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 ‘new music industry’
Industry experts discussed whether or not popularity of British music is declining worldwide. And a new global support organization for music creators that want to better understand the music business launched. Also, a new study showed that the total income of music composers has actually gone up in the Digital Age.
Brit-pop: In Decline?
Music fans’ tastes are becoming more globally diverse as they turn to local music and music produced in their home countries, according to the results of a recent study reported by the Daily Mail and published in the Economic Journal. The percentage of the pop music charts occupied by British artists has been in decline since The Beatles and the Rolling Stones dominated during the British Invasion of the 1960s.
Joel Waldfogel, a professor at Carlson School of Management, University of Minnesota and his co-author Fernando Ferreira analyzed data from charts in 22 countries during 2001 and 2007 – representing 98 percent of the total music market. They discovered that Britain still has a strong presence on the charts, fans have begun to gravitate towards more of their own domestic artists.
The project examined 23,000 artists and showed that in the 1960s, 30 percent of charting music was British. While British music received a boost in the 1980s thanks to Duran Duran and Wham!, its popularity has dropped overall. Dido and Robbie Williams were the only two recent British artists that made it to the elite list of chart toppers.
Waldfogel and Ferreira found that American music has definitely grown in the 21st Century, but the Internet has been a huge help to musicians in small countries. American music now comprises 60 percent of the charts, going up from 40 percent in the mid-80s. And of the 31 artists that showed up on the charts of 18 countries simultaneously for at least one year between 2001 and 2007, 23 – such as the Backstreet Boys, Christina Aguilera, Eminem and Jennifer Lopez – were from the U.S.
The “superstars” list consists largely of American artists. But this economic project showed that fans have also been buying a lot of music by stars within their hometowns and indigenous countries. In the 1980s, half of music was bought by domestic artists; by 2007, that number rose to 70 percent. This increase can be attributed largely to MTV and the Internet, which together helped get exposure for smaller artists.
Waldfogel and Ferreira stated, “Some smaller countries actually benefit substantially in this global market, as they are able to achieve market shares that are sometimes two or three times larger than the relative sizes of their economies … Moreover, new technologies that lower trade costs do not appear to have a destructive effect on local production and consumption of music.”
Waldfogel added that while many see MTV and the Internet as saturating the music industry and “killing diversity,” the Internet has actually had the opposite effect: “Overall, our findings suggest that concern about cultural domination by large economies – particularly the US – may be misplaced for music.”
The study did offer some more good news for the British music economy: The UK is one of only six countries with a music industry share that is greater than its GDP share, along with Sweden, New Zealand, the U.S., Finland and Canada. British music sales were 52-percent higher than its GDP share.
An article late last week on Billboard.biz confirmed Britain’s continued high music industry share and gave a first look into what new digital technologies are doing for artists worldwide. In 2012, One Direction and Adele pushed British artists towards a record album sale share of 13.3 percent, the highest ever recorded. The BPI described the surge as “something of an invasion and noted that one in seven of artist albums sold last year were by musicians from the UK. The only artist to interrupt a British world’s top-selling album in the past six years was Eminem, with 2010′s Recovery.
BPI chief executive Geoff Taylor said that music is “fundamental to Britain’s identity as a nation” and added, “As music goes digital, Britain has the potential to be even more successful, connecting instantly with fans who love our music wherever they may live. The time is right for government to back innovative businesses like music that can lead the economy back to growth.”
Brand New Fair Trade Music Network Launched
The music industry made history last week when more than 25,000 songwriters and composers from 50 countries in Europe, North America, South America and Africa formed the Fair Trade Music Network, a new independent support group for music creators. A press release on Businesswire reported, “its immediate goal will be the championing of a set of Fair Trade Music Principles designed to ensure transparency, fair compensation, and autonomy for music creators in an increasingly complex and non-transparent music business landscape.
Founders call the group a “network of independent alliances,” and it will not only act as an advocate for music creators, but also provide a set of resources about international legal and business information that affects songwriters and composers. Founding members include the European Composer and Songwriter Alliance (ECSA), Music Creators North America (MCNA), the International Council of Creators of Music (CIAM), the Pan African Composers and Songwriters Alliance (PACSA) and the Alliance of Latin American Creators of Music (ALCAM).
The group’s first project will be the Fair Trade Music initiative, about which the group released the following statement: “… more than any other sector of the music community, the songwriter and composer community has been hit the hardest by the catastrophic losses that have financially decimated the music industry since the beginning of the 21st Century. Our Network recognizes the drastic need for music creators to independently analyze the reasons for these devastating setbacks, devise solutions that benefit creators as the bedrock of the music industry, and advocate for the implementation of those solutions with our own voices. The initial result of this process has been the formulation of the Fair Trade Music Principles, which provide a framework for ensuring that music creators can survive and flourish in the future, to the benefit of individual songwriters and composers, consumers, and culture in general. It is those principles that we have come together to champion.”
Principles of the organization include fair compensation, transparency, recapture of rights, the right of musicians to form independent music creator organizations and freedom of speech. The Network has already started to develop activities that will help it promote these principles, including advocacy in favor of a system of “exclusive assignment” of performing rights in musical works to PROs outside of the U.S., opposition to non-transparent, direct performing rights licensing agreements currently being exercised in the U.S. and support for stronger and more creative approaches to tackling piracy.
Alfons Karabuda of ECSA, Rick Carnes of the Songwriters Guild of America and MCNA, Eddie Schwartz of the Songwriters Association of Canada and MCNA and Lorenzo Ferrero of CIAM talked about the historic foundation of the new Network: “Only a unified global music creator community can meet the challenges of survival in a fully internationalized music industry. It took many decades to accomplish the enormous task of organizing such a diverse geographic Network, but now having done so, we have embarked on a new course designed to ensure that the voice of the music creator is heard on every issue, loud and clear, throughout the world. We think for ourselves. We act for ourselves. And we speak for ourselves. We have many partners and allies, but ultimately, we take responsibility for our own futures. That is the new narrative, and it will be pursued in our own voice.”
Artist Incomes Up in the Digital Age
A new study indicates that the net incomes of music composers have actually gone up in the last 15 years, in spite of the challenges attached to file sharing, announced Peter Suciu of redOrbit.com.
Music downloading has been a hot-button issue that has led to lawsuits, including Metallica’s attack of Napster in 2000, which had them alleging that Napster was committing copyright infringement and violating the Racketeering Influenced and Corrupt Organizations Act (RICO). Of course, the lawsuit led to Napster’s demise and forced music tech companies to rethink the business models for their music downloading and sharing services, which led to iTunes and the newest music streaming services, all of which have actually helped increase revenues.
The above are some of the discoveries within the doctoral thesis “Nothing New under the Sun – Essays on the Economic History of Intellectual Property Rights in Music.” The thesis comes from the School of Business, Economics and Law, University of Gothenburg and reveals how the total incomes of composers within the music business have increased in the past 15 years.
Study author and researcher Staffan Albinsson said, “In 2011 their income from music streaming increased by 70 percent from the year before, and today downloads are generating more income than CD sales.”
Research focused on Swedish stats from 1980-2009 and found that the music industry has definitely lost revenue courtesy of illegal downloading. But composers of the music have also seen great increases in their income during the same time period thanks to substantially-higher revenues from concerts, radio and TV. And these revenues have experienced even more explosive growth since 2010.
Spotify and other streaming music inventions have made a huge impact: “The consumer can access a lot of material without breaking the law, and the rights holders are getting paid. There is no need for a discussion until next time new technology is introduced.”
Albinsson also found that new technology has historically not been embraced by the music industry when it is first introduced, which almost always has claimed that technology will lead to lost revenue. The printing press, the gramophone, radio and cassette tapes all caused debate about intellectual property rights when they were first released.
Albinsson does hope that intellectual property laws will continue to get scrutinized in order to improve the landscape for music creators and fans: “I’m convinced that different forms of intellectual property rights have different qualitative implications … The most illegally downloaded music is probably also the most expensive music to produce, and if the high costs cannot be recovered, this music won’t be there to enjoy.”
Pandora surprised the industry with reports of a significant ad revenue increase. Also, Ticketmaster claimed bots have been buying over 60 percent of the best seats to artists’ shows. And the chief executive of the British Arts Council talked about why artists need more support than ever before to build sustainable careers.
Pandora’s Skyrocketing Sales Adjusting Business Perceptions
Internet radio service Pandora reported a $28.6 million loss in the first quarter of 2013. But it also made $125 million in sales during the same period, a 55-percent increase from the same quarter in 2012 and a gain that can be attributed largely to ad revenue from unpaid subscriptions. And according to an article on Wall St. Cheat Sheet, many analysts are wondering what the implications of a streaming music service surviving and even thriving off its unpaid listeners could mean for the industry.
Pandora’s 49-percent jump in ad revenue to $105 million accounted for 80-percent of the company’s total sales. And the company is making moves to grow further, as it has also recently expressed that it would be moving into some of the same spaces as FM radio stations with its Pandora Premieres station, a station dedicated to playing unreleased songs from upcoming EPs and albums.
Pandora Premieres will be modeled after classic radio stations that gave music fans an inside look into an artist’s new album and will also present interviews about the studio experience and their careers. And Pandora will likely be getting this content for free from record labels, which will be getting much-needed publicity from parting with it.
Google’s All Access service has been labeled a competitor for Pandora, but experts claim that because these two services follow an entirely different formula – with All Access charging a monthly subscription – they will not share the same type of subscribers. Pandora’s user base – which grew by 700,000 in 2012 – and continued attempts at finding creative ways to earn income could help give it long-term viability.
Bots Hindering Ticket Sales
The summer concert season typically brings in significant revenue for artists, labels and venues. However, everyone involved the concert industry as well as fans could be fighting against bots in New York, Russia and India, grabbing up the most desirable tickets (many of which go unused) and contributing to low attendance and other disappointments, reported The New York Times.
Many fans are finding buying tickets impossible, as shows for major artists like Justin Bieber and others often sell out within minutes thanks to computer programs run by scalpers that can buy up seats faster than humans. To get to the bottom of the problem, Ticketmaster hired machine learning expert John Carnahan of Yahoo at the end of 2011 to head up its anti-bot initiative.
Ticketmaster and parent company Live Nation Entertainment have both become aggressive about battling bots both to put more tickets into fans hands and improve the reputation of the company, which has been in decline for several years. Bots have been causing problems in live music for years. And now, these programs are cheap, easy to procure and helping pump money into a secondary ticket market that has become its own multi-billion-dollar industry.
Investigations by Ticketmaster uncovered that bots have been used to purchase over 60-percent of the best tickets for some shows. And recently, the company sued a group of scalpers claiming it had used bots to purchase as many as 200,000 tickets daily.
And anti-bot initiatives have brought on new problems. Live Nation’s chief executive Michael Rapino admitted, “As with hackers, you can solve it today, and they’re rewriting code tomorrow … Thus the arms race.”
Still, because Carnahan and his team is closely monitoring each visitor to the Ticketmaster site, the company can figure out differences between humans and machines. Humans might click many different buttons at different speeds and different spots on the computer screen, whereas bots often click quickly in the same spot on the screen every time.
Carnahan’s traffic reports recently showed that suspiciously-bot-like visitors were sometimes making 600 times more ticket purchases than humans. Systems have been put in place to “speedbump” bots rather than kick them off the system entirely. They get slowed down, or, in essence, sent to the end of the line in order to let in more real customers. “We’re not trying to stop anybody from buying tickets … We’re jus trying to make sure that a fan can buy the tickets,” stated Carnahan.
Ticketing bots are often cheap and created in countries outside of the jurisdiction of American law enforcement, like Russia and India. Rob Rachwald of computer security firm FireEye revealed that one site in Russia charges only $13.90 for the keys to 10,000 Captchas. Ticketmaster replaced its Captchas in January with more difficult-to-crack versions. The company hopes to implement a new, secure mobile device system that will get rid of Captcha tests.
Live Nation did not reveal how many of its 148-million annual tickets are bought using bots. And few ticket resellers will admit to using them. Sanctioned groups such as the National Association of Ticket Brokers publicly disparage them and claim to be cooperating with anti-bot procedures.
But bots are still getting blamed for low attendance by the industry, particularly by concert promoters, artist managers and ticketing services. Jim Glancy of the independent concert promotion company The Bowery Presents stated, “There are sold-out shows in reserved-seat houses in New York City where we will have 20 percent no-show, and that 20 percent will be down in the front of the house … It’s speculators who bought a bunch of seats and didn’t get the price they wanted.”
Ticketmaster sued 21 people in federal court in April for fraud, copyright infringement and a slew of other crimes related to using bots to look for millions of tickets over a two-year period. But bots may not even be illegal. They have been banned in a few states, but enforcement of the law federally has not panned out well for the industry.
Not everyone agrees that bots are really casing problems for concertgoers. StubHub’s nonprofit group The Fan Freedom Project has been supporting ant-bot initiatives nationwide. But its president Jon Potter has also criticized Ticketmaster’s “holds” policy, which reserves large groups of tickets for sponsors, fan club members and industry contacts, preventing the general public from buying them, even when they go unsold.
Live Nation is also in a tough spot, because it actually profits from the resale market through its TicketsNow arm as well as through deals with some major sports group. Rapino does not feel this takes away from its anti-bot stance: “I have no problem if you bought a Justin Timberlake ticket and you decide to go sell that ticket to somebody … We would first and foremost want to make sure that the first ticket sold, that the fan has a shot to buy that ticket.”
Alan Davey of Arts Council England, on Perceptions in Popular Music
Chief executive of Arts Council England Alan Davey recently said that shows like X-Factor and the Idol franchise are bringing down popular music. In an interview with the BBC, he said that the perpetuation of the myth of “overnight celebrity” is causing more major record labels to drop artists whose first or second albums do not do as well as expected: “They want talent to be delivered to them ready-made. They’re not prepared to take a risk over a long period of time investing in talent.”
He also said that this phenomenon is something that happens in many industries under pressure, as the music industry has been under throughout the Digital Age as it struggles to make sales: “… They’ll concentrate on giving the public what they think the public want, rather than exploring and getting the public to find thing that they didn’t know they want.”
His concerns – shared by others on the Art Council – have led to the creation of a fund to help financially support emerging artists as they are trying to start a sustainable career in music. The Momentum Music Fund is setting out to distribute £500,000 among musicians that need capital for recording, touring, marketing and other career-building activities.
Vanessa Reed, executive director of the PRS for Music Foundation, which will be responsible for distributing the funds added that artists need more support than ever now that fewer individuals and companies are investing in talent long term: “It’s when artists are actually seen to be professionals, they’re working in the industry, but actually they’re struggling to have their voice heard … They are competing against the huge marketing machines that are supporting the kind of artists that come through X Factor.”
Artists and music industry leaders discussed the state of royalties from streaming services this past week. And AEG was investigated for fair trade violations surrounding ticketing in the United Kingdom. Also, artist manager, music-industry executive and international consultant Jeff Rabhan made some detailed predictions about the future of the music industry.
Artists Streaming Royalties Still Paltry
Fans, artists and music industry entrepreneurs weighed in about streaming services like Spotify, Pandora and even YouTube in an article published in The New York Times. Together, they painted a picture of how streaming services are really reshaping the overall landscape.
Spotify began nearly five years ago in Sweden and has been seen by many of the future of digital music. Sam Broe, a music fan from Brooklyn, was one of the first to sign up when it hit the U.S. in the summer of 2011. Broe said that using Spotify’s premium service has helped cut his monthly music budget from $30 to $10: “The only time I download anything on iTunes is in the rare case that I can’t find it on Spotify.”
Spotify, Pandora and YouTube have caused excitement within the ever-digitizing industry, which continues to struggle with piracy issues. However, even as digital companies explode into multi-billion-dollar entities, meager royalties have caused artists and others to worry about their livelihood.
Indie cellist Zoe Keating illustrated what streaming is actually earning for artists in 2012. She posted spreadsheets to her Tumblr blog that explicitly showed the royalties she earns from different music services, all the way down to the ten-thousandth of a cent. After her songs had been played over 1.5 million times on Pandora over six months, she earned $1,652.74. And on Spotify, 131,000 plays earned her $547.71, about .42 cents per listen.
She stated, “In certain types of music, like classical or jazz, we are condemning them to poverty if this is going to be the only way people consume music.”
However, low streaming music royalties only continue to reinforce the music industry transformation that has been in progress for decades. Record royalties have been a fraction of the sale price since the age of 78 r.p.m. records. And services like iTunes have only brought artists 7-10 cents after retailers, record companies and songwriters take their cut, giving birth to the industry term “a river of nickels.” But streaming has turned nickels into micropennies.
Will these micropennies ever add up? Chief executive of BMG Rights Management Hartwig Masuch says that only those artists who are aggressive about playing live shows will ever be able to be successful professional musicians.
However, Spotify board member, co-creator of Napster and former Facebook president Sean Parker said he believes that Spotify will one day get enough paying subscribers to help bring the industry back to the lucrative days before his company Napster began to change everything: “I believe that Spotify is the company that will make it succeed … It’s the right model if you want to build the pot of money back up to where t was in the late ‘90s, when the industry was at its peak. This is the only model that’s going to get you there.”
For mega pop artists, streams of hits have actually been providing significant revenue. A Google executive said that Psy’s “Gangnam Style” earned $8 million from YouTube when it was watched 1.2 billion times. However, most artists do not go viral.
Also, each service pays a different rate. Pandora’s, for example, are set by Copyright Law. And while Spotify did not officially confirm its rates, many executives who have worked closely with the company said it pays about .5 – .7 cents per stream ($5,000 – $7,000 per million plays) under its paid service and often 90 percent less for plays under its free service. And despite the fact that Pandora and Spotify have grown sharply in value, they still have not added significantly to the American industry’s $7 billion-per-year revenue. Downloads from iTunes and others made $2.6 billion in sales in 2011.
Cliff Burnstein, owner of the company that manages Metallica said that as long as paid subscriptions keep going up, there is still hope for streaming services to make a positive impact: “There is a point at which there could be 100 percent cannibalization, and we could make more money through subscription services.” The point is estimated to be at about 20 million subscribers worldwide.
Top industry lawyer Donald S. Passman, author of All You Need to Know about the Music Business said that royalty rates will go up for artists in the same way they have every time new technologies hit the industry: “Artists didn’t make big money from CDs when they were introduced either … They were a specialty thing, and had a lower royalty rate. Then, as it has become mainstream, the royalties went up. And that’s what will happen here.”
AEG Struggling against Monopoly Claims in the UK
AEG and Live Nation are in a battle for control over Hyde Park, Wembley Arena, the Olympic Stadium and several of London’s other biggest venues, said an article in The Guardian. As a result, AEG is being investigated by the authorities and accused of raising ticket prices and giving fans few choices when it comes to buying tickets to see big acts.
The live music market has been taken over by U.S. companies Live Nation and AEG. In 2012, Live Nation coordinated ticket sales for tours by Bruce Springsteen and Coldplay. While Live Nation recently took over the rights to shows at the Olympic stadium in East London, AEG has managed to snag exclusive rights to other huge venues like London’s 02 Arena, Caesar’s Palace’s The Colosseum in Las Vegas and many festivals, such as Coachella. AEG also owns LA Galaxy and is an L.A. Lakers investor.
But it was AEG’s recent ability to take over Wembley Arena, which had been controlled by Live Nation for seven years that set off alarms. The Office of Fair Trading (OFT) started officially investigating AEG in early January, concerned that the Wembley deal in particular might lead to a “substantial lessening of competition” within the live music industry of London.
A regulator decided in 2000 that Live Nation and Gaiety Investments needed to get rid of Hammersmith Apollo and The Forum before they could buy into Academy Music Group. One music industry source said AEG is facing a similar problem: “If AEG have control of the management of the two biggest venues there is of course the issue that they could look to impose ticket price increases, and exert more control over the artists and types of events.”
A Live Nation insider claimed that the company is grabbing venues to keep up with the ever-increasing demand for live music: “Live Nation is in favour of anything that promotes competition, choice and access to different music genres for audiences, not just in London, but across the UK … The company is committed to meeting that demand in 2013, including in the Olympic Park.”
Paul Bedford, the head of live events at a company that has helped set up festivals such as Creamfields and Field Day in Victoria Park said small ticketers will be critical to keeping live music alive in the UK: “It would be a crying shame for everyone if all the parks and key venues put out contracts to just one operator. Smaller, independent players are like indie record labels, fleet of foot [compared] to the major companies and essential for discovering new talent.”
Jeff Rabhan, on the Future of the Music Industry
Jeff Rabhan weighed in about what the future will hold for the music industry in a guest post in the ReverbNation blog. As an artist manager, music industry executive, international consultant and Chair of the Clive Davis Department of Recorded Music at NYU’s Tisch School of the Arts, he discussed what the climate could look like in the next few years for those looking to make careers for themselves in the business, which has changed more in the last ten years than it has in the previous 50. He explored four key areas: record labels; live shows; radio; licensing.
In terms of major record labels, Rabhan believes their rosters will shrink significantly, and they will shift focus to only acts that are a fit for radio. Labels will likely specialize in certain genres of music: “Imagine a Sony Music that only releases female pop records like Beyonce, Adele, and Shakira. Or an Interscope that becomes a hip-hop only label.” And this will open up the playing field for independent labels, who have already started grabbing more of the marketplace. They earned 32.6 percent of U.S. album sales in 2012, according to Soundscan.
And a “catchy song” will not be enough anymore to attract label attention. Artists will be responsible for building an interesting story for themselves that will appeal. Rabhan advised artists that are still looking for a record deal: “Continue to think global but start by acting local. Take a look at the labels in your area that may be a good fit first and truly assess if you belong on a major label. Chances are you don’t in the new world.”
Rabhan also said that live music will start moving towards the online environment. Mega artists are currently making most of their money off concerts and brand partnerships. And the way fans and artists perform live is already changing. Most are buying tickets to shows online, causing the death of hard ticket stubs.
And the fan experience is also changing significantly. Fans are not seeking the live experience at large arena and stadium shows anymore. Instead, they are flocking to online “venues,” watching festivals like Lollapalooza and Coachella as they stream live on YouTube and attending personal artists’ online performances.
Rabhan predicted that streaming concerts will continue to grow, especially for arena shows, because fans “would rather enjoy the show in the privacy and comfort of their own home and … because it gives artists another income stream.”
This means artists need to get comfortable with technology: “Posting flyers to get the word out and making tickets available only at the venue hurts your chances of reaching maximum fan potential. Work with your venue to sell tickets online or experiment with streaming shows for a small fee either live or after the fact. Get creative with your YouTube channel and make live content a bigger part of your fan experience.”
Even though terrestrial radio is still the top way people discover music, that situation could already be changing. But is local radio or Internet radio/streaming a better option for artists?
The Internet Radio Fairness Act (IRFA) could reduce royalties paid through services like Pandora, and record labels and artists feel it will strip rights holders of income. Rabhan predicts the bill will not pass. But the debate over it will still affect the future of radio. While radio will likely always exist, the way people access it will change as wireless service becomes more widespread and networks gain more power.
“Look for smarter recommendation-based software and more interactive and personalized experience – a theme that will repeat itself over and over in the growth of digital media and the technological advances that accompany it.”
This means that artists searching for exposure through radio will likely not get it unless they have a major label. And even now, “the sea of artists found on Spotify makes a breakthrough difficult and new artists are rarely ‘discovered’ via recommendation-based software platforms like Pandora. Look for local radio, specialty shows, college radio and a strong, creative Internet presence to get your music out.”
Rabhan stressed that the future for music licensing looks bright, as the opportunities for television, film and video games music placement grow. Though TV and film license fees have declined, artists are making up the loss through video games and using them to reach new audiences.
Also, the Internet is getting smarter, and many outlets are creating exclusive content that can only be found online: “Artists can now have their songs placed on everything from a Hulu original series to a series on Netflix.”
What will become of YouTube? It will be getting an overhaul in the next few years and add premium content and niche channels. Rabhan said, “YouTube has the potential to become the go-to platform for building business media in the future. They aim to develop channels that are topic specific and interactive – meaning viewers will get exactly what they want.” And the company’s investment in its future will help it form partnerships with other companies and products like Google.
This means artists will need to create lists of outlets, gaming properties, shows and online networks where they can pitch music: “Unsigned, up-and-coming acts regularly get placements on networks programs these days and that trend is going to continue. Make music licensing a centerpiece of your story.”
The landscape of the music industry continued to shift this past week as labels and film studios announced efforts to rescue the bankrupt retailer HMV, and Kim Dotcom launched his controversial cloud sharing service. Also, the co-founder of the online music platform DIGIHUBB examined some of the ways artists are using social media well.
The Music Industry Will Fight to Save HMV
Music labels and film studios will most likely support an organized rescue plan for the recently bankrupt music retailer HMV. Major music companies such as Universal Music, Warner Music and Sony will reportedly extend very lenient credit terms to potential buyers and offer discounted CD and DVD prices to make HMV look desirable, reported The Sunday Times. And Universal, especially wants to see the company survive: It acquired liability for rent for 16 HMV stores when it absorbed EMI in 2012.
HMV has been in existence for 92 years and is the last existing retail chain that specializes only in music and entertainment. Many, especially those holding onto the old world order of the music business are terrified of the pressure its fall will put on the industry. They feel that brick-and-mortar supermarkets and online companies like Amazon will compete even more aggressively by cutting their prices dramatically.
At the same time, 760 staff members at DVD and games rental firm Blockbuster in Britain lost their jobs as Deloitte announced it would be closing 129 of the 528 stores in Britain within the next few weeks. Both this event and the collapse of HMV hit the retail sector of the UK hard.
Hilco, the owner of HMV Canada is one of the top buyers for HMV in the UK and reportedly began talks with administrators Deloitte on January 18. However, there are also another 50 possible buyers looking into the purchase of HMV. And CEO Trevor Moore stated he is “convinced” that the company can be saved because of all the interest. Other bids could potentially come from Game, the private equity firm Endless and private equity veteran Jon Moulton/Better Capital. Hilco has already been successful at improving sales at HMV Canada since he bought it in 2011.
Kim Dotcom to Cause More Piracy Controversy with Mega
Notorious Internet entrepreneur Kim Dotcom launched his new online music and film locker service Mega on January 21, even though he and three of his colleagues are still waiting to be extradited from New Zealand to the U.S. And the site’s traffic so far has showed he is still a formidable force online, according to an article in The Huffington Post. His controversial service has once again opened up concerns for many in the music industry surrounding piracy issues.
Mega hit one million registered members within 24 hours of its launch. The extreme traffic actually shut down servers several times as the site climbed quickly to the top website in New Zealand and the 141st most-visited site in the world as of last Sunday. The site presents new users with 50 GB of free cloud storage and has already hit higher daily visits than popular sharing services Dropbox and Rapidshare.
Dotcom’s renowned file-sharing service Megaupload was shut down by the FBI in January of last year, and he was brought up on copyright and racketeering charges. The entrepreneur announced that the new site is totally legal because of encryptions that will make accessing its files difficult. He told Reuters, “This is not some kind of finger to the U.S. government or to Hollywood … Legally, there’s just nothing there that could be used to shut us down. This site is just as legitimate and has the right to exist as Dropbox, Boxnet and other competitors.”
Jack Schofeld of ZDNet pointed out that the FBI has been integral in turning Dotcom into an “Internet folk hero;” its high-profile investigation surrounding the shutdown of Megaupload gave him an “endless supply of free publicity.”
Despite Mega’s strong beginning, its success will still be dependent on Dotcom’s future. However, Dotcom’s extradition is now not likely to occur because of major blunders made by New Zealand law enforcement and the spy agency GCSB when Dotcom was first arrested.
And the new site’s legality is still up for debate, despite its creator’s insistence that it is legitimate and its tagline “the privacy company.” Jonathan Bailey of Plagiarism Today said that committing acts of piracy using the service is inhibited by client-side encryption, which forces downloaders to need a link and an encryption key to get at files from the uploader. However, experts have already pointed out some potential problems with security and safety. Dan Goodin of Ars Technica said that Steve “Sc00bz” Thomas has already created a product that can pull passwords from Mega’s encrypted confirmation emails.
Mega has already acknowledged this bug and promised password changes in the near future.
Maximizing the Power of Social Media
DIGIHUBB co-founder Tom Fazakerley shared some insights about how mega-artists like Katy Perry, Jessie J and Common are successfully marketing through social media and how artists of all shapes and sizes can follow their examples in The Guardian last week. He also talked about which platforms are working particularly well.
As he pointed out, MySpace and to an even greater degree, YouTube have enabled artists to throw their music out to a massive audience and removed boundaries within the music industry. And continuing technological shifts within the business along with the constant release of new platforms and apps are helping to make “getting heard” easier for artists, producers and promoters and have been responsible for the careers of people like Justin Bieber.
Fazakerly offered up some tips for those that want to harness the power of social networking:
- “Understand the mainstream music industry and read into what’s popular. Follow trends but make them your own; that differentiation is what separates the special few from the crowd.”
- He also suggested that bloggers and vloggers need to really highlight their personalities: “For example, you could start a tour video diary or use a vlog to show your life outside music … Separate your personal recordings from your professional ones by creating an account for each.”
- He also noted that Twitter is key, because it keeps things short and is very easily digested by fans and potential fans: “Treat Twitter as if it were an online networking event; respond to as many people as you can with a personal message, engage with your fans, regularly retweet and generally build relationships.”
- As he noted, Facebook is still the top social network as well as the #1 photo-sharing place on the Web, so it represents a critical visibility point: “Create an artist or band page to keep your work and personal life a little separate … It’s about building a relationship with your fans and enabling as many people to discover your music.”
Above all, he advised that artists actually have to be social on social media and check out the work of other musicians, comment and offer up helpful advice and support when appropriate. All the most successful artists on social media platforms engage in this way.
Fazakerley concluded, “You need to show you are innovative and understand the growing market and latest developments; only then can you let your talent and music production fly.”
Last week, the British Phonographic Institute (BPI) prepared to sue a pirate proxy service. Also, a collection of music industry stats pointed to exactly how the music industry is evolving. And media writer Sharmin Kent examined why creating a real community will be critical to rebuilding the music industry.
BPI vs. the Pirate Party
Britain’s music industry trade association the BPI announced it is making moves to sue the Pirate Party UK for providing access to The Pirate Bay, which was banned by the High Court in April. The Pirate Party extends across a number of European countries and is opposed to entities that prevent information from being exchanged freely via the Internet. The group created a proxy late last spring that bypasses the government’s ban; almost immediately, this website became one of the 150 most-frequented sites in the region.
A music industry representative told the BBC that the BPI has tried to settle with the Pirate Party outside the courtroom without success. The organization asked the Pirates to shut down the proxy website, but was met with threats. Pirate Party head Loz Kaye said the group will not acquiesce: ““It is clear that we are facing a significant threat, and we will have to fight it. And fight it well, not just for the sake of the Pirate Party, but because of the principles at stake. I have always believed that it is not just enough to have principles, you need to act on them too, even if it gets difficult … I joined the Pirate Party because I passionately believe these are political issues. For every new person who starts to ask questions about digital rights, that’s a win. For every new person who stands up and gets involved, that’s a victory,”
Kaye added, “Geoff Taylor of the BPI has written to me to say we should expect a letter from their solicitors.” Kaye also told TorrentFreak that the Party is fully prepared for an expensive fight in court.
However, Kaye shared with TorrentFreak that there was still no legal paperwork: “As of Saturday [December 10], if paperwork has been filed then we are unaware of it. If the BPI chose to file a lawsuit then we will deal with it as we become aware of it. We would have thought they would have preferred to talk to us first, but it is their choice as to what they do.”
Kaye and the Pirate Party also highlighted the damage that can be done by government website blocks: “Blocks now seem to have been used against services like Promo Bay, with the BPI being given significant power on deciding what they think should and shouldn’t be blocked. I would add that up until last week we had not been contacted by any party to ask us to take it down.”
Despite threats to fight against the proxy being taken down, the Pirate Party lacks the funds to engage in a lengthy court battle. It runs through donations from the public and is also currently engaged in a fundraiser to deal with this potential legal issue. The BPI is funded in part by major music labels.
“13 Interesting Stats about the Music Industry”
The website Pigeons & Planes outlined the 13 most fascinating effects of the music industry’s on-going and rapid evolution this past week. The stats below paint a realistic – and surprisingly optimistic – picture of the current music business and where it is headed.
#1: Streaming plays beat out radio spins 132 to 1 in 2011. Radio has not been rendered completely powerless, as it still helps break superstar artists, but it has weakened significantly as a music delivery method. In 2011, radio spins hit 158 million, whereas streaming plays were 21 billion. The numbers don’t tell the whole story in and of themselves, but they do point to the fact that the streaming music is still growing rapidly and companies like Shazam could soon be capable of taking over.
#2: Justin Bieber’s YouTube play count > the population of China and India put together. The population of China and India together is 2.6 billion. Justin Bieber’s VEVO account has earned 3,169,095,027 views. Adding the number of collaborative videos between Bieber and artists like Chris Brown, etc., the number is closer to 4 billion. This number is also 4/7 of the earth’s current population.
#3: Digital music revenue will top $8 billion worldwide in 2012. Despite grim pictures painted of the declining music industry, digital music sales and options for listening and distributing music online have experienced rapid and steady growth over the past five years. Projected digital sales for 2012 are $8.6 billion, with $5 billion of that coming directly from the U.S. Strategy Analytics reported, “Streaming revenues will increase 40 percent in 2012 – to $1.1 billion – whilst download revenues will increase by 8.5 percent to $3.9 billion … Therefore, streaming services will take over as the leading revenue growth engine for the music industry in 2012 …”
#4: The cast of Glee has been on the Billboard Hot 100 more times than any other artist. The Beatles, Aretha Franklin, Elvis, James Brown, Ray Charles, Stevie Wonder, Elton John, Frank Sinatra, the Rolling Stones, Lil Wayne are some of the artists that have most frequently charted on Billboard. However, none can match the charting power of the cast of Glee.
#5: The four major labels are responsible for 88% of album sales. In June, Nielsen announced that Sony, Universal, Warner and EMI still accounted for almost 88% of album sales. Thus, the “old school” industry is still in control of sales, despite all the new methods that have emerged for listening to music.
#6: Spotify is responsible for streaming 1,500 years-worth of music. While artists may not be seeing significant revenue from this outlet yet, there is no questioning that Spotify has exploded and will continue to grow.
#7: VEVO has paid $200 million in royalties to artists since 2009. This means it has paid brought more royalties to artists than any other music video service. Of course, the entirety of the payments may not have gone to artists yet (some go partially to labels, etc. or may still be stuck in the SoundExchange distribution system), but it still represents additional income.
#8: U2’s 360° Tour raked in $736 million. Starting in 2009, this two-year tour brought in $200 million more than the Rolling Stones’ giant A Bigger Bang Tour.
#9: Rihanna’s Man Down cost $1 million. The cost for producers, studio time, radio and publicity on Rihanna’s latest album really added up. Marketing was a huge percentage of this amount. However, Man Down shows how expensive and unwieldy it can be for major labels to try to “guarantee” a hit record. It also shows what these labels are willing to do in order to ensure their continued success.
#10: The entertainment industry has spent more than $1 billion on lobbying since 1996. Major corporations within the music, film and television industries spend millions trying to come up with fair policies for artists, listeners and employees. The RIAA alone has spent $30 million on lobbying since 2007.
#11: Clear channel will have $10.1 billion-worth of debt by 2016. Half of Clear Channel’s revenue comes from the over 800 domestic radio stations and 5,800 syndicated affiliates. Clear Channel’s performance could pick up naturally if it embraces partnerships with digital radio and other music services.
#12: Physical full album sales in 2012 will be lower than they have ever been in the past 18 years. However, physical copies still make up half of all albums sold. These figures point to the fact that technology has made singles easier to sell.
#13 Vinyl sales are growing. Despite the decline of CD sales, vinyl has become more and more popular during the past six years. 3.2 million records were sold in 2012, a 16.2% increase over last year.
Community and the Music Industry
An article written by media writer and music industry analyst Sharmin Kent “New Marketing Songbook: How the Music Industry is Building Community” explored the different ways the music business has been rebuilt around the idea of community, and the many existing channels that will continue to bring artists, fans and other music industry players closer together.
Last week, Metallica drummer Lars Ulrich publicly gave Spotify his blessing by offering up the entire Metallica catalog and reconciled with Napster co-creator Sean Parker. He admitted that the original battle was not about money, rather “just about control.”
Of course, P2P file sharing has been a hotly-contested debate since the 1990s and has sparked billions of dollars-worth of lawsuits. Above all, it offered up a new business model that gave the old order the choice to either adapt or fall. And P2P networks put the control of music listening and discovery back into the hands of the fans.
More than a decade later, labels have learned to work with the Internet and its many channels, including YouTube, personal social media accounts, etc. And artists are more connected to their fans – and thus their fans’ money – than they ever have before. The Internet has created the opportunity for artists and fans to build thriving online communities and for labels to satisfy music fans more readily with massive catalogs.
It took 10 years of kicking and screaming and millions in lost revenue for record companies to finally decide to come find their audiences where they were – on the Internet and streaming music. According to Kent, Spotify in particular shows that a balance can be struck between variety and control and potentially still make money for artists and record labels.
And sharing through social media platforms – aka, sharing through interactive online communities – is what has really helped services like Spotify, Pandora and Last.fm thrive. Social networking channels have proven themselves to be as powerful as some of the online channels artists and labels once feared – ones that previously leaked tracks and other information. They create an opportunity for musicians to get feedback from fans and keep these fans happy by offering them special experiences like free merchandise, live performances and concert tickets that draw music lovers close to them.
Many marketing experts are discovering that online music services are great tools because they not only allow musicians to share their music or favorite songs, but they allow the fans of these musicians to connect with users and draw in even more listeners.
On my 20-year journey in the music business, I have learned a lot of interesting things. One huge realization I had about the current music industry came to me as I was building this website (and continued as I started to get contacted by musicians that were visiting it). I couldn’t figure out why many people were glossing over all of the foundational work that is usually required to find great help. Why would people be so divorced from all the work that they have to do on their own, all the time they needed to devote to developing their sound and playing shows? Why would they not accept the real character-building shows, the “don’t forget to tip your bartenders and wai…oh you are the bartenders and waitresses” shows? And why would musicians think that an executive was likely to jump in and partner with them when what they had, at least on paper, was a hobby and not a real business?
For some, a light bulb turns on when they come to a realization. I experienced something a bit more substantial.
I was watching something on the Science channel about the planets, and an astronomer was talking about an asteroid hitting the earth. He said, “There has been more money spent on movies about asteroids hitting the earth than money spent on preventing asteroids from hitting the earth.”
Since then I have never looked at media – the field I’ve been in my whole life – in the same way.
Some of the effects the media has on us are well documented, but studies usually focus on questions like “Does violence in media have an impact on violent behavior in real life?” or “Does the media portrayal of rail-thin models and celebrities impact our feelings about our own body image and confidence?” The latter in particular is interesting and more applicable, because almost all studies on the subject point to the reality that people feel bad about themselves when comparing themselves to media ideals and have unrealistic expectations about what a “normal” person should look like. Essentially, people believe that they are supposed to resemble what they see in mass media.
When I thought about this concept, I wondered, could there also be a message in mass media about musicians and their success and does that affect us? It kept occurring to me that the media was minimizing the work that goes in to most musicians’ stories. I decided it was time to do some research myself.
To me, the definitive chronicle of a musician’s story is VH1’s Behind the Music. I decided since that was such a well known representation of how musicians became successful that it was a good idea to look at what was kind of info was being presented there.
I purchased several stop-watches and began to time out the percentages of the show that were devoted to different parts of an artist’s story (removing the commercials, etc). I watched a dozen episodes. It wasn’t hard to get the timing down because Behind the Music falls into a very familiar pattern:
1) Family background. The format is always, “Mom says her musician/superstar was different from other kids or recounts how hard it was growing up in the ‘hood, or how someone in the family was abused, and how these circumstances influenced their drive to be an artist, etc.”
2) Professional Struggle. This segment of the show highlights artists’ first taste of the business, the “struggle,” how they lived on $50 / week, how their choice to do something so unreasonable for a living upset family and friends alike. This phase covers making demos and meeting other musicians and executives. I even counted getting signed as getting part of the struggle, even though the momentum of the show clearly indicates that the record deal is a clear sign that success is around the corner.
3) Success. There is always a moment in Behind the Music where the album comes out, and the artist becomes a huge celebrity by creating a genre changing piece of work or a huge commercial success. And the documentary never looks back after that point. The term “big break” is also used a great deal. Sure, there are some issues, like drug habits, divorces, stress and inner turmoil, but the coverage from this point on is always the artist as a total success, even if there were hills and valleys in their popularity.
Would hearing partial truths affect our expectations and perception of what is fact? Simply put: Yes. Markus Appel and Tobias Richter’s study “Persuasive Effects of Fictional Narratives increase over time” even demonstrated that people believe many of the ancillary details presented in pure fiction, totally devoid of any fact.
For example, when you are watching the show Friends, you don’t believe that Rachel is a real person. You are aware that it’s Jennifer Aniston playing a role on TV, and that her character is named Rachel. But you might come to believe that peripheral information is true. For example, you might believe a waitress in Manhattan can afford a two-bedroom apartment near Central Park. Knowing that, if you are constantly reminded of the overnight success of musicians and never told about the work involved in their process, isn’t there a message here as well?
So, what does reality look like? My favorite example of someone who built their own business in music is the story of Sharon Jones and the Dap Kings, the band’s label Daptone Records and the founder of the band and the label, a guy named Gabe Roth.
Until her 40s, Sharon Jones was a guard at a correctional facility. And I played with Gabe in a band for a few years at NYU. Many years later, he agreed to be interviewed on this site. The words, “So, how does it feel to be this overnight success” started to come out of my mouth, but I caught myself midway through, and we laughed about it. Gabe hadn’t done anything different for 15 years; he just got better at what he did and surrounded himself with better people. And it was a breakthrough moment for me when I realized just how long he had been at it. He had worked at the same thing with a narrow focus for 15 years non-stop and was finally at a point where he was making a good living doing what he loved. Persistence and consistency had won out.
Why aren’t we exposed to stories like this? Simply put, because they aren’t popular news stories. “Man Works for 15 Years and Gets Great Business” is not as compelling as “Justin Bieber puts Video on Internet, Becomes Multi-Millionaire.”
A psychologist at the University of Pennsylvania named Angela Duckworth determined that “stick-to-it-ness” is called “grit,” which she defines as “the perseverance and passion for a long-term goal.” And she discovered that this grit is more important than intelligence or talent as a predictor of outstanding achievement. Individuals high in grit are able to maintain their determination and motivation over long periods of time, despite experiences with failure and adversity.
In his interview with me, “The Self Made Musician,” Gabe (a person I believe has real grit) said something that really stuck with me: “Instead of looking inward and local and trying to create something small that they can build from and concentrating on their craft, [musicians] are shooting for stars. It’s like playing the lottery. It’s fun, and if you win it’s amazing, but it’s not a business plan. You don’t say, ‘Okay, we want to start a business and want $500,000. The first thing we’re going to do is buy $4,000 worth of scratcher tickets.’”
A good business plan for your music is, first and foremost, specific. People always talk about the “next level,” and it drives me absolutely insane. I don’t begrudge people for wanting to advance their careers, but my frustration is when I hear the term “next level,” I know that 95% of the time the person saying it hasn’t clearly defined what they need let alone what they want. It sounds like they’re looking for a Nintendo cheat code.
Vague goals tend not to manifest. If you want to achieve your goals as a musician, you need to get really specific and write out a business plan. It doesn’t matter if you don’t know how to write a business plan or if you believe that it’s only for raising money or that it requires fancy number-crunching graphs. Truthfully, a business plan can start off as simply just visualizing where you want your music to take you in the next six months. Most people never do it. And 90% of the people reading this will probably not do it.
Do you really know what you want and what you need? Try this: Write down a six-month or one-year goal and then work backwards to the present moment. Be mindful that you will need longer-term goals as well, but they need not be as detailed.
Don’t do this because I say so. Do this because several studies, including a study conducted by Palo Alto Software in 2010 that was verified by the University of Oregon Department of Economics states that you are twice as likely to succeed if you finish a business plan.
I can’t write down a plan that will work for every artist, but I can offer a few guidelines if you are devoted to music for life (and not just looking at it as a fun hobby):
- Build a solid business foundation. Figure out how money is made in this industry and how publishing works. Register with ASCAP, BMI or SESAC and SoundExchange. Make sure you have a business entity established and trademark your name.
- Get your marketing materials in order. You’re going to need at least a 4-song recording (and one that requires no apologies), a well-written bio, a logo, a professional photo and a video of you performing live (for an actual crowd). You’ll also need vanity URLs on social networks, a website and to make sure all your digital real estate is interconnected.
- Set yourself up for the long haul. You need to engage in long-term planning if you want to work as a musician. Most “normal” businesses are not in the black for three, to five years, so why should a music business be any different? If you are truly in this for life, you should be investing in your business in a way that ensures you are set up to play and record music and get it to people at a moment’s notice over an extended period of time. This could mean building a home studio and getting a P.A. and a van. The point is, you’re going to have to plan multiple releases over a number of years and be prepared to play countless gigs. And you’re going to need to know how to accomplish this as cheaply and easily as possible. Don’t blow all your money on your first release, expecting it will propel you instantly to financial stability. Plan on truly playing and recording music on an on-going basis.
- Build a community and diversify. The music, the money and “the hang” (who you seek out as collaborators and the other musicians with whom you surround yourself on a regular basis) determines which gigs you should take, even if they divert you from your original work – sideman work, apprenticeships, etc. Remember, even Hendrix was a sideman.
- Think about B2C and B2B. It is also important to consider that everyone is talking about direct-to-fan in the digital age – an obvious, unfiltered Business to Consumer strategy (B2C). As they are building their communities, I’m of the opinion that many fledgling artists should also pursue Business to Business (B2B) relationships with like-minded artists. If you convince one band with a 50-person mailing list in another town that you are worth a damn, you can get your music in front of those people and start to break a new market if you’re willing to do the same promotion for them on a gig trade.
In summary, the confusion and frustration you may be feeling about your music career is just part of the process. It just so happens it’s not part of the process that people really talk about. The media is feeding you a steady stream of crap about who, what and where you should be in your career. Try to tune that out along with the hundreds of burnt-out naysayers you will meet along your journey who tried, failed and now want to talk you out of trying, too. Amputate the people in your life with this cancerous attitude, consume less celebrity media, or at least remember to take it with a grain of salt.
And remember grit and what I hear more than anything else about marketing strategies: “I tried that, and it didn’t work.” No musician succeeds without trying and failing. Try again.
In the first week of the new year, experts analyzed the music business in 2011, as Billboard reported on the performance of the 10 biggest music stocks last year and also presented the official figures for 2011 music sales. Also, Daniel Ek, CEO of Spotify and his promises to redefine the future of digital music went viral.
Music Stock Performance in 2011: A Mixed Bag
While the stock market for the music industry experienced an overall decline – falling by an average of 4 percent and ranging from a 42.5-percent decline to a 46.5-percent gain – in 2011, some of the 10 biggest music-based companies did well, according to an article published on Billboard.biz.
The five most heavily-music-focused stocks – Pandora, Live Nation, Sirius XM, Trans World and Warner Music Group (WMG) – gained 7.2 percent. The following is a quick list of the ten biggest music companies and how they did last year:
Trans World stocks rose by 47.4 percent. As a “brick-and-mortar” retail, the company faced some significant challenges in the market. While its revenue was down 17 percent in the 38 weeks ending on October 29, it still improved its net loss by 67 percent.
WMG was up significantly in 2011, by 46.5 percent. Experts attributed this improvement to its sale to Access Industries last spring. Last January, when the news leaked that the company had hired powerhouse Goldman Sachs to look for buyers, stock value spiked.
Apple stocks were up 25.6 percent, having risen 7.7 percent when Tim Cook took the CEO position on August 24. And they rose an additional 7.1 percent after Jobs death on October 5.
Sirius XM’s stock was up 11.7 percent, but, as in years past, rose and fell all year. There was a significant rise in December when analysts ascribed a “buy” rating to it based on its subscriber growth and good margins.
Amazon fell 4.3 percent last year. It peaked in October, but then quickly fell again. Despite the company’s big sales numbers surrounding the new Kindle Fire tablet, the stock never recovered.
Vivendi – which is the parent company of Universal Music Group (UMG) – was down 16.2 percent, falling steadily throughout the year. Despite poor performance, analysts still believe that Vivendi will rise above the market and continue to encourage stock holders to ride it out.
Live Nation stocks fell 27.3 percent last year, though the company did well overall despite a decline in the sale of concert tickets and other non-in-home entertainment. The company also expanded last year, taking on new ticketing, promotion and analytics features.
Best Buy fell a whopping 31.8 percent this past year. The stock fell in mid-December after releasing poor third-quarter numbers. The company also had to cancel some online orders for high-selling items right before Christmas, further impacting its popularity.
Pandora stock fell 42.5 percent. (It was judged on a period of only a little more than half last year because it went public in June.) Experts attribute this decline to concerns about the high cost of the company’s content, its ability to get local advertising revenue and competition from other streaming and satellite radio companies.
Finally, Sony fell almost 50 percent in 2011. Sony headquarters was hit by both a tsunami and computer hackers last year, so these events had something to do with the decline. However, it also experienced some significant losses in TVs and acquisitions. This marked its third year taking a loss. Many feel it will likely have a similarly bad year in 2012.
Music Business Profits Up with Digital Trumping Physical
Nielsen SoundScan released its official annual report on the music business this past week, and as expected, overall music sales are up 1.4%, the first increase since 2004. According to the president of NARM, Jim Donio, “This year’s results can be attributed to a variety of influences, including more aggressive marketing efforts and offers, availability and consumer adoption of legitimate digital commerce models, the power of social media, etc.
British singer Adele had the best-selling album , selling 5.82 million copies of 21 in the U.S. And without her, album sales industry wide actually would have been lower than in 2010. And her effort sold more than twice the copies of Michael Buble’s second-best-selling Christmas album.
And as also reported in Time magazine, for the first time, digital music sales exceeded physical album sales. They took a 50.3-percent market share of all music purchases, and, as in 2010, digital song downloads rose by 8.5 percent even when physical sales declined by 6 percent.
Experts speculate that 2010 might have been the music industry’s rock bottom. However, Donio and others are just looking forward to a hopefully brighter 2012: “It will be exciting to see what 2012 has in store as we anticipate new music from established artists and speculate about which stars-in-the-making might be making critical and commercial headlines in the next twelve months … Not to mention how products and services from familiar freshmen players in the digital commerce space will continue to unfold.”
More specific details about Nielsen’s report can be found at this link.
Who is Daniel Ek?
It was almost impossible to search for music industry-related stories last week without coming across the name Daniel Ek, the Founder and CEO of Spotify. In the past year, Ek has already been featured in Business Week and on almost every online tech publication in existence. The first week of January found him in The Wall Street Journal and Forbes, where he was presented as “the most important man in music.”
But is all this hype true? While Spotify has been popular among music fans, there has still been some significant controversy among artists since the streaming service arrived in the U.S. last summer, with several artists pulling their music complaining the site would not provide them with appropriate revenues.
On January 4, Forbes posted an early view of an article on Ek on its website, set to publish in its January 16th issue as part of its “30 Under 30” entrepreneur series, exploring Ek’s past, present and potential future impact on the music industry declaring him to be the savior that could potentially solve all the problems the Digital Age has introduced: “Daniel Ek created a free, Facebook-enabled platform that could save the recording industry from piracy – and iTunes.” The article takes an inside look into Ek himself and also daily life at the Spotify headquarters in Stockholm, which is described as being run by “frenetic energy,” which is representative of the “strange new reality of the music business.”
Born in 1983, Ek started his first successful internet-based business in 1997 at age 14. And as Forbes states, the industry has been waiting for an entrepreneur like him for the past decade – someone who could build an online music tool that was more tempting than music piracy and could also offer up a sustainable revenue model. Despite breaking new ground, Ek has stated he was inspired at an early age by the Napster experience (and he is among the generation of 18-30-year-olds who came to believe no one should have to pay for music).
According to Ek, his goal is to disrupt the music landscape in much the same way Sean Parker and Shawn Fanning disrupted it at the end of the last century. As put by Forbes, “In the current tech landscape, where Google provides the search, Facebook the identity and Amazon the retail, Ek wants Spotify to supply the soundtrack.” He wants to create an entire “music ecosystem.”
However, he has some critics. A November issue of The New Yorker featured an analysis by Malcolm Gladwell that talked about Walter Isaacson’s biography of another music pioneer, Steve Jobs, comparing him to a “tinkerer,” not an “inventor:” “Jobs’s sensibility was editorial, not inventive.” And Ek admits he falls into this same category: “I’m not an inventor. I just want to make things better.”
However, with 2.5 million paying customers globally and significant advertising revenue, many analysts would say that Ek has managed to at least revitalize the music industry. Still, labels and artists continue to be doubtful that Spotify, or Ek can actually save it.
Happy New Year! In this last week of the year, technology innovation was highlighted as Megaupload launched a new online music locker and a Spotify executive shared her thoughts on the powerful present and future of digital music. Also, Reuters announced that the music industry has finally seen a profit in 2011 for the first time since 2004.
Megaupload’s New “Megabox” Music Storage Space Launched
The controversial file-sharing site Megaupload announced the arrival of Megabox, a web-based online music locker and player and fully-integrated music store. But an article published on the Billboard.biz site, the company may face some significant challenges.
Based in New Zealand, Megabox works similarly to many other online music lockers, including Google Music, Amazon Cloud Drive or mSpot. Music is uploaded using Megaupload’s file-uploading application Megakey and sent directly to the user’s online locker. While the website does not indicate exactly how much storage space each user gets, information implies that it is capable of handling anyone’s entire music library.
Megabox also has a social networking component that allows people to search for and follow friends and send messages to them using the service.
And the music purchasing element of Megabox is its least striking component, though it is connected to Amazon and 7digital. Information about available music comes from Sony’s Gracenote service.
But Megabox will likely have some legal issues to overcome. History has shown that P2P services can create successful free file-sharing services that attract significant numbers of users. But legally-created stores and viable services are a much different story in the digital space. Limewire tried its hand at an MP3 store, but the service shut down late last year. And iMesh debuted a service that mimics P2P in 2005 after settling its lawsuit with record labels.
Over 50 million people use Megaupload daily, and the site accounts for 4 percent of Internet traffic worldwide. The key to Megabox’s success could lie in being able to appeal to its global popularity and huge user base.
Some Quick Music Industry Predictions from a Spotify Executive
Spotify’s VP of marketing, Angela Watts last week shared her assessment of the digital music space in 2011 and gave her forecast for 2012 in an interview with The Guardian. While she focused her statements heavily on the influence her company specifically has had on the music business, she did offer some insightful words about how innovations in online music has changed the way people use it to connect with each other.
She named 2011 as a “watershed” for the music industry: “The line between music access and ownership is blurring now that you can listen to whatever music you want, wherever you are.” And she added that new streaming services have expanded music listening and discovery into a collective experience that creates an ongoing conversation: “We’ve seen a big psychological shift with the realization that you don’t need to own music, that your musical universe can be blown wide open by not only having all of your tunes at your fingertips, but that of your friends, your favorite artist … Music forms such an important part of people’s lives and is to be given the power to discover, share and enjoy an unlimited amount.”
In this interview, Watts also hinted that the Spotify platform would be significantly expanding its apps offering in 2012.
Music Industry Profits Officially Up in 2011
Year-to-year comparisons put 2011’s album sales up from 2010, so says a report released by Reuters. Though the Soundscan sales year does not end until January 1, numbers show that by a small margin of 1 percent, this year will mark the first year there hasn’t been a profit loss in the music business since 2004.
In 2010, sales had dropped 13 percent since 2009. And before that, they had been steadily declining by an average of 8 percent annually since the early-mid 2000s as the industry adjusted to the rise of digital music.
But there is concern among experts, as the big successes of 2011 will not be very easy to recreate in 2012. The two highest-selling albums were Adele’s 21 and Michael Buble’s Christmas. And neither of these artists represent what has made for the typical “hit.”
Reuters also provided a rundown of what was successful and what failed in 2011. The following are the top three:
- “Retro.” Adele and the Black Keys gained popularity by making older music fans nostalgic and reinvigorating the idea of the “throwback” in a way that also appealed to the a younger generation. (And Adele’s 21 album should hit just under 6 million sales by January 1.)
- The return of the Christmas album. Every year there is a strong Christmas album seller. And this year, everyone bet on pop star Justin Bieber’s release. However, Michael Buble beat him out by almost a million copies, selling 1,964,000 units. Buble’s Christmas is currently the #3 best-selling album of 2011 and will likely take over Lady Gaga’s #2 spot when the sales year closes.
- The decline of the big rock band. While U2 set a record for the highest-grossing tour of all time in 2010-2011, some of the biggest rock bands of the 2000s fared much worse. Evanescence only managed to sell 284,000 units of its long-anticipated third album (hitting only 101 on the charts). And Coldplay only sold 877,000 copies of Mylo Xyloto, compared to their last album, which sold 721,000 copies within its first week alone. And the Red Hot Chili Peppers only managed to unload 458,000 of their new album, compared to their last one which sold 2.5 million.
With digital music still on the rise (and music retailers ever shrinking), many wonder whether or not 2012 could possibly offer another surge – or even a flattening out – for the music industry.