How Will Musicians Earn Money in the Future?

Jun 02 2011
Posted in File Sharing / P2P, Music Creation, Music Industry, Music Publishing, The Future
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Here is an excerpt from a great piece from Wyndham Wallace of The Quietus on how the music industry is killing music and blaming the fans. This rather dark opinion is spot on in so many ways and raises some very difficult questions about the future of the music business that most people do not want to talk about.

“All the time the industry talks of money: money it’s lost, money it’s owed. It rarely talks about the effects upon artists, and even less about how music itself might suffer. But no one cares about the suits and their bank accounts except shareholders and bankers. People care about their own money, and the industry not only wanted too much of it but also failed to take care of those who had earned it for them: the musicians. And it’s the latter that people care about. Because People Still Want Good Music.”

“In March this year, for instance, the RIAA – the Recording Industry Association of America – and a group of thirteen record labels went to court in New York in pursuit of a case filed against Limewire in 2006 for copyright infringement. The money owed to them – the labels involved included Sony, Warner Brothers and BMG Music – could be, they argued, as much as $75 trillion. With the world’s GDP in 2011 expected to be around $65 trillion – $10 trillion less – this absurd figure was, quite rightly, laughed out of court by the judge. The RIAA finally announced in mid May that an out of court settlement for the considerably lower sum of $105 million had been agreed with Limewire’s founder.”

What is questionable about all of this is exactly how much of the settlement of $105 million will flow to the musicians, songwriters and producers whose work was the subject of the infringement to begin with. In previous settlements including Napster ($270 million), Bolt ($30 million), Kazaa ($130 million) and MP3.com ($100 million) it is unclear how much, if any, of the money received by the labels ever reached the pockets of the artists. I have yet to see an accounting of this and many managers I have spoken with have simply laughed when I asked the question if they ever received any payment from these settlements. I suppose that proceeds from litigation may be considered recoupable costs.

“But if the industry wants to talk money, let’s talk money, albeit the ways that developing musicians are encouraged to make up the loss of sales income in order to ply their trade. Someone’s got to bring this up, because it’s not a pretty picture. Consider, first, direct-to-fan marketing and social networking, said to involve fans so that they’re more inclined to attend shows, invest in ‘product’, and help market it. In practise this is a time-consuming affair that reaps rewards for only the few. Even the simple act of posting updates on Facebook, tweeting and whatever else is hip this week requires time, effort and imagination, and while any sales margins subsequently provoked might initially seem higher, the ratio of exertion to remuneration remains low for most. It’s also an illusion that such sales cut out the middlemen, thereby increasing income, except at the very lowest rung of the ladder: the moment that sales start to pick up, middlemen start to encroach upon the artist’s territory, if in new disguises. People are needed to provide the structure through which such activities can function, and few will work for free – and nor should they – even though musicians are now expected to.”

“Still, if an act can find time to do these things, or has the necessary capital to allow others to take care of them on their behalf, then they can hit the road. Touring’s where the money is, the mantra goes, and that’s the best way to sell merchandise too. But this is a similarly hollow promise. For starters, the sheer volume of artists now touring has saturated the market. Ticket prices have gone through the roof for established acts, while those starting out are competing for shows, splitting audiences spoilt for choice, driving down fees paid by promoters nervous about attendance figures. There’s also a finite amount of money that can be spent by most music fans, so if they’re coughing up huge wads of cash for stadium acts then that’s less money available to spend on developing artists. And for every extra show that a reputable artist takes on in order to make up his losses, that’s one show less that a new name might have won.”

“Touring is also expensive. That’s why record labels offered new artists financial backing, albeit in the form of a glorified loan known as ‘tour support’. Transport needs to be paid for, as do fuel, accommodation, food, equipment, tour managers and sound engineers. These costs can mount up very fast, and if each night you’re being paid a small guarantee, or in fact only a cut of the door, then losses incurred can be vast, rarely compensated for by merchandising sales. Again, financial backing of some sort is vital, but these days labels are struggling to provide it. In the past, income from record sales could be offset against these debts, but with that increasingly impossible, new artists will soon find it very hard to tour. Everyone’s a loser, baby.”

From Beck’s ‘Loser’

Forces of evil in a bozo nightmare
Banned all the music with a phony gas chamber
‘Cause one’s got a weasel and the other’s got a flag
One’s got on the pole shove the other in a bag
With the rerun shows and the cocaine nose job
The daytime crap of a folksinger slob
He hung himself with a guitar string

Soy un perdidor
I’m a loser baby, so why don’t you kill me?
(Know what I’m sayin?)

“Whether the industry likes it or not, music is now like water: it streams into homes, it pours forth in cafés, it trickles past in the street as it leaks from shops and restaurants. Unlike water, music isn’t a basic human right, but the public is now accustomed to its almost universal presence and accessibility. Yet the public is asked to pay for every track consumed, while the use of water tends to be charged at a fixed rate rather than drop by drop: exactly how much is consumed is less important than the fact that customers contribute to its provision. Telling people that profit margins are at stake doesn’t speak to the average music fan, but explaining how the quality of the music they enjoy is going to deteriorate, just as water would become muddy and undrinkable if no one invested in it, might encourage them to participate in the funding of its future. So since downloading music is now as easy as turning on a tap, charging for it in a similar fashion seems like a realistic, wide-reaching solution. And just as some people choose to invest in high-end water products, insisting on fancy packaging, better quality product and an enhanced experience, so some will continue to purchase a more enduring musical package. Others will settle for mp3s just as they settle for tap water. Calculating how rights holders should be accurately paid for such use of music is obviously complicated but far from impossible, and current accounting methods – which anyone who has been involved with record labels can tell you aren’t exactly failsafe – are clearly failing to bring in the cash.”

“The problem is, it’s not really the industry that is being cheated. It’s the artists and their fans. People get what they pay for, but – whatever the industry claims – most fans know that. They just don’t want to hear the businessmen fiddle while the musicians are being burnt. Revenues are unlikely ever again to reach the levels of the business’ formerly lucrative glory days, but in its stubborn refusal to recognise that both the playing field and the rules themselves have been irreversibly redefined without their permission, the industry is holding out for something that is no longer viable. Lower income is better than no income, and the industry has surely watched the money dwindling for long enough. Musicians, meanwhile, are being asked to make more and more compromises as they’re forced to put money ahead of their art on a previously unprecedented scale.”

Read the whole ugly story here at The Quietus.

The comments alone tell the sad story of the state of affairs in the music industry today.

Comments 8 Comments | Permalink

Attention Music Managers and Artists: you may be owed BILLIONS in unpaid royalties

Mar 31 2011
Posted in Music Copyright / Legal, Music Industry, Music Marketing, The Future
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If you are a recording artist or a manager and have been distributing music on iTunes under a deal with one of the big record labels, pay attention.

F.B.T. Productions in Detroit, the producers who helped Eminem achieve his success are paving the way via a lawsuit against Universal Music and others, to larger payouts for digital music sales via iTunes and other digital services both past and future. This effort could unleash literally billions of dollars in unpaid royalties for recording artists.

How much money is at stake here?

This chart from Asymco, shows the accumulated payments made to suppliers of content to the iTunes store over time. You can see that the total amounts paid to the record labels can be approximated at $12 billion dollars since the launch of iTunes through the first quarter of 2011.

Source: Asymco

That would imply that the gross amounts collected by Apple are in the neighborhood of $17 billion dollars for iTunes music downloads.

So I did a little back ‘o the ole iPad calculation and here’s what I came up with.


royalty calculation image

I want to be realistic about the potential to collect and so will assume that half the music distributed on iTunes is from catalog sales of artists with older label contracts, and the other half is from music distributed from sales of newer artists. SoundScan numbers from last year show 648.5 million downloads of “catalog” singles in the US, meaning songs more than 18 months old, compared with 523 million for current tracks, so this seems like a very safe assumption.

Using this quick and dirty math, the potential unpaid royalties to artists from just iTunes sales would be around $2.15 billion. Admittedly some of this money has already been paid to music publishers, so the number may be overstated somewhat, and could benefit from a finer accounting. But then again, catalog downloads from iTunes could be closer to 80% which would make the unpaid royalty number higher. So the amount is significant. Really significant. Are you with me?

The lawsuit boils down to a distinction between selling “copies” of physical products such as CDs or vinyl recordings versus selling a “license” to reproduce the digital song data. Record labels actually ship physical product (principally CDs) to record stores; but in the case of iTunes it gets a license to replicate and distribute digital files. When the record labels sell “copies” of music, the artist typically receives a 10-15% royalty, but when the labels “license” the music to another entity, most artists typically receives a 50% royalty.

The complaint filed by F.B.T states “Defendants have failed to comply with the terms of the March 9, 1998 agreement and the 2003 Agreement by failing to account and pay royalties equal to fifty percent (50%) of Defendants’ net receipts from the digital uses of the Eminem Masters by the Music Download Providers and Mastertone Providers. Defendants apply an incorrect formula for calculating royalties with respect to those royalties to be paid to Plaintiffs which results in the payment of approximately twelve percent (12%) of receipts instead of the fifty percent (50%) required by the terms of the agreements.”

Universal Music Group, Aftermath Records and Interscope Records appealed against a ruling in the Ninth Circuit Court in December that said they should pay 50% of royalties on digital sales. The defendants took their appeal all the way to the Supreme Court.

However, the US Supreme Court just last week rejected Universal Music’s appeal in the case letting the Ninth Circuit Court of Appeals decision stand that digital music (under this particular agreement) should be treated as a license subject to a 50% royalty payment.

Now to be fair, not all label agreements are the same, and if you signed a label deal in the last 10 years or so, you have probably been excluded from the impact of this decision by contract. Label attorneys have indicated that newer artists are unlikely to be affected by the decision because more recent recording contracts include digital distribution in the definition of “sales” for artist’s royalty calculation purposes. But if you signed prior to the early 2000′s, you may be looking at a significant payday.

That apparently is the thinking by the estate of Rick James, which just filed a class action suit in April against Universal Music, opening the door for a massive settlement involving potentially thousands of artists. The filing can be found here. This is certainly not the last suit that we will see on this issue.

——–

For years I have been arguing that iTunes digital music distribution was a license of music, not a sale. When Steve Jobs and his team negotiated the original iTunes deal with the major labels, the economics gave iTunes roughly 30% of each download, like a distributor/ retailer of CDs would receive and the remaining 70% would flow to the labels and presumably be split as with a traditional CD sale.

But what was rarely questioned at the time, was the way the 70% label share would be split. The labels assumed that these downloads were “sales” of copies of the songs and that artists would receive their royalties based on traditional accounting practices.

Indeed in the early days of payments from iTunes, labels often continued to deduct fees for “packaging” and “breakage” and “co-op” often when there were no actual costs being incurred. Hardly anyone questioned whether iTunes downloads were “licenses” versus “sales” – which would have swung the payments heavily in favor of the artists.

Steve Jobs himself referred to his deal with the labels as a “license” in his rare and open “Thoughts on Music” letter posted February 6, 2007. Interestingly, this letter has disappeared from and is no longer available on the apple.com web site but you can still find excerpts via Google. Hypebot reported that “Although he (Jobs) consistently referred to Apple ‘licensing’ music from ‘the big four music companies’, when deposed in this case he claimed not to know whether his company’s relationship with Universal was, in fact, a license.”

——–

This potential $2.15 billion represents approximately 12.5% of the gross revenue collected to date by Apple, and that 12.5% figure could apply to all the other digital distributors including Amazon, Napster, and others. With Apple’s iTunes music revenue running around $300 million per month, that is another $37.5 million per month up for grabs at the present rates from Apple alone.

This ruling has the potential to forever transform the very nature and structure of the recorded music business. Certainly all of the cloud-based systems like Amazon Cloud Player and those being contemplated by Google, Apple and others will be commissioned under licenses, especially when you consider that multiple instances of files will be available on a PC, mobile device or streaming. The very idea of copies just does not make any more sense in the digital age.

This is a significant development for artists and the creative community. Artists and managers joined together could make it happen and see this incredible change of fortune through. This ruling will help transform the music industry for the better and redistribute the money in a way that is more sustainable. Certainly it will continue to be a painful transition, but finally there is some light at the end of the tunnel for creative people looking to sustain a career as a musician. And an indication of a better music business model for independent artists.

What do you all think of this?

Read more from the New York Times here.

The Supreme Court Case info is shown here:

Posted by Dave Kusek, CEO Berkleemusic

Comments 11 Comments | Permalink

Making a Living as an Artist in the Future

Feb 17 2011
Posted in Music Industry, Music Marketing, Music Publishing, The Future
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From the Wharton School, an article on the new economics of life for creators and how they will be compensated in the future.

Making a living as an artist has never been easy — whether in film, music or publishing. But the digital revolution — and to a lesser extent, the global economic crisis of the last two years — is transforming the business of content creation. One of the biggest shifts is in how filmmakers, musicians and writers are compensated. There is an evolving relationship between creator and publisher in which the artist bears a larger percentage of the upfront costs for the production and marketing of his or her work. In this new world, artists’ pay is based to a greater degree on how their product sells in the marketplace, a change that has major implications for the content creators themselves, large firms like Hollywood studios and music labels, and consumers.

“In the past, it used to be the case that content creators got paid the bulk of their salary in advance and whoever made that payment — whether it was the music label, the book publisher or the studio — would take on the risk of marketing and distributing that product,” says Kartik Hosanagar, a Wharton professor of operations and information management. “If [the project] was a success, [the publishers, studios, etc.] kept the upside, and if it was a failure, they bore that failure. Now the upside — or downside — is shared with the content creator.”

This shift is largely driven by the move away from shipping physical products toward increasing digital distribution. In music, the threat of digital piracy has made the business of selling songs more challenging, even as the shift from album sales to digital singles has further undermined traditional revenue streams in the music industry. In film, the decline in home entertainment revenues as consumers switch from DVD purchases to online streaming video has also put pressure on profits. And in book publishing and journalism, the move toward e-readers and online news platforms where revenue models are still in flux has created additional uncertainty. The difficulty in predicting the profitability of these products, Hosanagar notes, means that marketers are trying to shift their cost base. “A lot of firms are asking, ‘How do we move from fixed costs to variable costs?’” he adds. “That makes a lot of sense when you have unpredictable returns.”

In the music industry, the pressures on the business model have been even more intense. Ed Pierson, a Seattle-based attorney who represents musicians, says the 1990s were the heyday of big advances for musicians. According to Pierson, easy credit and a war for talent led labels to pay escalating upfront fees to musicians. But as music sales began declining, in part due to piracy and digital downloads that allowed consumers to buy just the songs they wanted and not the entire album, the flush times came to an end. The result these days, notes Pierson, is that labels are making fewer advances and the upfront money they do dole out is smaller.

Artists have responded by taking greater control of their business. “The risk is shifting away from the label and toward the artist,” says David Kusek, chief executive officer of online music school Berkleemusic.com and a digital music technologist. Some big names, including the Dave Matthews Band or the Eagles, have created their own recording labels. Lesser known artists have been forced to become entrepreneurs of sorts. Kusek points to firms like ReverbNation and Top Spin Media that have sprung up to help artists sell their music on platforms like iTunes, to promote a group or artist, or to help sell merchandise. Those firms, in many cases, will charge a small upfront fee and then get a cut of the sales the act generates. “It is a different gamble now,” adds Wharton’s Whitehouse. “The corporate players may be gambling a bit less and the artists may be gambling a bit more. But those artists can now have more control over their work than they did before.”

Read the whole article here.

Listen to the podcast here.

Comments 5 Comments | Permalink

A Shift Towards Legal Solutions for Music

Dec 09 2010
Posted in Music Copyright / Legal, Music Industry, Music Marketing
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From Katheryn Glass.

After years of attempting to battle illegal downloading of musical tracks on the Internet, the recording industry has taken its case to Washington. The industry backed a bill, which was introduced in the US Senate this fall.  The bill would shut down sites facilitating illegal downloads, and this idea that fans should actually pay for music seems to be gaining traction, both legally and among consumers.

It won’t be easy: only one in five digital music tracks is downloaded legally.

Now, the combination of legal progress, coupled with a shift in listening patterns, appears to support a system where consumers would ultimately pay for the privilege of listening to music. It also begs the question: Is a truce in the battle between fans who support free content, and an industry that wants to monetize music, on the horizon?

Even if it is, the road to harmony will be a long one. The Senate went on recess before the industry’s bill could be voted on, thus prolonging the debate about whether or not legislating curbing file sharing will be able to stop the problem.

“It’s convenient, it’s right there and no one is watching. So what you’re saying is that if somebody is watching you, it will stop you?” said Michael Wood, a former recording artist who’s now a music professor at Algonquin College in Ottawa, Canada. “If they can’t illuminate something so vile as child pornography on the Internet, then where does file sharing fit in?”

Musicians’ core complaint is that the illegal distribution and download of musical tracks violates intellectual property rights.

“We’re a country where manufacturing has gone south, customer service industries have moved abroad, so what do we have left? We have intellectual property,” said Rich Bengloff, president of the American Association of Independent Music, a nonprofit trade organization for independent music labels. “Intellectual property needs to be protected because that’s all we have left to make a living in this country.”

Record labels argue that piracy diverts more money away from the label, which leaves less funding available for the label to spend on the development of new artists.

“You need the sales of your current artists to invest in new artists,” said Jonathan Lamy, senior vice president of communications for the Recording Industry Association of America, a trade organization representing artists.

Finally, there’s the question of whether file-sharing is actually a hindrance or a help to artists, since more downloads — legal or not — help to promote artists’ music further. For all of the difficulties the Internet has caused for the music industry’s traditional business model, many musicians have certainly benefited from the array of websites that help with promotion, merchandising and fan connections.

Nevertheless, momentum seems to be turning against the tide of “free,” Internet content, as musicians, as well as artists from other creative fields such as writers and video producers, seek methods to assist them in monetizing their creativity.

Many fans argue musicians and labels are still making money. Live performances, endorsement deals and merchandise sales are all valid sources of revenue, but the industry says that those revenue sources are not enough to make up for the loss of album sales.

Lamy concedes that legislation isn’t the only solution and that the music industry needs to be able to offer fans a “compelling legal experience” in which to consume music, but he thinks having the ability to shut down illegal sites would go a long way in restoring a stable revenue stream to the industry.

Pay to Play

In the attempt to devise a new strategy for monetizing the music itself, a plethora of new ideas have been bandied about. The Internet has clearly emerged as the designated location where music is, and will continue to be, consumed, and many tech companies have attempted to create a legal model for consumption. Apple, Inc. (NASDAQ:AAPL) and Amazon.com (NASDAQ:AMZN) both have pay-per-download systems, which have succeeded in getting some consumers to pay for their tracks, but have yet to eclipse peer-to-peer downloads.

Pandora, an online streaming radio site which has become immensely popular, hitting 65 million registered users earlier this month, has helped generate revenue for the industry. The site provides exposure for new artists and encourages listeners to pay for songs they like by linking to legal purchasing sites.

Spotify is another music service that looks promising. It exists now in Europe, allowing fans who subscribe to a free service (or low-cost premium option) that permits unlimited playback of favorite songs, stored in a “locker” in the cloud, and also promotes legal purchase and downloads. The company is working to bring the service to the United States, but it is not yet available. MSpot, a similar idea, facilitates web-streaming of Android users’ music once they upload it to the cloud.

Google (NASDAQ:GOOG) is unveiling its own music store, according to a Billboard magazine report last month. Google’s marketplace would offer pay-per-download as well as cloud storage, or a music locker that consumers pay $25 a year to use.

While the industry seems poised to see legal sales of music increase, some say its reluctance to adapt to a changing consumer landscape is still a hurdle, which may further delay the “truce” many fans and artists seek.

Wood, the Algonquin College professor, said when he and a business partner tried to set up a system in Canada that would make digital music available for legal pay-per-download, they ran into difficulties. He said the record companies wanted too much money for the sale of the track.

“They still wanted 73 cents a track and other royalties to be paid on top of that,” Wood said. “You’re trying to negotiate a deal with a bit of an archaic system that’s not willing to bend.”

LimeWire chief executive George Searle agrees that the music industry’s reluctance to change its business model has added difficulty as it tried to combat peer-to-peer sharing.

“If as a community we have achieved nothing else, we’ve come to recognize that containment is a red herring,” Searle said. “We’ve got to do more than stop people from sharing copyrighted files. We’ve got to provide advanced, legal alternatives.”

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Direct to Profit – Trends in the Music Industry

Dec 06 2010
Posted in File Sharing / P2P, Music Copyright / Legal, Music Creation, Music Industry, Music Marketing, Music Publishing, The Future
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Last Friday I was interviewed by Dr. Amy Vanderbilt @DrAmyVanderbilt from the Trend POV Show where we discussed the changing distribution in the music industry and what it means for businesses everywhere.  Here you go:

Check out lots of great interviews on trends in business at Trend POV.

Comments 3 Comments | Permalink

Make a 360 Deal with Yourself

Jul 19 2010
Posted in Creativity, mobile, Music Copyright / Legal, Music Industry, Music Marketing, music power network, Music Publishing
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As we have seen, there are many different ways to make money in music today. In the past few years, much has been said and written about the 360 degree deal, where an artist/writer enters into a business partnership with a company and gives the company lots of rights to recordings, songs, merchandise, and touring, usually in exchange for a larger advance.

My advice to you is to make a 360 degree deal with yourself and find ways to generate revenue from your writing, performing, brand, activities, and interests that suit you and what you stand for. DO NOT license these rights away to any one company, even if it waives a huge advance in your face. You do not want to be dependent on any one entity for your livelihood, other than yourself. If you make the 360 degree deal with yourself, you can then selectively find the right partner to help you exploit the various revenue streams that you have by focusing on each stream individually to maximize its potential.

The other reason to make a 360 deal with yourself is that you want to integrate the marketing and promotional efforts across all revenue streams. The artist/writer and their manager should coordinate the marketing efforts to maximize revenue and to gain the broadest possible exposure from advertising, publicity, public relations, direct marketing, interactive marketing, etc.

The new 360 deal:

  • Own your masters and publishing
  • Purchase the services you need
  • Use and integrated marketing approach
  • Create multiple revenue opportunities
  • Control your career

Comments 10 Comments | Permalink

Music Business Education

May 17 2010
Posted in Creativity, Music Creation, Music Industry, Music Marketing, music power network, Music Publishing, Online Course - FOM
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Here is some excerpts from an interview I did with Rick Goetz from musiciancoaching.com

“I think it’s critical that you have your own website and drive traffic to your own website in any way imaginable, and that you set up ways to do business transactions on your websites. That can be collecting names, cell phone numbers, Twitter follows, selling product, building dialogue, communication, selling tickets and merch. That’s essential.

At Music Power Network and Berkleemusic we teach a lot of people DIY basics. Get your act together, get a website together, have a business partner that is going to help you create a strategy and deal with promotion and distribution and touring and publishing and your finances and the business aspects of your career so you can focus as much time as possible on creating art and getting better and practicing and becoming a better artist. I think that’s essential. Lots and lots of people I’ve seen – musicians, artists – have thought, “I’ll get online and Facebook and YouTube and get a bunch of friends and spend all my time blogging and tweeting.” But if they’re not working on your music, most of the time that other stuff doesn’t matter at all. If you’re not really great, nobody is really going to care.

It’s such a fine balance to strike between perfecting your art and being unique and different and having something to say and getting the word out. That’s the conundrum. We often counsel people that you have to have a business partner. At Berkleemusic we teach entrepreneurship, artist management, how to start your own business, how to run a business, how to market direct and use social media to market, what copyright law is all about, what contracts are all about, how to tour, how to make money, the realities of the different levels of touring and how you can get paid and use that to be a driver of your career.

It’s a huge ambition that we have here at Berklee to try and help create a healthy music industry going forward. If there isn’t a healthy music industry, none of us have jobs, none of our students have jobs and the whole thing goes down the toilet. We have to help people be free thinkers, entrepreneurs, to break the rules.

When we started the berkleemusic online school ten years ago there was no iPod, YouTube, Myspace, Facebook or Apple iTunes store. That all happened in the last ten years. So if you think about what’s going to happen in the next ten years, it’s going to be completely different and almost impossible to predict what’s going to happen. People that want to be in the industry have to be willing to accept that it’s going to constantly change for the foreseeable future. There is nothing you can be sure of, and the things that work today probably are not going to work tomorrow.

God willing, some kid is going to create the next big thing in music like Sean Fanning did with Napster or a new format or a new kind of virtual experience that is as good as a concert. Something like that is going to happen, and who knows what it is going to be?  It’s hard to predict.”

Read the whole interview here. Thanks Rick!

Comments 9 Comments | Permalink

Networking Musician Interviews Dave Kusek

Mar 22 2010
Posted in Interviews with Authors, Music Industry, Music Marketing, music power network, Music Publishing, Online Course - FOM, Podcasts, Radio, The Future
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Last week host of Networking Musician Radio, David Vignola interviewed me about Music Power Network and the Future of Music.  Here is the audio interview along with a link to David’s site.  Great resource for indie artists.

Music Power Network provides a wide variety of music business education, tools, interviews and lots of resources for the D.I.Y. musician. The site also offers an equal wealth of information / education for producers, managers or publishers.

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Plan for Success

Mar 05 2010
Posted in Music Industry, music power network
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“The best way to predict the future is to invent it.”  This is a great quote from Alan Kay, one of the creative geniuses behind the laptop computer and the mouse.  Musician can apply this thinking to their own careers by planning for success in a dedicated and systematic way.

I came across this great guest post by Kevin English on Creative Deconstruction that talks about the “Lower Class Musician” and suggestions for how to lift yourself out of that class into a middle or upper class status through controlling your overhead, aligning your expectations, creating a plan, getting a good and current education and diversifying your product offering.  These are all things that I have blogged about in great detail in the past and agree with completely.

Here in an excerpt from Kevin’s post:

“Learn to structure yourself like any other startup and formulate a strategy on paper that will sustain you for three to five years. You’ll soon find out that overspending on manufacturing, marketing, promotion and distribution is very difficult to recoup.

Adjust Your Expectations

For some of us, music is a hobby and that is okay. However, if you plan on feeding your children by touring the Chitlin’ circuit, that’s another thing entirely. When I realized that writing songs for Columbia Records and recording demos with The Fugees wasn’t going to sustain me forever, I had to adjust my expectations. These gigs were few and far in between and often times didn’t pay half as much as you would expect them to.

I studied profitable ideas, people, and businesses to find a common denominator. I learned that nine out of ten successful startups had a business plan. Not just any old plan, but one that was standard across all industries. Financial planning, marketing, and the management of people and products/services cannot be done on the fly. If all you want is for people to hear your music that is fine. But again, you can’t necessarily expect to make a decent living.

Accelerate Your Learning

Hundreds of books have been written on the subject of business plans, yet no one in the music business seems to think they need one — until, of course, they run out of cash. I spent years in my local SBA in Newark, NJ looking at sample plans, meeting with retired CEOs of successful companies, and learning how basic businesses operate.

If you do the same you’ll realize that most startups have more similarities than you’d expect. However, it is important to point out that no two plans are alike. You will still need to write a plan specifically based around your music-related products and services. My first plan was a disaster. I asked my uncle for $75K with a promise to return 20% of the loan over the next five years. He had a good laugh over that one, but at least he knew I was serious about my dreams.”

To read his full post look here.

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Searching for Salvation

Feb 08 2010
Posted in Music Creation, Music Industry, Music Marketing, music power network, The Future
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In the face of insurmountable odds I feel a competition is in order.

Here’s a pretty telling graph – Recorded music sales over time since 1999.   This is the truth.

oh my

If you are trying to make money selling recordings, or producing them you are selling into a market that is auguring into the earth.  If you are a pure-play label – either cash out soon and go home before it’s really too late, or start writing a new business plan.  It is time for you to start over.

If you really want to do 360 deals, then get the capacity, personnel and expertise to actually produce results or you are toast.  Todays nimble entrepreneurs and emerging music service environment is going to eat your lunch.  Specialization is in, generalization is out.

If you are a record producer or engineer, create other products to produce.  Broaden your horizons.   What are you going to be a producer of?  What “insanely great” product can you create?

If you think you can survive in the recorded music business, find something else to sell.  Simple as that.  There is no recovery from this decline.  Sure songwriters and publishers can still make money licensing for film, TV and new media (like ring tones), but the engine that has driven the music business for the past 60 years has run out of steam.

Recorded music as a propellant into prosperity is no longer viable.

Accept this fact, move on and adapt.  Use this as a jumping off point.  Reinvent yourself or your business.

This has been my mantra for the past 6 or 7 years.  If this RIAA graph above is not evidence enough, then I don’t know what is.  If you think being signed by a “record label” is your ticket to ride, then nice to have known you.   Enough already.  I can’t believe how many people still want this.  American Idol?

And if you are the RIAA, and think trying to preserve recorded music as a “business” is a sound investment, I would advise you look for another job, and soon.  Gaming Soundscan to count T-Shirts as a way of propping up the numbers and thinking everything is ok is self deception.  Look around you.

This is the truth people.  Recorded music sales are going to end as a viable business driver ’cause it is just not working anymore and is an outmoded concept of what music was all about.  “Digital” tracks are not going to cut it as they have been conceived thus far because it is just the same thing in a different form.  Fixing music in time makes no more sense.  Music is more fluid than ever.  Subscription revenue and streaming licenses are not going to support anyone when they are optional.  We need something new, something bold.

With this as a background I created Music Power Network.  To help people discover the future of music for themselves, and create a plan to take their careers forward.

We have to dig deep here.  This is a time to be honest with ourselves.  What is your music career all about anyway?  How are you going to survive?  What are your goals and your dreams?  How do you define success?  You can’t eat passion and you can’t spend perseverance.  What is your business plan?  What is your marketing plan?  We need some new ideas.  What are you going to do?

It is too easy to say that a 360 model is the way to go.  360 for who?  You or the “label”? What do you really need?  Who is actually going to provide the services required?  What does the team look like?  Where is the value, talent and capital going to come from?  Who is going to back your vision?

Think you have it figured out?

I am going to put together a team of people to search for the best new music business plans for musicians, songwriters and producers.  In the coming weeks we will put this competition together and announce it officially at SXSW or sooner.  Details will be forthcoming on how to enter, who the judges are and what the prizes will be.  I promise you it will be worthwhile and interesting.

So start working on your strategy and your business plans.  To be notified when the competition is announced, please click here and enter your email on the bottom of the page.

Please leave comments below on any ideas you have for judges, prizes, people to reach out to, etc.

Dave

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