New Music Boss, Worse Than Old Music Boss

frank_adrian314159 writes "David Lowery, musician (Cracker, Camper Van Beethoven), producer (Sparklehorse, Counting Crows), recording engineer (Archers of Loaf, Lamb of God), and geek (programmer, packet radio operator, ex-CBOT quant) talks about the economics of the music business and how the 'old boss' — the record labels — have been replaced by the new boss — file downloading services, song streaming, and commercial online music stores. His take? Although the old boss was often unfair to artists, artists are making even less money under the new boss. Backed with fairly persuasive data, he shows that, under the new distribution model, artists — even small independent ones — are exposed to more risk while making less money. In addition, the old boss was investing in the creation of new music, while the new boss doesn't. This article is lengthy, but worth the attention of anyone interested in the future of music or music distribution."

Comments

Fairly well known issue

[CAKAS]

Even indie artists have campaigned against these new services. For example, take Spotify, well known European free music service that gained lots of attention.

Many indie artists tried the service for several months and when the payout time came, they found out they only got a few hundreds (if even that) from the service. It was serious degrade from their previous earnings.

At the same time, Spotify shareholders and investors include EMI, Sony BMG and Universal Music Group. Since Spotify only paid small share to artists, the labels profited from increased stock prices. Because of this, they didn't need to pay artists any share but still profited greatly.

So yeah, there you go. Do you really think you're wiser than these guys? Keep trying to get around them, and they will assfuck you even more. Seriously. Do it. If you want to destroy any nice music we have.

Re:Fairly well known issue

[Anonymous Coward]

So where's this new boss? I see new method of old boss at work here.

Re:Fairly well known issue

[TheLink]

Spotify shareholders and investors include EMI, Sony BMG and Universal Music Group.

Aren't those the old music bosses? So not a good example.

Re:Fairly well known issue

[MightyMartian]

Yup, and they've innovated a new way to rob artists blind.

Re:Fairly well known issue

[danomac]

However, the cost of creating recordings has gone down. I sure wish I could do a week's or month's worth of work and get paid for it over my entire lifetime (and maybe even my kids' lifetimes.)

They can always go live and get paid for concerts. The days of being paid for a lifetime over a month's worth of work is going the way of the do-do.

Re:Fairly well known issue

[cpu6502]

Then maybe you should pick a different career where you CAN make money. If there are too many musicians, just as there are too many hamburger & fry flippers, than the income will plummet and be crappy. So choose a higher-paying income, rather than being a musician or McDonalds employee.

NOBODY is owed a living just because they want to do something. *I* happen to like writing science fiction but I'm not stupid enough to think I can make a career out of it. The field of writers is waaaay too full. So I became an engineer instead..... something few people can do, so I get paid big bucks. You (and others) ought to try the same if music isn't working out for you.

Re:Fairly well known issue

[w_dragon]

no artists, except those at the absolute top of the heap, are making a living selling their music anymore

This is fairly common in a lot of areas. No one makes money playing sports except the few at the very top. Actors are the same way. The issue is that anyone can do these things. Most of us can't do them overly well, we don't practice enough, but people play music for fun and can achieve a pretty decent level of expertise without ever expecting to be paid for it. In order to make money you need to be significantly better than the laymen that do it for free for their own enjoyment.

Want to make a living wage in a creative field? Go work for Disney, or Paramount, or some company that makes commercials, or any other established industry that needs those skills constantly. No, you don't get to decide what kind of music you're writing if you're writing the background track for a movie, but that's part of making money without taking a major risk.

Re:Fairly well known issue

[LandDolphin]

In order to make money you need to be significantly better than the laymen that do it for free for their own enjoyment.

I disagree. There are many artists that make money that are less talented then artist who are not making money. I would say that it is more about who you know then what you know. Sure, you have to have enough talent to perform, but talent will only take you so far. You have to have the right connections to get to the point that you start making real money.

Re:Fairly well known issue

[Apotekaren]

Actually, there is a difference. A bank will give you a loan and expect you to pay it back with a certain interest rate. When you've paid that back, you just have to pay your other costs, rest of your income goes into your pocket. With a record label you're forever stuck with only getting a small cut, and sometimes they even withhold a part of this to cover costs they think belong to the artist.
This is different. I don't think anyone would ever take a loan from a bank that demands that 90% of all future income from the investment go straight to the bank.

Also, the bank hopes to see you succeed(for obvious reasons), but can't really impact your success, and would be indifferent of your success if you went to another bank. Record labels on the other hand will try to block independent artists from breaking into the mainstream radio playlists(RIAA labels probably tolerate eachother though), unless they can force/convince you to sign, because you're their competition.

Re:Fairly well known issue

[Anonymous Coward]

So are you saying you don't want new music, art, books, etc, or you are just too fucking cheap to pay for it?

No, he's saying he wants new music, art, books, etc, but if there's too much of it, he can't afford to pay for ALL of it. Someone's not going to get money. Basic supply and demand.

Re:Fairly well known issue

[next_ghost]

Yes, new artists CAN do that. Financing your own music production is not a problem. Getting around recording industry is. Recording industry isn't profiting heavily from financing music production. They're profiting from their position as mass media gatekeepers. If you as a musician want to get on TV or big radio stations, you either sign up to them and become a star almost overnight, or you don't get there at all and stay practically unknown for a very long time. The Internet has undermined the gatekeeper position of recording industry but the change is coming very slowly.

Re:Fairly well known issue

[AngryDeuce]

No, he's saying that it's time to come back to reality and realize that we can't all be fucking professional football players, ballerinas, astronauts, rock stars, movie stars, stand-up comedians...

I'm a amateur musician myself but I've played in a few bands that did live shows and even done a little work as a session musician for others in the studio. I didn't pick up the guitar when I was 10 because I wanted to be a rock star, I picked up the guitar because I wanted to learn how to play; the instrument fascinated me. I know I will never in a million years make a living playing music, but that doesn't mean I'm going to throw the guitar in a closet like a fucking child. I still play often, still record my own little ideas, and I do it for myself. If I never earn a penny on music again, I'm totally okay with that. I have a real job that pays my bills. I play guitar because I love it.

The people that "make it" in the industry (and while I know this is true in music, it's probably true in film and other arts as well) aren't necessarily very good at their given craft anyway. Most of the time, it's just a matter of being in the right place at the right time. Conversely, I've met some of the most ridiculously talented musicians busking for spare change on street corners and, from the looks of them, probably spent their nights sleeping on a street corner as well. This is just as much fault as the industry as anything else. Ask yourself, how many ugly pop stars are there? A person could sing like an angel and never do more than sing jingles in commercials because they weren't lucky enough to be born with the right set of genes for physical attractiveness while some empty-headed chick with big tits and a great ass will become the next Britney Spears thanks to Auto-Tune and the support of a major label.

When the hell did people stop creating art for the sake of creating art? That's what I want to know. All this bullshit about how "downloading is killing music"...since when? I'm still doing my thing, and I know many other musicians that are still out there creating music, many of whom don't earn a dime doing it...are they supposed to just throw in the towel because they're not going to be the next Metallica? Better yet, if they DO throw in the towel because they're never going to be the next Metallica, why the hell were they playing music in the first place? Go get an MBA and earn 6 figures with the rest of the clowns on Wall Street.

Re:Fairly well known issue

[HapSlappy_2222]

Your example silly, because you pushed all the way to the end of the spectrum to a million bucks. Try this instead:

"It would be no different if a new act went to a regular bank, and convinced them to loan $25,000 (which could easily happen depending on credit rating) for 'production costs and marketing'. All but 'some tiny percentage' would go directly back to the bank to pay off the loan."

This is how all small businesses start, and it's really not difficult to secure the startup funds, if you're not ridiculous about it or go in with a few trusted members (hmm, maybe your bass player and drummer?). The hard part is having a good enough product (in this case, music) AND the ability to market that product (in this case, concerts, air time, etc) to expand from there, and if you don't, well... you either find a new product to sell (change the band up, write new and more popular stuff, change genres, etc) or get a job.

I don't claim to know if this would work for musical artists, but I know for sure that it works for a vast amount of other entrepreneurs.

The most ridiculous thing is that in the music industry, these big old huge scary label companies are really just performing the services that normal businesses (small or large) have plain old marketing departments on the payroll for. Why on EARTH would you ever want a *marketing department* completely in charge your product, from R&D to shipping? Seems like it would lead to selling only the products that are easy to market instead of coming up with innovative and terrific products that could be tricky to sell at first.... oh, wait a minute here....

Re:Fairly well known issue

[sneakyimp]

Good post. The elephant in the room for this bank metaphor is that banks are not stupid enough to lend thousands of dollars to young musicians because almost every band ever started fails. It doesn't take a bank analyst to realize that young, unproven bands are an extremely high-risk investment. Aside from the possibility of flat-out sucking, there are plenty of other pitfalls for them: drugs, stds, changing tastes of the public, and the fact that touring is a wretched endeavor until you reach a certain threshold of popularity. From what I've seen, recording advances (i.e, MONEY) are much harder to come by today than they were 10-15 years ago. I might be blind, but I don't see youtube or spotify or rhapsody handing out money to cultivate new bands and yet they profit enormously from new music and old music alike.

There's an excellent book describing the economics of the music industry called "All You Need to Know About the Music Business" by Donald S. Passman. Don't let the bland title fool you. It's a good book and describes how lucky artists might get 15% of revenues after a label "recoups" their investment. It also describes typical advance amounts -- $200,000 for a band in the late nineties. This may sound like a lot until you realize a band (and their staff) have to create their recordings, pay rent, buy/maintain a touring vehicle, eat, etc. Managers and Lawyers are also likely to skim up to 25% for their services. And even if you are successful, the record label will tell you that they have to 'recoup' the cost of electricity to air-condition Jimmy Iovine's bedroom on his 3rd yacht before you get your 15%. Try housing and feeding 4 band members, roadies, etc for a year or two with what's left after all the other expenses are paid. Admittedly, this book is out of date now but it does provide a good window on the music industry as it used to be and some information is still relevant. The abiding lesson in it is to get a good lawyer to defend against nearly a century's worth of accumulated douchebaggery you can expect from recording companies and distributors.

What has not changed is that you still need these:
* A great song that appeals to some demographic with disposable income
* A great producer/engineer to make your recording
* Publicity so that the world knows about your song
* Revenue to survive and sustain the creative process

I'd love to see a business school analysis of the industry's outlook. I don't have an MBA, but I'd be willing to bet that the assessment would be that the potential for profiting in the music industry has diminished greatly in the past decade for a variety of reasons:
* Lower barriers to entry (lower cost to record music due to cheap new gear, lower distribution cost due to internet, etc.) will introduce lots of competition. E.g., new 'competitors' like Rebecca Black or anything recorded in someone's garage.
* Other low-cost forms of entertainment (e.g., facebook, games, youtube, netflix, etc.) will introduce competition for listener's time and money
* Both the music industry and the entertainment industry in general will become increasingly splintered as more bands make music and more types of entertainment proliferate due to aforementioned competition. Margins will drop accordingly.
* Changing user expectations and 'unauthorized' distribution of recordings undermine (eliminate?) the ability of a band to extract revenue from the recordings they make. I.e., the kids think music is free and give it for free to all their friends. No one really has to pay the artist for their song any more. The fact is that spending on music recordings today is voluntary regardless of any other agreements or DRM or terms of use or whatever. Because of this fact, recordings probably shouldn't be viewed as a product but rather as marketing.

At the same time, there are some factors working in favor of musicians:
* New recording technology (not including instruments, amps, and mic

But this is what 'we' want, right?

[QuasiSteve]

But this is what 'we' want, right?

We don't want there to be multimillionaire 'artists', or hundreds of supposedly indie (but really signed with GenericIndieLabelX that's part of IndieGroupY that is a wholly-owned subsidiary of QuirkyMusicZ, a division of SONY Music Entertainment).

'We' want bands to be able to stand on the merit of the quality of their music - be that through being highly popular at the whim of the way the 'popular' wind blows, or through a devout share of followers who will buy merchandise and go to concerts. We want the remaining artists to perform music not for the money but because they want to perform it for their own joy (either out of performing or out of the reactions of the crowd) and any money they get out of that is just a nice little bonus.

'We' don't care if that means most current artists will just have to find something else to do, and others will just have to make it their hobby next to an 'honest' job.

And if that situation is not to particular people's liking, they would be more than welcome to become patrons of the (musical) arts if they have the wealth to do so.

As long as 'we' get to enjoy music for next to nothing or completely nothing, and certainly with as few middlemen as possible - because that is what the process induced by technology has allowed us since the days of the cassette tape, which the internet has merely accelerated.

tl;dr: Something about horse-and-buggies and all that.

Re:STFU and give us free music

[mooingyak]

you should me making music for the love of it, anything else and you're greedy

Here's the thing about it though:

Let's say I make good music. Right now I have a full time job to support my family, which means that any music I make is in the spare time between work and sleep and whatnot. If I can't make money off of the music I create, it will continue to be made only in the spare time I have. I will produce it slowly and sparingly. I won't be able to do that many live shows.

We don't need a system where I become a millionaire, but it does need to be enough that I can make music (or books, or any other form of art) my occupation rather than my hobby, if I'm good enough.

The Real Problem - Less Crap

[rudy_wayne]

The real "problem" is that musicians and record companies con no longer make as much money selling crap as they used to.

Prior to iTunes and other legal methods of downloading music, there was only one way buy music -- you went to a store and bought an album. Whether it was a CD, vinyl LP. 8 track tape or whatever, and it didn't matter if half the songs where crap. That was your only choice. Period. And that was a great deal for both musicians and record companies because it meant that they sold a lot of albums and made a lot of money. And lets be honest. Even the all time greatest "classic" albums have some filler on them. Songs that absolutely nobody cares about. In the past, it didn't matter, you bought the whole album and the musicians'/record companies got the maximum amount of money

But now, that's no longer the case. Only like 3 songs from an album? You just buy those 3 songs. And the math is pretty simple:

-- A million people buy those 3 songs from the album -- the artist royalties from 3 million songs sold on iTunes is a lot less than 3 million albums sold.

-- A million albums sold with 12 songs per album = $1,080,000 in publishing royalties for the songwriter (9 cents per song). But if a million people just buy those 3 songs publishing royalties = $270,000.

In the end, it's really no different than any other technological change. You can't make a living delivering packages by stage-coach anymore either.

Re:STFU and give us free music

[Maximum Prophet]

...We don't need a system where I become a millionaire, but it does need to be enough that I can make music (or books, or any other form of art) my occupation rather than my hobby, if I'm good enough.

We *need* a system where everyone has access to shelter, food, water and health care. We *want* books, movies, music and other entertainment.

He had me until...

[R3d M3rcury]

It’s usually after someone like myself suggest that if other people are profiting from distributing an artist’s work (Kim Dotcom, Mediafire, Megavideo, Mp3tunes,) they should share some of their proceeds with the artists.

Maybe I'm not hep to the way you kids are getting music these days because I have to spend time keeping you all off of my lawn, but these services advertise a way for me to access the music that I bought from any device anywhere that I happen to be.

Is he implying that Mp3tunes should be paying him to store my music and make it accessible to me from wherever I am?

Let's see...I have a SanDisk MP3 player. I have a bunch of music on it. Should he be getting paid by SanDisk? After all, SanDisk made a profit selling me a device to listen to their music. Without that music, why would I buy a SanDisk MP3 player? Shouldn't some of that go to the musician? How about that CaseLogic case I have to hold CDs? They made a profit from that. Shouldn't some of that go to the people who make the music that I hold in that case?

You made your money selling me the music. Now go away.

Re:the problem is there is too much music

[Kjella]

recorded music is your advertising and you should be making money on live performances from the real fans

Which kinda defeats the purpose of having fans from all over the Internet, there's many many bands that won't come to my little corner of the world and you'd have to be a pretty big fan to travel very far just to go to a concert. And even then they still only get one ticket. And maybe that one weekend they are there it doesn't work because you got another important event. You can't live off just a handful of fanatic fans who'll go to any length to see you.

just like almost every line of business these days. break even or lose on 90% of your customers and make your profit on the rest. something like 4% of dropboxe's customers pay them, yet they make A LOT of money

Where the analogy breaks down is that it's easy for everyone who wants to get dropbox's paid service to do so. With a live performance there's probably 4% that'd pay and 4% that easily could go (remember anywhere you hold a concert is where >99.9% of the earth's population doesn't live) for a total of 0.16% that actually came and paid.

Two birds with one stone

[Roger W Moore]

Be careful what you wish for. You just might get it.

If that is the moral then the article author might be in trouble given his stance. His last sentence is:

I’ll make technologists a deal, I’ll give up my song copyrights if you give up your software patents.

So how do we accept? More telling is that I think it shows he really does not understand the digital side of things very well. Outside major corporations or patent trolls I imagine many people would happy see software patents disappear.

My Experience

[rabtech]

I tried to start an indie label, partnering with a band that was well-liked locally and had some regional fame. We recorded at home with a TT-24 for digital I/O and monitoring and Logic 7 & Profire Lightbridge for getting it onto disk. Were able to do 24-bit 96khz and plenty of plugins. I had more multi-track channels and more processing power/virtual gear than any studio in the early 1990s. Grabbed a set of self-powered studio monitors for under $1000 (which blow away anything that was available for purchase in 1990).

We did the Tunecore digital distribution method, got into the local record shops, and generally tried to take advantage of any avenue we could.

Ultimately we lost money, here are the mistakes we made:

1. We pressed Vinyl. Granted, we got a good deal and it was a quality product (including MP3 download card using software I wrote myself) but the economics make it such that you need to sell at least a couple hundred to break even and there wasn't enough of a market for it. We sold over 100 in the first year, just from a few local shows and two local record stores. Come to find out this was more than almost everyone else - the local record store sold out (and paid us out) several times - the store manager was shocked to actually be paying money out as most of the indie albums don't sell enough to reach the threshold. Lesson: Don't press vinyl. Unless you can sell out a 5,000 seat venue in at least 10 cities you will lose money.

2. We thought CDs were on their way out so we didn't make that many of them. It turns out we should have - we sold through the CD run quickly and it was our biggest money maker, even at $5 each. This was in 2009 but still - people are more likely to buy CDs when out and about because they are small and easy to carry. Vinyl means a trip back to the car or having to lug it around town for the rest of the night.

3. Digital only works if you have access to some channel to get noticed - a friend with a very popular blog, a host of a very popular podcast who likes you, etc. There is too much music in the online catalogs - often good music. It is extremely difficult to stand out in the crowd, no matter how good you are. You should plan on about 1% conversion rate of people at the show to merch sales, so if 1000 people show up 10-20 will buy something.

4. Publicists and marketing don't work unless you can put a huge budget behind them. Thankfully we didn't spend a ton on this but others we know spent their life savings or thousands. Yes, they got local college radio interviews and blog mentions but none of it translated into increased sales of albums. It did bring a few people to shows but not enough to make up for the outlay in merch sales. This seemed to apply regardless of the genera.

5. We spent money on the launch show - it was a huge loser. If I had to do it over again, I wouldn't have bothered. It just takes too much money to put on a good light show so unless you have access to moving lights or projectors that you can borrow for free, or can play to a venue that already has the gear, don't bother. This leads into the next item...

6. Unless you are a well-known act, you will get screwed by the venues (who are often trying to squeak by themselves). Always charge a cover and make sure your deal is for the cover if you can (and have *your* helper work the door!). Local promotion is difficult - people are bombarded with Facebook notices, emails, etc about a ton of shows all the time so most people tune out. If possible, find out where the crowds already show up locally and make a deal to play there. It is much easier to make a new fan by going to where the people already are than trying to convince a bunch of strangers to come see an unknown band.

7. You must take credit cards. Period. Get an iPhone and Square and make sure you have signal. Make each band member get on a different network (VZW, ATT, Sprint) so you can be certain you will have coverage at the venue. Taking cards will often more than double your take vs not taking c