recording industry

Neil Young on living in the low-rez world

by David D. on February 1, 2012

“We can’t control the back end of the donkey.”

In this clip from the D: Dive Into Media conference, Neil Young begins by saying ”My goal is to try to rescue the art form that I’ve been practicing for the past 50 years.” He goes on to talk about  preserving the album format, how piracy is the new radio, and what Beats headphones bring to the back end of the donkey (more bottom end).

Neil wants to bring more attention to the front end: offering music in high-resolution formats, and making it available conveniently.  That’s what we’re all about, and we will focus on this in the next installment of Hi-Fi 2.0.  Let’s save the 95%!

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Zoë Keating: MMT Featured Artist

by David D. on January 8, 2012

An Alt-Classical Artist for the 21st Century

We first featured Zoë Keating as a Free Friday pick in 2010.  Last year she received more mentions in MMT than any other artist — largely due to a guest post she wrote for us: “Zoe Keating on Spotify, Apple and Independents (and lettuce).”

In addition to being at the vanguard of alt-classical music, she has become a leading light for the DIY movement and unofficial spokesperson for indie musicians.  As the handcrafted artisan music blog at the intersection of art, commerce, and technology, Zoë’s story and music have a special resonance with MMT.

Stage fright steered her away from a career as a classical performer and into a liberal arts education at Sarah Lawrence College.  After college, Zoë strengthened her tech skills through the tuition of several dot-com startups while moonlighting as a musician.

Then the dot-com bust provided an opportunity to work at music full-time while doing information architecture on the side.  Everything converged around the cello and MacBook Pro.  Although limiting at first, through advances in technology she is now “dealing with the repercussions of being able to do almost anything.”  And she has dealt with those repercussions quite well — producing music and managing her career with fierce independence and great success.

You can sample some performances and get more information from her featured artist profile, available from the dropdown list at the top of each page and previewed below.

 [click through for full profile]

click through for full profile

zoë keating photo: nadya lev

street signs: steve jobs keynote from the ipad launch

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Music 2.0: Battle of the Business Models (part 3)

by David D. on December 17, 2011

What’s the Best Business Model for the Music Industry?

Put simply, a business model is the plan for generating revenue and profits.  For musicians, that means being able to put food on the table and pay the rent.  As Jill Sobule put it, success in the music business “means not having to work a straight job.”

A solo artist may need a different business model than a band, and the business models for musicians will be different than those for music publishers, record labels, and streaming services.  Some of these businesses may be competitors, customers, suppliers, or partners; and taken together they compose (part of) the Music Industry.

So a better question would be:  What business models will work for the music industry in the 21st century?  Vivek Wadhra defines seven basic components of a business model:

  1. Reaching customers
  2. Differentiating your product
  3. Pricing
  4. Selling
  5. Delivery/distribution
  6. Supporting customers
  7. Achieving customer satisfaction

It’s easy to see how most of these activities would apply to the music business, but as an artist, you may be asking: “Hey, where’s the making music part?”  The business model canvas might work better for you.

Business Model Canvas Poster V.1.0

View more presentations from Alexander Osterwalder

Pete Townshend and Steve Jobs’ Balls

You may now be thinking: “Is this going to be on the test?  I mean, really, I’d rather not deal with any of this.”  In that case, you should probably be working with a manager you can trust, and earning enough to pay someone else to deal with it.

Which is just the way Pete Townsend liked it.  In the inaugural John Peel lecture last October, Pete waxed nostalgic for the old days, and enumerated the services provided by music industry past:

There were record companies and music publishers. Was it good, what the God of pop music had created?

Music publishing has always been a form of banking in many ways, but – in cooperation with record labels – active artists have always received from the music industry banking system more than banking. They’ve gotten…

1. editorial guidance
2. financial support
3. creative nurture
4. manufacturing
5. publishing
6. marketing
7. distribution
8. payment of royalties (the banking)

Today, if we look solely at iTunes, we see a publishing model that offers only the last two items as a guarantee, distribution and banking, with some marketing thrown in sometimes at the whim of the folks at Apple.

~ Pete Townshend

Having said he once wanted to cut off Steve Jobs’ balls, Pete likens  iTunes to a digital vampire bleeding artists for its “enormous commission.”

David Byrne’s Suvival Strategies

David Byrne takes a more even-handed approach, and describes a spectrum of distribution deals, from the 360 or equity deal to the self-distribution or DIY model.  In order of increasing artist control:

~ Wired: David Byrne’s Survival Strategies for Emerging Artists — and Megastars

While noting that no single model will work for everyone, Byrne does offer some advice:

I would personally advise artists to hold on to their publishing rights (well, as much of them as they can). Publishing royalties are how you get paid if someone covers, samples, or licenses your song for a movie or commercial. This, for a songwriter, is your pension plan.

Increasingly, it’s possible for artists to hold on to the copyrights for their recordings as well. This guarantees them another lucrative piece of the licensing pie and also gives them the right to exploit their work in mediums to be invented in the future — musical brain implants and the like.

Innovation vs. Ideals

Much of the talk about music business models has been around innovation.  The first 66 slides in the presentation below highlight business model innovation in the music industry.

Business Model Innovation Matters

View more presentations from Alexander Osterwalder

But not everyone has jumped aboard the business model innovation bandwagon.  In part 2, T Bone Burnett suggested that musicians who use the word “monetize” should be ashamed of themselves.  He believes that musicians should be focused on one thing: making great music.

T Bone can find soul mates in the views of (he keeps coming up, doesn’t he?) Steve Jobs and Umair Haque.  Discussing his period of exile from Apple, Jobs said there was one fundamental cause of Apple’s problems under John Sculley: letting the desire for profits outweigh passion.

My passion has been to build an enduring company where people were motivated to make great products. The products, not the profits, were the motivation. Sculley flipped these priorities to where the goal was to make money. It’s a subtle difference, but it ends up meaning everything.
~ Steve Jobs

Umair Haque argues that business model innovation can be exactly the wrong thing to focus on, and stresses value creation over monetization.

Consider finance. Securitization was a breakthrough business model innovation for banks. Everything was remixed by everyone. Yet, toxic junk was mostly what was flowing through that new business model. Business model innovation amplified value destruction. Banks who didn’t play the securitization game — and stuck to simple, one-sided deposit-taking business models — are today’s survivors.

The reason monetization is a dirty word is simple. It blinds us to value creation, at the expense of value capture. When we seek to monetize, we end up chasing the same old lame competitive advantage. I win, you (and you, and you) lose. Put another way: “monetizing” toxic junk — from CDOs, to Hummers, to McMansions, to Big Macs – is how we got into this mess.

It is by rediscovering how to make stuff that’s not toxic junk in the first place that we’ll get out of the mess lame, evil, brain-dead 20th century thinking has left us in. That’s the challenge of a new generation of revolutionaries. And it’s not about new business models: it’s about reconceiving authentic, deep, value creation.
~ Umair Haque, “Why Ideals are the New Business Models” – HBR

Regardless of how you feel about Britney Spears, that might go a little too far.  There needs to be a balance between creating great music and earning a living.  From a musician’s perspective, there are two major challenges that can sometimes conflict:

1. Discovery – getting the music out there and connecting with fans

2. Compensation – finding a way to get fair payment to make a living and continue creating music

From here we will take a look at some of the new music business models being developed, with an emphasis on how they can contribute to improving discovery and compensation for artists.

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Survey still says: musicians have little love for Spotify

by David D. on December 4, 2011

Spotify may be aiming to win the hearts and minds of app developers, but they still have some work to do when it comes to musicians.  We reported the early results of our Spotify survey here, and can now announce that the final results are…well, pretty much the same.  Once again:

  • When asked how they feel about Spotify as a listener, fans were twice as likely as musicians to profess their love.
  • When asked what they thought about Spotify from the musician’s perspective, musicians were three times as likely to feel the hate.

The survey is closed, but you can let us know how you feel in the comments below.

The first two responses to each question can be viewed as favorable, and the last two as unfavorable.  This time, 57% of musicians view Spotify favorably as a consumer, while the favorable rating from fans rose to 70%.

Looking at things from a musician’s perspective, 52% of fans rated Spotify as good or OK, vs. 43% of musicians.  The biggest split between fans and musicians is the 30% gap between those fans who hold an unfavorable view of Spotify from the musician’s perspective — just 18%, and the 48% of musicians who gave an unfavorable rating.

Also worth noting: 29% of fans don’t seem to care much about how Spotify works out for musicians. We did get a comment complaining that not sure, don’t know, and who cares are three different answers.  That’s (kind of) true, but since the survey page asks you to read this story first, it’s fair to say the not sure and don’t know answers betray a certain amount of indifference.

Why the hate?

Is it because streaming services like Spotify are “ghastly, malicious succubi suckling at the teat of artistic talent”? With 18% of their shares owned by major labels, and artists receiving fractions of a penny per stream, Spotify has managed to become the poster boy for everything that is wrong with both the old and new music industry when it comes to artist compensation.

Many of the issues with Spotify concern the ways independent labels are treated.  Zoe Keating did a nice job of summing up the controversy in a guest post she wrote for MMT.    According to Zoe, “the word on the street is that majors receive profits from Spotify’s advertising revenue and indies do not.”

The Guardian has reported conflicting statements on this, which may just reflect deals changing over time and differing in various countries.  In 2009, they wrote:

On Spotify, it seems, artists are not equal. There are indie labels that, as opposed to the majors and Merlin members, receive no advance, receive no minimum per stream and only get a 50% share of ad revenue on a pro-rata basis (which so far has amounted to next to nothing).

~ The Guardian – Behind the music: The real reason why the major labels love Spotify

Then in February 2011:

Though all deals with Spotify are covered by non-disclosure agreements (NDAs), it is well known in music industry circles that Universal was able to secure a minimum streaming rate for the ad-funded version of the site – something, it is understood, not even the other majors have been able to accomplish.

~ The Guardian – Spotify should give indies a fair deal on royalties

Assuming that there is difference in compensation, there are two basic questions to deal with:

  1. Fairness: why should indie labels and artists be paid less than major labels?
  2. Evasiveness: if Spotify has compelling reasons (or better, an algorithm) for different pay structures, why do they keep avoiding the question?

Since Spotify uses peer-to-peer technology to deliver their streams, I can see where it would be more expensive for them to manage tracks that are rarely requested. But that’s a quantitative problem that could be easily solved, and applied equally to both independent and major label artists.

What’s better for musicians: Spotify or Piracy?

It’s obvious from the survey results that not all musicians speak with one voice on Spotify.  Some say “hey — it’s better than piracy ” (well, actually it’s mostly Daniel Ek who says that).  Others argue that piracy is better than Spotify:

As an example, my own Spotify statements via CDBaby have thus far reported 4583 plays and paid me a grand total of $11.38, including precisely zero downloads via their own store – so in terms of raw financial return, 2 people torrenting my stuff and deciding to buy a CD or download, and/or go to a show would beat Spotify hands down.

~ Steve Lawson – Spotify, File-Sharing and Incomplete Statistics

Derek Webb makes a similar case when he says that giving music away is better than Spotify:

On Twitter, I recently said, “I make more money giving records away on @NoiseTrade (in exchange for info) than selling those same records on iTunes (let alone Spotify),” which resulted in some pretty interesting discussions.  I said that in response to questions I received after criticizing streaming services like Spotify, which claim to offer a viable alternative to “piracy,” when in reality they offer artists almost no meaningful revenue or fan connection.  And while iTunes is certainly a better financial model and more equitable for artists, it does almost nothing to connect the fans to the artists in a way that yields any long-term benefit.

~ Derek Webb – Giving it Away: How Free Music Makes More Than Sense

Spotify and Streams vs. Sales

In a response to Derek Webb’s post, Sam Fisher Jr. claims that both free and streaming music are undermining the ability for musicians to make a living:

Hard numbers:  sales have dropped for my releases by 25-35% since those releases became available on Spotify.  Streams have shot through the roof.  For instance, we received a $123 check for 34,000 streams.  Consumers are starving artists by streaming their music.

~ Sam Fisher Jr. – Don’t Believe the Hype

A recent study showed that Spotify and similar services increase access for artists, but reduce spending on higher-return formats like digital downloads and CDs.  After checking with the 238 independent labels distributed by STHoldngs, only four decided to stay on Spotify.

As a distributor we have to do what is best for our labels. The majority of which do not want their music on such services because of the poor revenues and the detrimental affect on sales. Add to that the feeling that their music loses its specialness by its exploitation as a low value/free commodity. Quoting one of our labels, ‘Let’s keep the music special, fuck Spotify’.

~ Wired – 200+ Labels Withdraw Their Music From Spotify: Are Its Fortunes Unravelling?

And it’s not just independent artists that are balking.  Coldplay decided to withhold their latest release, Mylo Xyloto from Spotify and other streaming services, presumably to maximize sales.  If more labels and artists decide to pull out, or to use streaming services for marketing samplers instead of streaming full catalogs, then the current instantiation of the celestial jukebox may be doomed.  We’ll look more closely at this as we continue our series Music 2.0: Battle of the Business Models.

Spotify, MOG and me

Spotify seems to garner the most (good and bad) press attention, but are they any worse than the other services when it comes to artist payments?  Maybe.  First, the disclosure: after comparing streaming services, I cancelled my Spotify Premium subscription and became a MOG affiliate, then a member of the MOG Music Network.

I think that both MOG and Spotify are fantastic resources from a music listener’s perspective.  I am conflicted when it comes to how they affect musicians.

For my own account, I don’t think either service changed the amount of money I pay for recorded music, mostly because I am very interested in audio quality and willing to pay for formats with higher fidelity.  This might change however, as technology improves and high definition streams become available.  The services have probably contributed to increasing the amount I spend on live performances and other artist revenue streams.

I doubt that the rates MOG pays are much different from those paid by Spotify.  The major labels are all shareholders in Spotifty, and both Universal Music Group and Sony Music have invested in MOG. But while Spotify seem to be tone-deaf to the complaints from musicians and independent labels, MOG at least sounds sympathetic and has answered some of the questions that Spotify continues to evade.

At the Digital Music Forum West earlier this year, MOG executive Anu Kirk said:

It sucks that right now artists are getting paid so little money by subscription services, but it sucks that artists are getting paid so little money by everyone.  Subscription services are paying out what they can, but there’s just a lot of music.

A lot of music, and not a lot of paying customers.  This, much more than streaming rates, is the real problem.  Spotify is losing money now, and this analysis suggests that rates will never rise above a fraction of a penny.

MOG CEO David Hyman thinks that with enough paying customers, streaming services can deliver more money than digital downloads.  Licensing costs are the biggest expense for these services, and without giving away precise figures, he offered the following comparison to Fast Company:

And even on iTunes, he says, the average consumer pays roughly $40 per year. “That’s like $3 and something-cents a month,” Hyman explains. “This is the average iTunes consumer: $3 and change. Out over every $10–again, this is just a ballpark, I’m not giving the exact number–but let’s say we pay $6 [per month] to the labels.”

“So, which one is going to make them more money?”

~ Fast Company – Spotify, Rdio, And MOG On Artist Payments: Don’t Blame Us

When asked about the criticism from indie labels and artists, Hyman responded “The indie labels get the same deals as major labels…How they negotiate their deals with their artists, I have no idea.”  Unfortunately, he went on to say: “I don’t know why indies would be different than a major. Maybe because nobody is listening to their music?”

Comments & respondents: back to our regularly scheduled survey

Respondents had the option of leaving comments for each question, a sampling appears below.  The majority of responses are still from the US (59%), with the UK again in second (14%) and the rest scattered around Europe. Two Canadians participated.  We do not know why.

Q. How do you feel about Spotify as a music listener?

Too many holes in it’s available music.

I like the product, but the forced integration with Facebook is making me reconsider. It is impossible to understate how stupid this move was. Hope you made a lot of money.

So far, it’s seems MOG’s library is a bit deeper, but it could just be the artists I’ve searched. Also, MOG offers 320kbps in it’s $5/mo package, whereas Spotify only gives it to $10/mo Premium subrscribers. I’m still deciding on which service to use.

Spotify seems to have more commercial music. Not great for finding underground and independent artists.

Q. How do you feel about Spotify from the musician’s perspective?

Gives the opportunity to listen to music before purchasing. If you have a great CD chances are you will score a purchase but if the CD is crap then you won’t, but I think it will motivate artist to make sure their albums are not one hit wonders.

I am writing this as an end user, I might have a different opinion from the other side of the fence!

It’s great to get the music out there, but the ‘revolution’ hasn’t finished yet….. so who knows what’s to come.

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Musicians’ Digital Performance Royalties at Risk

by David D. on November 5, 2011

This guest post is from Kristin Thomson of the Future of Music Coalition.

Recording artists and indie labels: there’s a movement afoot to change the way that you would receive your digital public performance royalties, and it’s not a good one, especially for recording artists.

Back in August, we blogged about the news that Sirius/XM was considering doing a direct licensing deal, expressing our serious displeasure with the move.

In recent days, the artist community — including AFTRA, AFM, The Recording Academy, A2IM and SoundExchange — has been broadcasting the message to their members about the negative consequences of direct licensing deals for digital performance royalties.  We applaud our artist colleagues for urging their members signed to indie labels (or self-released artists) to not accept these direct licensing deals.

We here at FMC wanted to join in the chorus and explain to musicians and labels why the current statutory licensing structure is better for all stakeholders.

1. Direct payments to artists put at risk

Currently, Sirius/XM pays digital public performance royalties to SoundExchange for the music it plays; SoundExchange then distributes 50 percent of the royalties to the sound recording copyright owner (usually a label) and 45 percent to the featured performer. The non-featured performers receive the remaining 5 percent.

Under the current structure, the money doesn’t pass through the record labels first; payments to performers are made directly and simultaneously, which means the performer gets his/her money for the digital performances whether they’ve recouped or not. And in some cases, performers are receiving checks with four or five figures on it, and the money keeps growing with each distribution.

If labels start to license to Sirius/XM directly, guess who gets all the money? The labels. Artists will no longer be paid directly and simultaneously via SoundExchange. Instead, their money would be passed through their label.

FMC has always argued that direct and simultaneous payments to artists is a good thing. We have lots of upstanding label friends, but history has shown that these passthroughs can lead to money being diverted to pay for album costs or other things. This arrangement lacks the same level of transparency that’s available to artists when receiving a check directly from SoundExchange.

Even though it presents a huge logistical challenge to SoundExchange to seek out all the performers who are owed money, FMC thinks artists being paid directly is absolutely critical.

 2. Artists and labels are paid more under the current structure

How much Sirius/XM pays SoundExchange is based on a rate set by the Copyright Royalty Board with input from stakeholders, in compliance with federal statute. Currently, Sirius/XM pays 7.5 percent of its gross revenue. The rates are currently set through 2012, after which they will be revisited to cover a period from 2013-2018.

Direct licensing deals means that Sirius/XM might pay a little bit less. While this might generate some savings for Sirius/XM, it’s clearly not good for labels OR artists.

Then there’s this. Billboard reported in August:

The question arises if the labels will pay the artist half the royalty, or 50 percent, they receive for each time a song is played, or will some labels choose to pay them their artists the regular royalty rate, which typically ranges between 15 percent and 20 percent.

Yep. There’s also a chance that, under this direct licensing arrangement, performers would see their royalty rates reduced. FMC cannot support such efforts to devalue the price of music.

3. Direct licensing deals leave musicians without a voice

SoundExchange is governed by an 18-person board that includes 9 artist reps and 9 label reps.  That means that musicians and labels have an equal say in how SoundExchange operates. (Remember, this is an organization that just paid out $88 MILLION in one quarter, so we’re not talking about chump change).

SoundExchange also has the power to audit licensees like Sirius/XM on behalf of everyone and make sure that they are paying correctly. If labels start to direct license, any errors made by Sirius/XM during playlist reporting would be much harder to discover, and only the biggest labels would have the resources to audit. We are more powerful collectively than we are separately.

If labels start direct licensing, artists will lose a voice in the discussions about licensing rates and payments because all the payments will be routed around SoundExchange — it’ll just become a direct negotiation between two parties, and artists will be left out of the conversation completely. FMC was one of the artist-focused organizations that fought hard to ensure equal representation on the SoundExchange board, and artists and labels have benefited greatly from this power-sharing deal.  We cannot support any effort that reduces our value in the stakeholder process.

4. Direct license deals might expand the rights

And finally, this move is also an attempt to expand what Sirius/XM is allowed to do with these licenses. According to Billboard:

In moving to directly license masters, the company is seeking expanded licenses that will allow for more functionality. For example, it wants to allow subscribers to record programming blocks and be able to rewind and fast-forward that segment. It also is seeking to allow music to be cached locally on devices and applications that have that capability. In seeking the former, it is in effect asking for a waiver from the sound recording performance complement of the Digital Millennium Copyright Act, which limits how many times songs from an artist can be played within an hour.

That would make satellite radio much closer to on-demand services like Rhapsody, MOG or Spotify, which operate under an entirely different licensing structure. Even non-interactive services like Pandora currently pay a different rate than satellite radio. By bypassing SoundExchange, Sirius/XM could up paying an even lower fee for expanded offerings.

Here at FMC, we want artists to get the money they’re owed for the use of their music on any platform. The statutory rate for digital performance plus direct payment via SoundExchange is an important piece of the compensation puzzle for creators. Bypassing it might benefit the bottom lines of major corporations in the short run, but it’s a dangerous thing for performing artists.

  • If you are a musician, we urge you to tell your labels you’d oppose any effort to re-direct your digital performance royalties through your label.  In the interest of fairness and transparency, your label should continue to license through SoundExchange.
  • If you are a label, we urge you to look closely at these deals, and remember that the statutory rate-setting process represents an opportunity for labels to work together to get the best rate possible.

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Music 2.0: Battle of the Business Models (part 2)

by David D. on October 29, 2011

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Fair trade music

October 18, 2011

Can you codify an ethical and moral dimension to the consumption of music? As we consider business models for music in the 21st century, how do we account for practices that support and sustain music and musicians?  Can they be identified and branded in a way that will encourage fairness and help inform consumers?  This [...]

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Music 2.0: Battle of the Business Models (part 1)

October 17, 2011

[View the story "Music 2.0: Battle of the Business Models (part 1)" on Storify]

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Are Subscription Music Services a Sustainable Business Model?

October 10, 2011

Or, how will musicians pay the rent in the 21st century? There was some spirited discussion around new business models and artist payments from online services at the Future of Music Policy Summit last week.  We will take a closer look at these issues in an upcoming article.  First, this analysis from Frank Woodworth of [...]

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Best of Future of Music Policy Summit 2011: The Fammys

October 5, 2011

 Here they are: the 2nd annual Fammy Awards.  Sadly, My IT Thing only allowed for one day of attendance at this year’s event, so most day 2 winners will have to receive their awards at a separate ceremony.  (Make your nominations in the comments below.)  Let the pageantry begin! Best Reporting:  Greg Kot, Chicago Tribune [...]

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