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.
Posts Tagged ‘Internet music piracy’
The UK music industry talked about trying to block Grooveshark on an ISP level. Also, industry leaders talked about digital marketing at the 10th annual Billboard Touring Conference. And Fast Company outlined the implications of two new big announcements on the music industry: Microsoft’s new music search features; Google Glass’ partnerships with artists.
Will the BPI Block Grooveshark?
UK’s record label trade body the BPI may be looking to block access to streaming service Grooveshark, reported TorrentFreak. The BPI has blocked a significant number of file-sharing websites since 2011.
Prior to the BPI pushing through the courts to get a website blocked, it typically contacts labels in the UK by collecting society PPL to check if any of them have a licensing arrangement with the site in question. In early 2013, Grooveshark was on the list of websites mentioned in a PPL message, although it was not included in last month’s injunction regarding 21 sites. However, Torrentfreak reported that PPL sent another message regarding Grooveshark, naming a deadline of November 11. The message asked BPI members if they’ve licensed “recorded music to the operators of the Grooveshark website in the UK.”
The BPI told Torrentfreak the survey does not automatically lead to legal action. But a Web block against Grooveshark would bring up some complicated issues. The streaming site has not made a lot of friends in the music business, but it is not like the file-sharing services that have previously been hit with ISP blocks; it has been actively trying to get licensing deals with record labels and music publishers and has been successful in some cases.
Grooveshark’s owners have continued to insist the their service is legal in the U.S., although users can upload content to its servers, meaning it hosts content that it does not have the license to distribute. Still, Grooveshark has a takedown system in line with the Digital Millennium Copyright Act (DMCA): It removes unlicensed content when it becomes aware it exists, which protects it from getting sued for copyright infringement in the U.S. Still, a handful of U.S.-based labels, publishers and artists have complained that it has a bad track record of removing unlicensed content. While the DMCA does not work outside the United States, a piece of European legislation offers similar protection to Web companies, though that protection has never been applied to the music space.
The fact that a handful of labels are working with Grooveshark and there could be extra legal challenges attached to blocking access to a site of this type means the BPI might be dissuaded from further action, especially when Web blocks have not been entirely successful at preventing music pirates from accessing unlicensed content by circumventing blockades.
Industry Leaders, on Digital Marketing Strategies and Touring
Executives from Facebook, Eventful, Gupta Media, Live Nation, Eventbright and Ticketfly talked about the digital marketing challenges and the concept of “too many fans, not enough customers” at the 10th annual Billboard Touring Conference, reported Billboard.
The concert business is currently thriving due to marketing strategies that have blossomed thanks to new media. Now artists can draw in fans through mobile, social media, email, re-targeting and push marketing platforms that build close and personal relationships. However, artists face challenges when it comes to converting fans into paying customers.
AEG Live’s VP of digital Joyce Szudzik also asked the panel of digital marketing leaders how data can maximize profitability. Facebook’s client partner of global marketing solutions replied, “Anything you’re doing both on Facebook, on web, on mobile is all feeding into this profile of who you are as a user. All of this data – Eventful, Spotify – all of these have plugs, and it feeds into your data, which makes targeting that much more exact.”
Even as technology expands, there are some truths that remain, such as that “content is king” for artists .Ryan Okum, SVP of social media at Live Nation explained, “Fans will do a lot of the marketing for us.” He added that Miley Cyrus’ recently announced BANGERZ tour offers a solid example: “We put a Facebook event in place, and late last night we crossed 100,000 RSVPs, which is the highest we’ve seen thus far. We also know that on average each concertgoer has around 300 friends on Facebook, so it’s just that hand raising of ‘yes I am attending this event’ — it does wonders for us.”
Everyone on the panel agreed that personalization is key to connecting with fans. Ticketfly’s Senior Director of Marketing, Kristina Wallender said, “They just want to feel special … For most clients, the top 5-percent of their fans generate up to 20-percent of their total sales. They’re the loyal fans, the influencers and they can be a huge part of a targeted marketing campaign.”
New services like Eventful’s DemandIt are also helping artists interact directly with their fan base. Artists poll their fans on social media to see where the demand for their music is the highest. Eventful’s CEO, Jordan Glazier stated, “Performers can also now see the demographics – the age and gender – but most importantly, there’s a highly effective contact tool, and the open rates on the emails sent out are usually around 80 percent, which are sizeable audiences.”
Szudzik called “influencer” a “big buzzword” for the year and added, “It’s figuring out who has the loudest voice. If that person says they’re going, their posse is going to follow.”
The panel ended with a question from an artist in the audience about whether or not any of the panelists would be able to come up with a way for fans to “zap” money from their phones to his phone instead of using services like PayPal. Szudzik responded, “We’re all for zapping … But to me it’s a battle against ease and data – there are so many different ways to purchase tickets, but as a promoter on the venue side, you still want to create an account, so you’re able to track them.”
Music Becoming Critical to the Tech Industry
Some announcements in the music industry last week about Microsoft and Google Glass have further exposed music’s significant impact on technology, according to Addy Dugdale of Fast Company.
Microsoft adjusted its music searches on Bing so that when users look for an artist’s catalog of videos, an array of screens pop up that showcase content from leading video sites such as YouTube, Vimeo, MTV, Artist Direct and many more. Microsoft features over 1.7 million songs, 70,000 artists and half a million albums. Google Glass also revealed it will be providing hands-free access to Google Play and released a video by DJ and producer Young Guru (Jay Z, Beyonce, Rihanna) that shows how the service helps him creatively.
Dugdale said the push by these two companies and others to feature music-related features also proves big companies like Apple need to figure out a way to prevent revenue loss. Apple’s iRadio will make money from advertising its free version, and Google is making a “musical ecosystem” for Glass and letting Nielsen tag and measure YouTube advertising after previously nixing the idea.
Much of Google’s search revenue comes from high placement of YouTube videos in its search results. And Bing’s reorganization of its music features shows tech companies are starting to see music as a key to their growth.
A new study revealed search engines do not significantly impact music piracy rates. Also, The National Music Publishers Association (NMPA) redirected a copyright lawsuit against a popular YouTube channel. And Presskit.to released the first-ever EPK-creating Facebook app.
Search Engines Fail to Drive Piracy
A recent study conducted by the Computer & Communications Industry Association (CCIA) contradict the RIAA’s regular claims that search engines are fueling music piracy, reported Billboard. The CCIA discovered that just 15-percent of traffic to websites with illegal content came from Internet searches. Only 8-percent of traffic came directly from search results for The Pirate Bay and other torrent sites.
The paper “The Search Fixation: Infringement, Search Results and Online Content” was compiled by CCIA’s VP of law and policy Matt Schruers. However, many in the music industry are taking the claims with a grain of salt, since the CCIA is a non-profit backed by Google (as well as by Pandora, Microsoft, Facebook and others). Many feel all this suggests is that people know where to go to download songs illegally and thus do not need to search for it. But several other non-Google-affiliated technology companies support the CCIA’s findings.
The CCIA decided to put together the paper after a report was released in February by the RIAA that looked closely at Google’s plan to punish sites’ search ranks based on how many removal requests were sent by owners. The RIAA’s report discovered that many sites with removal requests were going unpunished: “[The sites did not] appear to have been demoted by Google’s demotion signal in any meaningful way.
The RIAA has filed 7,770 requests for 27.4 million different URLs in just the last month. And in the same time period, the BPI has filed 34,200 requests related to 24 million URLs.
However, “The Search Fixation” does not prove without a doubt that search engines do not contribute at all to piracy rates. It actually indicates that search engines are not the #1 driver of traffic to illegal sites.
As an example, the paper shows that Internet searches for individual artist names are greater than searches for individual song titles. Searches for Rihanna outnumber searches for the song “Diamonds,” with or without “MP3” or “download.” Google Trends also revealed differences between terms used in the paper: Search frequency for “Diamonds” made up only 23-percent of searches for “Rihanna.” And “download” and “MP3” were more popular, 75-to-2 and 75-to-1.
Regardless of specific examples used, the RIAA found that the CCIA’s report only supports its own findings: “Every day, there are millions of popular searches, using the basic terms cited in our analysis, that produce results prominently featuring rogue websites that have received millions of piracy notices.”
There is still debate about exactly how much traffic to illegal websites is directed by Internet searches. The CCIA paper quoted Techdirt, which said that 15-percent of traffic to the MPAA’s list of 24+ illegal sites came from search. And the RIAA claims that of the two “worst of the worst” sites mentioned in its own report (mp3skull.com and mp3juices.com” get more than 25-percnt of their traffic from Web searches, a majority from Google.
The CCIA points out that removing illegal sites from search results is “unlikely to mitigate online infringement.” The organization argues that labels and artists should use search optimization in order to promote their own websites in results and bury illegitimate sites.
NMPA Suing YouTube Channel Giant
The National Music Publishers Association (NMPA) filed a copyright infringement lawsuit on August 6 against well-known YouTube channel Fullscreen this week. Redirecting blame away from YouTube and making individual channels responsible for illegal content could mark a change in the way publishers are attacking pirates, said ITNews.
Fullscreeen produces, promotes and markets music videos and other videos on YouTube. The company operates over 15,000 YouTube channels with over 200 million subscribers and makes money directly from ad revenue earned by unlicensed music videos on its channels. But the NMPA claims Fullscreen does not give songwriters or music publishers any of the profits.
Cases between the music industry and YouTube like Viacom’s $1 billion copyright lawsuit against the site have typically gone after individual unlicensed music creators. However, the most recent case is broader and focuses on cover-song videos.
Eric Goldman, director of the High Tech Law Institute at the Santa Clara University School of Law agreed it sounds more all-encompassing than past copyright infringement lawsuits: “I don’t recall a similar case involving a major YouTube channel or implicating lots of cover song videos in one case.”
And this lawsuit could indicate that publishers are figuring out how to succeed at bringing down unlicensed music content on the Internet and are learning from past verdicts. A judge ruled against Viacom in the recent case because of the “safe harbor” clause of the Digital Millenium Copyright Act, which protected YouTube. The idea was that YouTube cannot possibly monitor every piece of illegal music and video content it houses, so the task of licensing should fall on content creators and copyright holders.
“This is a substantial advancement from the Viacom versus YouTube case, where the copyright owners are still trying to hold YouTube responsible for the conduct of its individual publishers … It appears the NMPA is tacitly accepting that YouTube is a platform that enables good and bad conduct, but YouTube is not the infringer itself,” Goldman added. He also said the case shows that publishers are becoming more “enlightened” about the way they try to get justice.
The focus on cover songs also makes the NMPA’s case the first of its kind. Creators can get statutory licenses to record cover songs, but the license does not necessarily include performing it in a video released on YouTube.
Staff attorney at the Electronic Frontier Foundation Mitch Stoltz admitted he has never seen a case like the one NMPA has opened up before, but that it does not come as a surprise. He likened it to prior suits filed by the American Society of Composers, Authors and Publishers or Broadcast Music, Inc. against restaurants and bars for playing unlicensed music.
However, Stoltz said the case against Fullscreen will be challenging, because the court will have to figure out how involved the company is in content curation: “Can anyone post, or does Fullscreen select the videos? That makes a difference.”
Presskit.to Launching First EPK-Creating App
EPK offering Presskit.to released the first EPK app for Facebook pages, according to the Presskit.to blog. Facebook previously did not offer an EPK-creating app, making this new app the first of its kind.
The Presskit.to app can be installed in a couple clicks from within a user’s Presskit dashboard and allows others to access artists’ EPK content without leaving Facebook. Artists can read more about installation and design on the company’s blog.
Jimmy Iovine of Beats Electronics announced he would be launching a mobile subscription music service. Also, a study showed streaming music companies are boosting music economies and significantly decreasing music piracy rates in Scandinavian countries. And the Recording Industry Association of America (RIAA) offered a music pirate a non-monetary settlement to wrap up a seven-year-old case.
Beats Electronics Seeking AT&T Partnership for Spotify Competitor
Co-founder and CEO of Beats Electronics Jimmy Iovine stated he would be launching his subscription music service, Daisy, in the next few months and hopes to partner with major mobile carrier AT&T. He founded Beats alongside artist and producer Dr. Dre and began to form his plan for the service when he bought MOG, the on-demand subscription service that was well-received by users but did not have the power to succeed in the marketplace.
Iovine has been talking to major music labels to secure licensing and also AT&T executives in hopes of using user data plans to grow his user base, reported CNET. While AT&T appears to be Beats’ first choice, sources said they might be open to going with another carrier. AT&T and Beats spokespeople did not comment on the details, but a successful partnership with a mobile company could result in offering customers a period of free music access in order to convert them to paying subscribers. Having the support of AT&T could also give Beats a leg up as it builds its digital music business and takes on competitors.
Daisy will have to compete with the giant Spotify as well as with Deezer and Rdio. But the company will also have to go up against Google’s “All Access” and the YouTube on-demand service that is rumored to be launching sometime in August. However, Daisy has a “twist” that is creating a buzz: It will be run by a combination of humans and algorithms. Iovine has enlisted the help of musicians, DJs and others skilled at producing music to put together playlists. Trent Reznor of Nine Inch Nails has agreed to be Daisy’s chief creative officer.
Iovine said in February, “Most tech companies never get curation right … It’s not in their culture. We will be miles ahead of them. If you are going to the gym five days a week, we know that, and when you wake up, we will have a list for you.”
Entrenching in the mobile market – which is still one of the biggest music industry growth sectors – in Daisy’s early stages could prove a smart move for Iovine. Studies have also shown that using a mobile carrier to market a new service attracts a significant number of new subscribers. As an example, in 2009, Spotify teamed up with wireless carrier Telia and snagged a large percentage of the Swedish population.
Iovine has produced mega artists including Bruce Springsteen and U2 and has already earned the support of people in the music industry for Daisy. Warner Music Group’s owner Access Industries invested $60 million in the company in March, and Iovine continues act as chairman of Universal Music Group’s Interscope Geffen A&M Records subsidiary.
Can Streaming Music Services Boost Music Economies Worldwide?
The music industry in Norway is thriving in 2013, and online music streaming services could be contributing to the success, according to hard numbers.
Billboard stated that statistics published on July 11 revealed that streaming revenue was up 66 percent in the first half of 2013 and that streaming now makes up two-thirds of total music revenues in Norway, an increase of 20 percent from 2012. Total music revenues were up 17 percent even as sales of CDs fell 29 percent and music download revenue was 21-percent less than last year. Digital sales – downloads and streaming – now makes up 80-percent of total music revenue in Norway.
The fact that the rest of the Scandinavian region, including Sweden, Denmark and Finland has been experiencing similar shifts shows that streaming is having a significant effect on the music industry. In Spotify’s country of origin, Sweden, music revenue was up 13.8 percent in 2013 so far, with streaming nabbing the largest sales share. In Finland, sales were up just 1.2 percent, but streaming services have only just recently become available and 73-percent of music revenue in that country is still made up of physical sales.
And streaming services also seem to be helping in the fight against illegal downloading. In Denmark, a study sanctioned by the Danish recording industry discovered that legal streaming services also have significantly curbed online piracy. Over 81-percent of those surveyed that admitted to having regularly downloaded illegal music in the past said they stopped once they had access to legal streaming services.
The RIAA Wrapping Up Long Copyright Court Battle
The RIAA is trying to finally end the seven-year-long copyright infringement lawsuit with music fan Jammie Thomas-Rasset to a close by offering her a non-monetary settlement involving being an a spokesperson against piracy as an alternative to paying the $222,000 fine for illegally sharing 24 songs online through the former file-sharing service Kazaa. Her legal battle started in 2007, and has involved three separate verdicts for the same crime. The other two had her paying $1.92 million and $1.5 million in damages, respectively. Thomas-Rasset of Minnesota was the first file-sharer in the U.S. to challenge this type of lawsuit and has declared she would rather go bankrupt than pay it or speak out publicly against piracy.
Wired said, the RIAA’s offer to relieve some of her debt has been presented four months after the Supreme Court would not review Thomas-Rasset’s appeal declaring the amount of damages decided upon was “unconstitutionally excessive and was not rationally related to the harm she caused the music labels.”
RIAA spokesman Jonathan Lamy stated, “We continue to try to resolve this case in a reasonable way. In the past, for example, we have reached out to Ms. Thomas to settle the case in exchange for a contribution to a local music charity. We have communicated to Ms. Thomas that we would consider a variety of non-monetary settlement options, which is up to her to offer. We think this is a gesture of a good will and we’re doing what we can to resolve this case in a manner that works for everyone.”
The defendant’s attorney Michael Wilson confirmed the music industry has been trying to agree on a non-monetary option to relieve some of the debt, but has not yet given specifics: “The record industry was offering a kind of a public statement as a possible supplement so she wouldn’t have to pay the full amount … It was kind of a general idea, nothing concrete,” Wilson added. “I would assume it would be something along those lines: anti-piracy and culpability.”
The RIAA has previously tried to get public-service announcements from music pirates in order to settle lawsuits. In 2009, Kevin Cogill of Los Angeles was sentenced to two months’ house arrest and a year of probation for illegally uploading nine unreleased tracks of Guns N’ Roses album Chinese Democracy. Prosecutors tried to give him six months in jail, but he ended up agreeing to do an RIAA public service announcement designed to deter future offenders as an alternative. However, the organization never carried out the punishment.
The only other illegal file sharer to challenge an RIAA lawsuit was Joel Tenenbaum of Massachusetts, whose case appeared after Thomas-Rasset’s. His appeal was denied in June, and a Boston federal jury said he would have to pay $675,000 for sharing 30 songs.
Almost all the other thousands of RIAA cases against individuals have settled for a few thousand dollars outside the courtroom.
The RIAA issued a report accusing Google of failing to make good on its promises to punish pirate websites. And a survey showed continued sales growth in the musical instruments and equipment industry. Also, Billboard announced it will start incorporating YouTube plays into its Hot 100 chart formulas.
Google Breaking Anti-Piracy Promises
Google has not been making an effort to hide pirate sites, even though it promised the music industry six months ago to downgrade the sites in search results, according to a report filed by the Recording Industry of America on Thursday. In August, 2012, Google made an announcement saying it would look at the number of valid copyright removal notices for each site and create a new search algorithm that would make sites with many copyright complaints appear lower in search results.
The RIAA’s report last week stated it sees no proof that the new policy has actually penalized music piracy sites, and during the past six months, Google has received tens of millions of copyright removal requests. Steven M. Marks, RIAA’s general counsel said, “Searches for popular music continue to yield results that emphasize illegal sites at the expense of legitimate services, which are often relegated to later pages. And Google’s auto-complete function continues to lead users to many of those same illicit sites.”
Ben Sisario of The New York Times said the problems outlined in the RIAA report point to the two-faced company Google has built. One Google features an array of entertainment services that have licensing agreements with major labels, music publishers, movie studios and other media companies, such as YouTube and Google Play. And these features are becoming an integral part of the entertainment industry.
Google’s other side is its search engine, which has become “the road map to the Internet” people follow to find all content. Some of its methods are heralded by the entertainment industry, but a lot of them are not.
Google responded to the RIAA’s claims in a statement, saying that the company is making a serious investment in anti-piracy measures and will continue to work with the entertainment industry to offer more valuable content: “We have invested heavily in copyright tools for content owners and process takedown notices faster than ever. In the last month we received more than 14 million copyright removal requests for Google Search, quickly removing more than 97 percent from search results … In addition, Google’s growing partnerships and distribution deals with the content industry benefit both creators and users, and generate hundreds of millions of dollars for the industry each year.”
Musical Instruments and Equipment Sales Increasing in 2013
Consumer demand is increasing for musical instruments and accessories, said a January survey conducted by the top financing provider for music dealers GE Capital, Commercial Distribution Finance (CDF).
The survey revealed that 38 percent of its respondents are expecting an increase of five, to ten percent in sales this year, and 43 percent expect their sales to increase more than ten percent. The results showed that fretted instruments, keyboards, percussion and amplifiers will likely be the big sellers, representing 44 percent of revenue. And professional audio equipment will come in second at 37 percent.
Many brick-and-mortar retailers also seem to be growing their online presence, as 27 percent of respondents stated online sales will be between 15 and 45 percent of their business in 2013. Still, 36 percent said that online sales make up 15 percent or less of their business, and 17 percent have still not opened up shop online.
As more consumers head to the Internet to buy instruments and musical equipment, many retailers reluctant to create an online presence are concerned, with 40 percent saying they believe that online retailer and auction site purchases will affect the music industry significantly in 2013. And 19 percent are worried that reduced budgets for school music programs will affect their sales.
Most said they are no longer concerned about overall consumer demand for their products. Dave Wilson, commercial leader of CDF’s diversified products group said, “Like others in the industry, we’re optimistic about consumer demand this year … Although wholesale purchases were soft heading into 2013, we think that will turn around now that we’re seeing positive signs in the U.S. economy. Unemployment rates are declining, consumer confidence is improving and home sales are increasing, all of which are good news for sales of instruments and related products.”
In an attempt to help grow music education in U.S. public schools, CDF has been supporting Little Kids Rock, a program begun in 2008 that offers free instruments and lessons to students in schools without music programs across the country.
GE Capital’s survey included 104 retailers, manufacturers and distributors.
YouTube Will Factor into Billboard’s Hot 100 Chart
Billboard magazine’s 55-year-old Hot 100 singles chart will not incorporate YouTube plays into its formula, The New York Times said. Baauer’s viral video song “Harlem Shake” will debut at No. 1 this week as a result of the change.
“Harlem Shake” got little attention when it was offered up as a free download in May. But by last week, over 4,000 videos featuring fans dancing along to the song were being put up on YouTube every day.
And download sales and Spotify streams of the track also exploded. While Billboard had been planning to include YouTube in its charts for two years, it was the popularity of “Harlem Shake” that pushed it to update its policies immediately, according to editorial director Bill Werde: “The notion that a song has to sell in order to be a hit feels a little two or three years ago to me … The music business today – much to its credit – has started to learn that there are lots of different ways a song can be a hit, and lots of different ways the business can benefit from it being a hit.”
Billboard has also been making other moves to modernize the Hot 100. Aside from sales and airplay, it now includes data from streaming services like Spotify. In recent years, YouTube has been critical to making songs wildly popular many months before they get picked up by radio. Songs like Psy’s “Gangnam Style” and Carly Rae Jepsen’s “Call Me Maybe” provide solid examples. And so does Gotye’s Grammy-winning hit “Somebody That I Used to Know.”
“Harlem Shake” only had 18,000 downloads since its release in May. Once the tens of thousands of YouTube videos began to go up last week, it sold 262,000 downloads.
Billboard’s charts are based on data from Nielsen SoundScan, a company that has also been trying to update. When it first started in 1991, it offered up third-party sales data that changed the way record labels, retailers and others marketed and sold their products. Now Nielson also looks at radio plays and major streaming services. Senior analyst David Bakula said, “We want to measure how much consumption is going on, in whatever form a consumer chooses to consume something.”
Experts examined the future shape of the music industry last week, as stats continued to reveal predicted sales numbers and growth areas in the music industry for next year. And leaked tax records showed that the RIAA has experienced deep financial losses in 2012. Also, Pandora spoke out against a new bill regarding music royalties.
The Near Future of Industry Growth
The rest of 2012 will continue to be full of growth and reorganization within the music industry, according to further analysis of Strategy Analytics’ latest Global Recorded Music Forecast. The Music Industry News Network presented a break-down of consumer spending through the year, and offered some positive insights about formats to watch.
Streaming revenues will likely increase by 40 percent at about five times the rate of download revenues earlier in the year, topping out at $1.1 billion. And download revenues will grow to $3.9 billion, allowing streaming services to take over the market as the highest revenue growth engine. In fact, they will generate an additional $311 million for the music business, $8 million more than downloads.
Overall digital and mobile purchases will grow to $8.6 billion, whereas there will be a 12.1 percent decline in physical product sales, meaning that digital music will build its global share of recorded music. While digital spending will continue to dominate through 2015, eventually taking over the market, some countries, like the U.S., Sweden and South Korea will transition to digital more quickly than others.
The Director of Digital Media at Strategy Analytics, Ed Barton explained, “Although downloads still account for nearly 80 percent of online music revenues, this market is maturing, and spending is flattening in all key territories. Streaming music services such as Spotify and Pandora will be the key growth drivers over the next five years as usage and spending grow rapidly.”
But why will this shift take place? According to Barton, as music fans become more comfortable with new digital formats, they are coming to value “accessibility and availability” over building huge libraries of outright-owned music. And this drives growth in instant-access streaming services like Spotify. He added, “The emergence of cloud storage of a subscriber’s existing music library for seamless streaming to a range of connectable devices improves the value proposition further.”
And what will happen specifically with U.S. music revenue? By the end of the year, streaming revenues will grow at four times the rate of downloads, bringing online streaming and downloads up to double the share of music spending in the U.S. than worldwide. And U.S. physical product sales will decrease less than the global rate, declining by 9 percent. Physical spending won’t wait until 2015 to be overtaken by digital; this shift will happen in the U.S. by the end of the year.
Barton sees the Report’s numbers as a positive sign: “Having stabilized long term revenue declines resulting from the downsizing of packaged music spending, the industry will be hoping that digital can rebuild the U.S. market to something approaching its former stature.”
Is the World Ending for the RIAA?
Leaked tax records show that the RIAA could be in serious financial trouble, partially because of the continued high salaries of top executives within the organization and its investment in piracy lawsuits, along with the decreased investment of major record label executives that serve the company. Its revenue dropped by just under 50 percent in the past year, according to information presented by TorrentFreak and Digital Trends this past week.
One of the biggest proponents of anti-piracy initiatives like the Stop Online Piracy Act, the RIAA is showing signs of falling down. Its recent tax filings reflect that the organization’s revenue for the period ending March 31, 2011 has fallen by 44 percent over the previous two years, topping out at $29.1 million, compared to the $51.35 million it garnered in 2009. The number of employees on the payroll also decreased from 117 to 72. These huge drops lead many experts to believe the numbers for 2012 will drop even further, given their increased efforts to bring down pirates and fight against the changing music industry.
The fall in revenue can be in great part attributed to a drop in dues paid by major record label employees that serve as RIAA members. In a tax filing from 2009, the RIAA reported member dues of $49.8 million, as announced by Digital Music News. The new number is $27.9 million.
Of course, the first part of 2011 was one of the best for the music industry, as Nielsen SoundScan showed. For the first time in six years, total album sales rose by one percent.
Even though there has been a drop in overall revenue and member dues within the RIAA, executives are still earning impressive salaries. Former RIAA Chairman Mitch Brainwol earned $1.75 million, more than any RIAA employee. And the Chairman and CEO Cary Sherman, who at the time was the President, earned $1.36 million. The nine other most-well-paid employees get salaries between $309,000 and $715,000.
While the amount of money the RIAA spends on lobbying the U.S. government has held steady at $2.3 million per year, the amount of money the RIAA has collected in legal fees has dropped. While it has continued to aggressively pursue major anti-piracy lawsuits, it decided to stop going after individual infringers.
Pandora Getting Louder about New Music Royalties Bill
Online music service Pandora is continuing to get riled up about Rep. Jerrold Nadler of New York’s draft legislation on music royalties, according to The Hill. Spokespeople for the company claim it will only serve to discourage technological innovation and is also discriminatory against Internet radio.
Pandora is, however, backing a draft bill designed by Rep. Jason Chaffetz of Utah. This bill is designed to lower the royalty fees Internet radio stations pay so they are on even ground with cable and satellite radio stations. Chaffetz’s legislation would force Internet radio to be held by the same standards outlined by the 801(b) section of the Copyright Act.
Tim Westergren, founder and chief strategy officer of Pandora said, “The current system for establishing royalty rates is astonishingly unfair … Fairness demands that all music related rate settings utilize the same 801(b) standard.”
Nadler’s bill is backed by most other groups and companies within the music industry, because it would help improve compensation to artists when their music is played on digital radio services and on radio stations’ live-streamed online broadcasts.
The 801(b) standard is used in order to figure out the royalties that will be paid by the industry to music publishers and songwriters. Westergren stated, it is unfair that the industry will not use the same standards it uses on all other entities to force Internet radio to be responsible for paying artists. He added, “Congressman Nadler’s discussion draft would only perpetuate this hypocrisy and worsen an already flawed legislative mistake that is discriminating against new technology and hampering innovation.”
Chaffetz’s and Nadler’s bills have both caused a battle within the music industry and digital radio services regarding music royalties. And many are unsure of Chaffetz’s bill because they believe it could take money from artists.
Nadler himself has expressed that he agrees with Pandora about the need for equal rates, but that the bill that opposes his is not the solution: “The solution is not to get to parity at the expense of artists as Rep. Chaffetz’s bill proposes … We can and should both level the playing field for Internet radio and ensure that artists are fairly compensated …”
Rob Reid is a L.A.-based author and entrepreneur, and the founder of Listen.com/Rhapsody, the first online music service to get full-catalog licenses from all the major music labels and one of the top online music services, with over a million paying subscribers. He got his start in music growing up as an avid guitarist and songwriter, eventually choosing to focus on business when he attended Harvard Business School and wrote his first book, a first-person account of what it was like to be a student at that particular business school, which was published by William Morrow & Co. After business school, he got involved in the Internet as it was just beginning in the mid-‘90s, initially working at Silicon Graphics, a company that made graphics workstations, supercomputers and web servers. While there, he wrote his second book, Architects of the Web, in 1996, which chronicled the rise of the Internet as a commercial medium. Eventually, Rob decided to start Listen.com, which he grew from a barely-funded startup with just a handful of employees, into the now-renowned Rhapsody music service. At the 2012 TED conference, he presented his now infamous “Copyright Math” theory, the term he uses to explain the often confusing and intangible numbers cited by the two major organizations within the entertainment industry – the Motion Picture Association of America (MPAA) and the Recording Industry Association of America (RIAA) – in an effort to get others to rally against piracy. He has written pieces and features for various magazines and websites, including Wired and The Wall Street Journal. His first novel, Year Zero, is closely tied to the “Copyright Math” theory and releases on July 10 via Random House/Del Rey. It is a comedic science fiction story set mainly in present-day New York City about a society of highly-advanced aliens who are so enamored of American pop music that they accidentally commit the biggest copyright infraction of all time, thereby bankrupting the entire universe.
This is Part II of my recent conversation with Rob. He talked to me about the issues surrounding music piracy that inspired his recent TED talk and how he believes artists and the rest of the music industry can benefit from new business models. He also shared some more information about his new novel, Year Zero.
Thanks so much for continuing this conversation, Rob. I want to talk to you a little bit about where your TED talk came from. Why did you choose to speak on “copyright math” in a way that musicians could understand? How does copyright law work – or not work?
Right – “or not work.” Have you seen this recent back and forth that’s going on? There was an intern at NPR named Emily White who wrote this piece for the “All Songs Considered” blog. She pounded her chest about the fact that she has all these MP3s, but only ever bought a handful of albums. She wasn’t being snide about it, but she made the point, “I have 11,000 songs on my computer, and I’ve only ever bought 15 albums in my entire life, because I’m 21, young, fabulous and that’s the way we do things. Get over it, old people.”
And David Lowery, of Camper Van Beethoven and Cracker, who has been teaching some music courses at the University of Georgia for the past two years wrote this very long, well-written rebuttal to that. He’s friends with Sparklehorse, who apparently said he killed himself partially because he was living in destitution because so many of his songs got pirated, and he couldn’t make a living. It’s a pretty intense debate. This back and forth points to what a nuanced and complex topic copyright is.
The reason I got engaged in it and ended up doing my TED talk about copyright math is that I think we have lost the balance to such a degree in the realm of copyright that reasonable, level-headed people like the woman who wrote the post to the MP3 blog no longer take Copyright Law seriously, because it is so insane and disproportionate.
The example I like to use – which I didn’t use in my TED talk – is that in your state, the state of New York, if you get pulled over for drunk driving, you face a maximum fine of $500. It’s probably a little too low. But that’s the law of the land and what New York State has decided is the penalty for endangering your own life and the life of others on the road. If you get busted swiping a digital copy of “My Sharona,” the maximum penalty is that infamous $150,000. That goes so far beyond passing any reasonableness test that I think people who are confronted with laws like that and with all the major examples of overreaching on the part of record labels, legislators and litigators – and there are thousands of examples of the RIAA’s retail litigation – they can’t take the entire law seriously.
I think what has happened over a period of decades to copyright related to the music industry is the result of two things: 1) crazy laws; 2) a refusal on the part of the music industry during a very critical period of time to sell portable music downloads. Those two things were happening simultaneously. It led an entire generation to feel “morally comfortable” with the whole notion of piracy. The laws enforcing it are lunatic, and they weren’t selling the product anyway, so this piracy culture took root throughout the late ‘90s and throughout the first part of the 21st Century during a time when I spent three-and-a-half years trying to get licenses from the record labels to sell their music online. The licenses weren’t there, because they were not licensing it. In fact, they were de facto encouraging it, because they were essentially saying, “If you want this music, you’re going to have to pirate it, because we will not sell it to you.”
A mutual friend of ours has said, “It wasn’t the digital download that killed the music business. It was 40 years of greed and arrogance.”
Yes …and a refusal to adopt the new format. Think of this: The first mass-marketed MP3 player was the Diamond Multimedia Rio. It was announced in September of 1998 and shipped a couple months later. What the record labels did immediately was sue Diamond Multimedia to make portable MP3 players illegal. That didn’t work. And it’s a good thing it didn’t, because that led to a product trajectory that led to the iPod, which led to the iPhone and a revolution in mobile computing that I believe simply would not have happened if the record labels had successfully litigated portable music players out of existence, which was their absolute intention.
The first portable MP3 player shipped in about December of 1998. The iTunes Store was first licensed in April of 2003. So, for four-and-a-half years, this format was being adopted rabidly by a public that was more excited about music than it had been since the early ‘80s, the rise of MTV, Thriller, the rise of the CD and all that other stuff. And the music industry was boycotting. They were saying, “If you want this, you have to steal it, because we’re not selling it to you.”
And I believe that piracy is wrong. But enough years went by, and there was enough draconian laws and enforcement, that it created a level of moral comfort, so the notion of pirating music has never gone away. And record labels heaved a begrudging sigh and agreed to start selling their music to a ravenous public in 2002 in streaming form with us on Rhapsody and then in 2003 with downloads. So, while in 2006 you could buy a download, everybody has big brothers and sisters, or seniors at the high school when they’re in eighth grade. The culture of comfort with music piracy has been passed on from generation, to generation, and it’s not going away.
I found Lowery’s piece to be incredibly moving, and a very powerful statement on many levels. But I think this whole problem was created by tight-fisted laws that have no connection to society’s actual priorities. How can you say that filching a 99-cent download is 300-times worse than drunk driving? It’s absurd. And when people see laws like that, they start looking at copyright holders like me not as being victims of theft who deserve sympathy, but as coddled special interest groups. It’s tragic. But more and more draconian laws and crazy lawsuits is not the answer. The answer to it is to make piracy a low-rent experience that most people would rather not indulge in.
The example of that idea, which I think is most contrary and meaningful, is in the books industry, where we have a very minimal piracy issue. The first mass-market e-reader was the Kindle. And instead of suing the Kindle to stop existing, the six major publishers licensed their full catalogs to it the day it launched. So, 93 of the best sellers were available on the Kindle the day it came out. As a result, the world learned about portable books through a very elegant, fully-integrated, legal and beautiful experience. Piracy just never got any breathing room. You could download a crappy PDF if you got on BitTorrent. But why do that when you have Amazon’s immaculate retail sensibilities and at the time cutting-edge hardware and a seamless wireless network? The first consumer experience with e-books was beautiful. And it was legal. The first consumer experience with online music was with piracy, and that experience lasted for five years.
Getting back to the TED talk, I feel very passionately about this copyright issue. And I believe that overreaching laws that say you can put a billion dollars worth of pirated music on an MP3 player actually damage people like me and artists like Sparklehorse. Because, it turns us into objects of derision.
I agree with you. I have an eBook in the works, and I feel like I have no idea how to approach it. Giving it away doesn’t feel quite right.
And the good news is, you don’t have to worry very much about piracy when it comes to eBooks. Even the folks at Random House whose job it is to worry quite a bit about this will tell you that piracy is maybe a top-10 concern. But because of the power of Amazon, etc., piracy is just not a very big phenomenon.
What’s interesting to an eBook author is that you already have a platform. For example, you have 15,000 readers out there. If you decide to sell your book directly to the world, as opposed to going through a publisher, Amazon will give you 70% of revenue. The normal publishing deal is that you get 25% of their 70 percent. So, now you’re down to 14 percent. And if you have an agent – as most of us do – there goes another few points. The difference of your take as an author is about five times. Do you need a publisher to get through to the world? You may not. If you have a niche book that is primarily of interest to the people who are already following you, you don’t. You can sell it direct for a few dollars and sell a lot of them, because it’s a really easy purchase decision.
You’ve clearly really thought about all the intricacies of the piracy issue. But do you think the cat is out of the bag for the music industry? Is there any way of repairing this issue of being “morally comfortable” with piracy?
It’s very hard to change the behavior this level of comfort. I think what’s going to start to change it powerfully is the rise of “all-you-can-eat” streaming services. To pat myself on the back a little, we were really early with that idea with Rhapsody – a little too early. Rhapsody was the first company to get all five major record label licenses. We were ahead of Apple by nine or ten months.
That’s saying a lot more now, because at that time there were five major labels.
Definitely. We had an all-you-can-eat subscription service back in 2002. We signed Universal in July of 2002, and from that day forward, we had everything. But the entire world at that time only cared about downloads, and it’s been that way until recently.
It’s only now with the ubiquity of broadband, the increasing ubiquity of wireless broadband and the acclimation to it that a lot of younger folks are getting to the elegance and ease of use that describes an all-you-can-eat music streaming service. That’s where I think things change. Services like Spotify offer an experience that is unbelievably superior to piracy. Everything is there with a single click at your fingertips. There is friction-free and cost-free discovery. There’s no concern about viruses, lawsuits or being able to find music. It’s such an immaculate experience that I think even people on a super tight budget will look at that and say, “$10 per month (or whatever it ends up stabilizing at as a price)? That’s a fabulous music experience.” Let’s say the CD-buying public was probably 150 million Americans in 1999. Let’s lop a third off that and say there were 100 million Americans who cared enough about music back then that they were spending $100 per year on it. They can be persuaded to spend $10 per month/$110 per year on a streaming service. All of a sudden, you have a commercial music industry that’s even bigger than it was back in the day.
But the question is, does that translate into something that provides a sustainable income on an artist-by-artist basis?
This gets into an area I know less about, because it relates to the nature of the deals the artists cut with the labels and the sharing of digital revenue.
And even the revenue paid out by Spotify comes under fire by artists a great deal. I have never received payment through those types of services, because I don’t write at this stage in my life. But it is a common complaint among artists that it is not enough to live on.
Let’s do the math here. Let’s say that we’re talking about a world of 100 million consumers. Let’s say 100 million people used to buy CDs, and those same people could be brought over to pay for Spotify. 100 million at $10 per month – though I actually think the price will stabilize at a bit higher than that – is $12 billion per year in top-line revenue. The music industry peaked at about that in 1999, though I think it was $14 billion.
Now let’s think about the money. We have $12 billion as a notional maximum addressable in streaming. We had something similar to that in CDs. When we had that figure going on in CDs, a very big percentage of that went to the retail channel – probably more than goes to Spotify. I can tell that having run one of those services, they are very low margin. I think retail markup for music on CDs was 35% of the end dollar. So, if someone bought a CD for $15, I think about $5 went to the store. There is no way that 35% of the money that goes to Rhapsody ends up in Rhapsody’s pocket.
So, the money that goes into the music eco system – the labels or the artists – is at least as high as and maybe even higher in a streaming environment than it was in a physical retail environment. That should tell us that the same amount of money is going back to the labels and the artists in that community. The question is, how does that money get carved up? But if it’s getting carved up in a way that’s less favorable to artists than it used to be, that’s a brawl between the artists and the label. But, $12 billion being spent on music in the U.S., which feels like the ultimate point of stability or equilibrium for streaming services once they have reached equilibrium is as much money as has ever gone in there. And if it was possible to make a living off CDs, it should be possible to make a living off streaming.
The other thing that becomes interesting in that realm is, if you’re an artist and want to get on the shelf at Wal-Mart, as we know, you have to do a deal with a major label and deal with everything that comes with that. If you are an artist in the Spotify eco-system, you don’t need any label to do that. What you need to do is drum up your audience. And if you’re capable of drumming up your audience – building relationships with followers and fans as we were talking about earlier – you’re not going to have to share anything with a label at all. If you’ve figured out how to cobble together your 15,000-30,000 listeners, the revenue generated by them connected to your music is going to go directly to you.
I think the disintermediation favors us. But I think just as we have no more Beatles – no one of that stature and level of homogeny – for the average artist novelist, etc., because we all can get through to our audience, yesterday’s “big” is not today’s “big.” Today, there are hundreds of thousands of us who can actually get through to an audience, whereas previously there were dozens or maybe hundreds, so that means we’re all going to be selling fewer books, fewer albums, etc. So there might be a diminishing of scale that happens when there are just a lot more people getting through.
Eric Garland of Big Champagne is somebody else you’ve probably come across at some point. In an interview with me, he said something so profound. Someone asked him if there would ever be another Michael Jackson, and he said, “No … I’m not saying there will never be another quadruple threat talent or that there won’t ever be someone who captivates the bizarre imaginings of the world the way he did. I’m just saying that we will never again live in a world where so few media channels allowed one artist to dominate the attention of the world n the way that Michael did.” The ascent of Michael Jackson correlates beautifully to the ascent of a monolithic global media structure, and our world will never again see that. You’ll never again have just three channels on television with Michael Jackson on two of them.”
And it flows all the way down. My favorite band right now is The Hold Steady. And I’m convinced that in the ‘80s, they would’ve been as big as Pavement or The Replacements. In this environment, they’re not. Because, there are just a lot more people who are reaching and developing their audiences through these direct channels. I can go see The Hold Steady at a venue that seats 100-200 people. And I get a kick out of that. But I’d frankly be a lot happier if they were playing for 2,000-3,000 or more, because that’s the audience they deserve. But there are 150 channels instead of the three. You can’t be on 138 of them.
I guess this all comes back to the fact that it’s about curating a niche.
Yes. It’s about cultivating a niche. And I want to keep writing fiction. So, I think as an author, my #1 directive is to try to cultivate a direct relationship, certainly with readers, but also with folks like you and book bloggers – people who have small-to-mid-sized blogs and publications. And I want to get out to the big ones too. Nerdist.com is a fairly big site that recently gave away a free MP3 of John Hodgeman – who narrated the audio version – reading my book. I definitely want to get out to Nerdist, Wired and other big sites. But it’s really important to cultivate all the different channels. My goal is, a year or two from now, to hopefully have several dozen folks like you with whom I have a warm email relationship. That way, when I have something I want to get out there, I can talk to them. And that really wasn’t incumbent on a major published author 15 years ago. It is now. And I think it’s cool, because I think it’s good to talk to the world.
And you’ve definitely accomplished your mission. In closing, is there anything else you wanted to say about your book?
What I would say about Year Zero is that it is very Douglas Adams-like. It is a comedic sci-fi novel set primarily in present-day New York City. There is some galaxy traipsing. But it’s not hardcore, deep-future, crazy-alien-technology science fiction. It’s playful and present day. Although it is very playful and also fiction, it does consider the issues of copyright and intellectual property very seriously, although that’s a subtext. So, it’s not like if people aren’t interested in those topics they will be put off by it. It’s not heavy-handed or a lecture. It’s very heavily informed by my experiences with the music industry when I was building Rhapsody. So, if people are interested in the music industry and particularly in the way it interfaces with Washington, I think they’re going to really enjoy it.
You can learn more about Rob Reid and his work on the official Rob Reid website and follow him on Twitter and Facebook. Year Zero comes out today, and can be purchased on Amazon, Barnes and Noble, and IndieBound. Watch the book trailer, below! Please also check out Part I of this interview, “How to Connect with an Audience.”
Intellectual property issues were front and center this past week as the “copycat” trend took a new turn in the UK and a musician and music business entrepreneur talked about why digital piracy is becoming more of an excuse than a problem for artists. Also, a hip hop journal discussed why artists and professionals in all genres should look to the flexible business models and creative marketing techniques of hip hop crews in order to adapt to the modern music climate.
Copycat Songs Presenting New Industry Problems
The new trend of artists releasing cover versions of songs by other chart-topping artists before those songs are officially released is creating a stir in the music industry and raising questions about copyright laws, according to an article published in The Telegraph. Almost perfect replicas of the latest songs from pop stars are entering the charts before the originals even appear.
And recently one of these copies – a cover version of the song “Telegraph” by Maroon 5 and featuring the rapper Wiz Khalifa – managed to squeeze into the top 10 of British charts. The identity of the band was kept secret, but was later to be found “Precision Tunes,” managed by Joshua Weinstein in New York and put out on his label PT Records. When approached by the media, he promised to stop releasing copycat versions and to “relinquish any monies made” from these types of tracks. His label had also put out eight other tracks copied from other artists such as Usher, Jennifer Lopez and Justin Bieber.
He added, “We have currently restructured the company and its employees, are in the process of issuing takedowns and researching accounting for those releases.” The week the fake “Telegraph” made it into the top 10, it sold 34,492 downloads. It was sold via iTunes and The Orchard.
Precision Tunes’ cover was the first to reach the top 10. But in February, the cover band Kings of Pop cracked the top 40 with a cover of will.i.am’s song “The Hardest Ever.” And in April, the group “Carly Rae Jepsen Tribute Team” made it to #49 a week before Carly Rae Jepsen’s song “Call Me Maybe” was released.
“Copycat”ting is not a new phenomenon and has been happening since digital downloads began over a decade ago. Copycat tracks are created through the joint talents of session musicians and computer experts, who build an almost-exact replica of original songs after they hit the radio. Today, they sell the copies on iTunes and Amazon for slightly less than the price of new tracks. However, until recently, they were always released behind the original song.
The Maroon 5 incident has music industry executives and artists in an uproar and was likely made possible by the fact that, in the UK, singles by major artists get played on the radio for weeks prior to their official release. The purpose of this has always been to give these artists big sales numbers the first week of release, but is now allowing cover bands to get in first. People who buy copycat singles are a combination of those who do not want to wait for the real version and those who are unaware the copycat version is an imposter.
Industry experts stated that copycat versions have gone largely legally unchecked because they exist somewhere in the uncertain areas of Internet-based area of copyright law. However, those copycats that release prior to the originals actually break original artists’ “first mechanical right,” which allows songwriters to record and release their version before other artists.
Some labels are trying to prevent copycats by rushing their songs to market the moment they find a cover version. Early this month, a cover group called Can You Blow My hit number 38 with Flo Rida’s song “Whistle,” and the U.S. release was pushed to two weeks earlier than originally expected.
While online retailers like iTunes pass along a percentage of sales of the cover versions to the original composer as a writer’s fee, the performers of the original song miss out on sound recording royalties they would have received had the real track been purchased. However, online retailers are not responsible for copycat versions, and the top companies have waivers in place that all those selling through their services must sign, which state they own all the rights to the tracks.
Piracy: A Problem … or an Excuse?
Is piracy actually a problem … or is it becoming an excuse artists and music executives use to avoid having to adapt to a changing industry? Sudara Williams, a musician and the founder of DIY music zine Ramen Music asked this question on TorrentFreak this past week in an editorial piece entitled “Music Piracy is NOT a Problem, It’s an Excuse.”
As Williams stated, “’Piracy’ is still a hot topic of conversation in the industry. People who torrent music or have a huge music library are accused of screwing over artists, stealing, and being entitled. Piracy is still cited as The Main Reason Why Artists Are Broke.” However, research points out that the piracy “problem” is very complicated with many different moving parts. And studies have shown that the music industry’s decline is likely not directly related to file sharing.
In this piece, Williams explained how the Internet actually works for artists and music fans and what the current music industry actually is: “It no longer costs money to send music to others. You can get any song you want instantly, free or paid. You can build a library of 11,000 songs at no cost. Or stream everything on Spotify for a few bucks a month. Or pledge $250 for signed vinyl and other goodies from your favorite band or Kickstarter. Or pay $15 per album like back in the Good Old Days.
And he also stated that he is adapting to the reality of today’s climate and has been successful as a result: “As both an artist and music business owner, I know with certainty that it’s time to move on and spend our energy innovating new businesses and getting artists paid. My business is pro-sharing and pro-artist – I consider sharing a feature and it is a primary source of our revenue.”
And Williams also had some proactive tips for artists that want to survive and make a living in the industry, which he has learned through his own dedication to building a career and his own music business:
- “Be Pro-sharing and Pro-artist.” Artists should certainly get compensated for their recordings, as they take “money, resources and love” to produce. However, sharing can be great for business. Sharing acts as free advertising and can help replenish an artist’s fan base, which will lead to future sales.
- Getting artists paid is the responsibility of the seller. The “seller” could be a label, group of artists, third party or, in the DIY world, the artist themselves. But anyone selling music needs to be responsible for making their product attractive and making sure it gets purchased.
- Selling music is a business, not a dream. If you are a DIY artist and running your career with luck or magic rather than like an actual business, you are responsible for your own failure. You have to give your fans or “customers” what they want to buy and also innovate when new technology comes around, or stand out when you find yourself selling a product similar to what everyone else is selling. “This is business, not wish-fulfilling … Piracy is nothing more than a shoddy alibi for business failure and lack of innovation”
- Don’t blame your audience … know your audience. Williams points out, if labels had spent the past 12 years innovating and building what customers were actually seeking, everything might be different. There might be streaming services run directly by Sony or Warner instead of Apple. And some labels might have implemented a “fair trade” guarantee to help fans support their favorite artists. “Turning to ‘broke’ college kids and wondering why they don’t shell out money is a waste of time … In what world does it make financial sense that they spend $15 on an album vs. buy dinner or have a few beers with friends?” Williams is not saying this is fair, but it is the reality of the business: “You can’t sell music to folks if you can’t relate to them.”
- Sell to your target market. Artists need to learn how to figure out who will pay for their music and other products and who will not. And then they need to focus on either selling to those groups that are actually willing to buy from them or figure out how to make what they are selling more attractive to their fans.
Williams ends his editorial on a positive note, saying, “Now is the absolute best time to be a musician,” because all artists can produce albums in their homes using their existing computers and deliver it to as many as millions of fans, if the demand is there for next to nothing. They can get listened to by more people and have more options. And with the old label system falling, artists can be truly independent and in control of their own rights. Finding the audience is the difficult task for artists, but that has always been true.
Hip Hop Crews Embracing New Business Models
If artists want to learn how to build innovative, sustainable brands, all they need to do is look to hip-hop crews that have been successfully navigating changes in the music industry for years, says HipHop DX. The site examined seven different hip-hop crews that are building their brands outside the lines of traditional business models and why DIY movements are rising to the top of hip- hop and beyond in 2012.
The Kansas-City-based Strange Music label has been around since 1999 and has housed many successful indie artists, including Jay Rock, Brotha Lynch Hung. Collectively, it has sold over 2.4 million albums and has enjoyed five $1 indie albums and 14 Top 10 indie albums, along with three #1 R&B albums and 15 Top 10 rap albums because of its policy to keep its artist roster diverse and not focus on one genre. Their latest artist, Tech N9ne has capitalized on the idea that fans don’t just want music – they want a real experience. The crew focuses on its live show to make sure each is unique, and members wear their own merchandise on stage, knowing that merch sales are now becoming especially critical to actually earning a living.
Harlem-based A$AP Rocky and A$AP Mob has really capitalized on the idea of having a crew with a group identity and embracing the idea that artists need to be entrepreneurs and not just musicians. The group is comprised of a team of artists, producers, video directors and experienced business people and has used the talents of its members to diversify the products it offers as well as its marketing strategies, creating a strong brand through high-production-quality music, music videos and even a fashion line.
Hopsin and Funk Volume has gained success through YouTube, but never relied on it solely as a way to “make it big.” Instead, the group used YouTube to enhance its movement, which included regular live shows and recording. The unique video for “I11 Mind of Hopsin 4” released on YouTube late last year and has gained 12 million views, and the entire Hopsin YouTube channel is at 43.8 million views and counting.
L.A.-based Black Hippy, signed to Top Dawg Entertainment shows that building a solid team and taking every opportunity to participate in high-quality projects is critical for artists that want to earn a living in music. The group has continued to align itself with reputable partners and is comprised of members that continue to perfect their own craft through other projects to get their names out there and strengthen Black Hippy’s brand.
Odd Future emerged in 2010 and is made up of very artists that are too young to know anything but the new music business, which has allowed them to forge their own way and adapt easily to changes. Thy own their own label, design their own logos and have taken responsibility for their own careers. They continue to build their skills as rappers, producers, singers, videographers, graphic designers, etc. because they accept that they will very likely have to learn to control the many different aspects of their brand in order to survive.
Brooklyn-based Joey Bada$$ and Pro Era has tried to blend old-school hip-hop with its newer forms in an effort to attract fans of all different ages and with different sensibilities. The complaint among fans of original hip-hop has often been that modern hip-hop has not retained some of the elements that made early hip-hop so innovative. Pro Era has responded to this by bringing some of the older components into the new forms.
Kid Ink, now signed to Tha Alumni Music Group, has used the informal mixtape as a strong promotional tool for formal releases. His DJI11 Will-collaborated mixtape “Crash Landing” got the attention of critics, and he responded by putting out two more mixtapes to stir excitement over his debut album Up & Away. And because of the momentum he built by heavily pushing and promoting his mixtapes, his first single “Time of Your Life” garnered the attention of Chris Brown and Tyga, who collaborated on the remix.
Experts shed new light on two recorded music industry issues last week as Reuters presented some reasons why the EMI sale could weaken rather than strengthen Universal, and a professional study showed that music piracy may actually contribute to music sales. Also, the Bristol Institute of Modern Music (BIMM) revealed five tips aspiring artists and music business people can learn from Led Zeppelin’s manager Peter Grant.
Has the Label System Lost its Hold on the Industry?
Universal Music Group’s potential $1.9 billion takeover of the recorded division of EMI – which houses acts like The Beatles, Pink Floyd and Katy Perry – has been a hotly-contested topic of conversation since it was announced this past year. Concerns of a monopoly within the industry has caused Warner Music Group, consumer groups and independent musicians and companies to fight against what they see as a threat to future digital media.
However, according to an article in Reuters, regulators are likely looking at the other side of the coin as they decide whether the deal is viable. Major record labels might actually not be the Goliaths in this scenario, having been worn down over the years by big retailers and piracy that has driven the price of CDs and digital downloads and thus the profits of the recorded side of the industry down drastically.
Reuters interviewed eight antitrust experts about the EMI/Universal deal, and they were split about whether or not it would be approved. The music industry has changed so much in the past few years that many feel the 40-percent hold Universal would have on recorded music might not have as much of an impact as suspected, especially since the selling recorded music is no longer as profitable as it was a decade ago. Professor Daniel Sokol, who teaches antitrust issues at the University of Florida Levin College of Law said, “If [the U.S. Federal Trade Commission] block [the sale], it’s just because they don’t understand the market.”
Two other experts – who decided to remain anonymous – said that the decision might not even be influenced by the hard numbers; it ride instead on Warner Music Group’s success and persistence at arguing against the deal: “My sense is that the FTC could take a hard line depending on how good a job Warner does in generating complaints … It wouldn’t surprise me if it didn’t go through.”
Universal will go into discussions with the FTC in late May about potentially selling some assets to satisfy some regulators’ concerns. The label could also send a request to the FTC before early June to speed up approval of the deal so it can be finalized within 30 days.
The FTC is currently investigating the influence of Apple, Amazon and other retailers about its methods for pricing digital music and taking a look at the real impact of illegal downloads. The organization may agree with the idea that major retailers force music prices to be low, but Bert Foer, president of the American Antitrust Institute advocacy group said that piracy should not be considered relevant to the investigation: “It’s a passing issue and it will eventually get dealt with. It should not be the justification for allowing an anticompetitive merger to take place.
Consumer groups Public Knowledge and Consumer Federation of America have written letters to government entities asking them to look into the deal, fearing that the 40-percent hold Universal will gain could actually prevent innovation from occurring within the digital music space. Mark Cooper of Consumer Federation of America asserted, “If you control that much of the marquee content, they can determine the fate of new digital business models by withholding content.”
The Commission is also looking into allegations that have been made by various consumer groups about Universal’s resistance to license the biggest-selling items in its catalog to digital startups.
Universal’s Peter Lofrumento claimed consumer groups’ concerns about the sale’s negative impact on sales and music availability within the digital space are invalid: “The future of music also depends on providing consumers with as many legal alternatives to piracy as possible. We have licensed more digital music services than any other music company and will continue to do so to the benefit of our artists, consumers and the overall industry.”
The FTC has not publicly discussed Sony’s purchase of EMI’s publishing arm, but this transaction will likely not be under scrutiny in the U.S.
BitTorrent Sharing: A Promotional Tool?
A new study conducted by a Robert Hammond, a researcher from North Carolina State University revealed that BitTorrent music downloads could actually have a positive effect on album sales. Though major record labels continue to fight against illegal downloading, this paper reveals that this practice could actually be leading to more digital and physical sales.
For the past decade, a variety of researchers have been tracking the impact of piracy on the revenues of the recorded music industry. But until Hammond’s study, no one has had a large enough sample of download statistics from a BitTorrent tracker to get an accurate picture of the phenomenon.
Hammond published his results in a paper entitled, “Profit Leak? Pre-Release File Sharing and the Music Industry.” He collected download statistics of new albums released on the largest private BitTorrent music tracker between May 2010 and January 2011 and then compared them against sales numbers to create a model that would predict the correlation between sales and piracy on an ongoing basis: “I isolate the causal effect of file sharing of an album on its sales by exploiting exogenous variation in how widely available the album was prior to its official release date. The findings suggest that file sharing of an album benefits its sales. I don’t find any evidence of a negative effect in any specification, using any instrument.”
His sample included 1,095 albums from 1,075 artists. And his research zeroed in on albums that leaked on BitTorrent sites prior to their official release dates. Record labels have been the most focused the most on attacking pre-release piracy, and this type of illegal sharing has been at the center of anti-piracy criminal proceedings in both the U.S. and the UK.
However, this paper shows that attacking music piracy sites might actually have a detrimental effect on the industry. Hammond’s research points to the idea that piracy could be a promotional tool for artists and labels that mimics radio play and media campaigns. Still, piracy’s positive effect is modest: Hammond’s paper found that when an album leaks a month prior to its release, the result is only about 59.6 additional album sales.
Hammond’s study was also different from other researchers’ because it focused on album releases and not individual songs: “I focus on how file sharing of an individual album helps or hurts that album’s sales. The question of interest here is whether an individual artist should expect her sales to decline given wider pre-release availability of the album in file-sharing networks. I find that the answer is no.”
Hammond also found that popular artists profit more from piracy than new or emerging artists, who experience no negative or positive effects from pre-release piracy. This information contradicts other research, which Hammond said is because the data he had used is more complex and accurate than data that has been used in previous studies.
Five Lessons for Artists
The British music industry school Bristol Institute of Modern Music (BIMM) recently announced its three-year music management course and a £16,000 ($25,593) scholarship in honor of Led Zeppelin’s late manager Peter Grant, who was also responsible for artists like Chuck Berry and Little Richard. Grant was known for his no-nonsense ability to cut deals with record companies and tour promoters that brought musicians bigger profits and changed the landscape of the music industry.
Grant continues to be remembered as one of the best-known, ruthless, but most successful band managers in history. In an article published last week in Bloomberg Businessweek, Cliff Jones, former frontman of the Britpop band Gay Dad who now runs music business at BIMM said, “We often talk about turning points in rock music – Elvis, the Beatles and the like – but the music business itself had similar sorts of turning points, similar awakenings, and in this area, Peter Grant was a stuperstar of management.”
This article, “Five Lessons From Music’s Most Feared Manager, Led Zeppelin’s Peter Grant” presented a list of five lessons aspiring musicians and music business people can take away from the knowledge and professionalism Grant learned during the course of his career.
1. “Music comes first.” Even when he was negotiating incredibly profitable record and tour deals, it was clear Grant loved his bands and their music. In 1974, he even took the helm of Led Zeppelin’s Swan Song Records to give the band and other bands signed to the label more creative control. He also regularly dismissed opportunities for short-term publicity in favor of campaigns that would have more lasting impact and ensure artists would be around for many years.
2. “What’s good for other bands isn’t necessarily good for yours.” Led Zeppelin was known for not pushing singles because of their belief in the power of the full album and for not performing on TV because, as Grant said, “You just cannot capture the magic of Zeppelin … on a 25-inch screen at home.” While he admitted that TV had worked for other artists like Elvis, he felt Zeppelin’s harder-edged sound was more conducive to live shows. Grant’s firm stance on this led to the band selling huge numbers of concert tickets.
3. “No file sharing.” Grant was firmly against bootlegging and piracy, and regularly visited record stores to collect illegal copies of Zeppelin records and destroy them.
4. “Go the extra mile.” Grant often toured with his bands and set the precedent for other managers. He carefully guarded expenses and made sure his musicians made money. In fact, in 1979, Grant did not believe them when Knebworth festival promoters stated only 100,000 tickets had been sold. So, he hired a helicopter to take aerial photos in hopes of getting an accurate count of the attendees. The crowd was double what had been reported, and Led Zeppelin profited.
5. “Punch people in the face.” Peter Grant was known for physically assaulting those that wronged his artists. He once beat up a promoter that tried to gyp Little Richard and broke a Led Zeppelin bootlegger’s arm. However, BIMM’s Jonessaid, “This is a very exaggerated part of his life … He had a reputation for strong-arming people but it usually wasn’t much more than that.” Jones added that perhaps #5 could be scratched from the list: “We won’t be teaching all of the business ethics that he used.”