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 ‘napster’
Forbes explored how limited-edition sneaker endorsements have contributed to music industry revenue during the past few decades. Also, music attorney Lee Phillips explained why labels made a huge mistake by not signing a deal with Napster. And major labels filed suit against Pandora for allegedly violating New York State common-law copyright protections.
How Do Sneaker Collaborations Affect the Music Industry?
Sneaker brands have recently once again started collaborating with artists and musicians, and, according to Matt Powell of Forbes, with varying revenue results.
Since the 1980s, the music industry and the sneaker business have been linked, with groups like Run-DMC supporting Adidas, The Ramones promoting Chuck Taylors and others getting exposure for a variety of styles and brands. These collaborations have found a market with super fans and collectors. But, as Powell asked, what is the real value of these partnerships, and how mutually-beneficial are they for the sneaker companies and the artists themselves?
In terms of basic benefits of special edition sneaker endorsements, the artist gets a shoe with his/her name on it, and the brand gets to borrow the celebrity’s star power. And retailers who carry the shoes also get an “aura of coolness,” which can attract press and more business.
While musicians rarely are involved in the actual design process, their favorite colors and themes are incorporated into the resultant shoe to make sure the artist’s brand is represented.
As Powell pointed out, shoes endorsed by artists are not sold in great quantities, and are typically limited to 5,000 pairs or less manufactured. Therefore, these shoe sales do not bring in significant revenue for the music industry. Still, their limited quantity does put them in high demand, meaning they often command a high price when resold on the Internet.
The high demand for some of these artist-endorsed shoes has led to some misguided business and sales decisions, most often, the idea that they would sell well if their quantities were not so limited. For example, a decade ago, Reebok tried to capitalize on artists such as Jay-Z and 50 Cent by making more pairs and increasing the distribution of these artists’ shoes twice. Unfortunately, there was not a large enough market for the number of shoes manufactured, and both artists were dropped by the company.
Thus, Powell points out, if shoe endorsements are going to be beneficial from a financial and marketing perspective to artists and companies, “limited” edition needs to remain limited, no matter how popular the artist.
Why Labels Missed the Napster Boat
Entertainment attorney Lee Phillips, senior partner at Manatt, Phelps & Phillips said he is impressed by how the music industry has changed and adapted during the past 15 years. And as he told The Hollywood Reporter, the Digital Age has made his services even more valuable to his roster of musician clients, which includes Barbra Streisand, Neil Young, Brian Wilson, Kenny Loggins, Steve Perry and others. However, he admitted that since the days of Napster, “the record companies didn’t see this coming, and that’s typical for them.”
Phillips was honored on April 16 by the Entertainment Law Section of the Beverly Hills Bar Association as 2014 Entertainment Lawyer of the Year. He said that while the music industry will make it through the “digital revolution,” they have not been prepared for sweeping changes: “There are always changes in the record industry … Piracy has been around since the cassette, but when labels didn’t embrace digital right away, it was too late. I was there at the beginning, representing Real Audio, who hired me to acquire content from the labels, and the negotiations dragged on for almost a year. But music has always been important and will continue to be.”
And he added, the business is at a very different place from the place it was in the mid-late ‘90s, and they are still trying to make sense of the upheaval. “Suddenly, the bonanza of selling 3 million to 5 million copies of an album is gone. As a result, companies have cut their overheads and are trying to find out what their place is … The labels will pay anything to keep prestige acts … But there are only a handful of artists in that category. In signing new acts, it’s not only about talent, but what kind of following you bring to the table. That’s why labels have started signing these 360 deals. Since they’re not making money from album sales, they want a piece of touring, publishing, merchandising and endorsement.”
Phillips has also seen a lot of well-known artists ditch their labels and set up their own deals with release new albums. And he said he is still confident artists will make money in a streaming-centric universe: “We will eventually get to an economic place where it’s possible to be profitable … The amount of money you get per stream will drop, but the amount of people listening will go up, especially worldwide.”
He said corporate sponsorship will also supplement income, as music industry professionals work to link “brands to bands” and book acts at festivals sponsored by corporations.
Phillips also pointed to labels’ refusal to cut a deal with Napster at the turn of the century as a mistake it will continue to pay for as well as a sign of its failure to have an eye on the future of the music industry: “The labels made a mistake not doing a deal with the original Napster … I think they should’ve realized this was another revolution. They should have threatened to shut it down, and did, but offering to make a deal might have made more sense. Since then, they’ve lost control of their distribution, and they’ve been trying to get it back ever since. The album era is over, but I think that’s good for everybody. The artists don’t have to write 12 or 13 great songs; they only have to write two or three.”
Major Labels Calling out Pandora
On April 17, the three major labels Sony, Universal and Warner Music, plus ABKCO, the indie label in control of many early Rolling Stones songs filed a lawsuit in Manhattan’s New York State Supreme Court, alleging Pandora violated the state’s common-law copyright protections by illegally using recordings of songs recorded before 1972.
The New York Times reported, the recent lawsuit joins a series of cases filed in 2013 against Sirius XM Radio, which point out that recordings made prior to February 15, 1972 are not protected by federal copyright law and may not be receiving millions of dollars in estimated royalty revenue.
The four labels are saying Pandora is playing old songs without paying for licenses. The band the Turtles, known best for the song “Happy Together” were the first to act in the original Sirius XM suits, filing a $100 million class-action suit. The labels followed and are arguing that even though songs before 1972 are technically not protected by copyright, Pandora should still have to get permission to use them. The suit includes songs from the 1940s to the early ’70s by artists including the Beatles, Hank Williams, Aretha Franklin, Bob Dylan, James Brown and the Rolling Stones.
A statement from the labels read, “This case presents a classic attempt by Pandora to reap where it has not sown … Pandora appropriates plaintiffs’ valuable and unique property, violates New York law and engages in common law copyright infringement and misappropriation and unfair competition.”
Buddy Holly’s widow, María Elena Holly added, in a statement circulated by the Recording Industry Association of America (RIAA), the coordinator of the suit, “Just because Buddy and the other ’50s musicians recorded songs before 1972 doesn’t mean their songs have no value. These companies’ failure to pay the rock ’n’ roll pioneers is an injustice and it needs to change.”
A Pandora representative said the company was “confident in its legal position and looked forward to a quick resolution of the matter.”
Pandora has over 70 million active users, and Sirius XM has approximately 26 million subscribers. The two companies are two of the most popular listening services. Their royalty payments account for most of the $656 million in performance royalties collected by SoundExchange in 2013.
Napster officially called it quits and folded into Rhapsody last week. Also, in the wake of the EMI sale, experts discussed whether or not the music industry will never reach a point where one major label controls it. And finally, several analysts and legislators explored the complexities of SOPA legislation.
Napster and Rhapsody Merger Finalized
Napster had its last day on November 30. As of December 1, it officially merged with the #1 American on-demand music service Rhapsody, a month after the company finally bought the digital music company from Best Buy.
Of course, Napster has been a controversy in the music industry since its launch in 1999 as a peer-to-peer file-sharing service designed to help users swap music files. It only lived in its original incantation for two years before it was shut down by court order. Music industry trade groups including the Recording Industry Association of America filed hundreds of lawsuits against its users for copyright infringement and illegal downloading.
While it has been over 10 years since the original Napster ceased to exist, what many in the music business have called “the Napster effect” has profoundly shaped the way the digital music space has evolved. The company’s model brought to light a major supply-and-demand problem: Consumers did not want to pay $20 for an entire CD when all they wanted was a few songs off that CD. They also wanted a simple and inexpensive way to get digital tracks. The death of Napster brought about the birth of services like iTunes, Rhapsody and others that would follow.
Rhapsody was founded in 2001, and currently allows its users to download unlimited songs for $10 per month. It has 800,000 subscribers.
Financial terms of the Napster/Rhapsody merger were not released.
Will One Corporation Ever Control the Music Business?
The answer is “not entirely,” according to many entertainment industry experts. Many in the music business have been concerned about an impending monopoly by major record labels ever since EMI was put up for public auction and sold to Universal Music Group (UMG), who bought the record label component, and Sony/ATV, who purchased its publishing division.
Professor Nick Baxter-Moore of Brock University in Ontario, Canada said, “… It might be argued that one reason why EMI wasn’t sold as a whole to either [Sony/ATV or UMG] was to avoid regulatory obstacles being thrown up to block the sale.”
Still, the purchase of EMI has brought the number of major record labels down from four, to three: UMG; Sony/ATV; Warner Music Group. What were referred to as the “Big 5” became the “Big 4” in 2004 with Sony’s acquisition of BMG. The reduction to three has had many seeing the possibility of a recorded music monopoly in the near future.
However, Baxter-Moore and others feel that, while many are declaring the downfall of the music industry, it will never get to a point where any one major corporation has control: “We might get to a point whereby two corporations exercise a duopoly – a situation in which two major firms control the majority of the output of a given industry – that would arise if, or rather when, either Universal, or, more probably, Sony acquires Warner Music Group.”
He also believes that the strength of indie labels means they will never fully go away and allow for a single label to control output: “We might see a recording industry in which Universal and Sony and their many and respective subsidiaries control about 70-75 percent of the market (as long as neither one controls, by itself, 50 percent) and with national, regional and indie labels accounting for the other 25 percent.
While major labels are being purchased for huge figures, independents have slowly been brought into the spotlight in recent years, almost to a level of being competitors of the bigger labels. For example, Arcade Fire’s album The Suburbs, released on Merge, was one of the top-selling albums of 2010, and Adele’s 21, attached to XL was by far the most popular. Both these indie labels have been around for almost 20 years and have adopted business models similar to the majors because they release some music they feel will be more widely popular so that they can fund the release of records from emerging or fringe artists.
As Baxter-Moore asserts, while monopoly may not be inevitable, the EMI purchase could still cause some complications for artists and industry professionals: “Corporate concentration is bad for any industry … The sale of EMI, whether in one piece or two, contributes to further concentration of the music industry … History tells us this is bad news for musicians, for the music product, and for audiences and fans.”
The Stop Online Piracy Act (SOPA) Legislation: It’s Getting Complicated
Critics within congress of the Stop Online Piracy Act (SOPA) officially introduced a “legislative framework” for an alternative bill that they hoped would address some of the concerns many have had about the legislation on December 2. Their proposal was to update U.S. trade laws to implicate that downloading protected content – like a song, album or a movie – from a foreign-owned website would be treated the same as illegally importing foreign hard goods.
SOPA has caused some controversy since it was introduced. Critics have complained the bill directly attacks the freedom of online speech and hinders technological innovation. But proponents claim it is a necessary solution to the huge and growing problem of online piracy, citing stats that show that forty billion music files were shared illegally in 2008 – 95 percent of all music downloads worldwide – and that three-quarters of the video games released in late 2010 and 2011 were acquired illegally.
According to a recent editorial in The New York Times, “Musicians, moviemakers, authors and software designers are not the only victims. Piracy’s cost is measured in less innovation and less economic activity, as creators lose hope of making a living from their creations.” Still, the editorial stressed that legislation needs to be “tightened,” and that infringement as defined by SOPA is too broad and could actually cause some domestic websites that are not breaking any laws to be shut down unjustly.
Under the bill, copyright owners could tell direct payment providers like Visa or advertising networks like Google to shut down a website by filing a notice that the site or even just “a portion” of it “engages in, enables or facilitates” intellectual property infringement, or is ignoring this infringement on purpose. Once accused, websites would have five days to prove innocence. And companies like Google and Visa would be immune to being sued by websites that were cut off wrongfully. So, technically, copyright owners could prevent a website from earning money with one accusation. Provisions could affect websites that are already protected by the 1998 Digital Millennium Copyright Act, which protects U.S. sites with massive amounts of under-controlled like YouTube as long as they take down copyright-infringing material when it is brought to their attention.
The SOPA legislation – as well as similar legislation in other countries like Belgium, Italy and Finland that is already being enforced – was largely inspired by the need to stop foreign, “rogue” websites like the Pirate Bay in Sweden, a bit torrent site that has already been coming up with workarounds to allow it to continue to provide illegal content to its users. According to Torrent Freak, “The Pirate Bay Dancing” add-on has already been created by a group of coders called “MAFIAAFire” in order to redirect Pirate Bay and other bit torrent websites to new domains so if their domains are seized by regulators, their content has new homes. Undoubtedly, regardless of which shape new legislation takes, these types of workarounds will be inevitable.
The newly-shaped bill introduced in Congress on December 2 was designed to address many of the concerns about free speech and commerce. U.S. Senators and Representatives who worked on the new framework said they believe that creating a “21st century trade policy” will help prevent infringement while “ensuring the continued free flow of legitimate commerce and speech.” The revised bill would make it possible for a U.S. copyright holder to petition the International Trade Commission to investigate digital imports. That organization would then decide whether the company was violating intellectual property rights. According to these legislators, getting behind the trade laws helps them stay away from the “pitfalls” inherent in the original SOPA, which they claim gives the government too much power to control the internet based on little more than suspicion, does not provide clear definitions for the justification of shutting down an entire site and hinders the openness and innovation that drives the Internet.
In an official joint statement, the group of Representatives and Senators who came up with the new framework said, “By putting the regulatory power in the hands of the International Trade Commission – versus a diversity of magistrate judges not versed in Internet and trade policy – we will ensure a transparent process in which import policy is fairly and consistently applied and all interests are taken into account …When infringement is addressed only from a narrow judicial perspective, important issues pertaining to cybersecurity and the promotion of online innovation, commerce and speech get neglected.”
The digital space stepped into the music industry news spotlight last week as Rdio officially became an ad-free, streaming music provider and Rhapsody bought Napster. And in the wake of Steve Jobs’ passing, the CEO of Miramax expressed concerns about iTunes’ hold on recorded music.
Rdio Goes Ad Free
On Friday, all-you-can-listen service Rdio – whose backers include Skype co-founder Janus Friis – announced it was lifting the week-long time limit from its free trial and would offer users in the U.S. ad-free streaming. The new plan gives those that want to listen through computers and their Facebook accounts several months’ of unlimited, ad-free listening and access to 12 million songs. Mobile listeners will also get an extended period on their initial free trial, but will prompt them to sign up for a paid subscription after a short period of time.
When users sign up for the free trial, they get access to the service on the web and through desktop apps for Mac and PC. Features of Rdio include on-demand streaming of songs, access to information about what friends and others in the Rdio listening community are listening to in real time, the ability to share music on Twitter an Facebook, the opportunity to create custom, collaborative playlists, a personalized profile and digital music collection, recommendations that are delivered based on your tastes and access to artist and label radio stations.
A full mobile Rdio subscription plan is $10 per month, and a computer-based subscription is $5 per month.
Rhapsody Takes Napster from Best Buy
Streaming music service Rhapsody announced on October 3 that it would be buying Napster from Best Buy, according to an article posted on the Billboard.biz site. This has been a big digital acquisitions year for Rhapsody, as the company also acquired Yahoo! Music’s Music Unlimited and 400,000 subscribers in February.
When Best Buy took on Napster, the company had originally promised to secure some label deals for the online music service, but were unable to deliver. However, Rhapsody is equipped to help Napster stay competitive in the digital space, as it has 800,000 subscribers and a new “freemium” model, which helps keep it competitive with exploding free streaming services such as Spotify. In a statement, Rhapsody president Jon Irwin said, “There’s substantial value in bringing Napster’s subscribers and robust IP portfolio to Rhapsody as we execute on our strategy to expand our business via direct acquisition of members and distribution deals.”
The acquisition will be finalized by November 30 of this year.
Miramax CEO Mike Lang Rants about iTunes’ Threat to the Music Industry
Miramax CEO Mike Lang and Netflix chief content officer Ted Sarandos got serious about iTunes’ negative impact on the music business last week at the MIPCOM conference when they claimed that Apple was more likely to cause billions of dollars of losses in the film, television and music industries than music piracy.
Organizations like the MPAA and the RIAA have long maintained that piracy is what is bringing down the music and film industries. During MIPCOM – the annual conference for movie and TV moguls – Lang and Sarandos expressed much less concern about piracy and more concern about the threat of monopolies. Lang pointed out that people will not engage in piracy if they get what they want; thus, entertainment industry companies should subscribe to the motto “innovate or die” and decide what they distribute and how they distribute it by talking to their customers: “Piracy has not been the bigger issue for our company. I think all consumers at some point in their life, whatever market of the world, don’t want to pirate … and the way to react to that is to offer legitimate and great service for them.”
Lang talked candidly about the lessons he has learned from watching the music industry grapple with their digital strategy: “When consumers tell you what they want, give it to them. Figure out a way to give it to them, because they will figure out a way to get it.” And he stated that while music leaders have been focusing a great deal of energy on piracy and treating it as the main cause of declining profits, they may be doing it at the expense of addressing much bigger issues; the change to digital music in the last decade and the lower prices that have resulted should not be ignored as part of the problem. Sarandos echoed this sentiment and added, “Walmart changed the music industry more than Napster.”
Both also pointed to digital monopolies like the one Apple has on the digital music business as something to pay close attention to in the coming months and years. Lang stated, “Apple is the strongest company in the music industry because there was not enough competition, and still to this day there is not enough competition. As an industry it can’t then influence, packaging, merchandising – all the things that are vital … That’s why we did our deal with Netflix, and why we also did our deal with Hulu. We want multiple players to be successful.”
I got an email from my friend Cameron Mizell who runs the site MusicianWages.com recently. He told me Musician Wages was going to be doing a blogging blitz where lots of folks who blog about the music business would write about the topic “If you could go back to 1999 and give yourself one piece of advice, what would it be?”
That skinny kid framed by Atlantic Records founder Ahmet Ertegun and Jason Flom, then the President of Lava / Atlantic was me in 1999. I was an A&R representative at Lava at the time. Although it wasn’t really that long ago it was quite along time ago in terms of what has changed in music and business.
If I recall correctly:
- The Matrix came out that year.
- The swing music revival was just about at its peak.
- Something called Napster showed up.
- Cher’s “Believe” introduced most people to auto-tune
- No Itunes – no Ipod.
It was slightly later – in early 2000 when the Camp Chaos video went viral – at least in the circles I traveled in at the time. I never thought that piracy and file sharing would have been so rampant. I remember thinking this video was funny…I guess it still is in a much darker way. I can’t say exactly why but it reminds me of that time period a great deal.
That’s more than enough of a stroll down memory lane though. The question at hand? What one piece of advice would I give myself? Other than the suggestion to my mid twenties self that spending a majority of my disposable income in bars was probably not an advisable plan for the future I suppose I would really want to convey to myself the importance of being patient, persistent and consistent.
By nature I’m a pretty black and white thinker. I have a very addictive personality and patience has never been one of my strengths. This combination of traits have made for more challenges than I could possibly describe in a blog post. Thankfully, I have started to find ways around this and forced myself to find some semblance of a normal pace with my work and my life. It has taken ten years of looking at my life and the lives and careers of my friends and peers to realize that those who never strayed from their goals and found ways of working towards them slow and steady seemed to be the people who have made the most impact.
Patience, Persistence & Consistency. I have no significant regrets in my life. In truth I find myself more regretful about the things I didn’t do than the things I did. I believe that trying my hand at many different jobs and careers was a requirement to help me figure out what I did and didn’t want to do but if only I could hop in to a Delorean and pay my 1999 self a visit I would just try and explain that what I have seen and experienced in the last ten years leads me to believe that there aren’t any shortcuts (at least not ones that tend to last) and that people who become great at whatever they do tend not to chase their goals at an unmanageable pace. People who become great never seem to take their eyes off of their goals and make small strides as often as they can. If I could speak to the guy I was in 1999 I would try to explain that just because something I tried to master didn’t happen for me quickly did not mean that it was not worth pursuing… It just meant it was going to take a while longer than I wanted it to.
I don’t really feel the need to translate that into what that means for a musician or a music executive except to say “stick with it” whatever “it” is. I have been asked few times throughout my life what I would pay to live the life I wanted to live and my response has never wavered – “any amount of money”.
Happy New Year all…