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.
Napster officially called it quits and folded into Rhapsody last week. Also, in the wake of the EMI sale, experts discussed whether or not the music industry will never reach a point where one major label controls it. And finally, several analysts and legislators explored the complexities of SOPA legislation.
Napster and Rhapsody Merger Finalized
Napster had its last day on November 30. As of December 1, it officially merged with the #1 American on-demand music service Rhapsody, a month after the company finally bought the digital music company from Best Buy.
Of course, Napster has been a controversy in the music industry since its launch in 1999 as a peer-to-peer file-sharing service designed to help users swap music files. It only lived in its original incantation for two years before it was shut down by court order. Music industry trade groups including the Recording Industry Association of America filed hundreds of lawsuits against its users for copyright infringement and illegal downloading.
While it has been over 10 years since the original Napster ceased to exist, what many in the music business have called “the Napster effect” has profoundly shaped the way the digital music space has evolved. The company’s model brought to light a major supply-and-demand problem: Consumers did not want to pay $20 for an entire CD when all they wanted was a few songs off that CD. They also wanted a simple and inexpensive way to get digital tracks. The death of Napster brought about the birth of services like iTunes, Rhapsody and others that would follow.
Rhapsody was founded in 2001, and currently allows its users to download unlimited songs for $10 per month. It has 800,000 subscribers.
Financial terms of the Napster/Rhapsody merger were not released.
Will One Corporation Ever Control the Music Business?
The answer is “not entirely,” according to many entertainment industry experts. Many in the music business have been concerned about an impending monopoly by major record labels ever since EMI was put up for public auction and sold to Universal Music Group (UMG), who bought the record label component, and Sony/ATV, who purchased its publishing division.
Professor Nick Baxter-Moore of Brock University in Ontario, Canada said, “… It might be argued that one reason why EMI wasn’t sold as a whole to either [Sony/ATV or UMG] was to avoid regulatory obstacles being thrown up to block the sale.”
Still, the purchase of EMI has brought the number of major record labels down from four, to three: UMG; Sony/ATV; Warner Music Group. What were referred to as the “Big 5” became the “Big 4” in 2004 with Sony’s acquisition of BMG. The reduction to three has had many seeing the possibility of a recorded music monopoly in the near future.
However, Baxter-Moore and others feel that, while many are declaring the downfall of the music industry, it will never get to a point where any one major corporation has control: “We might get to a point whereby two corporations exercise a duopoly – a situation in which two major firms control the majority of the output of a given industry – that would arise if, or rather when, either Universal, or, more probably, Sony acquires Warner Music Group.”
He also believes that the strength of indie labels means they will never fully go away and allow for a single label to control output: “We might see a recording industry in which Universal and Sony and their many and respective subsidiaries control about 70-75 percent of the market (as long as neither one controls, by itself, 50 percent) and with national, regional and indie labels accounting for the other 25 percent.
While major labels are being purchased for huge figures, independents have slowly been brought into the spotlight in recent years, almost to a level of being competitors of the bigger labels. For example, Arcade Fire’s album The Suburbs, released on Merge, was one of the top-selling albums of 2010, and Adele’s 21, attached to XL was by far the most popular. Both these indie labels have been around for almost 20 years and have adopted business models similar to the majors because they release some music they feel will be more widely popular so that they can fund the release of records from emerging or fringe artists.
As Baxter-Moore asserts, while monopoly may not be inevitable, the EMI purchase could still cause some complications for artists and industry professionals: “Corporate concentration is bad for any industry … The sale of EMI, whether in one piece or two, contributes to further concentration of the music industry … History tells us this is bad news for musicians, for the music product, and for audiences and fans.”
The Stop Online Piracy Act (SOPA) Legislation: It’s Getting Complicated
Critics within congress of the Stop Online Piracy Act (SOPA) officially introduced a “legislative framework” for an alternative bill that they hoped would address some of the concerns many have had about the legislation on December 2. Their proposal was to update U.S. trade laws to implicate that downloading protected content – like a song, album or a movie – from a foreign-owned website would be treated the same as illegally importing foreign hard goods.
SOPA has caused some controversy since it was introduced. Critics have complained the bill directly attacks the freedom of online speech and hinders technological innovation. But proponents claim it is a necessary solution to the huge and growing problem of online piracy, citing stats that show that forty billion music files were shared illegally in 2008 – 95 percent of all music downloads worldwide – and that three-quarters of the video games released in late 2010 and 2011 were acquired illegally.
According to a recent editorial in The New York Times, “Musicians, moviemakers, authors and software designers are not the only victims. Piracy’s cost is measured in less innovation and less economic activity, as creators lose hope of making a living from their creations.” Still, the editorial stressed that legislation needs to be “tightened,” and that infringement as defined by SOPA is too broad and could actually cause some domestic websites that are not breaking any laws to be shut down unjustly.
Under the bill, copyright owners could tell direct payment providers like Visa or advertising networks like Google to shut down a website by filing a notice that the site or even just “a portion” of it “engages in, enables or facilitates” intellectual property infringement, or is ignoring this infringement on purpose. Once accused, websites would have five days to prove innocence. And companies like Google and Visa would be immune to being sued by websites that were cut off wrongfully. So, technically, copyright owners could prevent a website from earning money with one accusation. Provisions could affect websites that are already protected by the 1998 Digital Millennium Copyright Act, which protects U.S. sites with massive amounts of under-controlled like YouTube as long as they take down copyright-infringing material when it is brought to their attention.
The SOPA legislation – as well as similar legislation in other countries like Belgium, Italy and Finland that is already being enforced – was largely inspired by the need to stop foreign, “rogue” websites like the Pirate Bay in Sweden, a bit torrent site that has already been coming up with workarounds to allow it to continue to provide illegal content to its users. According to Torrent Freak, “The Pirate Bay Dancing” add-on has already been created by a group of coders called “MAFIAAFire” in order to redirect Pirate Bay and other bit torrent websites to new domains so if their domains are seized by regulators, their content has new homes. Undoubtedly, regardless of which shape new legislation takes, these types of workarounds will be inevitable.
The newly-shaped bill introduced in Congress on December 2 was designed to address many of the concerns about free speech and commerce. U.S. Senators and Representatives who worked on the new framework said they believe that creating a “21st century trade policy” will help prevent infringement while “ensuring the continued free flow of legitimate commerce and speech.” The revised bill would make it possible for a U.S. copyright holder to petition the International Trade Commission to investigate digital imports. That organization would then decide whether the company was violating intellectual property rights. According to these legislators, getting behind the trade laws helps them stay away from the “pitfalls” inherent in the original SOPA, which they claim gives the government too much power to control the internet based on little more than suspicion, does not provide clear definitions for the justification of shutting down an entire site and hinders the openness and innovation that drives the Internet.
In an official joint statement, the group of Representatives and Senators who came up with the new framework said, “By putting the regulatory power in the hands of the International Trade Commission – versus a diversity of magistrate judges not versed in Internet and trade policy – we will ensure a transparent process in which import policy is fairly and consistently applied and all interests are taken into account …When infringement is addressed only from a narrow judicial perspective, important issues pertaining to cybersecurity and the promotion of online innovation, commerce and speech get neglected.”
Jeff Brody is the co-founder of Brody Distribution Group (BDG), a New York City area-based company designed to serve the needs of labels looking for solid national distribution and to help market records to break and develop new artists. Jeff has worked in the music industry for nearly 40 years and got his start with a part-time job with record entrepreneur Jerry Winston in the early 1970s. Since then, he has worked for a variety of labels including PolyGram Records, Polydor Records and Mercury Records. In 1998, he left Mercury to form independent sales and retail marketing company JRB Sales & Marketing Innovations and then in 2002, founded BDG. BDG also works with the country’s #1 independent distributor, RED Distribution. He has worked with artists such as Todd Rundgren, Dionne Warwick and Donny & Marie.
I recently sat down and talked to Jeff about what drew him to the music industry, the changes he has seen in distribution for DIY, indie and major label artists over the years and some advice he has for musicians trying to get their music out there.
Thanks for taking some time to talk to me, Jeff. How did you first get started in the music industry?
JB:
Almost 100% of music industry people say how much they love music and pounded on every door possible to get into the industry. As much as I love music, the truth is I married into it. When I was discharged from the service to go back to school, I also got engaged. Not having much money, I needed a part time job. My future wife’s uncle, Jerry Winston (many old timers will remember Jerry; he owned Wendy Distributors in Newark and Malverne in New York) gave me a part-time job. Six months later, I quit school and got married, and the rest is history. I literally started out sweeping floors, taking orders over the phone, doing the billing and whatever else was to be done. I’ve held a lot of different positions since the 1970s, from an Account Executive for ABC/Dunhill Records, to a sales manager for PolyGram Records, to a Senior Vice President of Sales for Mercury Records. It all led eventually to me forming JRB Sales & Marketing Innovations in 1998 and then finally Brody Distribution Group in 2002.
Why did your interest gravitate towards distribution over other areas of the music industry?
JB:
I really didn’t gravitate there; it started out there. But even so, being around promotion people and other types in the industry, distribution and sales is where I always wanted to remain. I didn’t have any interest in promotion, A&R, Marketing (although that’s what sales and distribution people do – just retail marketing, not consumer marketing) or any other area. It seems sales is second nature to me.
When and why did you found BDG? And how do you see your role working with artists now that there are significantly fewer retailers?
JB:
When I first started my sales consulting business and worked very closely with RED Distribution I saw a lot of good small labels get turned down for distribution, not because of the artists, but because they didn’t have the infrastructure to succeed. So I presented to RED the idea of starting a company that would do the distribution deal with the label. And although not signed directly to RED, they would receive the same services, but I would be the person to deal with RED. Since then other people have taken that idea to other distribution companies. I guess it worked – love when someone steals an idea of mine!
As far as working with fewer brick and mortar stores, I still have the same old school philosophy – with a few wrinkles – with the ones that are still around and work very closely with them. I work with the stores, along with RED, whether they are indie or chain or mass merchandising. Here are a few examples of that philosophy:
Todd Rundgren worked with the Coalition and gave them an exclusive on his new new CD for a period of a few weeks, also holding back the digital sites for a week. We then did an in-store with the Hungry Ear in Hawaii where Todd Lives. We had a great debut on the Indie chart and are now selling it to everyone.
Dionne Warwick worked with FYE and did an in-store in Paramus NJ and had a nice debut on the Jazz Chart.
I worked with Donny & Marie, and we started off the awareness and sales campaign at QVC three weeks prior to the actual in-store. In half an hour they sold 10,355 units! We knew that QVC would be a great springboard for other things and insure high chart positions. We then did five Wal-Mart in-store appearances in the first three weeks of the release. We sold over 500 units or more at four of the five, which are amazingly high sales for an in-store. Those in-stores coupled with QVC and the great sales at the other retailers gave us a first week chart positions of #30 Top 200, #7 on the Indie Chart and #6 on the Country Chart – not bad for an act that hasn’t recorded together for 30 years! The TV and press were also a critical factor in the setup. All the major TV shows had Donny & Marie on and more TV is still to come. This story gave us the buzz and we got a New & Noteworthy at iTunes to kick in digital sales. It was a great success story.
That’s impressive. What are some specific ways you’ve seen distribution change in the past two decades, both for labels and for artists?
JB:
Going from regional distributors to major label distribution has been the biggest change and has had the most impact. Since the recording industry first started, labels used regional distribution channels to get their product into the stores and one stops. They then fought it out literally on the streets to get product shipped around the country. Although each distributor had a designed territory they all tried to transship into other markets. Now a lot of labels want to bypass the majors and go back to using indies. One of the advantages of using an independent distribution like RED is that RED has more time and patience to work an artist longer, much longer than a Major, since the Majors need to see big numbers much sooner due to the financial investment they have with that artist. The accounts also know RED is going to stick to an artist longer. They know the amount of time it takes and they work along with the label and distributor that way.
Is there any specific trend you see developing that could be the future of distribution?
JB:
The trend to me is very clear. Number one, the independent distributors are branching out to other revenue streams to make up or try to make up for the loss of physical sales. They are creating in-house departments for online press, marketing and social networking sites, starting sync licensing departments to get artist placement in TV shows and radio commercials and increasing their digital departments while decreasing the sales departments. As far as major distributors are concerned, they just keep consolidating labels, shrinking the physical sales force, expanding their digital departments and firing people. Also the digital department heads have started to replace sales people as the head of sales departments, unheard of a year or so ago.
Which qualities do online retailers and wholesalers look for in artists when placing their products with major retailers? Is it possible for DIY artists to get decent rack space or digital placement?
JB:
Unless an artist has a reason – like airplay, huge online awareness, touring, etc. – to be in a major retailer or any brick and mortar store, they won’t get into those stores, no matter which label they are on. I advise my labels not to release a physical CD unless there is a compelling reason to as stated above. Just because it is in a store does not insure any consumer will buy it, and the CD will only be returned. Unless an account like your local indie store or an FYE store has a spot for a hometown artist, a DIY will have a huge task ahead of them to try and get into a store. All major mass merchants insist that a distributor has a vendor number to do business with them. I don’t know how a DIY would ever get a vendor number. I used to have a deal with Anderson (Wal-Mart) to get local artists into some stores, but unfortunately those artists had no clue about what is took to sell records and they all failed due to one reason or another. Now any artist can get onto the digital sites through TuneCore or other aggregators. But getting a return phone call or paid could be another matter. I think some of the press has glamorized how easy it is succeed by yourself in this business, but the reality is, is isn’t. The artists still need some kind of support and infrastructure behind them.
How do distribution deals for major label artists differ from distribution for indie artists or DIY artists?
JB:
The distribution companies only deal with the label and not the artists. They do not pay artists directly. That is a label function.
Are there any strategies you’ve seen artists employing to market/sell their music to retailers – or directly to their fans for that matter – in the Digital Age that have been particularly successful?
JB:
I think that any artist in this day and age needs to make that connection with their fans, through their own site, Facebook, Twitter, etc. It’s about letting the fan discover the artist and the music. Let the buzz begin with the fan discovering who they are and spreading the word. Artists cannot force themselves on the kids of today. The kids of today are too smart and aware to be fooled; they know their music.
Do you have any parting words of advice for artists that are looking to get their music out there or get distribution deals?
JB:
I deal with new labels and developing artists every day. Here are a few things that I’ve learned along the way. If you are going to start a label be well financed and have the financial resources available when you need them. Do not go out and hire someone to get airplay for example without first having a deal in place, either physical or digital. It is just a waste of money. Everything must be coordinated, every aspect of putting out a cd, radio, press, etc. Don’t spend any money with people who you have not meticulously and painstakingly vetted and researched. Do your homework on these people. There are too many people just looking to take someone’s money and not do what they were hired to do. Never stop touring and sell your product at the venues. Labels want to see that before anything else. That is the first thing they ask, are our touring and how many CDs do you sell at the shows. And the best advice I can give you “Hire Brody Distribution Group for all your needs.”
To learn more about Jeff Brody and the work he’s doing with his company, visit the Brody Distribution Group website.
Brad Navin is the CEO of the Orchard an independent music and video distributor specializing in comprehensive digital strategies for content owners. Brad started his career in the mailroom at William Morris and went on to be an agent at the very successful boutique agency Artists and Audience Entertainment and later managed artists. I first met Brad in the late 1990s when he had moved from management to working at a startup called Digital Club Network. I figured that the heads of one of the largest independent content distributors would have a unique outlook and opinion on the business.
Brad thanks for taking the time to speak today. I wanted to see what was going on with you and the Orchard. Remind me how you went from doing business development for the Digital Club Network to running the Orchard in a few short years?
BN:
Digital Club Network was based on the concept of wiring up live music clubs to record and broadcast emerging bands over the Internet. I loved the model, and was helping build the roster of clubs that would participate. It was a successful run but it was pre-iTunes. It was hard to figure out how to monetize seeing John Mayer live at the 40-Watt club in Athens, Georgia in front of 15 people when there is was no iTunes. I think we were ahead of our time, as you can see from cool sites that exist today that are recording and broadcasting live shows. It ultimately led to where I am now; the principals that bought The Orchard and eMusic also bought some of the aspects of Digital Club Network and asked me to come over and join The Orchard.
Tell me about your career path while at The Orchard. You were in marketing, right?
BN:
It was more along the lines of acquisition. When I had come over here, Richard Gottehrer and Scott Cohen, who had founded the company and then sold their controlling interests to what’s now known as Dimensional Associates were doing more of what we now know as the TuneCore model today, except with both digital and physical: “Join The Orchard, pay as you go and we’ll do basic fulfillment.” By the time I joined iTunes had launched and eMusic was around, Rhapsody was Listen.com and just about to transform itself.
We changed our value proposition and decided we wanted to sign leading independent labels, but not just the cool cachet New York indie rock labels, but labels from all over the world. Independent here probably means something different than at other places in the world. We used to say “non-major label” music that we acquired from places all over the world. That also offered us an element of scale.
So, the idea of the long sale long before Anderson wrote “The Long Tail” in 2006.
BN:
Absolutely. People sometimes scoff when you can say things like, “The Orchard has 40% of the independent music out of Turkey.” They say, “Who cares?” And I will say, “You know who cares? Ex-pats living in Germany who buy a lot of Turkish music.” It’s not up to us to decide ultimately what consumers want to listen to if stores are giving us the opportunity to deliver myriad of music out to the unlimited shelf space that is digital. We want to fulfill that space, and that’s pretty much what we’ve done successfully now representing a couple million tracks of music on leading download stores throughout the world.
That is what is happening now though. That wasn’t the model when I arrived. I came in and changed the value proposition to sign labels and add elements of scale. As we started adding labels, and as revenues grew from not only the acquisitions we did but also the medium evolving, the company started expanding too. We needed to identify how we would support clients once they were in the system and how we could market music to the retailers, which led to whether we could create demand side marketing. This was known as new media marketing originally and is what we call interactive marketing now. We were really the first company of our kind to have in-house staff of this kind and we made interactive marketing a part of our overall core value proposition.
If you want to be distributed, we want to try to distribute and market you into the stores to try to gain placement and drive sales. As those things started evolving, my career evolved, and I was asked to manage more and more of the processes and people along the way. This eventually led to general management of the overall organization both as a private and then as a public company. A year ago in October, Greg Scholl, the former CEO, announced he was stepping down to join NBC/Universal, and they asked me originally to be interim CEO, and then made me an offer for full-time CEO in February of this year, which I was very excited to take, especially thinking about what the prospects for the company are.
I have to ask, how has your business changed when you have bands going direct to distribution like TuneCore, CDBaby, etc.? Have they affected your business at all?
BN:
Generally speaking, not really. I really respect those businesses and think they have a lot of value. Ironically, that’s how The Orchard started. We were fulfillment to digital and physical per album on a fee-based system.
With labels- we are bringing them products that are predicated on service, which is sometimes hard to describe in an industry so young. We want them to be really good at identifying great talent and making great music. We want to compliment their efforts, and it can vary from client to client. It can be, “Can our retail marketing team and interactive marketing team replace the dollars out they might spend on a third-party marketing company that they hire on a project-by-project basis, which is now inherent in the distribution relationship they have with The Orchard?” Or it can be, “Can we take out back office costs? Can we offer royalty accounting systems inherent to what The Orchard systems are that can help the label focus more on the music and not necessarily on the back office practices and also help them remove costs from their business?” That’s what being a good partner is for us.
I think what the press or blogs call DIY businesses are really good, but as one of our product guys here says, “It’s a dumb pipe.” We think fulfillment to digital retail is a commodity today. We’re not trying to be a commodity business. Yes, we represent a huge volume of music, but I think we have a good ratio of client relations people to clients overall, probably better than most companies out there. And we’re offering a level of service through our Orchard Workstation and through our retail marketing group and client relations group that others aren’t doing today.
Can you estimate the number of releases you guys do in a year?
BN:
I really can’t. It’s too difficult to do, because we have some clients that are really savvy and understand the space and might just put out a track at a time and keep things active to the consumer. And we have some catalog-based clients that are taking advantage of our compilation tool, in which online – because their music is stored in The Orchard cloud – they can compile different tracks and create compilations on the fly, and they are doing that constantly. It depends how you define what a release is, and I don’t have that number off the top of my head.
At times I am still entrenched in the old model: albums, singles, pieces. It’s hard to break that when you were at labels as long as I was. But I would guess you are doings hundreds of thousands of products annually.
BN:
Oh, yes. But to your point of both of us coming from the traditional business of the album format, that’s still extremely important, and I appreciate the integrity of the album format, and that’s what I subscribe to personally. The digital format allows for singles and EPs and then compilations to be made over and over again. And what skews that number too is when we create exclusive album types by store. So, the Local Natives might have three different albums at three different stores because we did an exclusive track for each of the three different stores.
When you are talking about the Orchard’s services – and I know these services vary from artist to artist and that a lot of people don’t appreciate that the pure volume of work involved in even the small tasks like moving around the meta-data associated with digital product – what different departments do you have and what do they do? What does your marketing arm do, what does your promotional arm do, etc.?
BN:
We have pretty distinct groups within the organization that market products. We have our retail marketing, our interactive marketing and our product-marketing group. We actually do have a physical sales group that is extremely good at their job. When we acquired TVT a couple years ago, we kept their physical sales team. They were one of the last independents to get true direct to retail distribution without having to rely on the one-stops. So we took on that business and have put it to work on both the TVT masters we required, but also on the physical and digital distribution deals with key labels on a very select basis
I call them distinct groups because we like to market and create promotions across retail channels – digital, physical, a la carte and streaming and digital radio type stuff too – that are serviced in different ways. So, for example, our retail-marketing group is going for placement on the digital stores and trying to get our products above the fold on a genre page or a home page to drive sales and gain exposure for our clients. This is different from our interactive marketing team. You need to think more about the demand side. They are going to hit online publicity outlets, savvy bloggers to get them to write about music and potentially create contests and different events to gain exposure for the artists in our system. We might exercise direct-to-consumer campaigns. We also might service online radio or services like those on a project-by-project basis.
Where do you see digital distribution going? Is it pushing one way or the other or going ways different from what you’d anticipated? You have a unique vantage point as someone who’s distributing this much music, particularly music that has usually been filtered by various tastemakers before it gets into your system.
BN:
Speaking strictly about the distribution business which is different form retail overall, I’m very bullish.
I think being strictly fulfillment has its value for some, but when you talk about the type of business The Orchard focuses on- the labels and specifically artists – you’ve seen a lot written recently about the pros and cons of DIY and what it means. Obviously I think it’s very important that you have a partner. Our best relationships and best clients and best sales, releases and campaigns have been when we’re partnering with our label clients and understand what each one is bringing to the table.
When The Orchard brings a staff of 85 people from offices in various places throughout the world, and our complete resources of our back offices to be able to compliment on a marketing level or compliment on an actual infrastructure for our clients, that allows our clients to be better at what they do. They are in the business of making music and identifying talent. We want them to continue to tap into that and focus on that, and we can support them. What the future of retail is? That’s a difficult question.
More music is being consumed today than ever before in various ways. I think piracy is a proxy for demand, and there really is demand out there. It’s the collective industry’s job to figure out a way to combat these things. But the bottom line is, music is always going to be in demand. It’s not going to be up to me, or the artists, or any record label to decide what the future of consumption is going to be. It’s going to be about consumer access.
Ultimately the consumer is who the labels and our artists and The Orchard should care about – can we get the music into the hands of the consumer? And is ownership important, or is access to the music enough? What’s the difference? If you can get whatever you want, whenever you want on the device you choose, don’t both things become the same? As long as they (consumers) can get it and can get quality, [ownership] may not make a difference. Of course, the bottom line has to make sense. If you trickle these things down to the artist level, it has to be sustainable revenue. Otherwise you’re going to pull the rug out from under the art form itself, and that’s the problem with current subscription and ad-based models. With a company like The Orchard, we just want to be well positioned. And I think we are well positioned because we’re working closely for our clients and are a platform for delivering media like music and video. I think we’re well positioned for the future, whatever that future may be.
I was going to ask you about mobile as well. I’m guessing by the tone of that conversation that you’re absolutely involved in the mobile space as well. But has that been as well received as we all thought it would be or did that decline with the decline of the ringtone business?
BN:
I think you have to say, “What is mobile?” We did not work with some of the drivers of great revenue a few years ago, like pop and hip hop ringtones; it wasn’t something we overtly chased. When the format crashed, we didn’t get crushed. I’m glad about that. So, what is mobile? Well, now that you have buying capability through apps on smart phones, the lines of mobile have been blurred. And that’s the whole concept of being able to get what you want when you want it. So, is iTunes availability through the iPhone app a mobile sale? We just call it digital revenue. There may be different types of digital revenue – a la carte, subscription-based services, streaming on demand services – it’s our job to try to negotiate the best deals we can on behalf of our clients. And we are aggressive in trying to get in on the new spaces, because you don’t know when the next Spotify is going to come along on the one hand. On the other hand, if we don’t like the store or the concept or don’t believe the store has a long-term value proposition or a plan to get off the ground, it’s not important for us to be involved in the launch of every store. It’s important for us to do the right deals.
Learn more about The Orchard.
This is part 2 of 2 of an interview with Jeff Price, the Founder and CEO of Tunecore. If you missed part one you can read it here.
Fair enough. From the TuneCore stats it sounds like the unbundling of the album really has completely changed the playing field. You have people buying one track, five tracks, an EP; it’s all over the map I’m guessing.
JP: It is. The other thing I would stress is in defining if a musician is breaking or successful, I think it’s rather narrow for anyone outside of the artist to determine that on their behalf. I think each musician and each band has their own definition of success to a certain degree.
Other than conducting a world-wide musician audit, I don’t think we’re ever going to have a metric that covers it anymore.
JP:
Exactly. And even if you did come around to some, there’s so many different income streams now, so to suggest that “breaking” or fame is predicated on album sales when you have record labels themselves doing 360 deals, because they’re doing deals where they get to participate in revenue that are outside of music sales because they now know when they make an artist famous, they don’t make money off the music the way they used to. So they have to partake of revenue that’s coming in from new income streams, like merch or gig.
How does a former record guy like you feel about that? Do you think that’s a justifiable approach, that these record companies become music companies?
JP:
Honestly, I think a management company is a record label. There’s no difference anymore. The only difference that now exists is distribution, but with something like TuneCore, it levels the playing field. Managers used to take X% of an artist’s revenue across all income streams. Now granted, they used to like to try to get those big advances from the majors, because a bird in the hand is better than two in the bush, and they could just take a big slice off the top. If the artist failed, they still made their money. But that’s the way they operate. It’s a manager’s job to go out and provide the artist opportunity that they couldn’t otherwise get on their own, or manage their affairs for them, or provide them new opportunities they couldn’t get. And they serve the musician, and they take a portion of that money for their services. The two are very similar.
Musician Coaching: Even towards the end of my label run I used to say, “If you were doing any real work, you were doing some kind of management.”
JP:
Absolutely. That’s what we did at SpinART. And frankly, it excites the hell out of me, because what I see is an explosive growth in the music industry. I’m not a “doom and gloom” guy on this at all. What I see is more music being created, produced, released, shared, discovered and bought than at any other time in the history of the world. And more is better; more is healthier. No one’s suffering because there’s more music. No one’s getting hurt because there’s more music, and I don’t buy it for a second that because there’s more it means no one can find the quality. That’s the joy of social networking.
The only thing I would say is it really does make somebody like a taste maker or a DJ much more special. It’s a much harder job now to be good in that role, because the amount of sifting can be overwhelming.
JP:
I agree with you to a certain degree. But on the flip side what you’re finding is the collective population is doing that sifting for us. What I mean by that is, the A&R source becomes society. You’ve got – I don’t know how many people tweet and how many people on MySpace and how many people on Facebook – over 100 million, and that’s a lot of people. What happens is, here I am, looking at a report, and I can tell you, the artist called Boyce Avenue at this point have sold over 1.2 million songs within the past twelve months, no record label. They now have management. In the month of November, they sold over 36,000 additional songs across their catalogue of nine different albums. Colt Ford sold over a quarter million songs over the past eight months. And here’s a funny one. Monsters Halloween Party, the Ultimate Scary Sounds or Music for Your Halloween Bash – it’s just spooky sounds – 1,700 albums, 10,000 singles. Never Shout Never – kid I mentioned before – 1.5 million songs in the past thirteen months, 32,000 songs sold across three EP’s in the month of November. Kim Zolciak, “Tardy for the Party” – I don’t know who she is yet, but maybe others do – 20,000 songs. This is just one month, by the way. This is the month of November I am describing right now. John LaJoie – a French Canadian comedian, uploads a video to YouTube for a song called “Show Me Your Genitals,” I kid you not, and another song called “Average Everyday White Guy.” He has now done over a quarter million songs in four months, and in the month of November, 1,000 albums and 12,000 songs. I’m looking at a list here that goes on for 3,000 artists. It’s every artist that earned over a certain dollar amount.
As a guy who helps democratize this process, you have to have a pretty interesting vantage point on what those people at the top of the list you just referenced are doing. To have international distribution for under $50 is phenomenal. But I do think there is a certain point that the landscape has changed so much by pure volume. What do you see that people are doing to distinguish themselves from everybody else who it might be their first month with a guitar, and their stuff is up on MySpace? What are you seeing that’s working?
JP:
The answer isn’t one that anyone really likes. I wish I could give you the silver bullet. The reality is, there’s nothing you can do to cause your music to sell beyond making sure it’s out there. Out there means, MySpace page, Facebook page, a TuneCore media player that you post all over the place, making your music available to buy in digital stores. If you’ve got a video, upload that video to YouTube. Communicate that the media is out there. You have access now as an artist to get your music out to the media points. It used to be you couldn’t get to MTV without going through multiple gatekeepers to get programmed. Now anybody can go to YouTube and upload a video. The trick is, the art you create has to cause a reaction. If it doesn’t cause a reaction, it doesn’t matter how much exposure you get. It doesn’t matter how many people hear it, because no one’s reacting to it. I always use “Smells Like Teen Spirit” as an example. If “Smells Like Teen Spirit” wasn’t a song that caused reaction, it wouldn’t have mattered how many times you heard it on commercial radio, it wouldn’t have mattered how many times you saw the video, it wouldn’t have mattered how many hundreds of millions of dollars were pushed at shoving it down your throat. If it doesn’t resonate with the consumer, with the music fan, people aren’t going to buy it.
Gone are the days of “spends double-platinum to get gold.” I remember those days not so fondly.
JP:
As you also probably remember, there was a 98% failure rate at the major labels. That’s the other point, which is sort of buzzing around the Internet, it used to be that you could only break if you had lots of money and connections. Bullshit. Even with lots of money and connections, you usually lost lots of money. 98% of the major record labels released failed. They didn’t take. And it wasn’t because of a lack of access. It was because the art didn’t cause a reaction. And the art has to cause a reaction. What’s so cool now is that with everyone having access to the media outlets – and I’m not trying to be vague, but upload a video to YouTube, go to iTunes and create an iMix, put in three of your own songs and nine songs by more popular artists in the same genre, because that’s how people discover music in iTunes. Name your song in a specific way to service the search engines, or do a cover version of somebody else’s song. People go to iTunes and look up songs they know. We have one band, as one example, to get sort of off the point, that uses us called “ACDB.” They sold 47,000 songs and over 1,000 albums in the month of November. The reason they sell so well is because ACDC isn’t in iTunes. So when someone looks up an ACDC song, they by default show up. That’s an extreme to make a point, the point being, keep in mind the way search engine technology works. If you call your song “Let It Be,” which you’re perfectly, legally allowed to do, your song “Let It Be” will show up next to other songs named “Let It Be.” You can also name your band in particular ways, or put “klezmer” in parentheses after song names. So there are ways to – I don’t want to say game the system – but there are ways to get yourself to surface or pop up using the fame of others or niches. The Internet is about niches. People are logging in usually because they want to hear Celtic or heavy metal dwarves doing opera songs, or whatever it is. If people are into that, you name your band, “Celtic Heavy Metal Dwarves Playing Opera Songs” and you’ll surface within the search engine.
Musician Coaching: Sorry, what? I completely tuned out. I was half-way on my way to sending out e-mails to start the Celctic Heavy Metal Dwarves band…
JP:
iMixes are one thing, media in particular, putting it out into the world and video. Don’t be afraid of video. You can flip out your phone now and film Paris Hilton, if you happen to bump into her on the street, it doesn’t matter the quality of the video capture, you’ll still get a bazillion people looking at it. Make a flash animated video game set to your music. Use the game as way to get people around the music. We now do digital distribution into Rock Band, where your song becomes able to be played in Rock Band. There’s a lot of people that play Rock Band, and there’s not a lot of songs to buy. The probability is, you could probably sell a whole bunch there and gain some fame through that. By the way, all that is not tracked by Nielsen. There are some bands that play video game conferences where they have 5,000 screaming gamers come to see them play. But when they go out and play at a regular venue, maybe they’ll have 100 people paying for them. It’s kind of funny.
Here’s a question for you. I also read in recent press that you guys partnered with Universal. How does that work?
JP:
Basically, we’re an A&R source for them, because the data we have – despite what others might suggest – on the musicians indicates those artists that are breaking.
They used to do that with radio spins on indie artists. I can see that working well.
JP:
It actually has. Since that deal has launched, there have been five signings by Republic in the last five months all coming from the top-selling TuneCore artists. Boyce Avenue, Jaron and the Long Road to Love (which I think that deal has closed), Colt Ford and there are a couple more. There are five of them that just happened. Prior to doing the deal with universal, there was Drake. Then before that, there was Soulja Boy and there was MGMT and Secondhand Serenade and Neveshoutnever and Medic Droid. The number of artists that have used TuneCore that chose to work with an outside company, primarily record labels or what used to be record labels is 20-25 bands in the last year and a half.
How does that work being that you’re non-exclusive?
JP:
This is a stunning part of the Universal deal. There’s now a website called Interscope Digital Distribution. There’s a website called IDJ (Island Def Jam) First Look, there’s Republic Digital Distribution and UniMo Digital Distribution, which is Motown. And TuneCore hosts and serves those Websites for those major label imprints. And any artist on the planet can go to those sites if they want and get worldwide distribution of their music under the exact same terms and conditions as TuneCore. You keep all your rights and get all the money. But if you choose to go through that site, what you’re agreeing to is to allow Interscope Records to see how you’re doing. You increase your opportunity of being discovered by them, and then they have to work their asses off and present you a deal to sign you. There’s no first look and no catch.
And it doesn’t cost any additional money to be a part of that?
JP:
No, it does not. And the reason I did the deal is because I feel that it’s not my place to tell an artist what they should or shouldn’t be doing. I want to provide options and opportunities and information. If you want to go and get signed to Interscope Records and strike a deal with them, and I can help you facilitate that, that’s my job. You want to get on iTunes? I’ll get you there. You want to get into Rock Band? I’ll get you there. You want to get into eMusic? I’ll get you there. You want to get paid for your streams on MySpace Music? I’ll get you there. You just hit the website, you upload a song, you click a button, and I get you there. So what this is, it gets you the worldwide distribution, but you have more direct access to the A&R people, who literally log in and troll through the data to see what’s going on with the artists that come through their site. And if there’s a band they want to reach out and contact, then they have to reach out and contact that band, or woo that band and provide the right deal that makes sense for that artist. And hopefully, with this empirical sales data under their belt, when you’re Nevershoutnever or Boyce Avenue and you can say, “Look, I sold over a million songs. What are you going to do for me?” It puts you in a better negotiating position.
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Check out Tunecore at http://tunecore.com
Jeff Price is the Founder and CEO of the digital distribution company Tunecore. Prior to founding Tunecore Jeff ran a label called SpinART Records for seventeen years and also worked at E-Music in their very early days.
Jeff, thanks for taking the time to speak with me. Take me back to five years ago when you saw this need and created TuneCore.
JP:
While at SpinART I crossed paths with Frank Black. It’s the Pixies really that get credit for all this. The Pixies get credit for TuneCore! In 1995-96, I was trying to get a band that SpinART had released called Lotion on tour with Frank Black. Frank Black was going on a solo tour, and through the booking agent I got the name of the manager, a guy named Ken Goes. I called Ken Goes, and while we were on the phone, I was telling Ken why we should have the band Lotion open for Frank Black. Ken put me on hold, and came back and said, “Well, that deal just fell through.” And I said, “What deal?” He said, “Well, we have a new album called ‘Frank Black and the Catholics,’ and we were negotiating with Stone Gossard from Pearl Jam to put it out through his record label, but the deal just fell through.” I asked him why, and he said, “We had done a deal with a company called Good Noise, where they had the exclusive rights to the ‘Frank Black and the Catholics’ album in the digital format, and we only had the physical to offer them, and they wouldn’t do that unless they had all the rights.” Mind you, this was 1995-96.
Digital rights didn’t mean too much in 1995-1996…
JP:
Yes, and there was dial-up, not a lot of broadband. And with mp3, people thought, “Huh?” So I told Ken, “Well, I can release it.” He said, “Well make me an offer,” and I did; and we ended up releasing the next seven Frank Black and the Catholics album, and the Pixies record, and the Frank Black/Francis double-disk DVD. More importantly what came out of it is a gentleman showed up at my office from a company named Good Noise named John. John is now the chief financial officer of TuneCore, but John at the time was consulting for Good Noise, and he said, “You have the physical, we have the digital; we should talk.” And Good Noise is the company that became eMusic. I met John, and we hit it off, and I was involved in writing the business plan for eMusic. They also used me to help raise venture capital. That’s how I got into the whole digital distribution realm, was through this Frank Black album, and my introduction to Gene Hoffman and Bob Kohn, the founders and CEO and Chairmen of eMusic. Ultimately I was the interim vice president of content acquisition for eMusic, where I would pick up the phone and call other record labels to attempt to license their music for sale at eMusic.com. Then I got into the business development and intermittently ran the New York office. Then I moved out west for a year and lived in San Francisco during the whole Dot-Com boom. That was a treat. (That’s sarcasm in case that’s not picked up by readers.)
I really got immersed into the digital download culture, because that’s where it all began, with eMusic. Moving on from there, after being with eMusic from 1996-2000, I came back East, and I no longer worked for eMusic. They laid me off; they actually laid everybody off. I continued to focus on SpinART, my record label until around October 2005, where I literally was sitting around watching my label go under. I was trying to figure out, “How can I stay in business and be involved in the music industry? What can I do?” Record labels make people famous, and then they monetize that fame by selling the music, but so much music is being given away for free, and this whole thing is chaotic and confusing. I wanted to come up with a way to remain in the music industry which wasn’t predicated on whether or not the music sold, but would still be of value to the musicians. The second thing that occurred was my record label spinART got pitched by what’s called digital distributors, also known as aggregators, to do the digital distribution for the label. SpinART had a deal at that point through Warner to do the physical, but it didn’t have anybody to do the digital. We did all our own direct digital deals. These aggregation companies showed up and said, “We want to do spinART Record’s digital distribution.” I asked them what the deal terms were, and they said, “Well, we have to control the rights to your master recordings exclusively for a minimum of three years or five years, and every time the music sells, we want to take a percentage of the money just like a physical distributor and take anywhere between 15-30% of the revenue. And we’re going to account back to you quarterly, 45 days after the end of each quarter even though we get paid monthly and we’ll only pay you if we determine you’ve made enough money, and we’re going to do all the collection and administration.”
So you basically said, “Where do I sign up for that abuse?”
JP:
That’s what I heard. That’s probably not the way they put it, but that’s what they were saying. To take a step back before I move forward, realize that up until digital distribution, if you wanted to have a career as an artist you had to get signed to a record label, because the record label had the deal with the physical distributor, and the physical distributor was the entity that could put your record onto the shelf of a store to allow it to be bought. If it wasn’t there, it couldn’t be bought. And to do physical distribution is tremendously expensive and has huge overhead and a huge knowledge base. You need a 500,000 square foot warehouse with 50-foot high ceilings; you need people running around picking and packing and shipping music. Everything in the music industry is on consignment, so all those CD’s that get shipped out to the 10,000-plus record stores across the 3,000 square miles of the United States can all come back for a full refund at any point. And when they come back, they can be broken or they could have stickers on them. They could need to be destroyed or refurbished or alternatively you need to deal with the billing cycles on them, so if someone has a 60-day credit term and return a portion of their inventory, you have to give them their credit back. This is a huge nightmare. And that’s just the warehouse and the invoicing and the returns processing.
Then you need the other 30 people running around the country walking into the record stores, going to the store buyers and trying to get the product in the store and putting it on their limited shelf space. You beg, you borrow, you plead, you pay the money to rent their real estate in the form of cooperative advertising like a listening station, or you take the guy out to dinner. You know the sort of things one would do in order to gain access to that shelf space. Some of it was unseemly, and some of it was very expensive. But the gatekeeper to the success of the sale of the artist in some way could be the buyer at the store; because if the buyer at the store didn’t put the record on the shelf, it couldn’t sell, and if it couldn’t sell, money wasn’t being made. The physical distributor made their money when the record sold. So, if Tower Records took it in and put it on its shelf, and they paid $10 back to the distributor and sold it for $15, the distributor would take 25% of that $10 — $2.50, give the other $7.50 to the label, and the label would then give the artist their share, which was anywhere from $1.35 – $1.75. That was the food chain.
What happened with digital distribution is you had two fundamental changes in the industry. You had unlimited shelf space, where everything could be in stock at no detriment to anything else. So for the first time there was no more fighting for shelf space. With iTunes, if you run out of room, you just plug in a new hard drive. So everything can be in there, and it doesn’t hurt anything else. So people that talk about, “All this other music in the world is causing other music not to sell,” with all due respect – bullshit. If your music isn’t selling, having half a million less tracks on iTunes isn’t going to cause it to sell.
The other thing that occurred had to do with inventory. It used to be that if you wanted to sell 100,000 copies of something, you had to manufacture 100,000 copies and then hope to God they sold. Now you don’t have to manufacture anything. There’s no upfront cost for inventory. You have infinite inventory that replicates on demand as a perfect digital copy. It’s always in stock, it’s always available, and it’s always ready to be bought and duplicate itself. So with unlimited shelf space and unlimited inventory being the new way record stores stocked music, you just circumvented and dis-intermediated the music distribution system. You don’t need that big warehouse with the pick, pack, ship and so-forth.
And it became much easier to become a music distributor, because all you needed to do now to become one was to get a contract with a store like iTunes. Once you got that contract, you could deliver the music to them via Internet, moving the digital file from Point A, to Point B. The contracts are hard to get, and they’re not given to just anybody, but distribution got wider as soon as digital stores popped up because for the first time you began to have music and artists and labels gain access to distribution and be available in stores to be shared or discovered or bought where they were never there before. But even that had a limit to it, because the digital distributors that popped up also made money when the music sold under that model that I previously described. And if the music didn’t sell, then they weren’t making any money, and if the music did sell, they made an unlimited amount of it off of other people’s hard work. If you’re a band, you go out, you play a gig. Someone sees you, and they go out and buy you. Well, if you went through a digital distributor that takes a percentage of the money, when your fan buys your music through your gig, you just paid 15%-30% of it to somebody else.
I had a real problem with that back-end model and with the distribution fee in the digital world. I didn’t think it made sense. I thought artists were getting screwed. I really did. And I got really pissed off. So when these people came in and told me how they would do spinART Records digital distribution and control our rights and take an unlimited amount of money, and control the collection of it and so forth, frankly, I told them to go f*ck themselves. It was wrong. We had just at that point released a band called The Dears, and I put $50,000 into tour support and $100,000 into cooperative advertising. The band was sleeping on floors and eating ramen, and we were all busting our asses. And I’m going to give this company over here 15% of the money from the sale of the music for moving a digital file from Point A, to Point B? They did claim they were going to market and promote our stuff, but that’s all smoke and mirrors. You can’t actively market and promote 10,000 releases per month, which is what they claimed to have. You can’t.
Glad you said it out loud…
JP:
Not only that, but when I pointed that out to them, they said, “Well, no, we’re going to prioritize spinART’s releases.” And I said, “Really? So you’re going to f*ck everyone else and just promote me?” And they said, “No, no, that’s not what we meant.” And I said, “Well what did you mean?” And they said, “Well, we only get to market and promote those releases that are doing well.” So I said, “Oh, so you’re going to market and promote things that are already marketed and promoted?” So I thought, “Not to mention this is an unlimited amount of revenue coming in off the sale of this music for the entire five years, and you’re going to stop marketing and promoting – if you’re even doing that in the first place – within a couple weeks.” And marketing and promoting in the digital world, really, to be honest is, you pick up the phone and you call the guy – there’s one of them – at iTunes..
So that was that, and I got so incensed about it that I literally picked up the phone in October of 2005, and I called my friend Gary that I worked with at eMusic. He was a coding engineer there. I said, “I have this idea. Why don’t we create a website where anyone on the planet can go – anyone, with no filter – and they can just go there and sign themselves. They can have worldwide distribution, they upload their music, they upload their cover art, they pick the store they want to go to, and they pay a simple up-front, flat fee for the service. That’s it. They get 100% of the revenue when the music sells, it’s non-exclusive, they can cancel whenever they want, but we’ll help get them there. ‘Where do you want to go? You want to go to iTunes? Great. You click a button and go to iTunes and pay the up-front flat fee, and that is it.’” I almost say it’s analogous to Federal Express. You pay a postage fee to deliver a package. That is it. I am a service industry, and I’m serving the musician. Technology has made it possible to have infinite shelf space and infinite inventory, so let them all in! No more filter. Do it under a service model. Serve the musician.
That was the idea, and we launched January 26, 2006. Four years later – and this is kind of weird – TuneCore artists represent one of the highest revenue-generating music catalogues in the world. There were over $32 million in digital download revenue generated through TuneCore artists in 2009 alone.
Put some kind of framework, because generally speaking I’m a guy who, $32 million and pretty much anything over $5 million is lottery winnings that I can’t even fathom. What is that compared to any of the big four labels?
JP:
TuneCore artists, or TuneCore as an entity by market share, is the fifth largest music entity in the world. It goes Universal, Sony, Warner, EMI, TuneCore, in regards to market share, in regards to number of releases and amount of revenue generated solely off digital sales. Within four years, this entity – which is sort of the democratization of an industry – represents everybody else, that long tail that apparently people claim has no value, or claim aren’t “breaking” on the Internet actually does and has become a monster force. It’s exciting, and it’s not just 50 million people selling one song. It is hundreds of thousands of artists selling tens of thousands of songs.
While we’re here, and mind you Tommy (Tom Silverman) went out on a limb and set out a certain criteria of, of albums released in 2008, there were only twelve that sold 10,000 or more according to Nielsen. Now, Nielsen has never been 100% accurate, and I’m sure that as people like yourself have democratized the artist, getting their music everywhere, it’s become even less accurate. But, by whose criteria – whether you agree with it or not – how far off was he?
JP: I don’t know how to answer the question, because people don’t buy music by the album anymore. They buy music by the song across the artist’s catalogue. For example, Never Shout Never has three four-song EP’s. And across those three four-song EP’s released within four months of each other, they sold over a million songs. That’s not album sales. That’s song sales across a catalogue. It’s not even the right question anymore. I struggle with it because it’s like, “What does that have to do with the price of tea in China anymore?” It has nothing to do with it. Suggesting a band is or is not breaking because they did not sell an album is insane.
I think the most interesting thing about what resulted in the debate was that the one criteria, which was in fact the standardized one doesn’t hold the water it used to for sure.
JP:
Nielsen is a great company. And SoundScan, which is now a Nielsen-owned property really was the litmus test. If Nielsen indicated through SoundScan sales – after 1992 when it actually became institutionalized and moved off the handwritten Billboard chart – it really did represent accurately those bands that were “it” and that were breaking and relevant. It reflected the popularity of an artist, because the popularity of an artist was reflected by album sales. The two were together. What’s happened now is you’ve had a decoupling between music sales and fame, or between album sales and fame. You can have people more famous and more popular than anybody, going back to – and let’s ignore the Beatles for a moment – Sponge, or The Bloodhound Gang, who were literally at the top of the Billboard Charts. Sponge if I remember correctly was one of the most played songs on commercial modern alternative rock radio, yet by today’s standards they were less popular and less famous than Nevershoutnever. The reason for that is specifically because the Internet has enabled people to get that fame, which is then monetizable on a global basis from their bedroom. And there is no editorial filter, and there is no gatekeeper from allowing people access, and then social networking picks it up from there. That’s what’s so cool.
I’m not trying to sidestep the question. I just don’t know how to answer it. I wouldn’t say an artist is or is not breaking predicated on album sales, because that’s just not what people do anymore.
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Part two of this interview will run in the next few days. In the meantime
Check out Tunecore at http://tunecore.com
