This site is a blog for musicians and music industry people. It is a free educational resource and it is also the way I advertise my music consulting services. I am an entertainment professional with deep roots in the music industry. Throughout my music career I have been a major label A&R representative, a music supervisor, an artist manager, a reality show producer, a bass player and the head of a digital record label.
Posts Tagged ‘streaming music’
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.”
Last week, Google announced the upcoming launch of its new music locker storage service in Europe and secured licensing with Warner Music Group (WMG). And the landmark “F.B.T. Productions v. Aftermath” lawsuit involving some of Eminem’s music was finally settled. Also, Trent Reznor delivered some advice for aspiring artists that want to navigate the modern music business.
Google Play to Launch in Europe
Google’s long-anticipated new free scan-and-match music locker storage service Google Play will finally launch in Europe on November 13. The music store will launch in the UK, France, Germany, Italy and Spain and will offer the full features of its cloud locker technology, Andy Rubin, Google’s SVP of mobile and digital content said in a blog post on October 29.
Rubin told users, “[You] will be able to purchase music from the Google Play store and add up to 20,000 songs – for free – from your existing collection to the cloud for streaming to your Android devices or web browser.”
He added, “We’re also launching our new matching feature to streamline the process of uploading your personal music to Google Play. We’ll scan your music collection and any song we match against the Google Play catalog will be automatically added to your online library without needing to upload it …”
The service will hit Europe before it hits the U.S., though it will soon be available there as well. All product features will be totally free, with free music storage, matching, syncing across devices and listening.
This marks a critical step in Google’s path to compete with Apple, Sony and Amazon. Google chose to launch its original cloud service without licensing deals, eliminating the possibility for a scan-and-match function.
Google also finally signed a deal with WMG – its only hold out label – to add its catalog to the store, so it now has a full set of major labels attached, a year after the official launch of Google Music.
UMG/Eminem Music Royalties Lawsuit Finally Settled
A federal lawsuit with big implications for digital royalties and the entire music industry was finally settled this past week, revealed a story published by The Hollywood Reporter. The case, F.B.T. Productions v. Aftermath Records saw Eminem’s early producers, Mark and Jeff Bass suing a subsidiary of the Universal Music Group, because they believed they were not getting royalties owed to them from iTunes and other digital store downloads. (We have been following this story at Musician Coaching for a couple years. You can read more about its origins by checking out the interview from 2011 with lawyer Patti Jones, Esq.)
UMG stated that royalties for the downloads should be the same as for CDs, but F.B.T. argued that the downloads should instead be considered licensed music, which is worth more money; artists earn 10-20 percent from sales of albums and singles and 50 percent from licenses for uses such as a TV commercial, etc.
The U.S. Court of Appeals for the Ninth Circuit in California ruled in favor of F.B.T. in 2010, overturning a previous jury verdict. And both sides have been engaged in a damages trial for over a year. Another trial was set for April, 2013, which would have given the Bass brothers a platform to reveal the details of the millions of dollars they were owed, plus the underhanded way UMG and other major labels dole out revenues between foreign and domestic factions before sharing with artists. In fact, in June, even the judge involved in the case accused UMG of trying to “dupe” him by providing misleading information about the way it distributes revenue.
However, on October 29, the lawsuit ended with a private settlement. While the settlement has been officially filed, neither side would reveal the final settlement amount or the terms of the agreement.
Eminem was not involved personally in the F.B.T. case. However, it paved the way for other litigation in the past two years. Musicians including Kenny Rogers, James Taylor, the Temptations, Weird Al Yankovic and Rob Zombie filed suits against their labels for huge sums. Sony settled a class-action suit earlier this year that gave a group of artists $8 million total in missed royalties.
Many in the music industry feel that this case will set a legal precedent for the label-artist relationship going forward. While Universal has argued that the case will not change the landscape, many lawyers disagree. San Francisco-based lawyer David M. Given, who has worked on many of these cases, including one filed by the estate of Rick James said, “The legal precedent the case has set has already had a profound impact … If UMG paid the price, which I think it probably did, then that will set the bar (which I expect will be high) for the settlement of other download royalty claims, like the ones in the James class action, for other recording artists.”
Trent Reznor, on How to Make it in the Music Industry
Trent Reznor had some words of advice to share with artists trying to make it in today’s challenging music business in a recent interview with Techdirt.com. After some misinterpretation of comments he made about going back to major record labels earlier in the month, he also decided to set the record straight and talk about his continued respect for the DIY journey and the importance for artists to understand the business aspects of their careers.
And Reznor asserted that the advice he would give to up-and-coming musicians looking to create a strong business model is the same advice he would give to established acts: “My advice today, to established acts and new-coming acts, is the same advice I’d give to myself: Pause for a minute, and really think about ‘What is your goal? Where do you see yourself?”
He detailed the danger of focusing on the ever-elusive “record deal” and why all artists need to instead focus on honing their craft and “brand” by sharing his own story: “As a 22-year-old kid in Cleveland, it seemed to me that just playing out in bars, hoping someone noticed your band, and then offered you a record contract, while that’s possible, I didn’t know anybody, and didn’t know anybody who knew anybody that that had ever happened to. The strategy then, was let’s work on getting a band, and something that means something, music that matters, music that I feel proud of, and a vibe and name and ‘brand’ of this thing, and then try to reach maybe some small labels that had music in the same vein of what I liked.”
In today’s music scene, Reznor said, artists have a lot of opportunities to build a strong fan base. And they need to define what their ultimate goals are now more than ever before and know when seeking out a record deal is appropriate, and when it is not: “If I were that person [starting out] today, there’s a hell of a lot of things that didn’t exist then, that exist now – like YouTube, like the ability to self-publish, like the ability to reach everyone in the world from your bedroom if they’re interested. I’d focus my efforts on what seems like a logical way to do that that maintains integrity. If my goal is to compete with Rihanna on the pop charts, I’d think that requires going through a major label system with a powerful manager.”
He stated that he made a decision to go back to a major label for his latest endeavor How to Destroy Angels, because it fit his current goal, which requires him to go beyond what he has built with Nine Inch Nails. He was concerned that only Nine Inch Nails fans would latch onto the new project. And a label offers him the chance to extend far beyond his current fan base.
He further explained, “The main reason I do what I do is I want to do something that matters. I want to be able to create art that reaches the maximum amount of people on my terms … That was a key component … Because it came down to us – us being the band now – sitting around and identifying what our goals were. And the top priority wasn’t to make money. It was to try to reach the most amount of people, and try to reach the most amount of people effectively, that doesn’t feel like it’s coming completely from my backyard.”
This past week was marked by on-going change in the digital music market as owners of streaming site Deezer discussed why they will be avoiding the U.S. market, and Apple’s proposed new Web radio service met with very mixed reviews among label executives. Also, blues guitarist Walter Parks gave some sound advice to artists that want to build long-lasting careers in music.
Deezer: Taking Off … but not in the U.S.
French streaming music site Deezer, one of the most successful European start-ups will not be expanding to the U.S. anytime soon, according to an article in The New York Times. And Chief Executive Axel Dauchez said that he believes ignoring America is what will help his company compete with global powerhouses like Spotify.
Founded in 2007, Deezer is the second-largest digital music streaming services, behind Spotify, in the number of paying customers it has attracted worldwide. With headquarters in Paris, it provides unlimited access to millions of on-demand songs on users’ PCs, mobile phones and tablets.
And Deezer is getting industry nods for its lack of U.S. focus: Warner Music Group’s owner Access Industries gave the company $130 million this month – one of the largest sums ever to be invested in a French company.
Dauchez said he believes this financial endorsement “… shows that they think the music market is beginning to turn around.” With the help of Deezer, Dauchez hopes to increase the revenue within the music industry and give musicians, labels better returns. Deezer generated 50 million euros in revenue in 2011, and Dauchez set a goal to hit 1 billion euros annually by 2016.
Deezer has two million paying customers, about half the number Spotify enjoys. Since Spotify became available in the U.S., it has seen rapid growth. But Deezer wants to focus its money instead on expanding to 160 other markets. Music industry analyst Mark Mulligan remarked, “Like a canny general who decides to march around a heavily fortified stronghold and thus effectively leave it stranded behind enemy lines, so Deezer expects the streaming war to be waged on different shores … They are both right and wrong.”
Many analysts have said that Deezer should be concerned about competition in the United States, where aside from Spotify, Rhapsody, Pandora and Rdio all thrive, even with slightly different business models. And Mulligan claims the U.S. streaming market has not yet hit its ceiling, as premium streaming is still too expensive for a lot of music fans. Outside the U.S., Spotify is ahead of all other streaming companies, except Deezer, which is the #1 most popular in France.
New financing will be important for both Deezer and Spotify, because they have both spent huge amounts of money. In an effort to draw in new listeners, both services offer free, restricted versions. But they must pay royalties on everything, even tracks that are free to users.
Streaming services have tried to pay for free listening by selling advertising. But Dauchez stated that securing this has been a challenge. So, Deezer has turned towards using its free service as, first and foremost, a marketing ploy to convert more people into paying listeners.
This policy is proving an expensive way to expand. Deezer was profitable in 2011, but is expected to lose money until 2014 as it becomes available in new countries. It has already moved into other European countries and will amp up growth in the next month.
Its popularity in France is greatly attributable to a marketing partnership it has with mobile provider France Télécom, which includes the service as a bundled part of some mobile phone packages. But whether bundling will be as valuable as straight subscriptions remains to be seen.
In an effort to set itself apart from Spotify, Deezer has been beefing up its social features and editorial content, which includes playlists and information on local performances by favorite artists. Dauchez said, “We don’t want to be a ‘smart jukebox’ … If you want to rebuild the value of music, you have to rebuild the engagement with the listener.”
Will Apple Radio Fly?
Apple is investing a lot of energy into getting major record labels to jump on board with its proposed Web radio service, unofficially coined iRadio. But some label executives are not buying it as a bright idea, said insiders at CNET. And this could cause the project to stay grounded.
Apple is hoping to launch its ad-supported Web radio service early next year. But many music industry executives said what the company is offering them is just is not good enough to warrant their approval. Sources said Apple is offering a lower royalty rate than Pandora, although it wants to provide more features to its customers than the currently top Internet radio service provides to its customers. Pandora pays a statutory rate set by Congress that limits the way users can interact with songs.
To make up for Apple’s lower royalty payments, it is offering a percentage of ad sales to labels. While some industry leaders feel this cut will not be big enough to make a partnership worth it for labels, others think it will be good for the overall music business if Apple provides Pandora with a worthy competitor.
A source said it would be easy for iTunes to push a Web radio service out to its sizable audience and also use it to boost download sales, which have flattened out in the past year. Because Apple owns 64 percent of the digital music market, analysts have said that labels have to think about what might happen if Apple cannot expand to markets that are gaining in popularity with consumers.
Industry leaders have also stated they think that Apple could provide Pandora with support to get the Internet Fairness Radio Act passed, which would reduce the royalty rates Web radio services have to pay to artists, publishers and labels. Big record companies and music managers have been fighting against this bill for the past several years and have plans to join to discuss their strategy to fight it this coming week.
Walter Parker, on Music, “Sucking it up” and Getting Personal
Blues guitar legend Walter Parks spoke recently to the Huffington Post about how he has been able to build a solid career in an ever-changing music landscape and delivered some very matter-of-fact advice to aspiring musicians. Parks has enjoyed an international career, acting as lead guitarist for Richie Havens, half of the folk-duo the Nudes and leader of the swamp-blues group Swamp Cabbage. And after spending more than 30 years in the music industry, he released his first self-titled solo album in December 2011.
Parks talked to Arts & Culture section writer Laura Cococcia about the challenges he has experienced breaking through in the music industry and how he developed his voice, style as an artist and grew his business. Most importantly, his perspectives illuminate why artists need to establish a “well-rounded view on art as a life’s work that requires rigorous study, observation and intimacy with the fabric” of their audience.
From the beginning, Parks was committed to greatness, and as he admitted, he does not understand any musician who does not strive to be the best at his/her craft: “From an early age I was entranced by subtle technical aspects of great records. I was acutely aware of timbre in different instruments and I could hear the microphone placement used to capture textures and create dimension. Only the best producers know how to evoke the sonic fantasy that most listeners take for granted … Neither the promise of money nor sex (as it is for most) was a career motivator for me early on. I had and still have a drive to realize an original sound that I’d like to share with many people and be recognized for. This is not a desire for stardom yet it’s a desire to connect with and inspire people, admitting of course the self-serving good feeling that ensues in so doing! Averageness is deplorable. I am perplexed by un-outstanding people.”
And while he admitted that he still struggles to make money on touring, and recording, he said that his success is greatly attributable to his on-going dedication to learning about the intricacies of the musical craft and advised other artists to do the same, even when the process is outside their comfort zone:
“Learn music. Learn harmony. Whether or not you like jazz, study basic jazz harmony, even, for instance, if you play folk music. Jazz harmony is not complicated yet knowledge of it provides a cushion of peer respect and it improves your writing.”
He also stressed the need in today’s market for every musician to be an incredibly hard-working entrepreneur running his/her career like a business while connecting intimately with the audience:
“Some aspects of a music career are going to feel like work. Suck it up. Be an adult and join the rest of the working world — that is your audience. The upside (if one is needed) is that in general you will be guided by what feels good to you throughout a large chunk of your career during your creative process – during your writing …
Accept that you will make money in art when you connect with audiences and with people who can help sponsor you. No amount of money can insure that you will connect. Be willing to change your art (possibly only slightly) if you are not connecting, provided that you don’t feel polluted by the change …
Do business often. The business part of your day is ‘the work.’ ‘Work’ often. Work the phones, social media, the post office etc. Never sell. Selling is bullshit. Selling is manipulation. Selling is the act of convincing. Selling is a lie and everybody knows it. Instead, share, offer, present. The market, your audience, will decide how easily you can meet expenses. This is capitalism. Be at peace with capitalism. I say this because capitalism will work for your art if you produce quality, are industrious and are unwilling to take no for an answer. Our country ascended because of the creativity of a proportionate few forceful risk-taking idealists, inventors, and politicians. Aspire to be in that club. Proudly be unaverage. Have fun being different but don’t fake it …
Force yourself to learn the ways of people. Look people in the eyes. If you don’t care about people you’re in the wrong profession. Talk to strangers and learn from them. Offer to them. When you feel depressed, get your ass out of your apartment and do something for somebody else. Time is proving that a good artist can work many years so don’t trash your body – as it is your tool, as is your instrument.”
Analysts examined how Microsoft’s long-anticipated streaming music service could affect the overall industry this past week. And the entertainment industry teams up with Internet Service Providers (ISPs) to fight digital piracy. Also, a legal dispute over the rights to Ray Charles hits could change royalty payments for other artists.
Microsoft and Xbox Music
On October 14, Microsoft announced the launch of a new streaming music service, Xbox Music. It will be available for Android, iOS, Windows 8, Xbox 360 and a few other operating systems and according to an article in PCWorld is a reboot of the company’s expensive Zune project, which emerged and flickered out when iTunes first exploded.
News of the new service came days before the anticipated release of Windows 8 Pro and Microsoft Surface tablet, products which will be part of Microsoft’s new mobile-heavy business strategy. It also was timed right after reports that Microsoft Office would soon be available for both Android and iOS.
Xbox will present free streaming music as well as a subscription option for those that want to download individual tracks or hear music devoid of advertisements. It will also feature a full music store. It will be a direct competitor with companies like Spotify, Pandora, Google Music, iTunes and Amazon Music.
Xbox Music will also offer a special deal: Those that purchase a Windows 8-run tablet will be able to stream millions of songs for free, unlike Spotify, which charges $10 monthly for use on tablets.
Microsoft’s new music service will allegedly offer free access to 18 million songs for those in the U.S., with ads run every 15 minutes. Then, for $9.99 per month or $99.99 annually, consumers can listen without interruption. Music fans will also get the Microsoft Music store, which will have MP3 versions of songs for download at around $.99 per track. A “Smart DJ” tool will also serve as a music discovery system that will play new music for music lovers based on their favorite bands and artists.
How do analysts feel Xbox Music will impact the industry? Opinions are varied, said a piece in the International Digital Times. Some experts stated they feel that a shift to mobile could alienate many Microsoft fans; others feel it is a smart move that will draw in different types of users. Industry analysts and ZDNet contributor Steven J. Vaughan-Nichols declared, “No matter when Microsoft delivers the Android and iOS goods, Microsoft’s support of any version of Office on a non-Windows smartphone or tablet strikes me as an odd move. In a shareholder letter, Microsoft CEO Steve Ballmer said that Microsoft is shifting its model to focus on devices and services. This is a radical and dangerous shift for a company that’s always made it money from software licensing. And, now, instead of using Office as a crowbar to pry users from iPad and Android tablets to its Surface tablets, Microsoft is going to offer Office 2013 on its device rivals?”
Microsoft is giving up some of its market share with this latest move by creating cross-platform software. However, this could be a move to create more sustainable revenue in light of the fact that Windows has become a much smaller part of the company’s annual income. Microsoft’s 2012 revenue reports show that Windows only brings in the third-largest revenue for the company, behind Microsoft Office and its Server and Tools department.
The Xbox branding could help the company rev up its entertainment division, though it will not likely save the music industry. Xbox Music will be the default music application on every Windows 8 PC’s Start screen. And it is one of the first apps built for touch. The Windows 8 app – the best entry into the Xbox storefront – will ship on October 26. Spokespeople for Microsoft said it will expand the regions where Xbox Music is offered in the coming months.
“Six Strikes, You’re Out” to Combat Piracy
The Center for Copyright Information (CCI) will soon join together with ISPs such as Comcast, Verizon and a few others in order to establish a new “Six Strikes and You’re Out” system to fight digital music piracy and provide much-needed education to music fans, according to a report offered by CBS News last Wednesday. While news of this new program was first reported in September by both PC World and Ars Technica, more details and exact dates have recently emerged.
CCI Director Jill Lesser stressed, “It’s not a six strikes program. This is an educational program …There are a series of educational alerts that will be sent out to subscribers.” And it will be officially known as the Copyright Alert System.
Rob D’Ovidio, associate professor of criminal justice at Drexel University stated that this program is meant to help people understand that committing copyright infringement online is no different from stealing anything else: “Under the eyes of the law, downloading a piece of music from one of these file-sharing sites without authorization is no different than walking into a store and stealing a physical good.”
Five ISPs will begin to go after infringers in November, as exposed by leaked AT&T U-Verse training materials received by TorrentFreak. The program will give violators five chances via written warnings that detail violations and potential consequences.
D’Ovidio said the outline of the program supports the idea that education is a priority for both the entertainment companies and ISPs: “It’s definitely not a zero-tolerance type of approach … They’re working with the customer, recognizing there’s still a lot of misinformation out there – especially among the younger users They don’t know what’s acceptable and what’s not. Copyright law is a confusing thing for lawyers, let alone teenagers.”
Information about the program does not suggest cutting off pirates from their ISPs or other services. It will, however, require them to go through educational tutorials online before being allowed access to certain sites. But six strikes could result in a lawsuit from copyright holders. D’Ovidio continued, “The Internet Service Providers don’t want to lose customers; at the same time, they do have a responsibility … [But] the fact that someone is watching, and somebody knows where you’re going, hopefully that can serve as a deterrent.”
The program will put file-swapping users at the mercy of ISPs and content owners after the sixth strike. During the process of the program, no personal information about Internet subscribers will be offered to content owners without due legal process and the subscribers’ consent.
D’Ovidio added that content creators have to take more responsibility: “It’s been shown if the industry can put out alternatives that are low-cost, easy to use, where consumers can get access to those files very quickly, people do shy away from the use of illegal services.”
Lesser said in September that the “softer language” is an extension of the new approach the CCI has taken in the wake of the controversial Stop Online Piracy Act (SOPA). This latest initiative will team up the MPAA, RIAA with a handful of ISPs.
How Ray Charles Could Further Change the Music Industry
Music producers are on the edge of their seats as a legal fight over the rights to many of Ray Charles’ hits – including “I Got a Woman, “A Fool for You” and “Mary Ann” – rages on between his surviving family members and his charitable foundation. An article on The Hollywood Reporter site showed how the lawsuit is testing important issues regarding song terminations.
Charles’ children, whom he mostly cut out of his will, are trying to terminate a copyright grant on the songs to Warner/Chappell Music. If the songs go back to the children, the Ray Charles Foundation will no longer receive royalty checks.
The foundation sued his children in late March, saying that the termination notices they offered are invalid because the songs were created while Charles was employed by a record label and music publisher. Thus, the songs are “works made for hire, ‘authored’ by the predecessor to Warner/Chappell,” meaning his offspring have no legal rights to terminate.
A judge determined that the songs were not made for hire in late September, leaving the door shut for a potential lawsuit to be filed by Warner/Chappell. However, the Ray Charles Foundation recently decided to argue the side opposite to its original complaint. The foundation said earlier this month that the songs were not made for hire.
This statement is setting up a lawsuit directly related to termination rights, which has recently become a hot topic in on-going copyright law debates, especially since Bob Dylan, Tom Waits and Tom Petty have all just sent their own termination rights notices. And the industry now waits to see whether a court will feel that artists do their work as “employees” of record labels and publishers, thus giving them no right to some royalties.
This issue was broached earlier this year as Victor Willis of the Village People won a lawsuit and was able to get a federal judge to deny publishers the right over his works. However, this particular decision did not take into account the “made for hire” defense, because the music publisher dropped the claim before that particular component was decided.
In the lawsuit begun by the Ray Charles Foundation, the decision made by Judge Audrey Collins ruled that if “the works were not works made for hire and the foundation were receiving royalties from simple assignments, [then] it would be a ‘beneficial owner’ in the copyrights and would have standing to assert an infringement claim.” However, the judge was not sure if the foundation would be able to challenge the terminations and ordered more evidence to be presented.
The foundation’s response on October 2 was that Congress has not been clear about who can challenge terminations. The “if” was not well defined in Collins’ ruling. Howver, the foundation does admit that Charles is the author who assigned the work to someone else. And this left an opening for Charles’ children to try to get Charles’ songs back from the label, which they began to do on October 9.
If the judge decides that the foundation’s claims have merit and lets the case to continue, it could change the outcome for industry players like record producers to challenge termination notices.
And the judge will likely address whether or not the Ray Charles songs are “made or hire,” a distinction that could represent a critical change for record labels and publishers that find themselves inundated with termination notices.
Last week, experts and artists alike analyzed the new music business and discussed methods for surviving in it as New York Magazine presented a breakdown of pop music’s new metrics, and industry veteran David Byrne released his new book outlining where the music business is headed and how all musicians can take charge of their own careers. Also, Rdio introduced its new Artist Program, which helps artists maximize earnings from streaming digital music.
Do the Music Industry’s Old Metrics Matter?
There is a new math attached to Top 40 music in the Digital Age, according to an article in New York Magazine. And artists need to start coming to terms with reality, change their goals and define and manage their careers very differently.
One of the biggest signs of change is that the record for the #1 album that sold the least number of copies (since 1991 and the SoundScan era) was broken three times in the first part of 2011. Previously, it had only been broken three times in 16 years. Still, since 2008, there have been 66 #1 songs, and just six artists have been responsible for half of those: Katy Perry; Adele; The Black Eyed Peas; Rihanna; Flo Rida; Lady Gaga. 1986 saw 31 #1 songs created by 29 different artists. But in the new music industry, “new” is not always better, as this piece pointed out. Catalog albums – those that are over 18 months past their release date – outsold brand new ones in 2012 for the first time in history.
Despite lower album sales numbers overall, stadium-oriented acts like Radiohead are no longer the only ones filling giant venues like Madison Square Garden. Artists that would have been considered small and indie in previous years, like Phoenix, Interpol and The Black Keys have all sold out The Garden and other huge performance spaces, in large part due to their abilities to build up a following of anywhere from hundreds of thousands of fans, to millions of fans on social media sites like Facebook and Twitter.
As the article also highlights, in the new “rock star economy,” while there is money to be had by everyone from DIY artists, to major label acts, income varies wildly between those groups. The average five-piece DIY band that is making an album every five years pulls in just under $11,000 annually per member. A Pitchfork-beloved indie label four-piece group earns about $126,000 per member per year. And a major label act, as big or bigger than Beyonce, can expect to pull in a total of almost 33 million.
How Music Works: How to Be a Musician and an Entrepreneur
Where is the music business headed, and how can artists make a living and create great art within the space? These are questions industry veteran, musician, writer and entrepreneur David Byrne asks and attempts to answer in his new book How Music Works.
In his latest tome, Byrne tackles the concepts behind making music in the current world for the first time, focusing on the future rather than the past and revolving around his own personal business dealings and experiences, which he presents in pie charts and real stats. He told Wired, “I want folks to see the fairly simple math that pushes us towards making certain musical and career decisions … The book is about how myriad external factors influence the music itself, and money is one of those factors.”
The book is also a way for Byrne to help other artists see an example in someone who has been making his own way in music for a long time and help them make some better sense of the music world. In a universe where everyone is now being forced to take charge of their own careers, he feels his story – full of successes and also, as he admits, some failures – can provide some insight into how decisions all musicians make shape their careers: “I also thought that by being transparent and using my own experience as an example, I could let other musicians see what their options are – and how their decisions might pan out … It’s all very confusing until you bring it down to what exactly one makes on a record for a year’s worth of work. Then it hits home, and the reader can sense what it takes for a musician to survive.”
In large part because most other artists – especially not those at Byrne’s stage in his career – have ever been upfront about their incomes, How Music Works breaks new ground. He felt that presenting the realities of his earnings – despite the fact that it made his business managers uneasy – was important to creating an honest depiction of the landscape for others.
The book also goes beyond just business aspects and outlines what Byrne feels to be some of the most exciting movements in music outside the U.S., further expressing his long-held belief that the term “world music” is generic and distasteful, and American music fans need to rethink the way they receive and define music outside the U.S.: “I stand by my disdain for the term – it implies that there’s an ‘us’ and then there’s everybody else … Have things changed? A little. You might see Rolling Stone or maybe even Pitchfork review a new Caetano [Veloso] record, or one by Lenine or some other Brazilian artist, but given the amount of creativity that exists in the world, we’re pretty much locavores.”
He added, “The interweb allows us greater access to many of these artists, which of course is great in my book — I follow a lot of them and order their records online — but on the other hand, the web also allows us to stay exclusively within our little tribes more than ever.”
How to Earn More Money from Streaming Music
As options for streaming music evolve, artists continue to complain about how much money they are earning from these digital services. But a new offering from Rdio is hoping to help musicians maximize their income from this channel. Rdio CEO Drew Larner talked about this new Artist Program in an interview with The Musician Network last week and about why building up awareness of social music discovery and techniques to make it more effective is important to artists of all sizes.
The Artist Program is a way for an artist of any size to get rewards for successful fan engagement through Twitter and Facebook. Artists will be paid $10 for each new subscriber they bring to Rdio and also get access to a customizable Rdio artist page and a dashboard that allows them to track metrics and see their referrals accrue. Through this dashboard, they can convert any link on Rdio to a unique link associated with their account and share those links with fans on social media sites. Anything, whether a song from their own albums or a song from their favorite new inspiring artist can be shared and attributed to them, so they earn money for any type of Rdio-related interaction.
The new program is also designed to help artists earn money more immediately, above and beyond licensing deals, since Rdio does not pay royalties directly to artists. He said, “… We have agreements with labels and distributors and they have deals with their artists. This program is meant to complement the licensing deals we already have in place with labels and distributors for access to music on the service, adding an additional direct revenue channel to artists and providing a new element of transparency around the streaming music model.”
The need for artists, music entrepreneurs and executives to adapt to technology was highlighted last week as the head of the new EMI/Universal discussed the company’s area of focus going forward. And industry analyst Mark Mulligan followed up the previous week’s keynote speech about whether or not streaming services have hit their ceiling with more stats supporting why Spotify must change its business model in order to grow. Also, the chairman of the Production Music Association (PMA) talked about how the landscape for film and TV music has changed in the past few years and how music supervisors are choosing artists and tracks to use in their various projects.
Are Smartphones and Tablets the Future?
The chairman of the new EMI/Universal conglomerate Lucian Grainge announced the company would be focusing heavily on developing strategies for smartphones and tablets in order to expand its reach to Brazil, India and Egypt, according to a report in Financial Mail.
The EMI deal was finally cleared by the European Commission on Friday, contingent upon it getting rid of some of its assets. Grainge stated that the rapid expansion of Google’s Android platform for touchscreen phones as well as increased sales of the iPad and other tablets provides an opportunity to vastly increase the sale of digital music.
According to Grainge, “The trends that we are seeing alongside the spread of the latest technology, from tablet computers to the Android phones, make emerging markets increasingly attractive for digital music – and that’s paid-for digital music or digital music with revenues attached …”
Universal/EMI will be looking at countries like India, Brazil, Turkey and Egypt, which have been shown to be full of music fans that want to hear music from local and international artists: “Content is at the heart of it – the most important part.”
Grainge pointed to The Beatles – whose catalog is part of EMI’s assets – as proof that bands and artists can continue to make money off their recordings throughout the world “forever.”
Grainge is tasked with getting rid of approximately 30 percent of EMI’s revenues to meet the demands of the EC. He plans to hire an executive to oversee this process, which will mostly unloading parts of the Parlophone label catalog. EMI’s current chief executive, Roger Faxon left the company on Friday, with more layoffs to follow.
Mark Mulligan: “Losing Free Customers is a Good Thing for Spotify”
Top music industry analyst Mark Mulligan was met with some skepticism from the music business in recent weeks when he questioned the actual growth potential of companies like Spotify, Rdio, Mog and Rhapsody as part of his speech at the Future Music Forum in Barcelona. As a rebuttal, he gave further context to Spotify metrics in an entry on his own Music Industry Blog on September 24.
Mulligan said, numbers show that Spotify had to acquire about 1.8 million users per month just to keep 400,000 of them. Estimate are based on the fact that Spotify reported 32.8 million registered users at the end of 2011, 10 million of which were active. And in March, 2011, Spotify reported 1 million paying subscribers – 15% of active users – putting their active users at 6.7 million. Spotify announced 10 million registered users in September 2010.
Mulligan admitted that there are likely “monthly and seasonal variations” in these figures, causing the exact numbers to be different each month, and that many of the 1.4 million new monthly users that lapse may pick up the service again later in the year. But regardless, if 2011 is any indication, Spotify has to sign up quite a bit of new users than it keeps.
Mulligan also pointed out that this customer loss is actually not a sign of an ailing business model: Losing low-level and free users will actually strengthen Spotify’s business going forward. Since Spotify’s model is about ideally selling premium subscriptions – which is what will help the company itself, along with labels, publishers and artists make money from their work – the “free” part of its business is just a marketing tactic. The number of free users that keep listening is not actually important. What is important is how many of them convert to paying customers.
“… It benefits Spotify if those users who have no intention of paying churn out early on from the free service as it means less cost to Spotify’s bottom line. As challenging a path towards profitability as Spotify may find itself on, it would be a dramatically more difficult road if all of those 32.8 million users were active. So Spotify’s business model and margins actually benefit from the majority of those new free users churning out of the service early, allowing Spotify to focus on migrating the remaining engaged free users to paid.”
And this “free churn” concept is what led Mulligan to question the profit opportunities for streaming services. As he pointed out, while the “free-user-leakage” factor fits in with Spotify’s business model, it challenges the foundation of that model.
Two-thirds of Spotify’s customers in 2011said “no” to something that was free, which means that streaming audio may not be appealing enough to music fans. The reasons that Spotify’s free users disappear are varied and include advertising, the inability to burn to CD and the fact these digital tracks cannot be downloaded for offline listening. While a lot of these issues can be rectified by paying $9.99 per month, the average consumer is not spending that much money on music monthly anymore. In fact, that number is the average spend for only the top 20% of music fans.
Mulligan stressed that because most consumers will not experience the incredible ease of use and features attached to the full streaming audio experience, they will never be enticed to pay for it. Therefore, cheaper price points will be the key for Spotify and other streaming services going forward.
Production Music Hitting a Crossroads
Where is production music heading in the future? And how can artists get their music into film and television?
These are some of the questions Sonic Scoop asked newly-appointed Production Music Association (PMA) Chairman Randy Thornton recently, in anticipation of the organization’s upcoming gathering, “The Future of Production Music: Opportunities, Challenges & Threats” on October 11 in New York City. The PMA is a non-profit organization that promotes and protects the rights and interests of publishers and composers of music used in film, television, radio and other media. Thornton, also the CEO of Warner/Chappell Production Music said he is anticipating some big challenges for those working with production music going forward.
The production music market has actually managed to stay profitable and stable, even while the rest of the industry has been thrust into chaos. However, while the number of production music catalogs and creators has been expanding, the amount that customers have to spend is decreasing. And the retitling of tracks – which is legal and lets rights holders put the same song in a variety of libraries – is creating some confusion for those distributing revenue.
Thornton pointed out that the biggest issue in the production music industry as it expands has become keeping the quality of music high and selling that quality to those that have much less to spend than in previous decades: “I feel that the biggest challenge currently facing the production music industry is that of maintaining the value of our music in the marketplace … The current environment is one of increasing competition for ever-dwindling budgets. The upside is that there are more potential clients than ever. The downside is that many clients are being squeezed financially and are therefore pressured to look for ‘alternative sources/practices’ for production music, many of which are detrimental to the sustainability of the industry as a whole … I feel that it is critical that we strive to maintain or elevate the value of our music, thus enabling a viable financial future for our industry as a whole.”
And the landscape has changed significantly in the past five, to 10 years. The PMA currently represents 450 catalogs, which is ten times more than it represented a decade ago. And decreased budgets, combined with the splitting apart of many TV, film and new media companies has created mass confusion when it comes to analyzing licensing models and the cost/benefits of each one: “Education and a commitment to understand current needs on both sides of the fence are crucial to ensuring real progress for our industry.”
Thornton stressed that he feels recent changes in the production music climate could actually provide positive opportunities: “The production music industry has consistently grown in both size and quality over the past 10 years: Long gone are the days of clients bemoaning the fact that they ‘had to use a library cue.’ The creative and production values of current production music works are leading the world in many segments of the market, including the work of many GRAMMY and Emmy award-winning composers and producers.”
And this could offer many new artists the chance to start diversifying their careers by writing production music: “Clients have a huge choice these days when it comes to choosing music, and their choice more often than not centers around creativity and production values — both of which are good news for our industry!”
This past week, recent major changes in the music climate were the main focus, as Universal Music Group (UMG)’s bid for EMI’s music division and a top music industry analyst questioned whether or not streaming music is already approaching its peak. Additionally, Musicmetric numbers showed that Australia has the highest instances of music piracy based on its population. And finally, Jimmy Osmond provided important tips for bands that want to sustain the over-50-year career that the Osmonds have enjoyed in the industry.
Universal’s Bid for EMI Approved
UMG’s acquisition of EMI Group Ltd.’s recorded music division for $1.9 billion was finally approved by regulators in the U.S. and abroad on Friday morning. This merger, which has been hotly contested by artists and professionals on all sides of the industry will put the label in charge of the entire Beatles catalog as well as the albums of artists like Coldplay and Katy Perry. This approval marks one of the final steps necessary to making the once four major record labels into three.
The U.S. Federal Trade Commission approved the deal with no exceptions, whereas in Europe, the EU will force Universal to sell a large number of EMI assets to keep the playing field fair for independent labels.
UMG officials were excited about their victory. Chairman and CEO of UMG Lucian Grainge told the Los Angeles Times, “[The merger] will allow us, I hope, to do our bit to return the industry to growth … It will enable us to continue to invest in more music, to create investment opportunities for the entire Universal group, it will give us the opportunity to work with entrepreneurs in different genres and it will give us a cushion through this crucial crossover period as we hurtle toward a primary digital business.”
UMG contributed to 29.9% of total album sales in the U.S. in 2011, which put it ahead of Sony Music Entertainment’s share of 29.3% and Warner Music Group’s 19.1% share. EMI held 9.6% of sales, whereas smaller independent labels had 12.1 percent.
Is Streaming Music at its Peak?
The surging popularity of streaming music services has given labels and artists hope that they can finally adjust to and profit from music’s shift to digital. But top music industry analyst Mark Mulligan, in his keynote speech at Future Music Forum in Barcelona on Thursday called this optimism into question, calling into question the actual growth potential of companies like Spotify, Rdio, Mog and Rhapsody.
According to Mulligan, while Spotify is a bright spot, everyone should learn lessons from past technological advances within the business: “There is a natural ceiling of adoption of the people who are willing to pay $9.99 a month for music they don’t own … If you look at growth from launch, Spotify is – at best – on par with where we should be. The likes of imeem were the future of the music industry once, too. The most Vodafone (UK) got to was about 600,000 customers. Spotify’s (UK) paying subscriber count is about 600,000, to 800,000 … This market should be much more dynamic than where we are now. It’s a niche proposition. The majority of mass-market consumers are still not interested in the pricepoint.”
As skeptical as Mulligan admitted he is, he acknowledged the efforts of digital pioneers like Rhapsody, and encouraged those that have enjoyed quick success to continue to work to improve their business models: “It took Rhapsody 11 years to get to one million users, it took Spotify nine quarters … Spotify has to work really hard to get to where it wants to be.”
He said Spotify especially needs to work on creating a mainstream model that will satisfy more than just the early adopters, who enjoyed unlimited access for free: “Spotify is having to acquire 1.9 million new customers a month in order to retain 400,000. It’s a huge, huge marketing problem. The average pay TV service would want to see churn rates in the low single-digit percent … They’re having to work so hard to keep where they are – like a duck: It may look serene under water, but underneath it’s legs are going like the clappers … What it shows us is that streaming clearly isn’t for everyone.”
However, subscription services are banking on new devices and mobile carriers that give them the chance to bundle services with products and get new customers. And these efforts were not possible when imeem was trying to gain its fotting and Vodafone was only offering a music subscription service to its own customers. Still, as competition increases and music services go after the same partners to create bundles, they may experience some barriers to growth.
Ultimately, Mulligan stated that downloads have not provided “hockey-stick” digital growth for the industry, and streaming, as with any other business model will have its own growth end point. He challenged music entrepreneurs to continue to improve the packaged music experience they are offering and find a way to incorporate exciting artwork, access to lyrics, chats with bands and other engagement opportunities and then monetize this format.
Australia Revealed to Have the Most Music Pirates
Information from bit torrent sites gathered by Musicmetric revealed that Australians download more illegal music, more frequently based on their population than any other country in the world, according to an article published on The Age. Conversely, Australian music fans also pay for downloads and purchase physical albums at a surprisingly high rate.
The Musicmetric survey showed that Australia placed sixth in the top 10 for music downloads in 2011, with 19 million. The most downloading country was the U.S., which downloaded music 96,681,133 times, twice the next-highest-downloading country, which downloaded 43 million units.
Of the 19 million downloads in Australia, which has a population of 23 million, the number of them obtained through illegal sites was higher than in any other country. And interestingly enough, the most popularly-illegally-downloaded artist was the local Adelaide-based hip-hop group the Hilltop Hoods. The manager of the group, Dylan Liddy, was skeptical of Musicmetric figures, but said that illegal downloads are unfortunately just something artists have to accept as the shift to digital continues to take place: “We are in the business of selling records so it would be great if we could monetise everything. But at the moment, the way that the music world has moved is getting illegal downloads and that’s very hard to police … It is what is. It’s great that the boys are popular.”
Still, Liddy said that while the Hilltop Hoods provide an example of the problems with illegal downloading, they also are still selling records in their home country, which is currently enjoying some of the best sales numbers of any country globally. The band’s latest album, Drinking From the Sun continues to be in the Top 40 on the Australian sales charts, seven weeks after its debut and has sold over 70,000 copies in all formats combined.
Many in Australia are taking Musicmetric results on downloading with a grain of salt, though the numbers are noteworthy when compared to those offered by the Australian Recording Industry Association (ARIA) for 2011. Both sets show that Australian music fans are comfortable with digital music. ARIA found that legal digital sales have continued to rise, and sales were up by 37 percent in 2011, with digital sales also taking up 37% of the market. ARIA also found that 25% of downloading was done via illegal sites.
Jimmy Osmond: “How to Survive in the Music Industry …”
Jimmy Osmond, the youngest member of the Osmonds recently spoke to the Daily Herald about how his family’s band has managed to find success in the music industry for 54 years – longer than any other group in history. He said that while recording and performing has become such a normal part of his life that he does not really even think about it anymore, he has learned a lot about maintaining success along the way, especially as part of a band and not a solo artist:
- Have fun. As Osmond has realized, there is no way anyone can spend a long time in showbiz unless he/she is having a great time along the way: “We’ve never stopped, for 54 years, re-creating ourselves … just because we love it.”
- “Know your strengths.” Band members need to be able to respect everyone’s roles and talents. According to Osmond, he sometimes thinks of himself and his siblings as fish in an aquarium: “Marie is our beautiful angelfish; Donny is the shark; Wayne, with his jokes, would be the clownfish, and so forth … I’m the little sucker fish, zipping around keeping the tank clean.”
- Embrace change. Keeping things fresh is what keeps bands interested in their music and the experience of creating art together … and also what holds fans’ attention: “Part of keeping it fresh for yourself and for people who follow you is change … We’ve had country hits, pop hits, rock and roll hits – we never wanted to be bored with us either.”
- A sense of humor is imperative. Osmond stressed that getting caught up in being successful can make the experience of being in a band and making music a chore. He said, “We don’t take ourselves seriously … We’re just doing what we do because we love it. We’ve never had those moments where we’re so narcissistic that we stop enjoying what we’re doing.”
- Have a dream. Sometimes bands can let ambition get the better of them and stop setting challenging goals. Osmond recently decided to book the biggest tour he and his brothers had ever done – so big, he wondered whether or not anyone would show up: “We played 51 dates and sold more than 100,000 tickets … We’re going to kick off another 50 dates in January.”
- Take a cue from Elvis. Though he has received a lot of advice along his journey as a musician, Osmond said that one of the best pieces came from Elvis Presley when they played together in Las Vegas: “He always emphasized, ‘No matter what, take time for your fans … As you go up the ladder, be kind to everybody, because you’re definitely going to see them on the way down.”
Experts examined the future shape of the music industry last week, as stats continued to reveal predicted sales numbers and growth areas in the music industry for next year. And leaked tax records showed that the RIAA has experienced deep financial losses in 2012. Also, Pandora spoke out against a new bill regarding music royalties.
The Near Future of Industry Growth
The rest of 2012 will continue to be full of growth and reorganization within the music industry, according to further analysis of Strategy Analytics’ latest Global Recorded Music Forecast. The Music Industry News Network presented a break-down of consumer spending through the year, and offered some positive insights about formats to watch.
Streaming revenues will likely increase by 40 percent at about five times the rate of download revenues earlier in the year, topping out at $1.1 billion. And download revenues will grow to $3.9 billion, allowing streaming services to take over the market as the highest revenue growth engine. In fact, they will generate an additional $311 million for the music business, $8 million more than downloads.
Overall digital and mobile purchases will grow to $8.6 billion, whereas there will be a 12.1 percent decline in physical product sales, meaning that digital music will build its global share of recorded music. While digital spending will continue to dominate through 2015, eventually taking over the market, some countries, like the U.S., Sweden and South Korea will transition to digital more quickly than others.
The Director of Digital Media at Strategy Analytics, Ed Barton explained, “Although downloads still account for nearly 80 percent of online music revenues, this market is maturing, and spending is flattening in all key territories. Streaming music services such as Spotify and Pandora will be the key growth drivers over the next five years as usage and spending grow rapidly.”
But why will this shift take place? According to Barton, as music fans become more comfortable with new digital formats, they are coming to value “accessibility and availability” over building huge libraries of outright-owned music. And this drives growth in instant-access streaming services like Spotify. He added, “The emergence of cloud storage of a subscriber’s existing music library for seamless streaming to a range of connectable devices improves the value proposition further.”
And what will happen specifically with U.S. music revenue? By the end of the year, streaming revenues will grow at four times the rate of downloads, bringing online streaming and downloads up to double the share of music spending in the U.S. than worldwide. And U.S. physical product sales will decrease less than the global rate, declining by 9 percent. Physical spending won’t wait until 2015 to be overtaken by digital; this shift will happen in the U.S. by the end of the year.
Barton sees the Report’s numbers as a positive sign: “Having stabilized long term revenue declines resulting from the downsizing of packaged music spending, the industry will be hoping that digital can rebuild the U.S. market to something approaching its former stature.”
Is the World Ending for the RIAA?
Leaked tax records show that the RIAA could be in serious financial trouble, partially because of the continued high salaries of top executives within the organization and its investment in piracy lawsuits, along with the decreased investment of major record label executives that serve the company. Its revenue dropped by just under 50 percent in the past year, according to information presented by TorrentFreak and Digital Trends this past week.
One of the biggest proponents of anti-piracy initiatives like the Stop Online Piracy Act, the RIAA is showing signs of falling down. Its recent tax filings reflect that the organization’s revenue for the period ending March 31, 2011 has fallen by 44 percent over the previous two years, topping out at $29.1 million, compared to the $51.35 million it garnered in 2009. The number of employees on the payroll also decreased from 117 to 72. These huge drops lead many experts to believe the numbers for 2012 will drop even further, given their increased efforts to bring down pirates and fight against the changing music industry.
The fall in revenue can be in great part attributed to a drop in dues paid by major record label employees that serve as RIAA members. In a tax filing from 2009, the RIAA reported member dues of $49.8 million, as announced by Digital Music News. The new number is $27.9 million.
Of course, the first part of 2011 was one of the best for the music industry, as Nielsen SoundScan showed. For the first time in six years, total album sales rose by one percent.
Even though there has been a drop in overall revenue and member dues within the RIAA, executives are still earning impressive salaries. Former RIAA Chairman Mitch Brainwol earned $1.75 million, more than any RIAA employee. And the Chairman and CEO Cary Sherman, who at the time was the President, earned $1.36 million. The nine other most-well-paid employees get salaries between $309,000 and $715,000.
While the amount of money the RIAA spends on lobbying the U.S. government has held steady at $2.3 million per year, the amount of money the RIAA has collected in legal fees has dropped. While it has continued to aggressively pursue major anti-piracy lawsuits, it decided to stop going after individual infringers.
Pandora Getting Louder about New Music Royalties Bill
Online music service Pandora is continuing to get riled up about Rep. Jerrold Nadler of New York’s draft legislation on music royalties, according to The Hill. Spokespeople for the company claim it will only serve to discourage technological innovation and is also discriminatory against Internet radio.
Pandora is, however, backing a draft bill designed by Rep. Jason Chaffetz of Utah. This bill is designed to lower the royalty fees Internet radio stations pay so they are on even ground with cable and satellite radio stations. Chaffetz’s legislation would force Internet radio to be held by the same standards outlined by the 801(b) section of the Copyright Act.
Tim Westergren, founder and chief strategy officer of Pandora said, “The current system for establishing royalty rates is astonishingly unfair … Fairness demands that all music related rate settings utilize the same 801(b) standard.”
Nadler’s bill is backed by most other groups and companies within the music industry, because it would help improve compensation to artists when their music is played on digital radio services and on radio stations’ live-streamed online broadcasts.
The 801(b) standard is used in order to figure out the royalties that will be paid by the industry to music publishers and songwriters. Westergren stated, it is unfair that the industry will not use the same standards it uses on all other entities to force Internet radio to be responsible for paying artists. He added, “Congressman Nadler’s discussion draft would only perpetuate this hypocrisy and worsen an already flawed legislative mistake that is discriminating against new technology and hampering innovation.”
Chaffetz’s and Nadler’s bills have both caused a battle within the music industry and digital radio services regarding music royalties. And many are unsure of Chaffetz’s bill because they believe it could take money from artists.
Nadler himself has expressed that he agrees with Pandora about the need for equal rates, but that the bill that opposes his is not the solution: “The solution is not to get to parity at the expense of artists as Rep. Chaffetz’s bill proposes … We can and should both level the playing field for Internet radio and ensure that artists are fairly compensated …”