tickets. Fitz and the Tantrums gave away free MP3s of their music in an effort to sell more tickets to their live shows and ended up increasing their album sales by 120,000 copies.