This site is a blog for musicians and music industry people. It is a free educational resource and it is also the way I advertise my music consulting services. I am an entertainment professional with deep roots in the music industry. Throughout my music career I have been a major label A&R representative, a music supervisor, an artist manager, a reality show producer, a bass player and the head of a digital record label.
This past week, comments from label heads and other industry executives in the wake of the Grammy®s seemed to indicate streaming services are a necessary evil for artists’ success. And MySpace’s new Internet radio player rejuvenated interest in the social networking site. Also, analysts noted that Kodak’s recent demise may provide a glimpse into the future for the music industry if it fails to embrace new technologies.
Could the Industry’s Resistance to Digital Streaming Be Futile?
Artists’ and labels’ boycott of music streaming services like Spotify – which recently reached 3 million subscribers – and Rdio could actually be detrimental to their continued success going forward. As a result, many label executives are starting to change their tune about the importance of participating in this relatively new digital music venue, according to an article published in the Financial Times.
Adele – who won six Grammy® awards last week and has sold 17 million copies of her album 21 worldwide – was particularly under scrutiny as one of the small number of very well-known artists refusing to put music up on streaming services because they fear their presence on “free” sites might detract from digital and physical album sales. And Spotify’s criticism of those that refuse to adapt to the changing music landscape seems to be rubbing off on some music company chiefs.
Until recently, Warner Music Group (WMG) was one of Spotify’s more vocal opponents. But Spotify’s rise to the top as a global music subscription service, even chief executive Steve Cooper has admitted it may be time to embrace it as a necessity for artists: “Streaming services are coming on strong.” Even though they still comprise under 10% of total digital revenue for the music business, he admitted that their explosive growth rate indicates “you will eventually see those lines cross.”
Spotify’s chief content officer Ken Parks stated that the negative attitudes of Adele, The Beatles and others who have refused to adapt to the new streaming models are in the minority, but have just made headlines because they are high-profile artists: “The vast majority of artists and their labels are behind this model.” And Universal Music Group (UMG)’s digital president agreed last month that those who have said Internet music streaming is “cannibalizing” the industry have no real basis for their argument and are just resistant because of a fear of change. His comments were a reaction to official reports that stated digital music revenues had increased in 2011, breathing new life into the industry after almost a decade of floundering.
Proponents of Spotify and other services are not denying that the pay-out per track is less for artists than what they can earn on iTunes and digital music stores. However, the growth of the space has already been so significant that experts are foreseeing much bigger payouts as time goes on and the number of listens rises. And increased label and artist support will only help this growth, as it has already helped transform several subscription music streaming sites into global businesses. Rhapsody, the first subscription music service recently acquired Napster from Best Buy and finally launched in the UK and Germany. And after finally gaining support beyond its home country of France, Deezer has launched in countries across Europe and Latin America in the past few months.
Rhapsody president Jon Irwin said he believes the industry is starting to embrace streaming because technology – particularly mobile technology – has improved so quickly and business models are finally starting to clarify: “In the last couple of years, technology moved to the point where smartphones and networks make the product experience so powerful … Two and a half years ago, there was no mobile access.” Because so many services are now offering the same prices and content, Irwin and others believe packaging and presentation are going to be key to increasing a particular service’s popularity.
And artists are going to need to reach out to fans by being stream-able if they want to keep them engaged. Independent music analyst Mark Mulligan forecasts that there could be an agreement reached between holdouts like Adele and streaming services if they implement “windowing, where albums’ releases are staggered across different services.” Former streaming holdout Coldplay tested this out by releasing Mylo Xyloto physically and on iTunes in October, then making it available through Spotify, Rdio and Rhapsody in early February. According to Mulligan, “The relationship between streaming and the download could be the same as radio and the CD. Radio cannibalizes sales as well … But artists get many multiples higher on Spotify per play than they get on the radio.”
Parks reminded critics that iTunes was also initially opposed by huge artists, including Radiohead, when it arrived on the scene in 2003: “We are obviously pursuing a model that changes the way the industry and artists have done business for over 50 years … That kind of thing can be difficult to do.”
The MySpace Music Player: Bringing Back Internet Radio
Nearly-forgotten social networking site MySpace managed to rope in over one million new registered users thanks to its new music player, according to a press release issued last week and reported by Billboard.biz. The service debuted on December 19 and brought the site beyond 25 million registered users.
The new music service provides access to a catalog of 42 million songs and has a recommendation engine that can be integrated with Facebook. While MySpace credits its acquisition of new users to the music player, many analysts claimed the fact that the site finally integrated with Facebook probably provided just as much help. App usage numbers reported by AppData.com showed that from early January to early February, usage of MySpace’s Facebook app rose from 900,000 monthly users, to 1.6 million monthly users.
MySpace’s move to Internet radio puts it in competition with other sites like Spotify and Rdio, which could provide it with a big challenge as both are more experienced in the streaming space. However, the fact that MySpace is a social network, an entertainment site and a music service bundled into one and not just purely a play-on-demand site will likely give it an advantage.
Aside from Internet streaming services, the site will also be competing within the Internet radio space, going head-to-head with Pandora, Clear Channel’s iHeartRadio and Hype Machine. Internet radio could be a good avenue for MySpace to take because it has lower barriers to entry than other models, and because radio is still the most easy-to-use, universal medium for music fans; they still spend more time listening to radio than to on-demand music.
The Fall of Kodak: A Lesson for the Music Industry
Kodak’s recent bankruptcy should be seen a lesson for the music industry, according to a recent Billboard piece that points to a Knowledge @Wharton article. It provides a glimpse into the consequences of not adapting to technological change and provides some insight into what might happen if the music business fails to evolve, embrace digital technology and abandon some of its outdated business models.
131-year-old company Kodak filed for Chapter 11 bankruptcy protection on January 19 after a steady demise that began full force in the late ’90s. Last month, it reported almost $6.8 billion in deficits. But how does such a long-standing company fall? It has tried to respond to changes within the industry by expanding into the world of digital picture frames, digital cameras, video cameras and printers and building an online picture-printing business. However, it still has had to close manufacturing plants, processing labs and has laid off tens of thousands of employees since 2003. And despite attempting to stay up with new technologies, it was resistant to truly changing its focus to meeting the new needs of its customers by developing entirely new products, instead focusing on trying to find new uses and improvements for its existing products.
As stated by the Knowledge @Wharton piece, these issues should sound familiar to those within the music business. Music companies have just experienced a decade of layoffs and a completely changed retail environment, thanks to the rise of digital music. And they are being asked to abandon age-old business models in order to satisfy music fans and continue to give artists and others a viable way to make a living.
While there are similarities between Kodak’s problems and the problems of the music industry, there are also differences. Kodak’s products were supplanted by new products, whereas “legacy music companies” will retain the rights to the product fans want, which is the most popular music. However, the music industry will still have to change from within or the companies that refuse to evolve will be overtaken by new companies that will be formed in order to fulfill the needs of the modern music consumer.
Many experts point to the fact that evolution is actually happening. Physical distribution (which is the pat of the business that is arguably the most changed) has been completely transformed, prices have dropped and different packaging has helped keep CD sales strong as the digital market grows. Many record companies are diversifying to accommodate the shift to digital and latching onto sponsorships and other opportunities. However, experts still wonder, when looking at what happened to Kodak (who did try to change) what will give the music industry a better outcome than Kodak. The answer could be in leadership: “… Entrenched leadership often finds it difficult to break old patterns that once spelled success. Kodak’s history shows that innovation alone isn’t enough; companies must also have a clear business strategy that can adapt to changing times. Without one, disruptive innovations can sink a company’s fortunes – even when the innovations are its own.”
Last week, Vevo’s real benefit to artists and the music industry was called into question by music publisher Matt Pincus amidst news of its revenue boom in 2011. And Noel Gallagher and music industry experts weighed in on the factors that lead some popular bands to quickly fade into obscurity. Also, the president of the Recording Industry Association of America (RIAA) criticized Wikipedia and Google for their part in taking down SOPA and PIPA.
2011: A Boom for Vevo and Major Labels, a Bane for Indie Artists and Publishers
The thriving online video service Vevo – which provides about 40% of the content streamed on YouTube — earned $150-million in revenue in 2011, causing many to be hopeful about the future of music video monetization and another potential area that could rebound in the music industry. However, according to a piece written by Matt Pincus, the founder and CEO of the independent publishing firm Songs Music Publishing and published on The Wrap, independent artists and publishers have yet to see a dime, and it is time for everyone to rethink what is fair.
As Pincus pointed out, what isn’t being said about Vevo’s boom is that despite this $150-million gain, most independent publishers and their songwriters have not ever been paid by Vevo. He says this is because major record labels have stated they have the right to license songs to Vevo on publishers’ behalf, stating that if they are paid, they will take on the responsibility of passing money onto publishers in the same way they do with revenue from tracks on iTunes. But in the case of Vevo money, they have failed to actually come through on that promise.
According to Pincus, record companies are able to get away with this because of the “Controlled Composition Clause” that is within their artists’ recording contracts that usually features unclear language and applies to songs that are written specifically for artists’ records and “controlled” by the artist as well as producers, co-writers, etc. This clause claims to give labels a free sync license that allows them to use music videos that feature the “controlled” songs for promotional uses (uses that don’t bring the labels direct payments). The language was originally added in order to cover videos shown on MTV, but now labels are able to use it to avoid paying indie publishers for videos aired on streaming music sites like Vevo.
Pincus’ article noted that the purpose of videos has changed significantly since the early MTV days, when labels were not paid by broadcasters. Now, videos represent a very real source of revenue for labels, which calls into question the idea of giving labels the right to manage licenses with Vevo for controlled songs. (Incidentally, Songs Music Publishing represents over 300 songwriters, many of which are recording artists. And none of the Controlled Composition Clauses these Songs songwriters have grant a free license to labels for Vevo videos.)
Pincus concluded that labels are not actually legally sanctioned to issue a gratis license for videos featuring songs that are not controlled, whether to Vevo and other streaming sites or to any other entity. When there is no contract between a label and a songwriter, music video rights cannot be granted to the label. And while the case settled between the National Music Publishers Association and YouTube last year finally gave independent publishers some much-deserved net ad revenue from YouTube, Vevo was somehow left out of this decision.
So, as Pincus asked, “Are record companies to blame for relying on shoddy language to withhold royalties, or is it Vevo’s responsibility to insure that the songwriters that helped it pull in $150 million this year share in their success?”
Noel Gallagher and the Industry, on Adele and Why Artists “Fall off Cliffs”
Singer/songwriter Noel Gallagher recently told the Mail that, despite Adele’s huge success the past few years, he predicts she – like so many other female artists before her – will have a short shelf life: “I feel sorry for girls in the music industry. They do have a very short shelf life. For instance, Duffy: who? Gone. She was massive. And I don’t doubt for a second that the same thing will happen to Adele.”
While Gallagher expressed his belief that female artists have a shorter career trajectory than male artists, a music industry lawyer interviewed by The Guardian stated the situation is not unique to women; wildly popular artists on both side of the gender line often fizzle out, and often with good reason: “Duffy is an interesting case … because her story applies to a lot of artists. Buoyed by success, they immediately think, ‘Why am I giving 6% of record royalties, a third of my publishing and a 20% management commission to other people? I am a genius! I will do it myself!’” And this thinking is what led Duffy to leave her record label, manager and her producer, who had co-written and performed on a majority of her platinum-selling album. As the lawyer pointed out, artists that fall out of the spotlight often go on to make “a bad record without any guidance from professionals. And then they wonder why it’s all gone wrong.”
The article “When bands fall off cliffs,” written by Rob Fitzpatrick in October, 2011 explored the many reasons for the “band collapse syndrome” and pointed out that a lot of bands and artists that have exploded onto the scene and received critical acclaim have faded away in the 2000s, citing examples including the Kaiser Chiefs, MGMT and Glasvegas.
Interestingly enough, when approached by The Guardian to discuss how it feels for record sales to drop, none of the bands discussed in the article would comment, likely, as the Fitzpatrick speculated, because “admitting a failure is tantamount in the eyes of the music industry to condemning yourself for ever,” but also possibly because the artist is typically the last one to realize it’s over. However, an unnamed A&R rep for a label put it this way: “Well, I’ll tell you precisely what it feels like … It feels shit. But the second album by every single band I’ve ever signed has flopped miserably, and no one really understands why. When you sign a band, everyone at the label is very excited, but as soon as it starts going wrong every bastard runs to the hills and the A&R man is the only one left.”
Wikipedia and Google Targeted by RIAA President
Wikipedia and Google are in charge of the future of how copyrights, infringement and anti-piracy legislation is handled, according to an op-ed piece written by RIAA president Cary Sherman in The New York Times on February 7. In his critique, Sherman called out the guilty parties and blamed them for sinking SOPA and PIPA, each of which he sees as a solid and well-balanced piece of legislation.
As Sherman stated – and what became the center of his argument, “Misinformation may be a dirty trick, but it works …Wikipedia, Google, and others manufactured controversy by unfairly equating SOPA with censorship.”
He added that policy makers were not going into the process of working out this new legislation without considering all sides of the argument or with the intent of promoting censorship or anti-constitutional values, or to further cripple the already ailing music industry: “Policy makers had recognized a constitutional (and economic) imperative to protect American property from theft, to shield consumers from counterfeit products and fraud, and to combat foreign criminals who exploit technology to steal American ingenuity and jobs. They knew that music sales in the United States are less than half of what they were in 1999, when the file-sharing site Napster emerged, and that direct employment in the industry had fallen by more than half since then, to less than 10,000. They studied the problem in all its dimensions, through multiple hearings.”
Sherman pointed the finger at Wikipedia founder Jimmy Wales for riling up the under-informed masses to protest, creating a “digital tsunami” that stopped legislation that on many levels could have been a positive step towards bringing more money to artists and creators and taking it away from undeserving parties. He asked, about the “11th hour” shutdown of the legislation, “Was this the result of democracy, or demagoguery?”
And Sherman continued his argument by pointing out that Wikipedia and Google’s rallying – “as two of the world’s most popular Web sites” – was an “abuse of trust and a misuse of power:” “When Wikipedia and Google purport to be neutral sources of information, but then exploit their stature to present information that is not only not neutral but affirmatively incomplete and misleading, they are duping their users into accepting as truth what are merely self-serving political declarations.”
And finally, Sherman presented a rallying cry/call to action of his own: “Perhaps this is naïve, but I’d like to believe that the companies that opposed SOPA and PIPA will now feel some responsibility to help come up with constructive alternatives. Virtually every opponent acknowledged that the problem of counterfeiting and piracy is real and damaging. It is no longer acceptable just to say no …We all share the goal of a safe and legal Internet. We need reason, not rhetoric, in discussing how to achieve it.”
This past week, the music industry was focused on whether new business models would create growth, as Trent Reznor discussed focusing on music in film and some predictions for the future of the industry with TuneCore, and a new professional study was released about overall profitability of the music business going forward. Also, the Chairman of Warner Music Group (WMG) voiced his objections to the EMI Group acquisition during his last day on the job.
Trent Reznor: Scoring for Films and the Shifting Music Industry
Trent Reznor talked to CEO of TuneCore Jeff Price last week about his successful shift into writing music for films and where he sees the music industry headed in the future.
In the TuneCore blog, he first discussed his growth as an artist over the years and why it was important for him to identify his strengths and weaknesses as an artist through trial and error in order to find a “truthful” voice that would help fans connect with his music: “… I’ve kind of tried to be editorial about my own writing skill set – what I’m good at and what I’m not so good at. And I’ve focused in on some things that I don’t feel I’m very good at. I’m not good at telling a story. I’m not a Paul McCartney, or a Tom Petty … that can write a story about somebody else. I’ve never really tried it [publicly], and when I’ve tried it privately it feels disingenuous.
… I started writing by just opening up a journal and there were words that were truthful because they weren’t meant to be lyrics, and that had a sense of integrity to it that I could tell felt real. And that became kind of a template for me to a) stay sane and get this out of my system, and b) I thought that taking some of this ugliness that was bottled up inside me and channeling it into something that had some degree of beauty to it at times, felt like ‘Wow, I’ve found my voice.’”
And how did Reznor break into scoring films? It didn’t necessarily come easily at first, as he does not necessarily consider himself a “real composer.” And the process of scoring The Social Network (for which he won an Academy Award) was far different from the process he (and his partner Atticus Ross) used for The Girl with the Dragon Tattoo. However, he tried to bring what he learned about his own personal skill set as a musician into the experience: “…I find that if I can emotionally relate to something about it, I can turn the faucet on, and ideas come out. If I feel like I have skin in the game, if I feel like it’s… if I’m a part of it, then I tend to find that I have to get out of the way and just let the ideas and music come out.”
It’s one thing to say, ‘Music has a big impact in a movie. It really manipulates how you feel.’ I understand that concept. But to see … a movie that I’d seen a few times now, without any music, transform into something that felt much darker, or weightier, or more vulnerable? It was really fascinating to witness firsthand and be a part of.”
Reznor has lately been touted as one of the innovators in the “new music business” who has managed to find a unique business model that allows him to continue to experiment with his art while still working consistently and seemingly effortlessly. Still, he sees a “tough road” ahead for him and other DIY artists, though he is still optimistic: “… I think we are in between business models. It felt clear to me that labels didn’t know what they were doing back then … We didn’t go, ‘Let’s go with an indie label,” which has the same business model … We went direct from us … The label’s me and my manager, as loud as I can shout on Twitter or anywhere else. And you realize the shortcomings of that, that you’re only as loud as people that want to listen to you.
… I’m not disenchanted by things. I think in a lot of ways it’s the wild west right now, and it’s wildly exciting, and it’s interesting when something’s been disrupted this greatly, the record business. There’s limitless potential, but it also requires a lot of effort.”
And according to Reznor, re-building the music industry is going to have to center around really understanding what the fans want and finding an infrastructure that will solidly support artists’ rights: “I think the promise, and what I would hope more than anything, is that when we get to this new business model, whatever that is, on the record label side and also on the publishing side, [is] that somebody is strongly speaking up for artists’ rights when that starts to get figured out. And that in an age of potential transparency, that the actual content creator has a seat at the table, and it’s not ALL the things glomming on to it that are carving off their parts.
What I consider, from a consumer point of view, the next good business model, the next thing that makes sense, is if there were mass adoption of music subscription services, like Spotify. I think in an age of broadband connection being everywhere, everyone having powerful computers in their pockets, this sense of … normal people feeling comfortable with the idea of the cloud and having all the music available in the world available to you at your fingertips, anywhere you want it all the time, that’s pretty cool. That requires some education on the part of those companies, to help people to understand what that is.”
A New Study Shows, “the Sky is Rising” in the Music Industry
Industry expert and TechDirt blogger Mike Masnick shared the results of a new professional study of music industry growth in a presentation at the midem music festival last week. And the news seems to be promising: “Contrary to the dire warnings of the legacy entertainment industry players, the market is booming, with even greater content choices for consumers, more options for creators, and many more opportunities for smart businesses and artists to make money.”
Masnick’s presentation revolved around the release of a new research paper put together by TechDirt and sponsored by CCIA and Engine Advocacy. The paper examined the real state of the music and entertainment business and more realistically looked at some of the numbers behind “doom and gloom” reports about the death of the industry that continue to make the same cynical statements about “cheap” consumers, paltry returns for artists on digital sales and why new laws need to be created to prevent a complete implosion.
As Masnick argued, an honest look at the numbers shows that “the overall entertainment ecosystem is in a real renaissance period … the industry is growing both in terms of revenue and content.” The report was split into video and film, books, music and video games and showed that during the last decade, all four segments have actually showed significant growth and opportunity. The amount of content produced in each area has grown at an astronomical rate, revenue has grown and, despite rumors of consumers just wanting everything for free, these consumers have actually continued to spend more of their income on entertainment – 15% more in the period from 2000 to 2008.
What were some of Masnick’s other key points? In the past decade …
Masnick admitted that there are significant challenges, including the Internet itself: “the Internet has eaten away at some traditional means by which these businesses made money. But, as the data shows, there is more money going into the overall market, more content being created, and many new ways to make money. That shows that there is a business model challenge – and a marketing challenge – but much more opportunity in the long run.”
He concluded that the major challenge will not be to respond to a business that is getting smaller, but to figure out how to “route around existing structures” in an industry that has actually expanded significantly.
More information on this study can be found on the TechDirt blog and in Forbes.
Out-Going Chairman of WMG Edgar Bronfman Against EMI Acquisition
Edgar Bronfman, Jr. stated he was strongly opposed to Universal Music Group (UMG)’s acquisition of EMI Group, according to an article published in The Wall Street Journal. At the D: Dive into Media conference on his final day as Chairman of WMG, he said he was concerned that bringing EMI on board “would create what I call a super-major that would control not only the future of recorded music but the future of all digital media.”
He added, “I think it’s dangerous, I think it’s problematic and I think it’s got to be stopped … It does strike me as hubris particularly for Universal to think it’s going to be easy to buy EMI, and frankly to think they can buy EMI at all.”
According to Bronfman, WMG has plans to lobby against the upcoming merger, both in the U.S. and abroad. However, a senior Universal Music executive who listened to Bronfman’s statements declined to respond, claiming that only an official spokesperson for UMG – who was not present at the conference – was permitted to make a statement. And the spokesman was traveling and unable to be reached.
Once combined, Universal and EMI would control 40% of the worldwide music market. Bronfman stated that this would give the mega-company the power to establish terms for new online music services and other companies and would greatly decrease artists’ options for earning income.
When criticized for voicing his objections merely because of a “sour grapes” situation – since WMG lost out on a bid for EMI – Bronfman stated that had nothing to do with his analysis, especially since a partnership between Warner and EMI would have resulted in a smaller market share than Universal currently has by itself.
January 31 was Bronfman’s final day as chairman of WMG, though he will continue to serve on its Board of Directors. He was appointed CEO in 2004 as the leader of the investment group that bought the company from Time Warner, Inc. He also led the company’s push to acquire EMI.
Universal won EMI in an auction, settling on a price of $1.9 billion and agreeing to be responsible for meeting any regulatory conditions. The deal is set to close before 2013.
Last week, new theories surfaced about the real impetus for the Megaupload shutdown as further details about the recent arrests emerged. And two Mötley Crüe members weighed in about the oddities of the modern music business and what artists can do to succeed. Also, Grammy® winner Ne-Yo joined Motown as an A&R executive with hopes of reshaping its artist roster and making music a more unifying force.
Megaupload’s Fall May Not Have Been about Piracy
The dramatic shut-down of Megaupload and arrest of its founder Kim “Dotcom” last week may not have entirely been about piracy, according reports in a variety of publications, including TechCrunch and Time magazine. The move by the U.S. Justice Department could have been part of a plan initiated by the music industry to protect itself from the ramifications of Megaupload’s soon-to-be-released, disruptive music store and DIY artist distribution service.
Plans for the “Megabox” service were first released by TorrentFreak in December. While the service was still in beta, listed partners included 7digital, Gracenote, Rovi and Amazon. And Megaupload had launched a marketing battle against major music industry groups, including the RIAA and the MPAA, who showed Kim Dotcom in an anti-piracy film. The site had also sued Universal Music Group for blocking its YouTube campaign featuring a variety of major recording artists singing its praises.
But many sources speculate it was actually the impending launch of Megabox that added the most fuel to the fire, as Dotcom himself had described the service as a major iTunes competitor. Megabox had plans to offer free premium movies via its “Megamovie” site, which, along with its many music streaming and services to artists would have moved it from being a mere digital locker site to being a major transformative device for digital content.
Megabox had outlined a model that would allow unsigned artists and any other unattached content creators to sell their works through the site and pocket 90% of their earnings. Artists would have also had the option to completely give away songs and still be paid for them through a “Megakey” service. According to its founder, Megabox had potentially discovered way to get around the labels, RIAA and the entire music business.
And due to Megaupload’s gigantic size, popularity and support by some potentially influential musicians, it may have been able to succeed where other services have not yet been able to legally. According to a report by Time, the rapper (and superstar Alicia Keys’ husband) Swizz Beatz was officially listed on the Megaupload website as its CEO just prior to its shutdown. While he hasn’t been implicated in the lawsuit, and experts speculate this title was just a vanity title that emerged as part of the celebrity YouTube campaign, his presence further supported the site’s reach.
Before it closed last week, Megaupload was the 13th most visited site on the Internet and made up 4% of all global Internet traffic. It had 180 million registered users, 50 million daily visitors and was already a service many artists trusted to distribute their digital content. Megabox was set to monetize all this and pass on a majority of its earnings directly to artists. Kim Dotcom and a handful of other executives have been charged with racketeering, money laundering and multiple counts of piracy.
Vince Neil and Mick Mars: Where is the “Weird” Music Industry Headed?
Mötley Crüe singer Vince Neil and guitarist Mick Mars each discussed the current music industry climate this past week and talked about how artists can find success.
According to Neil, the music industry is vastly changed since his band first found fame in the ‘80s, and the many places artists now have to focus in order to be seen presents major challenges: “… There are so many different outlets for music now. Thirty years ago, you had MTV; everybody watched MTV and everybody saw your video. There was one place to go; now there [are] thousands of places to go … it’s just harder to get everybody to look at you at the same time.”
He also said that there is not much that is “secret” in today’s business. Social media has given fans the opportunity to get closer to their favorite artists: “I think with all the social media everybody pretty much knows everything. What you’re doing and where you’ve been and where you’re going.”
And Mick Mars stated that today’s bands are going to have to come up with new methods for delivering music to their fans, because the music industry is “getting weird:” “I think the future will have to see bands put together really cool packages that will be worth it for people to go see.”
Mötley Crüe begins a Las Vegas residency in February. Though Mars admitted he would rather be touring than staying put, he admitted he feels hopeful that the residency will inspire other artists to start their own residencies and open up the industry to new ideas: “I know it is a cool thing we are doing, and that we are probably going to make this possible for other bands to do the same thing. I don’t know if we are planning on doing more of this type of thing or not. We are going to have to check it out and see.”
Ne-Yo Named Senior VP of A&R at Motown
As recently-appointed A&R executive at Motown, 32-year old, award-winning artist Ne-Yo hopes to help the industry and music fans revert back to a united front, according to a report by Fox News. The Grammy® winner’s new title was announced by Universal Music on January 25. He has multiple hits as a solo artist and has written huge songs for Rihanna, Beyonce and others.
While Motown has its roots in black music, this type of music originated as art that could appeal to everyone and unite fans. And Ne-Yo said that he hopes to return to this idea in a music industry that he believes is becoming increasingly segregated: “I want to get back to a place where everybody’s listening to the same thing no matter what race, color, creed you are …Now there’s music that’s specifically for black people and there’s music that’s specifically for white people, and I feel like the essence of … music is lost when you do that.”
In his new A&R role, he hopes to bring artists to the label that are deeply talented but also willing to work. He wants to focus on those who are driven to be working musicians, not just “one-hit wonders:” “I definitely plan on making sure the people I bring to the industry are going to be an asset to the industry as opposed to a liability … It’s more than ‘She looks good in a short skirt’ or ‘He looks good with his shirt off’ – it’s about somebody that has talent.”
Ne-Yo is set to release his fifth album in summer, 2012 and will be moving over to the Motown Records label himself from Island Def Jam, also a subsidiary of Universal Music.
This past week in music, industry analysts highlighted trends that have emerged during the Digital Age as experts claimed January is the best month for artists at all levels to release an album, and a study of the Billboard chart system showed that artists who show up on these charts only spend about five years there. Also, the file-sharing giant MegaUpload was finally shut down by the U.S. Department of Justice and labeled a “mega conspiracy.”
Want to Make it Big? Release Something in January
January has long been labeled a “dead month” in the music industry. But a study of artist releases – both major label and independent – conducted by the Independent showed it could actually be the perfect time for particularly emerging or lesser-known bands to sell more albums and register on the charts. And scoring a #1 hit is a good move for any band, as it increases sales, radio airplay and can garner better spots at live music festivals.
Since 2006, January releases have catapulted quite a few independent bands and artists to #1 on the charts, including The Arctic Monkeys in 2006 (Whatever People Say I Am, That’s What I’m Not) and The View in 2007 (Hats off to the Buskers). And Adele’s #1 success in January, 2008, 19 inspired her to release her album 21 in January 2011, an album which sold 200,000 copies in its first week and made her the best-selling artist of last year.
What is the advantage for artists of a January release? The biggest benefit is that sales of just 30,000 albums can earn them a #1 spot, whereas in other months, that sales figure would have to be about three-times that much.
This year, new artist Lana Del Rey is hoping to replicate Adele’s formula for success by releasing her debut album at the end of this month. However, in competition with her will be Adele herself as well as more established artists Bruno Mars and London indie band The Maccabees, all releasing their third albums the same week.
Experts say the real reason January can be such a prime month for new artists in particular to get noticed is because it is during this time of year that the media and music fans are hungriest for something new. According to John Hirst from HMV, there has typically been six weeks of silence after Christmas and “…When no one’s released a record for two months the public’s appetite is for something new. It’s easier to get media attention and positive reviews so an album can over-perform.”
How Long is the Career of a Billboard Artist?
Artists who make Billboard charts are there for only about five years on average, according to a study spend on average only about five years A recently-released professional study conducted by Storm Gloor, MBA at the University of Denver’s College of Arts and Media (CAM) and published in the 2011 Music and Entertainment Industry Educators Association (MEIEA) Journal. And according to Gloor, more than one-third who make the charts will be “one-hit wonders.”
This study is based on analysis of Billboard charts and other pop music data and is phase one of a research project designed to figure out how artists’ popularity and the length of their careers have been impacted by the huge music industry shift brought on by the digital revolution and other major events of the past 15 years. This first part of the study analyzed over 50 years of Billboard music charts.
The official results were that artists stay on Billboard charts in some capacity from 3.95-6.16 years and that 34-percent of those whose debut albums – of any genre –hit the charts only appear there once. However, with pop artists, that figure is 50 percent.
Gloor said the results of this study will be particularly important to aspiring artists who want to plot out real, long-lasting careers in music: “The research is important to aspiring artists in understanding their own long-term planning in light of such realities. They need to know what they are facing as they start planning for their careers and beyond.” He also said this information could help labels, as they will be able to use it to create more effective promotional strategies for their artists going forward.
The second part of Gloor’s study will involve an examination of music business trends and how they affect the popularity of artists who make the charts. According to Gloor, his initial findings have been that artists who chart might gain national popularity faster, but will not likely stay in the spotlight for long.
MegaUpload Shut Down by Feds
One of the world’s most formidable file-sharing websites MegaUpload finally bit the dust on Thursday as it was shut down by the U.S. Department of Justice for violation of piracy and copyright laws. The feds issued an indictment declaring that MegaUpload was a “mega conspiracy” and labeled it a global criminal organization stating its members “engaged in criminal copyright infringement and money laundering on a massive scale.”
The indictment also charges MegaUpload executives with earning $175 million through subscription fees and advertisements and taking $500 million in royalties from movie producers, authors, musicians and other copyright holders.
According to an article in The Washington Post, prosecutors stated that the company attempted to hide the fact that they were paying users to upload illegal movies and music and used the financial windfall this practice created for a “lavish lifestyle.” Federal agents confiscated dozens of luxury autos, including site founder Kim Schmitz’s, aka “Kim Dotcom”’s Rolls-Royce, which sported the license plate “GOD.”
Of course, MegaUpload is just one of a number of services that provide file sharing online. Sites such as Mediafire and Rapidshare and also cloud storage services like Box.net and Dropbox also offer easy ways to share content. This shutdown and the potentially impending SOPA and PIPA bills – which brought about internet-wide protests by Craigslist, Wikipedia and Google last week – has many running legitimate services concerned about their future and whether or not the government has the right, even in the absence of a passed bill, to shut sites down for hosting pirated content without allowing the companies to defend themselves in court first. As Eric Goldman, a professor of intellectual property law at Santa Clara University said, “They will wonder if they have done anything different from MegaUpload, and does that mean the Feds will come through their door?”
One detail that made MegaUpload different was that it managed to get celebrities on board to support it with its online marketing campaign featuring Kanye West, Lil’ Jon, Sean “Diddy” Combs as well as Russell Simmons and director Brett Ratner, who all professed their love for the site in a series of promotional videos.
The indictment against MegaUpload was unsealed Thursday, but was issued by a federal court in Virginia on January 5. The Justice Department released a statement with the indictment: “This action is among the largest criminal copyright cases ever brought by the United States and directly targets the misuse of a public content storage and distribution site to commit and facilitate intellectual property crime.”
Authorities were dispatched last week to arrest three MegaUpload executives employed by its two companies Megaupload Ltd. and Vestor Ltd. in New Zealand, including the site’s founder, Schmitz. The indictment also charged the two companies with running a “racketeering conspiracy, conspiring to commit copyright infringement, conspiring to commit money laundering and two substantive counts of criminal copyright infringement.”
In retaliation for the shutdown on Thursday, a hacker group named “Anonymous,” linked to the Twitter accounts @YourAnonNews and @AnonOps took down the websites for the Department of Justice and Universal Music as well as for the Recording Industry of America and the Motion Picture Association of America.
The Justice Department also seized 18 additional domain names linked to the case.
Big changes in the music industry took the spotlight this past week as the music industry filed suit against the Irish government and Billboard changed the format of its Top 200 for the first time in almost 60 years. Also, Dave Grohl talked candidly about the state of rock and why he believes record sales have been down.
Irish Government Embroiled in Music Industry Lawsuit
The Irish government is currently being sued by the music industry for failing to comply with the new SOPA-like EU copyright law that requires websites suspected of illegal file sharing to be blocked, according to an article on the TechEye website. And if the industry wins, Ireland will be the first country sued into insolvency over music piracy.
The suit has its roots in a 2010 lawsuit brought about by EMI that claimed Irish law did not hold up an order against an ISP for a music piracy site. The music industry stated that since the State had not held up copyright law, it could be held responsible for all the file sharing that goes on in Ireland, worth several trillion dollars.
Ireland has agreed to put a “statutory instrument” that would block websites and help them comply with EU copyright law as soon as possible. However, the music industry is planning to use the legal principle – already used in Italy – that allows a government to be sued for damages for failing to follow an EU directive.
Getting a conviction will be difficult, however, because the industry would have to prove that blocking websites actually stops piracy, then also show that the Irish government did not implement a system fast enough.
The New Billboard Top 200
2012 will mark the year Billboard finally made changes to its Top 200 list, which has had the same format since its inception in the mid 1950s. Now, deeply-discounted albums will not be counted, which could make promotion more difficult for labels, according to an article in the Los Angeles Times.
As an example, Lady Gaga’s Born This Way song hit U.S. pop charts last June, selling 1.1-million albums in its first week, marking the best debut sales since 2005. However, 440,000 copies of the song were sold by Amazon for 99 cents to promote its online storage service. And according to the new chart set up, these would not count as regular sales.
On January 13, Billboard posted an article about chart changes, stating that albums sold for less than $3.49 – selected because it represents half the wholesale cost of an album – will no longer be included as sales.
Billboard is a 117-year old institution and first began its “Billboard 200” chart in 1991, when it started using sales data from Nielsen SoundScan. And since its inception, this chart has been the most reliable music-purchase-tracking system in the U.S., providing an inside, “hype-free” look at sales and giving consumers and retailers raw numbers about an album’s popularity.
Of course, digital music has entirely changed the landscape of the industry, as album sales began their decline with Napster and then iTunes, which drove fans further online. And now, there are many more factors to consider besides just sales when gauging a band’s popularity, including YouTube views and Facebook friends. However, until this past week. Billboard has continued to present the raw sales numbers, digital and physical.
One of Billboard’s arguments for changing its system is inherent in the question of how inexpensive an album can be before it counts as essentially free and thus cannot really be called a real “sale.” However, the policy of not counting albums below $3.49 is only in effect for the first four weeks of their release. Proponents of this new system have noted that finding a new album for under $3.49 is uncommon, though Amazon has been known to offer new albums for under $2.99 in order to improve site traffic.
Because this new chart rule will alter the way album sales are calculated, it could actually change marketing. If the rule had been enacted in 2011, there would not have been a million-selling album debut. Lady Gaga would’ve only sold 660,000. Of course, no real money will be lost by artists or labels, because any money lost through deep discounting is lost by retailers. However, the new system could change the way emerging artists use digital and lower price points to increase sales and gain traction in the industry.
While some artists, managers and labels have had harsh words to say about the new system, others agree with Billboard when it claims to just be trying to accurately represent the changed the industry. Small label head Jeremy DeVine said, “I’ve been waiting for Billboard to crack down on these Amazon sales since they were first introduced …the sales are great for consumers and the artists, but from a chart perspective it treats a $10 album and a $1 with equal legitimacy … These kinds of quick sales paint unrealistic pictures of success for everyone involved.”
Dave Grohl, on the Loss of the “Good” Record
In a recent Q&A with Billboard, music innovator Dave Grohl of the Foo Fighters talked about the current music climate and what he believes to be the real reason behind low music industry sales: a majority of the music just isn’t good enough.
The Foo Fighters had a great year in 2011, releasing their critically-acclaimed seventh album Wasting Light, earning six Grammy nominations and embarking on a successful worldwide tour. And while Grohl admitted to having “the best year of his life,” he did have some choice words to say about why the music industry might be failing:
“Someone asked me recently, ‘What do you think the problem with the music industry is?’ I said, take the Adele record, for example. It’s an amazing record and everybody’s so shocked that it’s such a phenomenon. I’m not … You know why that record’s huge? Because it’s f–king good and it’s real. Now imagine if all records were that good. Do you think only one of them would sell? F—k no! All of them would. If all records were that good the music business would be on fire, but they’re not.”
But the focal point of the interview was a question has been cropping up for decades: “Is rock dead?” And Grohl’s response was that, while he believes most rock is not making the cut, he is not going to be joining so many other of the world’s best musicians by answering that question “yes:” For years, usually about once a year, you have a rock band that comes out and says, ‘We’re gonna save rock’n’roll,’ and then you’ll read an article asking, ‘Is Rock Dead?’
Grohl adds, “There’s always gonna be rock’n'roll bands, there’s always gonna be kids that love rock’n'roll records, and there will always be rock’n'roll. I travel all over the world and play music, and it’s easy to think rock’n'roll has gone away when you’re in a country like America. We just got back from a trip Down Under, we did a tour of Australia and New Zealand where we were pulling 40,000-50,000 people a night, selling out stadiums. To me, that means rock’n'roll is alive and well. The thing that will never go away is that connection you make with a band or a song where you’re moved by the fact that it’s real people making music.”
In the first week of the new year, experts analyzed the music business in 2011, as Billboard reported on the performance of the 10 biggest music stocks last year and also presented the official figures for 2011 music sales. Also, Daniel Ek, CEO of Spotify and his promises to redefine the future of digital music went viral.
Music Stock Performance in 2011: A Mixed Bag
While the stock market for the music industry experienced an overall decline – falling by an average of 4 percent and ranging from a 42.5-percent decline to a 46.5-percent gain – in 2011, some of the 10 biggest music-based companies did well, according to an article published on Billboard.biz.
The five most heavily-music-focused stocks – Pandora, Live Nation, Sirius XM, Trans World and Warner Music Group (WMG) – gained 7.2 percent. The following is a quick list of the ten biggest music companies and how they did last year:
Trans World stocks rose by 47.4 percent. As a “brick-and-mortar” retail, the company faced some significant challenges in the market. While its revenue was down 17 percent in the 38 weeks ending on October 29, it still improved its net loss by 67 percent.
WMG was up significantly in 2011, by 46.5 percent. Experts attributed this improvement to its sale to Access Industries last spring. Last January, when the news leaked that the company had hired powerhouse Goldman Sachs to look for buyers, stock value spiked.
Apple stocks were up 25.6 percent, having risen 7.7 percent when Tim Cook took the CEO position on August 24. And they rose an additional 7.1 percent after Jobs death on October 5.
Sirius XM’s stock was up 11.7 percent, but, as in years past, rose and fell all year. There was a significant rise in December when analysts ascribed a “buy” rating to it based on its subscriber growth and good margins.
Amazon fell 4.3 percent last year. It peaked in October, but then quickly fell again. Despite the company’s big sales numbers surrounding the new Kindle Fire tablet, the stock never recovered.
Vivendi – which is the parent company of Universal Music Group (UMG) – was down 16.2 percent, falling steadily throughout the year. Despite poor performance, analysts still believe that Vivendi will rise above the market and continue to encourage stock holders to ride it out.
Live Nation stocks fell 27.3 percent last year, though the company did well overall despite a decline in the sale of concert tickets and other non-in-home entertainment. The company also expanded last year, taking on new ticketing, promotion and analytics features.
Best Buy fell a whopping 31.8 percent this past year. The stock fell in mid-December after releasing poor third-quarter numbers. The company also had to cancel some online orders for high-selling items right before Christmas, further impacting its popularity.
Pandora stock fell 42.5 percent. (It was judged on a period of only a little more than half last year because it went public in June.) Experts attribute this decline to concerns about the high cost of the company’s content, its ability to get local advertising revenue and competition from other streaming and satellite radio companies.
Finally, Sony fell almost 50 percent in 2011. Sony headquarters was hit by both a tsunami and computer hackers last year, so these events had something to do with the decline. However, it also experienced some significant losses in TVs and acquisitions. This marked its third year taking a loss. Many feel it will likely have a similarly bad year in 2012.
Music Business Profits Up with Digital Trumping Physical
Nielsen SoundScan released its official annual report on the music business this past week, and as expected, overall music sales are up 1.4%, the first increase since 2004. According to the president of NARM, Jim Donio, “This year’s results can be attributed to a variety of influences, including more aggressive marketing efforts and offers, availability and consumer adoption of legitimate digital commerce models, the power of social media, etc.
British singer Adele had the best-selling album , selling 5.82 million copies of 21 in the U.S. And without her, album sales industry wide actually would have been lower than in 2010. And her effort sold more than twice the copies of Michael Buble’s second-best-selling Christmas album.
And as also reported in Time magazine, for the first time, digital music sales exceeded physical album sales. They took a 50.3-percent market share of all music purchases, and, as in 2010, digital song downloads rose by 8.5 percent even when physical sales declined by 6 percent.
Experts speculate that 2010 might have been the music industry’s rock bottom. However, Donio and others are just looking forward to a hopefully brighter 2012: “It will be exciting to see what 2012 has in store as we anticipate new music from established artists and speculate about which stars-in-the-making might be making critical and commercial headlines in the next twelve months … Not to mention how products and services from familiar freshmen players in the digital commerce space will continue to unfold.”
More specific details about Nielsen’s report can be found at this link.
Who is Daniel Ek?
It was almost impossible to search for music industry-related stories last week without coming across the name Daniel Ek, the Founder and CEO of Spotify. In the past year, Ek has already been featured in Business Week and on almost every online tech publication in existence. The first week of January found him in The Wall Street Journal and Forbes, where he was presented as “the most important man in music.”
But is all this hype true? While Spotify has been popular among music fans, there has still been some significant controversy among artists since the streaming service arrived in the U.S. last summer, with several artists pulling their music complaining the site would not provide them with appropriate revenues.
On January 4, Forbes posted an early view of an article on Ek on its website, set to publish in its January 16th issue as part of its “30 Under 30” entrepreneur series, exploring Ek’s past, present and potential future impact on the music industry declaring him to be the savior that could potentially solve all the problems the Digital Age has introduced: “Daniel Ek created a free, Facebook-enabled platform that could save the recording industry from piracy – and iTunes.” The article takes an inside look into Ek himself and also daily life at the Spotify headquarters in Stockholm, which is described as being run by “frenetic energy,” which is representative of the “strange new reality of the music business.”
Born in 1983, Ek started his first successful internet-based business in 1997 at age 14. And as Forbes states, the industry has been waiting for an entrepreneur like him for the past decade – someone who could build an online music tool that was more tempting than music piracy and could also offer up a sustainable revenue model. Despite breaking new ground, Ek has stated he was inspired at an early age by the Napster experience (and he is among the generation of 18-30-year-olds who came to believe no one should have to pay for music).
According to Ek, his goal is to disrupt the music landscape in much the same way Sean Parker and Shawn Fanning disrupted it at the end of the last century. As put by Forbes, “In the current tech landscape, where Google provides the search, Facebook the identity and Amazon the retail, Ek wants Spotify to supply the soundtrack.” He wants to create an entire “music ecosystem.”
However, he has some critics. A November issue of The New Yorker featured an analysis by Malcolm Gladwell that talked about Walter Isaacson’s biography of another music pioneer, Steve Jobs, comparing him to a “tinkerer,” not an “inventor:” “Jobs’s sensibility was editorial, not inventive.” And Ek admits he falls into this same category: “I’m not an inventor. I just want to make things better.”
However, with 2.5 million paying customers globally and significant advertising revenue, many analysts would say that Ek has managed to at least revitalize the music industry. Still, labels and artists continue to be doubtful that Spotify, or Ek can actually save it.
