This site is a blog for musicians and music industry people. It is a free educational resource and it is also the way I advertise my music consulting services. I am an entertainment professional with deep roots in the music industry. Throughout my music career I have been a major label A&R representative, a music supervisor, an artist manager, a reality show producer, a bass player and the head of a digital record label.
This past week, HITFIX looked back on the 10 most impactful events in the music industry in 2011. And the latest trends have shown big acts gravitating away from big venues. Also, the new chief executive of Sony Music UK talked to The Guardian about the current state of the music industry and the impact of EMI’s split sale.
The Top 10 Biggest Music Industry Events of 2011 Revealed
In her “Music Power Rankings” column on the HITFIX music site, blogger Melinda Newman listed the 10 most influential stories and events of 2011 this past week. In way of intro, she noted, “… any way you look at it, this was a watershed year for the music industry in that the old, traditional way of business continues to morph into something new and those who can’t shift with the times or continue to cling to the old way of doing things will fall by the wayside.” She added, “… it felt like a little of the joy came back this year after a long, bleak period.”
Her picks for the biggest music industry moments include …
Will Big Music Acts “Downsize” Venues?
Music mega-stars may be following trends that have artists connecting more intimately with their fans by moving away from arenas and large amphitheaters and towards smaller concerts at medium-sized venues, according to a report in the Pittsburgh Tribune.
Many promoters in Pittsburgh and beyond have noted that artists like ZZ Top and Motley Crue, held out for huge stadium shows in the ‘70s and ‘80s, whereas in the past couple years, they have been going for medium-sized shows and a more personal experience for their fans.
In Pittsburgh, Bruce Springsteen has played the small venue Soldiers & Sailors Memorial Hall & Museum in Oakland, and Ray Davies and Bruce Hornsby both had shows at the Carnegie Library Music Hall.
Promoters and other industry experts have a variety of explanations for why the concert industry is becoming more “compact.” Columbus, Ohio-promoter and owner of the club Stage AE Scott Stienecker cited the decline of radio and the rise of easy access to music through the internet as a contributing factor: “ [In the ‘70s, ‘80s and even ‘90s] We only knew what radio stations played for us … Now, there’s so much access to music. You’re sitting next to your buddy and he’s into Chip Tha Ripper … There’s so much music that is new, and they always want something tomorrow that’s different from today.” And more options means more bands are touring, and that it’s harder for one band to build a large-enough fan base to fill a stadium or an arena.
Other promoters cite a decline in talent (and a decline in the quality of artists’ live shows) as a reason there is less of a draw when artists come to town. Former Pittsburgh promoter Ed Traversari said, “You don’t have that same style where you used to get a CD or record and every song was good from top to bottom … Now it’s ‘I’ll pick one song from this band, one song from that band.’”
However, according to Billboard magazine, the superstars still do well. U2’s 360 tour is a good example. But other artists like Bon Jovi and Roger Waters both grossed in the $100 million range.
While younger artists like Taylor Swift and Lady Gaga did well last year touring, Gary Bongiovanni, editor of Pollstar is not confident that new talent will be capable of building lengthy careers: “The question is will they be selling tickets five or 10 years from now … That’s a worrisome thing, because we don’t see a lot of evidence of a replacement crop of artists coming along … I think the conventional wisdom is that we will see more smaller shows and less of the larger shows at arenas.” He blames downsizing partially on mistakes that were made recently when bands booked tours at large venues and had disappointing attendance, often having to cancel shows and disappoint fans because of poor ticket sales: “Bands that are savvy will underplay a market in order to build demand and provide a better show for patrons.”
Bongiovanni also talked about why playing smaller venues could mean a better show for artists and their fans: “People who go to a sold-out show in an auditorium are thinking they’re in exclusive company and that they’re lucky to be there … if you’re in an arena, looking around at all those empty seats detracts from the experience.”
Musicians are becoming more aware that touring and the industry are changing. Bret Michaels performs at different-sized venues throughout the year. And when he plays larger venues with Poison, he brings along similar acts like Def Leppard or Motley Crue. According to Michaels, as an artist, you need to seek out a venue “you feel good at. But whether it’s big or small or medium sized … attack all of them like you’re playing Madison Square Garden.”
Nick Gatfield of Sony Music UK: The Music Business “Needs a Massive Shakeup”
The new chief executive of Sony Music UK recently shared his thoughts on the fate of his former co-workers at EMI and why the music industry still needs big changes with The Guardian. Gatfield was senior executive for two and a half years before he leaving for Sony in January 2011.
Gatfield confirmed the rumors that there was a major culture clash between the “straight-laced bankers” of EMI’s owner Terra Firma and the creative music industry professionals: “You had a private equity group and on top of that, people with ‘fast moving consumer goods’ type backgrounds trying to manage the business as if it was a production line of inanimate products.” He called it an “uncomfortable fit” and echoed Thom Yorke’s (of Radiohead) sentiments about EMI being like “a confused bull in a china shop.” Gatfield added, “Your ‘product’ is human beings who have opinions. [The art of managing talent is to] reduce the slippage.” But artists cannot be treated like commodities, because it belittles the art of making music. “You’re dealing with the psychology of running a creative business … The music industry is populated by very passionate and highly intelligent people. It’s not like everyone’s been asleep at the wheel.”
In his interview, Gatfield also talked about how piracy has reshaped the label system and the music industry. Piracy has taken a lot of money away from record companies. And according to Gatfield, the government’s implementation of a “three strikes” rule against offenders through the Digital Economy Act was a good start, but isn’t going far enough: “Broadband businesses are being built on the back of illegal filesharing … As high-speed broadband becomes ubiquitous the problem is going to get bigger and bigger. We need site-blocking, and it’s an incredibly spurious argument for the ISPs to say that they can’t do it because they can do it and they do do it.” He feels the process of cracking down at the ISP level is too slow, as letters to offending customers saying their internet service will be diminished or cut off won’t be sent until 2013: “… the lion’s share of the cost … is picked up by the recorded music industry.”
However, he does feel that in the next two or three years, the music business will start to rise up again. And the digital revolution has not been completely detrimental to the industry; downloads make up around 35% of Sony UK’s music sales.
“In a weird kind of way this business needed a massive shakeup.” And now that the industry has been downsized, he feels the key is to focus on breaking new acts: “The business has to be less cynical … If you have a brilliant piece of music people will flock to it and they will buy it. Quality will win out.”
Alex Jacob is the Senior Communications Executive at the International Federation of the Phonographic Industry (IFPI) in London, UK. He has worked at the IFPI for over five years as a member of the communications team. He is responsible for reaching out to stakeholders and working with the media to explain developments in the music industry and the steps required to develop a sustainable digital music sector in the future. IFPI is headquartered in London, but has offices worldwide in cities including Miami, Hong Kong and Brussels. The organization also works with 45 affiliated groups, such as the British Recorded Music Industry (BPI) in the UK, the Australian Recording Industry Association (ARIA) and the Recording Industry Association of America (RIAA) in the U.S.
Recently I got to sit down with Alex and discuss the latest developments in the worldwide anti-piracy movement, the future of recorded digital and streaming music and steps artists can take to protect their music online.
Thanks so much for taking some time out to talk to me, Alex. Tell me a little bit about IFPI.
AJ:
IFPI is the international trade body for the record labels, both the four internationals and also many hundreds of independent labels throughout the world. We exist to try and persuade governments and policy makers of the importance of strengthening intellectual property laws in the Digital Age so that our members can continue to invest in artists and produce great new music. We also work to extend the rights of our members in areas of Public Performance Rights. For example, you might know that the U.S. is one of the few countries that doesn’t have broadcast rights for producers or artists. So that means unlike in the UK or in France, every time a radio station plays a track, it does pay the songwriter, but it doesn’t pay the producer or artist. And obviously when you have an up to $20 billion corporate radio industry, that’s potentially a lot of money that the music industry is losing out on in comparison to other countries. It also means that when American artists are played – as they very often are – on radio stations overseas, that money doesn’t float back to them because there is no reciprocal arrangement for when overseas artists are played in the U.S. Those are the kinds of campaigns we work on.
Just to clarify, that would be like SoundExchange if it covered the non-digital broadcasts.
AJ:
That’s absolutely right. And then you have sister organizations of SoundExchange such as Phonographic Performance, Ltd. (PPL) in the UK that collect income from radio stations and TV stations that use recorded music. These music licensing companies work very closely with IFPI and our performance rights committees to try and ensure that the best practice is copied around the world and that the rights of producers and artists are extended around the world so that everyone enjoys a level playing field.
I had not heard of IFPI prior to internet piracy becoming such a household word. Would you say the primary function at this point is to protect digital copyright? Is that where a lot of your efforts are focused?
AJ:
Yes. IFPI has been around for a long time. It was founded back in 1933 and has always fulfilled a range of functions. But piracy has always been right up there on IFPI’s agenda. And piracy has a physical world too – the CD world. At one point, one in three CDs sold worldwide roughly was a counterfeit and had no money going back to the artists and record producers, so it was obviously a major issue. In the digital world, we estimate that 95% of music downloads online are unlicensed and illegal, with no money going back to the producers and artists. There’s a quantum leap in the level of piracy from the physical/CD world into the digital world. When you’re laboring under that burden of an industry, it has to be one of your major priorities.
Do you think there is any going back at this point? Do you ever foresee a time where Pandora’s Box will close?
AJ:
I think we’re very keen to embrace the legitimate use of technology. Our members have licensed more than 30 million tracks through over 470 legal services worldwide. So, there’s no objection to making music available to consumers and music fans online. We’re very keen to do that. The problem is obviously the illegal downloading and streaming – the piracy problem. And as I said, 95% of music downloads are unlicensed and illegal. That’s one hell of a figure. We do think that we can actually improve on that. We’re starting to see countries worldwide introduce legislation to tackle the problem – in France, South Korea, New Zealand, the UK. Governments are starting to put laws on the books that actually require some cooperation from internet service providers (ISP)s, who are effectively the gatekeepers of the internet. In tackling online piracy – not just of music, but also of books, films, software, games – President Sarkozy has convened this huge conference in Paris in which he’s brought together the content industries and the tech industries to talk about how we can create what he calls a “civilized internet” – an internet where privacy laws are respected, that can’t be abused for criminal use and one where intellectual copyright is respected and creators can actually get some remuneration for their work. And that doesn’t just mean in the music industry or with iTunes or other services. There are many different business models out there. There are streaming services that are free for people to use and enjoy, such as Spotify, which is available in many European countries, YouTube is of course extremely popular as a free-to-use video streaming service. And alongside that there are subscription services and download stores.
But it’s that help from government that we feel can help us move the needle in terms of piracy. We’re doing our bit in terms of licensing all these range of services. And now government and ISPs need to do their bit to establish the rule of law online and stop it from being, as Prime Minister John Key of New Zealand said, a “wild west.”
Where do the negotiations in the U.S. and the UK – which are two of the biggest music markets on the planet – stand?
AJ:
In the UK, the Digital Economy Act was passed last year. It still has to be fully implemented. There as a judicial review of the Act brought by two ISPs that was rejected, although they are now considering whether or not to appeal that. But under the terms of the new Digital Economy Act, ISPs have to send noticed to individual users that are uploading copyright infringing files and say, “We know what you’re doing, please stop and start using the good legal services that are out there.” And if a system of notifications alone doesn’t work in the UK, then ISPs will be mandated to bring in sanctions.
That’s for uploading only?
AJ:
That’s for uploading copyright infringing material to the internet. Of course as you know, with most online file sharing systems, you are uploading an downloading at the same time, with the nature of the way they work.
It’s interesting that they would catch it on the one way but not both ways. What about in the U.S.? Have you made any headway with government stepping in and protecting these rights?
AJ:
We certainly have a lot of political support from people like New York Governor Cuomo, Vice President Biden and from other politicians. I know the film industry as well as the music industry has been trying to reach out to ISPs. There is no response at the moment, but we’re hoping the U.S. will look and see what’s happening in other countries like France and the UK and see the success story from those countries that may move things forward.
One of my favorite reports that comes out every year is the Digital Music Report that IFPI puts out every January about the volume of music being traded and sold and all sorts of different statistics. You’ve been there for a while and watched this. What is the overall trend you’re noticing in terms of users moving away from CDs and towards digital? Where is music use headed?
AJ:
There’s absolutely no doubt that year after year, digital is accounting for an increasing share of the market. In the U.S., which is probably the most developed music market in the world, you’re seeing a 50/50 split between the digital and physical as revenue channels. It’s not quite that in most of Western Europe, but it’s heading that way. Globally, we’re looking at about a third of record companies’ income coming through these channels. We don’t predict the death of the CD. Vinyl hasn’t even died, which you might expect it to purely on technology grounds. People still seem to enjoy having a physical collection. The gifting market particularly is very strong for CDs. You can’t really buy your mom an iTunes voucher for Mothers Day. It doesn’t have the same impact. We expect the digital share of revenues will go up, but that the CD will still be around for a long time to come.
What about the ratio of purchase to piracy? Has piracy planed at this 95-percent rate?
AJ:
The ratio of pirated music to legally-purchased music has been pretty constant. But what we’re seeing is that as broadband networks roll out across the world, both the legal and illegal consumption of music increases in tandem with that rollout. So, the 95-percent rate has remained constant, but that percentage reflects both rising piracy and also rising legal sales. iTunes for example, earlier this year marked its 10-billionth music file sold. Legal services are popular, but at the moment they are still dwarfed by piracy. We very much hope that all the work we’re doing in terms of working with our governments to try to get a modernized set of copyright laws along the lines you see in countries like France and South Korea will help shift the needle on the 95 percent. The first graduated response systems have only started running in the last few months, so it’s still very early days. But we have to be optimistic that both the new services that are coming on stream and these kinds of actions that are backed by government will have an effect.
The streaming services have come under fire because the compensation rates are not acceptable to a lot of artists. I don’t have an opinion one way or another, frankly, because I just don’t know enough about it. Have you noticed that when a popular streaming service gets introduced into a market that sales decline or increase?
AJ:
Funnily enough, I believe it was Glenn Peoples of Billboard that recently noted that the markets in which Spotify – which is the largest streaming service in Europe – operates have seen much stronger digital growth than the ones where it doesn’t operate. So it seems in countries such as Sweden – where Spotify was developed – that it doesn’t seem to be eroding the download store model. It seems to be complementing it. Physical sales are of course falling in all markets, so it’s hard to say whether streaming services affect that or not. We can say that the overwhelming cause of the overall revenue decline has to be the mass availability of free music to download. Study after study has shown that the net impact of illegal fire sharing is negative on music sales.
In terms of the streaming services, we think they’re a great complement to the download stores, and we’re excited about some of the streaming services that are being developed in Scandinavia at the moment. We’re seeing ISPs bundle music services into monthly broadband fees. They are either partnering with existing services like Spotify, or they’re selling their own. Scandinavia is the lab for these services, but you’re starting to see them come out in other markets now. It could be good for a family to make the decision put the music on their broadband, particularly in tandem with tougher online copyright systems in places like France. If you are Mom or Dad running the family computer, you might think, “Actually, I’ll pay the ten euro every month to get the subscription service and not fall afoul of the tougher online copyright laws.”
I was told by Eric Garland of Big Champagne at one point that the biggest predictor of how likely your music was to be illegally traded online was how active you were on the internet; the more active you were on the internet, the more likely your music was to be stolen. Is there anything copyright /content holders can do that lessens the amount of piracy?
AJ:
Absolutely there is. We run an internet anti-piracy team here, and our international groups do as well. If record labels register their content with us, then we can put out content protection guys to work to try to curb the amount of illegal distribution of their work online. Last year for example, the internet anti-piracy group here in London secured the take-down of seven million infringing links worldwide. They can also help record labels talk through their whole protection procedure, ensuring that they have the best systems in place to minimize the damage from leaks. It’s very difficult to avoid all leaks, particularly once the CD has been shipped out from the factory to the stores ahead of sale. But they can help you reduce the leaks during the period before the official release. And the average leak a couple years ago used to be several weeks before an album was released; now it tends to be just several days. That is at least mitigating some of the impact. And of course subsequent to the leak are take-down notices put out against the blogs and forums that are posting links to the illegal content. That kind of action can really make a difference and can make all the difference to an artist’s initial chart position that , as you know is so important when they’re trying to market the album further and get on. The difference between getting into the Top 20 and not getting there is huge.
So, it certainly is worth any record label, small thought they may be, talking to their IFPI-affiliated national group and registering their content so we can help them.
So, quite literally, someone would go to the IFPI directly – or the RIAA in this country – and just register with you. Does the size of the label matter? Do you have to have a certain number of copyrights?
AJ:
No. The actual official IFPI statute talks about making sound recordings available in “reasonable numbers.” We have many small independent members that have a fairly limited repertoire. But our internet anti-piracy guys are out there working on the big Taylor Swift releases and also classical indie labels like Hyperion on their piano concerto series. There’s a full range of work they undertake. Definitely the advice I’d give to any record label is to go speak to your local industry association and register your repertoire.
About half my readers are industry and half are DIY musicians. So, if you’re a single artist that started a record label to release your own album, and then you went to any of the direct distributors – ReverbNation, TuneCore, CDBaby – would you be eligible for the types of services IFPI and its affiliate organizations offer, or not necessarily?
AJ:
Off the top of my head, I think you would be. If you’re making sound recordings available, even through a partner, and at a reasonable level trying to commercially sell them, you’re certainly someone we’d be interested in talking to. The systems are here and set up and working. We recently had a conference organized by the Association of Independent Music (AIM) – which is the indie body in the UK – to try to set up small, indies. And they are often artists that are self releasing and forming their own label.
If you’re in the UK and interested in becoming a member and registering your repertoire with the anti-piracy team, you can email anti-piracy@ifpi.org. U.S.-based indie record labels should call RIAA about membership at 202-775-0101. To read more about Alex Jacob, the anti-piracy movement and his organization, please visit the IFPI website.
Jim Donio is the President of NARM – The National Association of Recording Merchandisers and has been with the company for just under twenty-two years. Prior to being at NARM Jim worked for a non-profit trade association in the computer industry.
Jim, thanks for taking the time to speak to me today. Please tell me a little bit about the organization, the mission statements and what you do.
JD:
The organization is designed to provide a nexus for commerce and content. It’s the only trade group that does that in the music business. There are fairly homogenous trade groups that focus on different aspects of the industry – be it creative, be it independent, be it the technology, etc. – but NARM is unique in that we bring together as our members the trading partners that build the business and advance the business together from the standpoint of getting the content, working together to promote it, market it, get it together, etc. and be that conduit with the entities that have the direct-facing relationships with consumers. Our members are everything from small, independent physical stores, to online stores to mobile stores to the largest corporate entities such as iTunes and Best Buy, Target, etc. That’s on the retail and service side. And then on the supplier side, we have the four major music companies, many of the highest profile independent music companies and individual members. We have students, we have artists, we have managers, lawyers, etc. It’s a pretty diverse community of the music business, and we focus our resources and efforts around the operational issues that help businesses to execute more efficiently and focus on data and consumer intelligence; we gather information to help people make more informed business decisions, learn more about their consumers, put market intelligence to work for them as well. We have events. We do webinars and salon events, which are a combination of networking and educational events. Then we do a large annual convention which is coming up from May 14th-15th in Chicago at the Hilton, next month. One of the more compelling components of this convention is that we have something called the Music Business Crash Course. It is taught by Rich Bengloff, who is the head of the American Association for Independent Music, and he’s also a professor at Fordham University in New York.
And my former co-worker at Elektra – he’s a bright guy.
JD:
He does the course, pulls together a faculty of some of the foremost names in the independent music business, and we do a day and a half intense course, which covers the economics of the business, new delivery models, outsourcing, promotion, marketing, has some keynote presenters and provides an opportunity for a lot of dialogue and meeting and greeting and getting a sense of, if you’re just getting into this business, what you need to know, and if you’ve been in it for a while and you’re finding yourself lost in all the changes, how you can work your appropriate focus with these new tools. If you’re feeling a bit lost you may need a refresher. We bring together also some new companies in the space. So this is of particular interest to students and artists, and we offer a fairly outlandish $29 registration fee for a day and a half course, which is unheard of for artists and students. If you participate, we throw in a membership to NARM for the year, which is worth $25. So, effectively, you’re paying $4 for this day and a half course. It makes a statement from NARM’s position that new artists, students, people who are learning more about the business are the future of the business, and we want to do what we can to help them learn what they need to learn and make the contacts they need to make to advance in the business. If you’re a company, small label, manager, attorney, someone that is an accountant, it’s $99. I think that’s still a steal for what we’re offering.
How is NARM sustained? It’s educational and a force that lobbies for these various constituents you’ve just mentioned, but is this by government grants or by dues?
JD:
It’s a non-profit organization. It’s not owned. I’m the president, but I don’t own it. It’s not a for-profit entity that is owned by any one person or persons. We have a volunteer board that is comprised of executives from the resale and wholesale sides of the business. We have annual dues that are paid either by an individual, if it’s an individual person or a company. It’s a sliding scale of dues for the companies that is based on their sales volume. We have ten different categories of dues. We also have events and charge registration fees for the various events we do. Many of the smaller events are free to members as a member service, but we invite non-members to register and pay a fee and sample what NARM does, so hopefully they will consider joining the association. That’s how the association is sustained.
Tell me about how as the business has gone through the obvious digital shift, what did you lobby for before there was – let’s be honest and call it – a crisis? What are the central issues you’re lobbying for at this point in the face of outrageous piracy and as the retail side of this business is undergoing some massive changes?
JD:
The entire infrastructure of the music business has transformed in the past ten or eleven years, and what we’ve done is continued to have the association reflect the industry. Today, our board consists of more “traditional” retail entities, but also includes companies like iTunes, Amazon, Nokia and Verizon. We’ve adjusted our representation and our profile in accordance with that. We have brought on someone like Bill Wilson, who came to us from Atlantic Records and from a career that spanned a variety of technology companies as well as labels to be our director of digital strategies and business development. So one of the key underpinnings of his work here at NARM and our “advocacy” for the future of this business is a creation of a working group called the “Digital Think Tank,” which has grown from literally a handful of companies six-eight months ago to about 40 companies. These companies are coming together and trading companies. So it’s not homogeneous – it’s not just the retail companies and the service companies – it’s the retail companies and their label supplier companies and technology partners to work on three pillars of the business: operational standards; metrics and data visualization; product innovation and product development. Bringing people to the table in these areas is designed to help the business perform better ultimately through coming up with ways in which we can come up with common operational procedures and standards, and it probably will not come as a surprise to you that even in this day and even with all these technological advances that have come about, there are databases and systems that still can’t talk to each other and measurements that still don’t coincide. We’re working very hard, and it may not be the sexiest aspect of the business, but it is a foundation for the future of this business to reach a point where the business is growing and going in a very positive direction. Having said this, we still find ourselves in a revenue situation where 65% of the recorded music revenue is still physical and 35% is digital. With that in mind we’re still keeping balls in the air and looking at ways in which there can be alternative strategies for the physical marketplace. There’s still a sizable marketplace, although smaller than it had been, but still sizable for the CD, and for other physical manifestations of music and other forms of entertainment. So we’re working on programs around giving music as a gift, the deluxe product for the super fan and other new physical manifestations that can come out and provide an affordable and exciting way for people to purchase their music in a physical form if that’s what they want. NARM is very much now about finding equilibrium for these various delivery methods, because we don’t see a point in the foreseeable future where its’ going to be 100% zero. We still think there’s going to be a period of time in the coming years where we’re going to be dealing with a physical and a digital and mobile marketplace.
I think there will always be a marketplace – and certainly not for all products – for special products that actually have a place in someone’s hand rather than on someone’s hard drive. I agree with you.
Are you lobbying for different causes at government to petition for funds or help at protecting copyright? Who are you lobbying for?
JD:
Not so much that. We have been consistently supportive in those areas, and we’re certainly not leading those kinds of efforts. The Recording Industry Association of America (RIAA) in Washington, D.C. has been at the forefront of that. But we’ve been consistently very supportive both on the physical and the online piracy side of things. We can’t forget that even in a marketplace where the sales of physical product have declined, there’s still a significant physical piracy business. And I call it a business because it’s in many ways an organized criminal business where there are warehouses that are set up with devices to rip off CDs and sell them on street corners and at flea markets.
In China, they probably rival the legal businesses.
JD:
Or exceed it in some cases. We’ve worked very closely with RIAA where we’ve had retail members testify and act as unofficial agents in their cities to flag and notify RIAA when they see suspicious sales of products. We’ve been very supportive and very involved in that side of the business. In terms of lobbying, I participate with a group of CEOs of all the various music industry trade groups where we’ve traveled to Washington, D.C. on any one of a number of occasion and have visited members of Congress and members of the Senate and talked about the implications of piracy not just in the U.S. but literally as a worldwide crisis. When people look at what the impact of that is and write it off as just being a drop in the bucket for a superstar entertainer, they’re not thinking about the fact that it trickles down to the clerk in a retail store or the warehouse worker who is packing and shipping boxes. Regardless of the level or the stake that person has, it’s stealing something that is having a deleterious impact on someone’s livelihood. Whether they are at the top of the food chain or a different level of that spectrum, there’s still an impact, and it is stealing. No one would ever consider walking into a store and just saying, “I really like those shoes so I think I should just have them because they’re there.” That same psychology should apply to music in whatever form it’s being provided in.
It’s interesting I’m not torn about it and recognize it’s theft but I’m also guilty on it on a number of occasions, to be quite frank. I don’t pay for music like I should, but what’s of greater concern for me than just music, and I can’t substantiate this now on this conversation, but I’m told that America’s number one export to the world is intellectual property, and all intellectual property as bandwidth gets greater or on equal footing depending on file size can be traded like music. So we are in fact, music being one of the most fluid of the properties right now because of the way it was set up damaging a whole number of businesses. Has anyone come up with a decent idea that might fix this issue that you’ve heard recently?
JD:
In the UK they passed a piece of legislation that is designed to partner with the ISPs in the country.
Is that a three-strikes rule?
JD:
Yes. Something along those lines. It’s called the Digital Economy Bill. That’s certainly a direction that I think is being explored. I know it’s being explored here as well, because that’s where all the activity is focused. If there can be some partnership there to identify people who are engaging in this activity, there can be some beneficial outcome of that. But there are certainly differing points of view on this topic.
I’ll wrap it up kind of quick. Is there anything you can advise given the changing marketplace? You have a very unique vantage point on the industry as a whole.
JD:
Here’s what I would say. I’ve spoken to a lot of groups of students who are artists as well as students at NYU and at a number of colleges. One of the strong messages that I’ve put out to that audience is that as creative and as talented as you might be, there was a moment in time when you could focus on that and the business would sort of take care of itself, and you could perhaps rely on others to do for you. We’re no longer living in that world. There’s been a complete paradigm shift, so that if you’re a creative person and a person that creates intellectual property today, you need to understand the business as well as the creative, perhaps never more so than today. You need to be in a position to have all the information you need about the business aspect of what you are doing and make a decision about whether this is a career for you and something you expect to be your sole livelihood, or is it something you just enjoy doing and that you’re going to do on the side, or is it something that is merely a hobby? You need to make a conscious decision. If you’re going to be a working musician, a working songwriter, a working artist, you need to have a very intense internal discussion with yourself and make sure you understand and have a complete command of the legal implications, licensing implications. It’s so much more complicated today that you can’t afford to ignore that and not understand those things. Just to tie it back to this course we do, it has attracted over the number of years we’ve done it a lot of artists and small artist-owned labels who really until they step into this environment and have an opportunity to engage with folks who have been in this place and been in this space really don’t have as clear a sense of the magnitude of this as they should. That’s a service and a role that we hope to continue to fulfill.
To learn more about Jim and NARM visit Http://narm.com and if you are going to be in the Chicago area on May 15th-17th consider attending NARM’s 2010 Music Business Convention
Eric Garland is the CEO and Founder of Big Champagne LLC. For those unfamiliar with Big Champagne it is an online media measurement company. It is a gross oversimplification of what they do but basically they monitor what content moves where online and how often. How many times is apiece of content (a song, a movie, a video) purchased, traded, streamed or stolen online? Big Champagne can tell you.
I first met you in 2003, and you were really just starting the company off. Tell me what the impetus was for tracking media and what you did and what you do now.
EG:
The company started as most creative ideas do with an artist. I’ve tried for many years to take credit for the original brainstorm, but it was my friend Glen Phillips – who I’m sure you know of, and if you don’t, his band was Toad the Wet Sprocket. In the late 90’s he had broken up the band to become an independent artist and do a solo album. And Napster happened, and we were friends, and he knew I was into the sort of tech end of the digital music space.
What were you doing at the time?
EG:
I had been a career management consultant straight out of school and had been working for a big HR consulting firm called Towers Perrin. We did a lot of work in the mid 90’s for Anderson and for Enron. I got out of that business at the right time. But I’d always been involved in what was called at that time, the CM^2 Practice of that business – Communications and Measurement. So Glen and I were talking about the original Napster, and it was at that moment when Lars from Metallica was giving press conferences about suing every last Metallica downloader, and Hilary Rosen and the RIAA were making a lot of noise in the initial litigation. I remember Glen saying one night after a little showcase when we were sitting at the bar in L.A. at Largo, “I just want to sell those people a t-shirt and let them know I’m still alive, and if they were a fan of what I did with the band in my major label incarnation that I’m still here and I’m still writing songs, and I’d love to get an opportunity to play those songs for them.” It was just this very human moment where he said, “I don’t want to sue anyone, I just want to find an audience.” Following that, we had some really directive conversations about how to take – not Napster specifically, I think we were already talking about all these Napster-like things that were popping up on the internet – all these internet communities that were growing up around what the industry viewed as wholesale theft of the music and turn it into a community that an artist could leverage.
The early conversations about Big Champagne were very much about social networking before we even had that term. We did a lot of work with Glen and ultimately a lot of artists in the early part of this decade doing things like marketing to Napster users and Audio Galaxy users. There were a lot of p2p’s popping up that had reasonably good community features – things like artist subscription list. Audio Galaxy had these great things you could sign up for saying, “I’m a fan of Elvis Costello, and if there’s any news about Elvis Costello or new music, you have permission to let me know.” We were doing that very nascent early internet marketing stuff, mostly on behalf of bands and artists because labels wouldn’t touch p2p. And then because of litigation, most of those great social features of early file-sharing networks were taken away. They created obvious targets for the music industry’s lawyers. The p2p operators had to adopt this “See no evil, hear no evil” stance. So we looked at what we were doing and said, “Look, if this becomes really anti-social and about anonymous people hunkered over their glowing streams, uploading and downloading music in their solitude. What’s the opportunity? Is it all just lost?”
We looked at what we were doing and said, “The only part of this business that would translate in that world would be broad metrics and essentially trying to do for what internet music what the Nielsen Company did for early television audiences – quantify activity and assign it geographically and start to do audience measurement.” We said, “We’ll push in that direction, and the rest in our small way is history.” We did that and got a lot of attention doing that because it was during the period when the media was fascinated and consumed with internet and music piracy – up, down or sideways. We became a frequent source for information and by the time things like iTunes and Rhapsody and the earlier legit places for digital music plays came along, we were considered an authoritative source for information about digital music. And we ended up going on to do deals with retailers and portals and social networks.
It started off as Napster and the offshoots – all your p2ps. And now you track all the digital download stores and all the sales for the aggregators.
EG:
We do, yes. And broadcasters. We’ve had a deal for several years with Clear Channel. We work with MTV/Viacom. We’re trying now to incorporate information about – and I say this smiling a little bit – “all of it.” I don’t know if “all of it” really exists anymore, but we’re trying to map as much of the measurable consumption of music as one can. As a result of that, people I knew when you and I knew each other will see me and say, “Hey, Garland, congratulations! You went legit! You came on over from the dark side.” That always sticks with me a little bit. I always want to respond with, “No, we didn’t. We really just followed the marketplace. When people were consuming music on the internet with the original Napster, we paid attention to that. And when they started to consume music on Myspace, before most of the people in the business knew what that was, we paid attention to that … and YouTube and iTunes and all the rest. Our business didn’t change. The ways people consumed music changed, and it’s always been our business to follow them. So that’s what we do.”
I’m not going to dwell on it because I know these questions have been beaten to death – but are we still looking at piracy being 19/20 downloads basically? Are we looking at 95% of all music downloaded is being done without compensating the artist?
EG:
Downloads remain overwhelmingly free and unauthorized, yes. It varies a lot by artist and title. For some artists, 95% is a fair and in some cases conservative estimate to give piracy for certain types of artists.
I didn’t realize. Is there a genre difference or some type of artist that is suffering more from theft?
EG:
Absolutely, and statistically it’s very easy to plot. A big urban crossover or pop smash – a single song that’s dominating the top of the rhythmic or the pop charts – is going to be overwhelmingly downloaded for free and illegally. And you look at the number of records sold compared to those downloads, and it will make you cry. But then you look at Susan Boyle, and not only is there relatively little internet piracy, but you look at her MySpace plays – legitimate, but internet access as opposed to paid traditional retail access – and it’s overwhelmingly traditional bricks and mortar. An upper demo – old folks – love buying records, and a lot of kids don’t even know habitually what that means. It’s rare for them to buy a record at all. As a genre, Nashville, country held out far longer. The big urban records got hit the hardest and fastest and remain by the numbers the most pirated.
Is that because they are more likely to be online in torrent form or for exchange, or is that statistically?
EG:
It’s never about supply. Everything is readily available. You can never say, “Well, Susan Boyle doesn’t get downloaded a lot because it’s hard to find her, and it’s not quite one click away.”
Well sure, at that level. I guess I meant somebody on an obscure indie put out something, and there just weren’t a lot of peers or files out there.
EG:
I think especially in recent years with the rise of one-click hosting sites, which include everything from Rapid Share to Mega Upload and Storage-Dot-O, you’d be dismayed and cry your eyes out if you just Googled “name of indie record” and the word “.rar” or the word “torrent” and “rapid share” just using the Google search engine, without having to fire up any file sharing software at all. It really isn’t about supply, because the internet continues to get better and better about making it all available. It really has to do with two things. The obvious and less interesting thing of the two is age; somebody who is 40 or 50 or 60 is more likely not only to like that Susan Boyle record but to buy it as opposed to grabbing it on Bit Torrent, and somebody who is fifteen is more likely to love the Rihanna record, but is more likely to grab a song – even if they pay for it – for a buck than to spend $15 or $17. That’s the less interesting thing because I think it’s so obvious we can all intuit that.
I think the more nuanced, more interesting thing to me is that it’s not just the demo, it’s also the nature of the relationship between the artist and the fan; meaning, as the nature or the impression of downloads or listens, Lady Gaga’s piracy rate is much lower than a lot of big urban crossover or pop one-hit wonders. Why? Because even though it’s the same kids and even though God knows the material is easily accessible for free online as it is with Taylor Swift, there seems to be more connective tissue and more expectation on the part of fans that, “Hey, this is more than a song, and may even be worth a couple bucks; and it’s definitely an album experience and not just about grabbing the single.”
There’s definitely always been the sense that a nameless, faceless band that came along with one single was much different from somebody who was a press darling and a fashionista and engaged on more fronts.
I guess what I am driving at is – is there something artists are doing online that correlates to more or less piracy?
EG:
Unfortunately I think the clearest correlation there is, the more digitally-savvy you are – because you are usually a reflection or a mirror of your own fan base – and digitally positioned you are as an artist, the more widely pirated you are going to be. That seems to be the overwhelming correlation. If you are selling vinyl records and CD’s off a website and collecting check by P.O. box only, chances are the rate of piracy will be lower.
Wow. That’s almost a slap in some ways. Be online, be everywhere and get your music ripped off. (I’m shaking my head and laughing bitterly and without joy at this point as is Eric)
EG:
We’re laughing, but it’s so abundantly clear that I don’t want to shy away from it. Digital is dual edged. I don’t use that to recommend against leading and making use of all the digital platforms and being an overwhelmingly 21st Century artist. I don’t think you have the option to just say no to that, even though it comes with an extremely high rate of piracy, because that’s where the entire business is going. You’re going to have to be able to win in that environment.
Musician Coaching: Let’s get off the happy track of piracy soon… I was at a Christmas party the other night, and I was talking to a music manager who has huge clients and he said, “Yeah, there’s no money in this business anymore.” And clearly he has different standards than I do, but it’s like, “really?”
EG:
I get that at every gathering, especially at Christmas. It’s a Dickensian Christmas in the music industry, because in part, the harder they come. It is I think in some ways most painful in those upper ranks. I’ll certainly put your friend who represents big artists in that category. Because there is so much to lose, and it’s so immediately visible when the bottom starts to drop out. If you are a struggling artist, or a lower/middle-class artist – someone who has quit the day job or barely – I’m not sure all these macroeconomic forces and things like the global piracy epidemic actually affect you as immediately. Your business is a very different business, and you’re actually still just trying to get heard and make connections with a relatively few number of people, some few numbers of thousands or tens of thousands of people who are together going to help you eke out a living. And at that level, I don’t know that you can point to the sea change in the industry from 2000-2010 and say, “It killed me.” In balance, you’re probably about where you would have been or a little bit north of where you would have been. Because with that sea change have come some advantages to the little guy. But if you’re Aerosmith or the Eagles, of course you have some sob stories to tell, because those big checks are still big by your standards or mine, but they’re not as big. And they never will be again.
Do you think there will ever be a diamond album?
***(RIAA classifies an album as diamond when it has shipped ten million copies)
EG:
I read something that suggested that a couple of albums over the last ten years sort of crept into the diamond. I think the Beatles’ Number One is now diamond.
I’m not sure that counts.
EG:
That was the point I was going to make. Some catalogue records may still continue to creep into the diamond category typically; but will there ever be another new artist who genuinely sells ten million copies, an artist that is not already known to all of us.
And you can say that with absolute certainty with all the numbers you have flying around you daily?
EG:
Oh, with great confidence. I tried to dramatize it during the MJ news cycle. We got a lot of calls for number when Michael died and the pile-on of digital sales of his catalogue started; and somebody made the mistake of asking me the question, “Will there ever be another Michael Jackson.” And I said, “No.” And the person said, “What do you mean? You didn’t even take a pause!” And I said, “Well, 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. So when I say with confidence, “No- We’ll never again have a diamond album,” it’s not because we won’t have great artists or very popular artists. It’s just that the world will never be captive to so few signals ever again, so the marketplace will always be more fractured than that.
I definitely want to change subjects and talk about the fact that you’re tracking the evolution of how records begin to creep and sell both indie and major and across the board. Where do these things that go viral start usually? And are there any such places that are not as obvious, or are there channels you believe are underserved where a lot more files are propagating?
EG:
It’s funny, and it’s kind of reductive to say, “Internet viral is just in some ways a new expression of nomenclature for word of mouth.” Because it is really all the same thing it’s always been, only with increasingly powerful tools. You remember in the early days of internet – mid 90’s to late 90’s – there would be these e-mail forward viral phenomena: “Dog Bites Man’s Crotch” or something. There were these horrible little QuickTime videos, and those things at that point no one was tracking them, because it was just going Outlook to Outlook or inbox to inbox. But we know because we would go to lunch and talk about it that they were viewed tens of thousands of millions of times. In the same way, e-mail is still a key driver of word of mouth. We’re typically not e-mailing Quick Time videos around anymore, we’re e-mailing YouTube links. But e-mail is a huge driver and obviously Twitter and all the various messaging clients of all the social nets – Facebook, etc. – but it’s still fundamentally comes down to a lot of people simultaneously deciding that something is worthy of a few seconds of attention for fill-in-the-blank-reason. “This is curious, this is funny, this is outrageous, this is sad, this is impossible.” When I think about the OK Go treadmill video, I think mostly, while it certainly got a lot of attention for the band, it was not about a pop rock band, that was about nerds on treadmills and executing what I think people thought was an outrageously accomplished and choreographed routine in one take: an impressive feat of humanity. That’s one of the good ones, because I think people wanted to watch it for the right reason.
So the music was a backdrop for a stupid human trick in your estimation?
EG:
Yeah, but a friendly, empathetic stupid human trick in a sense that I think people were genuinely impressed and cheering these funny guys. It wasn’t, as so many of these things are, strictly Schadenfreude or mean-spirited. There are a handful of things that appeal to some aspect of our humanity, and that just drives us to tell a friend, and we have so many tools that make it “viral internet phenomena.” But I’m not convinced that the hit rate is very high in terms of there being something really additive or it building some asset that an artist can use and capitalize on and realize long term. Sometimes it vaults an artist into a level of recognition or consciousness that they can really benefit from, but I’m not convinced that’s eight out of ten; it may be two out of ten times.
You have all this wealth of information, and clearly, if you release a video you should be on YouTube and if you release a song you should go to one of the many cheap to free distributors and be on all the most popular digital service providers. But are you finding that there are any platforms on the rise that people should be aware of, or any things bubbling up from places that are unexpected?
EG:
I’ll come back around and answer that specifically so I don’t bury your question, but what it makes me think first is, I’m not a big believer in short cuts, cheats, jumping to the front of the line. In other words, I think a lot of artists are thinking, “If I’m one of the first guys who’s using the next Twitter or the next Facebook, I’m going to have this huge advantage and going to have gotten one over or exploited the tools in a way that essentially let me jump the turnstile.” I’m not a huge believer in that, and I say that in part from the perspective of someone who like an aspiring artist is trying to build attention, a fan base and relationships in my case for a little company. We’re trying to do this too, and it’s certainly not a direct analog, but we’re certainly trying to maintain a profile and build meaningful connections and grow the scope of those connections. What we always say to ourselves and what I would say to any artist is, certainly, be everywhere to the extent that it costs you nothing to do that – not even time – to the extent that all the videos are uploaded to a single YouTube account that is clearly identified as being yours and not being even that clever but being diligent about things like managing your meta data, making sure your digital music is available everywhere that someone might meaningfully look for it. You can work with somebody like a TuneCore or a CDBaby to outsource that stuff for you.
But be everywhere not in the sense that you’re spending 40 hours a week as an artist doing things that artists don’t really do, but rather tick all the boxes. Fine. But then your real job is to use that flint rock and create some little sparks and from sparks a little kindling and from kindling a fire, and then fan that fire, and I don’t believe in a whole lot of short cuts when it comes to that. You have to be good, and then you have to focus on that first and second degree of separation and build your Kiss Army, one by one, by one.
Sometimes, without the benefit of the traditional media machine (radio promo and video ads) an artist makes it through. It’s so rare though and the circumstances always seem to be so specific to that artist that there seems to be nothing that can be learned from their example or replicated by others. There weren’t really a series of moves on the chessboard. For most artists success is something that has to be earned fan by fan.
I was once told by Ahmet Ertegun “A hit will find a way.” I guess that hasn’t changed.
EG:
Right. I think that’s true. To your question though about are there any new places, new venues?
You would know if there are places online or tools to look out for. I would love to know your perspective on companies or platforms that would be of interest or are vastly underserved.
EG:
I actually think that one looming opportunity is in these one-click hosting sites, because I’ve never seen artists use those platforms at all. They’re free. You know what I’m talking about, this category of things that includes Mega Upload and Rapid Share. They’re free. You can be the one to create what could in effect be your EPK or content bundle that you want anyone to be the first thing to find or see. You could be the one to upload that and watch. It’s like this brilliant stroke of free SEO in the sense that anyone that searches for your relevant keyword – the name of your band or song – I guarantee you among the top results are going to be these one-click files. Google floats them all to the top. It’s in some ways really driving the piracy problem. But as an artist or manager or label distributor, you could take some control of that.
You can be the one to determine what the content is and how it’s distributed and whether it comes with a file on or an opportunity to get someone to opt in or have a relationship with you. It’s just something where strategically, in the same way artists were loath to use file sharing networks because they didn’t want to get their hands dirty – not so much artists, but management companies didn’t want to work with file sharing companies because they didn’t want to get their hands dirty. In the same way that it’s verboten to work with a bit torrent site, I think we don’t have that luxury with one-click hosting. These are not pirate businesses, these are legitimate businesses. They are sometimes U.S.-based, venture-based, really profitable businesses. And are they enabling infringement in the same way that Google and YouTube are? Sure, all day every day, but they’re not of the variety that they’re going to be easily reprimanded or knuckled under, so I don’t think we have the luxury of saying, “Oh, I don’t want to work with them.” I think there’s too much opportunity there.
I didn’t even think about that, but with Google’s music initiative anybody who would upload that on several of those sites could definitely drive what the first impression is or what one of the first impressions is…
EG:
To put a fine point on that one, if you are not making streaming music available now – we’re not even talking about giving something away for free – through Lala and what will now be Myspace Music, iMeme and iLike, you’re not even covering your bases fundamentally. And you probably don’t have time for that, nor should you make time for that; but CDBaby or TuneCore or one of the other aggregators will.
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