Music Publishing & Songwriting

While I was walking home tonight, I passed by a museum and something in the window caught my attention. It was a display of a small antique pipe organ from the late 1700’s– it looked like a very early attempt to create a miniature Wurlitzer that could be played at home. A rather odd, “Chitty Chitty Bang Bang” type of contraption, it reminded me of the homemade time travel machine rigged up by Doc Brown in “Back to the Future”. In its day, it probably looked as cool as the iPad. Now, it’s not something that anyone uses to get the job done.

The sight of this awkward, ungainly invention brought me back to an analogy made by one of my colleagues earlier in the day, as we discussed the current challenges of copyright licensing. “I feel like we’re trying to drive some old unrestored 1950’s clunker” he said, “the kind that only the old guy that owns it can actually drive, because you have to know just how to wiggle the gear shift and how many times to pump the brakes to make it all work”. I heard almost the same sentiment at a lunch with one of the industry’s most respected copyright lawyers. Everyone in the music business knows it’s true, though few will say it publicly, since it directly undermines our demands to get paid for what we own. But the old copyright system just ain’t working anymore. The truth is:

The process of licensing copyrights has to change drastically and fundamentally, if the whole concept of copyright is going to survive at all.

Right now, we’re driving down the Information Superhighway in that old 1950’s jalopy– we’ve got it floored and we’re doing about 35 miles an hour. Copyright holders are not only being run over, we’re also being passed by, as young entrepreneurs from the Google, YouTube, Spotify generation create global empires built on providing immediate, free access to entertainment and information. Meanwhile, the copyright community is still back somewhere on the side of the road, trying to figure out who owns the rights in which territory and for how long, and who has the right to issue the license, and how many licenses will be necessary, and what should the license cost. At best, we’re an impediment. At worst, we’re irrelevant.

Consider:

At a family wedding, the bride and groom do a crazy dance to a medley of big pop hits– it’s all relatively harmless (at least from a copyright standpoint) and clearly covered by the principle of “fair use”. After all, this is kind of what music was made for. But not too surprisingly, the dance is captured on videotape by the people filming the wedding. It’s then posted on YouTube, probably as a simple, cheap way of sharing the moment with family and friends. Again, it’s all still covered by fair use, since it’s largely a private activity and there’s no attempt to sell anything.

But suddenly, the family wedding video becomes a viral phenomenon, and millions of viewers go to YouTube to watch the silly dance, generating plenty of tangible economic benefit to YouTube in the process. At this point, clearly the copyrighted material contained in the video (that is the medley of recorded music to which the dance is performed) should be licensed, and the labels, artists, publishers and songwriters should be compensated. But how? Just a guesstimate would indicate that there could be 15 different artists, all of the major labels (some of which might no longer own the master recordings in question), probably at least fifty songwriters, and twenty different music publishers, each of whom would have to grant permission, and then play a role in determining the appropriate sync fee for each song. It would take months for a two minute home video, and probably cost in the six figure range. Ridiculous.

Here’s another:

A video collector owns outright some archival footage of a big star performing on a TV variety show from years ago, which a new mobile entertainment provider now wants to license and sell as a download to mobile phones in Asia. But within this short segment, the big star performs a song, which would have been licensed under a sync agreement that covered only that particular performance, in that territory, during a specific window of time. In order to use the footage in a different medium, territory and era, a new sync license will need to be negotiated with all of the publishers (many of whom have sold their catalogs or allowed the copyrights to revert to the songwriters). And then there’s the matter of union fees. Several of the performers on the show may have been members of the American Federation of Television and Radio Artists (AFTRA), Screen Actors Guild (SAG) or the American Federation of Musicians (AF of M), which means there might be residual payments due for any reuse of the show. Good luck figuring that one out.

A last example:

A music fan in Japan wants to purchase the new CD by an American act signed to Columbia/Sony Records in the US. The CD has never been released by Sony in Japan. The fan logs on to Amazon, locates the CD, and purchases it. But Amazon can’t fulfill the transaction, due to a copyright infringement lawsuit initiated by Sony Japan. As the local distributor of Sony product in that territory, Sony Japan owns the rights to sell that product in their region. By allowing the consumer to purchase directly from Sony in the US, Amazon is infringing on the copyright. And it’s true, even though Sony Japan has no intention of making the record available in Asia. As the copyright holder, the local company has the right to distribute the product or not, at their discretion.

In part, this explains why a consumer in the US who wants an album by a French artist released only in France can’t simply go on iTunes and purchase it. He or she can go to iTunes France and see the album or hear samples of the music. Certainly, the consumer can steal the record on any number of illegal sites. But purchase it? Nah. That would be copyright infringement. Go figure.

Anyone who reads this blog regularly knows that I’m a staunch defender of copyright. I’m not a believer that information wants to be free. I am however realistic enough to know that information wants at least to be available, at some generally reasonable price. Right now, our copyright laws are a hodgepodge of political compromises and outdated principles, all changing from country to country. In a global world, they are structured territory by territory. In a society based on instant access and immediate gratification, they are restrictive and reliant on step by step negotiations with half a dozen different parties for a single use. They can’t survive like this.

Unfortunately, there are no attractive solutions. Clearly, any reform needs to be done on a global level. The web is worldwide after all. That should be easy. We can take it up right after we solve the problem of world hunger and get everyone to agree on global warming.

Even worse, the only viable answer to the internet-related problems seems to lie in some kind of system of blanket licensing, similar to that used by the performing rights organizations to collect on music being used in public venues. In some form or another, a tax or surcharge would need to be assessed on electronic equipment or computer technology, or directly on internet service providers, mobile phone networks and other “distributors”. The money collected would then be shared among the entire creative community, from publishers and labels to artists, writers and union members.

If that seems like a simple and clean resolution, it’s not. The problem is that all of the money would go into a fund, and then be distributed to the copyright holders without any clear way of attributing it to a specific use. Worse, the ability of each individual copyright holder to negotiate fees on his or her own behalf and to collect them would be lost– thus eliminating two of the major functions of a music publisher in one fell swoop. In essence, such a move would make much of the music publishing role obsolete. If only for reasons of self-interest, it’s not a proposal I relish.

The only thing worse is the alternative, which is what’s happening now. We are already becoming obsolete, simply because people are ignoring us. Sure, we can still make things grind to a halt with a major lawsuit here or there, or exact our revenge with a jumbo copyright-infringement settlement–after about ten years in court, fighting appeal after appeal. But the judges are getting less sympathetic, the law is seeming less and less just to society at large, and the internet generation is moving ahead without us. Most importantly, we’re leaving stacks of money on the table every day, by not being able to take advantage of licensing opportunities for our music. There’s no value in owning copyrights if no one has the time, patience or money to license them. Already, more and more creators are simply making new product which they own in its entirety, and licensing it directly to individual services.

There was an article in the New York Times today, about an inmate who after having been wrongfully imprisoned on death row for twenty years had just been set free. His one request to a benefactor had been a Walkman, only to be informed that no one used them any more, and handed an iPod. As the surprised ex-con acknowledged, it’s painful sometimes, but things change. You have to move on.

Otherwise, you’re an artifact in a museum window.

I know it’s summer and everything, but let’s face it– I’m a New Yorker. I’m not much for gardening or working in the yard. Nevertheless, I recently found myself battling the forces of nature in preparation for an upcoming outdoor barbecue, trying to singlehandedly turn an overgrown, out of control patch of jungle into own of those tame, manicured, Hampton-like lawns. With all the sweating and cursing, the endless labor and the distinct lack of progress, it felt about like a day in the music business, during what has to be the deadest, most uninspired period I’ve ever seen during 25 years in this industry.

In a summer that has seen continued dismal record sales, falling publishing incomes, the crash of the touring business, and worst of all, the tragedy at Love Parade in Germany, the whole music biz seems stuck in the kind of dreary, gray blanket of stale air that has hung over NYC for most of the summer. It’s hot, uncomfortable and nothing’s moving.

Even Billboard seems to be struggling to come up with anything to fill the pages. Last week they ran an article about a consortium of European banks who are partnering with Universal Music, to offer a discount subscription for music downloads with the opening of every new bank account or charge card. Out of 200 participating banks in Germany, 6,000 people have signed up. That’s 30 people per bank. Jeez. 30 people? And they wrote an article about it? Must’ve been a slow news day.

Staring out at a wild, unruly, tangled mess of a field, it’s not easy to leave the lawn chair and get out the weed-whacker, but we’re quickly nearing the point of no return. It’s August, and the fourth quarter is about to kick in. Somehow, the industry has to find a way to start at least laying the groundwork for better times ahead. Undeniably, it’s been a bad year in the fields. Still, we have to start doing the obvious work to get something growing again:

Step One: Take Control

Nature abhors a void. Even when it looks like nothing is happening, something is going on. Right now, even as the music industry stands still, other more dynamic businesses, from social networking companies to Apple to mobile networks to investment companies are expanding their influence, grabbing our audience, choking off some of our own opportunities and redefining the entertainment landscape on their terms, not ours.

It’s incredible that even after losing control of the music industry to MTV way back in the 1980s, then losing it again to illegal file-sharing in the first part of this decade, and yet again to Apple and iTunes in the second half of the decade, the record companies and music publishing companies have still not offered up anything to even attempt to control the playing field in their own industry. Streaming didn’t originate with record labels or publishers. Neither did the iPad or YouTube. Given the extent to which they’ve benefited from it, why did a music publisher not come up with a TV-show like “Glee” years ago?

If we don’t want to think beyond making music, then we can rest assured that someone else will. Then they, not us, will decide how our product is marketed, distributed, and sold, as well as what price it will sell for.
Don’t believe it? Notice how 80 years later we’re still going hat in hand to the radio industry, begging them to play our records (and in the case of the record industry, wishing they would actually pay us something to do it). Why does every new initiative in the music business seem to revolve around piggy-backing on someone else’s innovation, like making a channel on YouTube or taking an ownership share in Spotify? If you don’t control your turf, someone controls it for you.

Step Two: Clear out the dead.

You can’t hope for much new growth until you get out the wheelbarrow and start cleaning up the mess. This is actually one huge advantage for new, small companies entering the business. At least they’re starting fresh. The great burden being carried by all of the major music corporations is the fact that they have little choice but to manage the slow death of the CD, and the whole traditional business model that surrounds it. Everyone knows that it’s on it’s way out. If they could, they’d kill it off entirely. But the truth is that it’s still the primary source of income. No one can afford to abandon it. Consequently, too many resources go into keeping the dead man walking, while the infant survives on whatever is left.

For those who are still forming their overall business strategy, this is an opportunity to embrace a new model, free of the ties to the past that are strangling the industry’s major players. Take advantage of it. You don’t have to build your business around manufacturing CDs, or getting radio airplay, or trying to place songs on million-selling albums, or focusing on your own home territory simply because that’s what everyone has always done. Those old branches of the tree quit growing years ago. Anyone trying to hang onto them is going to be hearing a distinct cracking sound in the next five years.

Of course, abandoning the old ways of doing business means you’ll have to come up with new ones. That’s never easy. But it’s easier to create something new and alive if you’re not spending 80 percent of your time trying to resuscitate something dead.

Step Three: Look at what grows naturally.

None of us are completely in control of our own fate. Sometimes you decide what will grow in your garden, and other times, no matter how hard you try, the garden decides what will grow. We all have to adapt to our environment, and the faster we do it, the easier our life will be.

Part of the reason the music business continues to struggle is that it’s been determined to force results out of a market that simply doesn’t want what it’s offering. People don’t buy albums. Fine. Sell them something else. The audience is constantly shifting and losing interest. It’s frustrating, but it’s nature. Give them a constant stream of new songs, rather than ten new ones every two years.

In most cases, the marketing strategies that have worked recently, from mixtapes to YouTube videos to mashups to blogs, have grown up naturally out of their environment. Meanwhile, the field is littered with millions of marketing gimmicks, from “enhanced” CDs to special “fan club” subscriptions, that emanated from corporate planning sessions, only to dry up and wither when they ran into a skeptical and disinterested fanbase. If it’s not happening at a grass-roots level, then the grass won’t grow. Work with the forces of nature, not against them.

Step Four: Plant a seed.

A few years ago, I decided to plant some trees. Being the impatient city boy that I am, I decided the bigger the better. I bought trees that were already at least half grown, planted them, then looked around and admired my efforts. Within a few days, I had a garden that looked as if it had been growing for years. Within three months, I had a garden full of big, dead trees.

Later, an Englishman (and hence, a genetically gifted gardener) suggested that instead I should buy some tiny little saplings. The theory was that if they died, I’d hardly notice. At the same time, being very young, they were more likely to adapt to the soil and eventually start to grow. So far anyway, it seems to be working.

Much of the reason that the music industry has failed to discover new technologies on its own, or clear out the old failing business models, or even jump on trends that have taken root at street-level, is that the large corporations that dominate the field want things to be too big, too fast. Faced with the pressure of producing quarterly results, they can’t wait for a new idea to grow. Just as they can’t afford to nurture artists through a three or four album development, neither can they nurture new business strategies or marketing initiatives that could take years to pay off.

Again, those just now staking their claim to a tiny spot on the music business landscape have a real edge here. If you keep your overheads low and your expectations reasonable, you can afford to let nature take its course. Try your new idea in an inexpensive, low-risk way. Take a deep breath or two. If it doesn’t take, it’s no great loss. But if you see it growing, you can patiently nurture it along, until it suddenly has a life of its own.

Last weekend at the barbecue, I spoke with a friend in the garment business, who has a clothing company in New York. He explained to me that even fifteen years ago, there were dozens of manufacturers, tailoring shops, pattern-makers and fabric factories throughout the country who created garments for a wide variety of clothing lines. Today, there are virtually none. Trade policies, wage pressures from developing countries, outdated union rules, organized crime, and short-sighted management policies combined to essentially eliminate the industry. We’re not talking about a tough business cycle. The dress-makers, weavers, tailors and other specialists have left the country or found other work. The machines have been sold off. It’s not coming back.

Industries do die. It’s not enough to reassure ourselves that “music will always exist”. Sure. But will the music industry? It didn’t exist much before the 1900s. It doesn’t have any guarantees for the future. Another six months has come and gone, and nothing is happening. Sooner, rather than later, we better get out the shovel and start digging our way out of this mess.

I think the advertising tagline of the New Music Seminar, held last week in NYC, should have been changed from “The Revolution Starts Here” to “Welcome to the War Zone”. That seems to better capture the mood at the parts of the conference I attended— battered, beleaguered, angry and afraid. Very afraid.

And for good reason. During one presentation, NMS’s organizers Tom Silverman and Eric Garland from BigChampagne laid out the real numbers that music makers and marketers are up against, and as most of us in the industry already knew, it wasn’t pretty. These numbers have since been flying around the internet, as a rather fitting post-script to an event that was supposed to celebrate new music. If this is the revolution, I think we’re losing:

Albums that sold at least one copy in 2009: 98,000
Albums selling less than 1,000 units in their first year of release: 92,601
Albums selling more than 10,000 units in 2009: 1,319
Albums selling more than 5,000 units in 2009: 2.058
Albums selling more than 250,000 units in 2009: 85

As these numbers have circulated, I’ve seen several comments questioning their accuracy– wondering for instance if they include worldwide sales. It doesn’t matter. Anyone who is hoping that international numbers will significantly change the picture is dreaming– the record business in Europe is in a free fall and Latin America just posted similarly dismal results. We can’t kid ourselves. The fact is that no one working in the industry on a daily basis would dispute these numbers. There is simply far too much music chasing an ever-dwindling audience.

Rather than making excuses or trying to find a silver lining in the storm clouds, our best response to the crisis is a crash course in survival skills. Of course, there are obvious external forces that are causing much of the industry’s pain– most notably the fact that every kid around the world over 10 years old has figured out how to take our product for free. Certainly, there’s a need for a concerted effort across the industry to combat piracy of all kinds. But you and I, working on our own, aren’t going to solve that one. Given the daunting situation staring us in the face, let’s focus on what really matters: saving ourselves.
How do we rise above the masses of people spending money, putting out music, and seeing little or no results? Here are three fundamental tips:

1. Be Strategic.

Most people making albums have put more thought into the artwork and the credits than they’ve put into what they’re actually going to do with the music. Incredibly, that is as true at a major label level as it is with self-funded indie efforts. Projects are green-lit, recording studios booked, producers engaged without anyone having given serious consideration to basic marketing questions like:
Who is this act’s audience?
How does that audience listen to music?
What kinds of records are they willing to purchase?
How do you reach that audience in order to market to them?
Which of those marketing methods are feasible, given your budget?
If it needs the support of radio, does the record have a clear radio single?
If you need to sell the CDs at shows, does the act have opportunities to tour?
Given the results of similar acts, how many records can you reasonably expect to sell?
How much then can you afford to spend on making and marketing the record?

If you are a hip-hop or a dance-pop act, your audience is entirely single-driven, even at a superstar level. Consequently, until you have a hit single there is no reason to make an album. If you make jazz records, all indications are that the audience responds only to artists who have established a level of credibility through touring and playing with well-known musicians. If you haven’t done that yet, then don’t make a record. For a country artist, there are very few ways to reach a sizeable audience without radio airplay. If your budget is tight, then better to record one single and use the rest of the money to promote it than to record ten songs that no one will ever hear. For a singer-songwriter with only a small local following, selling 500 CDs might seem like victory, rather than defeat. And indeed it can be, providing you can make the whole product for under a few thousand dollars. The key here is to have a plan.

2. Be Realistic.

The reason that most artists, record label executives, and producers approach their recording projects without the requisite strategy is that the process of planning requires a reality-check. As Simon Cowell would happily point out, most artists could benefit more from a look in the mirror, an honest self-appraisal and perhaps some frank feedback from family and friends than years of lessons and words of encouragement.

In pop music, artists have to look like stars, have endless stamina, possess a drive and work-ethic that go well beyond obsessive, and rely on a charm that wins over anyone who meets them. If that’s not you, then don’t waste what could be a successful career as a producer or songwriter churning out ill-fated solo albums. If you’re a rock band that can’t play live, then making records is an exercise in futility. Hip-hop acts need some kind of street-level following. If you’re not generating a response on that basic level, then it’s time to go back to the drawing board. A DJ/producer who makes records that differ drastically from what he or she plays at a club is bound to disappoint the audience.

Don’t fool yourself. Don’t rationalize and don’t look for miracles. If you can’t hear your music objectively or see yourself clearly, then you’re not ready to make a record.

3. Be Frugal.

Most major record companies spend both too much and too little–blowing money on travel expenses, dozens of misguided mixes, over-cutting and endless experimenting with changes in direction, only to suddenly pull back when the marketing, promotion, and tour support bills come in.

While the scale of spending differs drastically on an indie level, the same kinds of mistakes show up again and again. Artists operating on a shoestring cut an album where a single would have sufficed, or an album when an EP would have been more effective, or put 15 songs on a record rather than 9 or 10, as if the sheer number of songs would be a selling point. They spend money on vague, abstract artwork for their album cover that presents no visual image to communicate their identity to an audience. They hire an independent radio promoter to work a song to radio without a budget sufficient to break the song in any meaningful way.

While it’s not going to make anyone a fortune, to sell less than 5,000 records, or even less than 1,000 is not necessarily a bad thing. One thousand CDs at $15 a piece still makes $15,000. If it cost $5000 to make and promote the record, then it was a profitable venture– putting you ahead of 90% of the major label releases each year. The problem occurs when you’ve spent $17,000 to make the record, and you haven’t even begun to market it. When you’re operating in a sales environment as difficult as the one we face at the moment, you must be able to record at minimal expense, get the most value for your dollar, and put your money where it can generate results. This is a market the leaves no room for error, and even less for extravagance.

I’m continually amazed at the number of beginning artists, with no following at even a local level, no obvious radio single, and not even a clear artistic direction, proudly announce to me that they’re “working on their record”. Former multi-million selling acts like Matchbox 20 struggle to sell records in the current market, and yet here is a new act with less than a hundred people in their fanbase making an album. Why?

The answer is: because it’s too easy. The ease of home-recording, the universal availability of digital distribution, and the rise of the DIY ethos have removed many of the barriers to music-making, and that’s a good thing. But by doing so, it’s caused many artists to feel that recording their own record is some kind of rite of passage that must be fulfilled at the earliest possible date.

Athletes often talk about having “a respect for the game”. That just means that no matter how talented or gifted a sports star might be, he or she still has to appreciate the difficulty of what’s being undertaken, whether it’s hitting a 90 mile an hour fastball or pedaling a bicycle up a mountain, and must be prepared to do the hard work necessary to be victorious.

The scary numbers that many of us have been looking at for nearly five years now indicate that artists, producers and record labels need a little more “respect for the game”. It’s not difficult to make an album. But to make even one song that a significant number of people genuinely care about enough to purchase is a monumental undertaking. Before you go marching into a war zone, have a plan, be realistic, and consider the costs. Let the revolution start there.

I don’t usually get too personal in this blogspace– but I thought this week I’d offer up a quick excerpt from Chapter One of the Eric Beall biography for which absolutely no one is waiting (and which happily, no one is actually writing).

The story begins just before I graduated from Berklee College of Music, when, like most graduates everywhere, I was searching out possible job opportunities with a mixture of anticipation, excitement, ignorance and desperation. While I didn’t know much about what I was doing, at least I knew enough to be reading Billboard regularly, and that was where I happened on an article about a young whiz-kid named Tom Silverman, who was the founder of Tommy Boy Records, one of the seminal record labels in the history of hip-hop.

Riding high off the success of “Planet Rock” at Tommy Boy, Tom was quickly emerging as an industry leader, having also co-founded the New Music Seminar. Based in NYC, this conference was at the epicenter of a wave of new music taking shape in the early 1980s, it was where new wave and punk rock, hip-hop and electronic dance music all met and mingled, with hundreds of new artists, indie label owners, A&R people, press and other entrepreneurs plotting out their path into the industry.

The article I read about Tom Silverman concerned his plans to launch an industry group called “The Independent Label Coalition”, which was intended to be a trade group controlled by independent labels from across genres. The hope was that by working together to improve the business environment in the independent music world, the ILC could increase the ability of these smaller companies to compete with the major labels that dominated the industry. At the end of the Billboard interview, Tom pointedly mentioned that he was looking for volunteers– and I quickly reached out to be in contact.

Tom Silverman, from Tommy Boy Records and the New Music Seminar

To me, The Independent Label Coalition seemed like an ideal opportunity to meet people in the music business, learn about the industry, and hopefully build relationships that would result in gainful employment. To Tom, my willingness to volunteer undoubtedly confirmed yet again one of his pet theories, that in the music business, there was always a young kid who would work for free just for the chance to be involved. Happily, I did manage to meet Tom shortly thereafter, and was given a small role in the Independent Label Coalition.

I moved to New York from Boston in the middle of July, 1984, dropped my still-packed boxes in my tiny apartment, and immediately reported for duty at the New Music Seminar, where the Independent Label Coalition was officially being launched. I helped to check people in for the conference; I stood for endless hours at the ILC booth in the exhibit hall; I worked the door at Studio 54, where the Independent Label Coalition had a kick-off party. I was yelled at by Bob Krasnow (the head of Elektra Records); I screwed up most of what I touched; I tried to network in rooms of hundreds of people where I didn’t know a soul. But I also met dozens of new entrants in the music business sweepstakes, saw early performances from artists that ranged from the Beastie Boys to Run DMC to RuPaul to Madonna (check out the video below), and sat in dozens of panels where I learned the realities of how our industry is structured. Thanks to Tom Silverman and the New Music Seminar, I suddenly entered the music business, and I’ve been fortunate enough to remain there ever since.

The Independent Label Coalition didn’t actually work out very well– the idea of coordinating activities among indie record labels, made up of some of the most defiantly “independent” personalities in the world, proved to be a little Utopian for the real world. To me, it didn’t much matter. The ILC did exactly what I needed it to do, which was to give me my first network of friends, supporters and mentors in the music industry. In fact, many of those people I still maintain relationships with today, more than twenty years later. One of the leaders of the ILC was David Renzer, who at the time was a successful songwriter and producer. David went on to become the head of Zomba Music Publishing, where he wound up signing me to my first publishing deal. Now, David is the worldwide president of Universal Music Publishing. Another early compatriot from the ILC days was Duncan Hutchison, who became the president of Caroline Records, and is now the Chief Content Officer of RightsFlow, the licensing organization.

The ILC also introduced me to to a wide group of record industry entrepreneurs, including Eddie O’Loughlin at Next Plateau Records, who continues to be a colleague and mentor to me, Sergio Cossa, for whom Shapiro Bernstein, the company where I work now, administers the Emergency Music catalog, and of course, the illustrious Tom Silverman.

To bring this story to a well-crafted and slightly ironic conclusion, it turns out that Tom Silverman, along with my friend David Lory, one of the industry’s most creative and forward-looking executives, has now relaunched the New Music Seminar. After concluding in 1995, the New Music Seminar was brought back to life in 2009.

Dave Lory, New Music Seminar

As it turns out, I’ll be participating in NMS 2010, being held July 19-21st in New York. I’ll be promoting my books, “Making Music Make Money” and “The Billboard Guide To Writing and Producing Songs That Sell”, as well as my new consulting service, “Ask The Music Business Weasel”. If you can be in or around New York during this time, I strongly urge you to be a part of this conference, which is all about uncovering new paradigms and business models for success in today’s music business. And if you’re there, please find me and say hello. I’m looking forward to signing some books, chatting a bit, and being part of an event that played a key role in my own development as a songwriter, producer and executive.

http://www.newmusicseminar.com

Contrary to what many believe, the music business is not really such a tough thing to break into. There are no entrance exams, no licenses to obtain, and far less financial commitment than in almost any other business (have you ever thought what it would cost you to get into the restaurant business, or steel-manufacturing?).

Even better, there are hundreds of organizations, societies, conferences, and trade groups to help you start your network. The New Music Seminar is one of many such points of entry. All you have to do is show up, start learning how the industry works, and make some friends. It worked for me. I’ll hope to see you there…

It seems almost cruel to kick a company when they’re down and gasping for a final breath, but the news from EMI Music just keeps getting more and more bizarre. Only 10 weeks after naming Charles Allen the executive chairman of EMI Music (he replaced Elio Leoni-Scelti, who himself lasted only 18 months), Terra Firma announced that the head of EMI Music Publishing, Roger Faxon, would be replacing Allen, taking over the helm at EMI Music (the record division) as well. Even by music industry standards, that’s an amazing bit of turnover– Allen has gone from executive chairman to a vaguely defined “adviser” role in less than one financial quarter. It’s like watching a bit of time-lapse photography, where a process of destruction that usually takes a year and a half has been condensed into 10 weeks.

And all of this is meant to reassure the investors.

Roger Faxon, Chief Executive EMI Group

The real irony is that after three years of completely inept decision-making, Terra Firma is actually making a pretty good call on this one. At least Faxon has a genuine understanding of the business. While he didn’t build EMI into an industry-leading publisher (that was the work of Marty Bandier, who is now at Sony ATV), he has maintained the company’s status despite the ever-present rumors of the corporate parent’s financial demise. EMI Music Publishing still has one of the strongest executive teams in the business, a catalog full of classic songs, and a current writer roster that made it the Publisher of the Year once again at this year’s ASCAP Pop Awards. The obvious strategy here is to try to use the strength of the publishing company to shore up the weakness of the recorded music division. It makes pretty good sense… on paper.

For reasons that are fathomable only to the executives that run major media companies like Universal, Warner, Sony and EMI, none of the major music companies have ever managed to create any relationship between their record companies and their associated publishing companies. There are remarkably few acts that are signed both to Warner Bros. Records and Warner Chappell, or to Sony ATV and Columbia Records. In fact, the relationship between many of these publishing companies and their affiliated labels is downright hostile. At Sony ATV, I was well-aware that many top-level A&R people at Columbia and Epic were steering their new acts to EMI Music Publishing, convinced that the artist would get more money and promotional support at that company than at Sony ATV. Likewise, EMI Music Publishing has made no secret over the years of their disdain for the hapless label that shares their name.

Some of the hostility can be attributed to executive envy, political gamesmanship, and the general corporate tendency to put one’s personal bonus ahead of the interest of the company itself. Some of it comes from the fact that many of the publishing companies and their associated labels have very different histories, areas of specialization, and financial means. To call the relationships “dysfunctional” would be something of an understatement.

Not too surprisingly, in the world of independent music companies, the idea of having a label and publishing company cooperate for the greater good has been far less elusive. In fact, many of the great success stories among independent labels have been built around the idea of record company and publishing company working together– from Motown Records and Jobete Music, to A&M Records and Almo-Irving Music, to Jive Records and Zomba Music, to Disney Records and publishing. It’s not terribly tricky. It simply means that the record label either strongly encourages or demands that their artists make a publishing deal with the related company, and likewise, the publishing company tries to keep any new talent they discover or hit songs generated by their writers “in house”, by bringing them to the associated record company.

So the idea now being put forward by Roger Faxon and the string-pullers at Terra Firma, to use EMI Music Publishing to bolster the fortunes of EMI Records, is not a crazy one, even if it’s relatively untried at a major music company level. I can almost understand how the non-music business weasels within Terra Firma could see this as the last best hope– and could have great expectations for the power of the two companies when finally brought together. It certainly won’t be the first time during their grand experiment in the music industry that Terra Firma has had their hopes dashed, though it may be the last time.

As obvious as the idea to unite the two companies sounds, it’s about ten or fifteen years too late. At this point, with EMI in such precarious condition, it’s almost impossible to see how this plays out. Most top artists with any other options would be understandably hesitant to sign to EMI Records right now, and quite frankly, it is probably not the first place that anyone from EMI Music Publishing would recommend for their artists. The publishing company needs its top writers, artists and producers to focus on creating the biggest hits possible, regardless of which label they happen to be released on.

Even if EMI Music Publishing were to encourage their top new artists to consider going to EMI Records, many are under contract with other labels for years to come, or are signed to production companies with ties to other companies, or have managers with relationships at other organizations. To create any real synergy between the two divisions is probably a five-year program, even in a best-case scenario.

Best-case scenarios have not served Terra Firma well. Indeed, the real problem with its buyout of EMI and the subsequent meltdown that followed has been a simple case of unrealistic expectations, which when unrealized, only increased the need for greater miracles in the next financial quarter. The ultimate result of this is the kind of ridiculous game of CEO musical chairs that we see now, where each new person is brought in with high hopes and a touted “turn-around” plan, only to find themselves doing a disappearing act as soon as the “turn-around” doesn’t turn out as planned. Every business should challenge its leaders to do the very best they can do. But if you challenge people to do the impossible, you will inevitably be disappointed. If you bet on them doing the impossible, you will not only be disappointed– you’ll be broke.

Terra Firma CEO Guy Hands

From the moment that Terra Firma purchased EMI in 2007 for the wildly inflated price of $4.7 billion dollars, they put themselves in a corner from which they can never escape. The loans that made that purchase possible were made on earnings expectations that were unrealistic for any music company in the present business climate, especially a company that was hardly a market leader even three years ago. In order to make the interest payments on those loans, Terra Firma now needs EMI to generate income at a level that is simply not possible for a music company in this environment.

If you try to drive a Volkswagen in the Indy 500, it won’t win the race– even if you press the gas pedal to the floor and keep it there. It’s not that it’s a bad car. It was never built to run that way. Further, if you insist on trying to do it, you’ll eventually ruin the engine– all because your expectations were not remotely in keeping with what the automobile was designed to do. EMI has plenty of talented, dedicated people in its offices around the world. It’s not inherently a bad organization. But music companies are not investment banks or oil companies. They don’t generate that level of cash. If you try to force them to do it, you’ll wind up cutting the creative experimentation you need, taking dangerous chances on high-priced “sure things”, demoralizing your staff, and draining your most productive assets to pay for your least-productive ones.

As remote as the problems of EMI might seem, the lesson of unrealistic expectations is one worth keeping in mind, even for individual songwriters and entrepreneurs entering the publishing game. As Andre de Raaff, the CEO of Imagem Music once sagely pointed out to me in a discussion about the disappointment of many investment firms who recently acquired publishing catalogs– music publishing is indeed a relatively steady business, but only over the course of about ten years.

When looked at over a decade, most established music publishing catalogs tend to hold their value and provide a relatively predictable rate of return. But within that ten year period, there can be wild swings in income from one year to the next. Currency fluctuations, copyright lawsuits, split disputes, hit songs or big flops can cause unexpected spikes or dips in the financial picture. Should you happen to buy into a catalog during the wrong three or four year period, you could easily panic when you don’t see the results you expected. If you can’t afford to wait it out for ten years, at which point the good and bad times will probably even each other out, you risk taking a sizable loss on your investment.

For those starting up a company, that means that you need to have a clear, level-headed understanding of the risks involved, the potential profits, and the time-frame in which you expect to see some action. Here are three rules to keep in mind that should help you avoid the dangers of great expectations:

1. Don’t buy anything based on what it could be.

The music business is built on dreams of endless potential. Every catalog you will ever be offered for purchase will be “full of undiscovered hits that have never been recorded!”. Every songwriter you consider signing will be on the verge of becoming the next big thing. Every cut you get will be under consideration to be the next single. None of it means anything.

Of course, all of it is possible–and hopefully one of the acts or songs you sign will turn out to be wildly successful. But you don’t do the deal based on that expectation. You negotiate the price based on what something is earning now (if it’s an established artist or catalog) or on a very conservative estimate of what it could do (for new artists or songs). You don’t plan for success. Plan for slow and steady growth, and make your financial decisions based on those plans. Then be surprised by success.

2. Don’t look for a quick money.

There isn’t any. All money in music publishing comes through the proverbial pipeline– a CD is sold at a retailer, who pays the distribution company which then pays the label which then pays Harry Fox or the equivalent which then pays the music publisher. Most of the time, that process takes somewhere between a year and a year and a half– longer than that for international royalties. Performance money is somewhat quicker, but still at least 9 months from when a song is on the radio. This is why songwriters want advances from publishers– because it’s very easy to find yourself starving, even while you’re hearing your song on the Top Forty countdown.

If you sign a new writer with an advance, no matter how minimal, it’s very unlikely that you will recoup that advance within the first year. Even if the songwriter is able to write a song in the first week of the deal, and you’re able to get the song picked up by an A&R person in the first month, it will still take three to six months for the artist to record it and release it, and another month and a half before it starts to impact at radio. It’s almost impossible that the money for that airplay or sales will show up in your coffers before the end of the first contract period. When it comes to signing and developing songwriters, you have to be willing to stay in the deal for at least a couple of years in order to get your money back.

3. Desperation is dangerous.

Decisions only get harder when you’re desperate. If you need to show results quickly, you will take foolish chances, be too aggressive, overpay for deals, or put too much pressure on the songwriters signed to you.
If you’re trying to stave off financial disaster, you’ll make budget cuts that will impair your ability to find new acts, drop unrecouped songwriters too soon, and sell off songs or catalogs at a fraction of their real value.

The music biz is a risk-taking business– but in order to take risks intelligently, you need a solid, supportive environment in which to work. That means enough capital in the business to survive while you’re waiting for your pipeline to come in, low overheads that can be covered by slow and steady growth, and enough patience and belief from your partners or investors that you are able to follow your instincts, and even make a few mistakes along the way.

A little more than a month ago, when Terra Firma was desperately trying to raise funds from its investors to stave off a Citibank takeover of EMI, they trotted out the new CEO at the time, Charles Allen, and announced that Allen would be unveiling “the new plan” to turn EMI from investment bust to boom. It was hard not to feel badly for the new leader, who was essentially being asked to create a fantasy picture in which everyone’s expectations would eventually be met, even as everyone knew that this was a completely unlikely scenario. As it turns out, he didn’t stick around long enough to even initiate the plan. And now there’s a new dream on the table.

As my father in law likes to say, you can’t teach a pig to fly. Trying will only frustrate you, and annoy the pig. Keep your expectations in line with reality, and you’ll have a far greater chance at not only meeting them, but maybe even exceeding them.

Alright—mark it down in the “Believe It Or Not” column. This interesting newsflash first appeared in one of my favorite industry newsletters, A&R Worldwide:

Fan-Financed UK Band Lands Multi-Album US Record Deal

Leaving aside one obvious question (isn’t every band essentially “fan-financed” to whatever degree?), the following story stood out like a flower in a mineshaft, sprouting up in the middle of news about more corporate layoffs and the ever-falling fortunes of the music industry. You don’t hear many stories like this one:

Scars on 45, a UK based band began making waves on the website Slicethepie back in 2008. The site provides an opportunity for music fans to provide ratings and reviews for unknown bands that they are passionate about, and then to take it one step further by actually getting involved. With enough positive response, a band can reach the “funding” stage, at which point they can raise funds directly from their fanbase to record an album. In return, the fans who choose to invest receive shares in the commercial success of the record. Fans can invest anything from 1 pound (GBP) on upward. Through Slicethepie, Scars on 45 managed to raise 15,000 pounds (GBP) to help record their debut album.

As it turns out, “Beauty’s Running Wild”, the fan-funded track on the album was subsequently featured on “CSI-NY”, and attracted more than 50,000 website hits within days of airing. This in turn attracted the attention of Alexandra Patsavas, a leading music supervisor best known for her work on “Twilight: New Moon”, “Gossip Girl”, and “The O.C.”. Patsavas brought the act to her label imprint, Chop Shop, which is distributed by Atlantic Records.

Great news for the band of course. But if you think this is a success story for Scars on 45, check out the even better ending to the tale:

Those who invested in the band through Slicethepie back in 2008 hit the jackpot. When the band was signed, a buyout clause was triggered and shareholders were bought out at a 50% premium to the then market-price—representing a whopping 800 percent return on their investment!!

Not too many people had investment returns like that in 2009. What’s most interesting though is that not many music companies, big or small, had returns like that. While “professional investors” like Guy Hands are going bankrupt after sinking billions of dollars into EMI; while investment bank-backed publishing companies are struggling just to stem losses, this group of music fans managed to turn a 1 pound investment into 800 pounds—without having to do any work! Slicethepie CEO David Courtier-Dutton was quoted saying, “We are delighted for both the band and their fans which, in this case, have truly been instrumental in their success. We believe that consumer-driven filtering has an increasingly influential role to play in the face of the music industry…” With an 800 percent return on investment, it certainly does. Count me in.

What’s interesting is that the success of this Slicethepie venture highlights several very useful concepts when it comes to investing in the music business—ones that seem to often slip by the more high-rolling music execs and investment bankers. If you’re looking to acquire music for your publishing company or record label, here’s a few principles to keep in mind:

1. Buy low. Sell high.

The problem with most big-bucks investors in the music industry is that all of them are looking for the same thing: hits. They want big-name artists, well-known catalogs, songs that are on the charts. In fact, most of the investment-backed publishing companies have avoided new artists all together. They focus solely on catalog purchases.

The problem is, when you’re buying hits, you’re paying the top price for something that in most cases, has only one direction to go. Established superstar artists can’t usually get much more super—they can only fade. Songs at #1 today can’t go any higher. What seems safe is actually the most risky investment you can make—you’re paying top dollar for something that is already at its peak. Whoever found Scars on 45 in 2008 was buying at a fire-sale price. That’s where you get a bargain, and it’s also where you find the big pay-off.

2. Bet what you can afford to lose.

One has to assume that no one who made the initial investment on Slicethepie.com was betting his or her grocery money on a new, unknown band. I’m confident that no one was taking out a loan just so they could buy a piece of Scars on 45. The problem with most large-scale investing in the music industry over the past five years is that the investors have taken out massive loans (and hence, have massive interest payments) or they’ve invested other people’s money, people who quickly grow impatient if the ink starts to turn red.

The sad, ironic and inescapable truth of the speculative bets made in the music business every day is that the worse you need the gamble to work out, the more likely it is to fail. Maybe it’s because investors who can’t afford to lose tend to over-think, throw good money after bad, or chase the popular trend a little too late. Maybe it’s just the way the world works. But don’t put your money in the game if you can’t afford to lose it. Better to bet one pound if that’s all you can afford, than to take out loans to bet a hundred thousand pounds. Ask the guys at Terra Firma.

3. Bet on things that people like.

This has always been a pretty good formula for success in the music industry. It’s amazing how few people do it. Clever as it is, the concept of Slicethepie and “fan filtering” is really not that much different than old-school music entrepreneurs who would check out their songs with local audiences, get a DJ to spin their records in the clubs, ask the local retailer what people were buying, or see who was getting the most applause at the talent show. In my book, “The Billboard Guide To Writing and Producing Songs that Sell”, Daniel Glass, the president of Glassnote Records talks about being a young DJ, and seeing Prince, Barry White and others in the DJ booth, watching the dance-floor reaction as they tried out new mixes they were still working on in the studio. Daniel himself uses web activity as a major gauge for his own signings at Glassnote, which led him to artists like Secondhand Serenade.

It’s always easier and safer to give the audience what they want than to create something and then convince the audience that they should give it a chance. Certainly, great art has been created with either approach. But the average hit rate is a lot higher with an approach that watches what audiences are responding to, and then puts money into giving those audiences what they like.

4. Bet with your ears.

Most professional investors in entertainment, and even a lot of music executives, bet more with their eyes than with their ears. They watch sales chart action, or look at past financial records, or watch what others in the industry are doing, but they never really listen to the music. Clearly, part of knowing what the audience wants (concept #3) is watching reactions and tracking audience response. But once you see what’s happening, you still have to listen.

Some things look good on paper for reasons that have nothing to do with the music itself. Perhaps the appeal of an act is not really rooted in their music, but in some other social phenomenon. That’s okay if you’re the record label, but you wouldn’t want to buy that song catalog. Maybe something is flying up the charts because a savvy manager is spending a fortune on radio promotion to make a stiff look like a hit. It’s been done. You can use your eyes to do initial research. But if your ears tell you differently, trust ‘em. In this business, they’re the only real friends you have.

5. Don’t be afraid to cash out.

As every gambler knows, there is a time to hold ‘em’ and a time to fold ‘em. The great thing about the Slicethepie venture is that if a band is signed, the initial investors are in a sense, forced to fold up and cash out. It’s likely the biggest favor they’ve ever received. The truth is, the odds are stacked against a band like Scars on 45, as talented as they are. It is entirely within the realm of possibility that Atlantic will never make money on the band—it happens with alarming frequency. But for the initial investors, the game is over, and they’ve won.

If you’re running a small publishing company, there will be instances where you will build a writer up from nothing, only to see a larger company swoop in and woo him or her away with the promise of untold riches, the moment that writer has his or her first big record.

Most of the time, that’s just fine. You will have that writer’s first big record, for which you probably paid relatively little. On the other hand, the big company will have spent far more than they should, and will usually wind up with a songwriter who never has another song as big as that first hit. In many cases, you’ll get a call a few years later from that same writer, now dropped from his or her big publishing company, and eager to come back to where his or her first success originated. When you’re a small player, you play for small victories. When you get one, take it and don’t look back. Put your energy into finding the next undiscovered jewel.

And somebody, pass that pie!

We’re seeing the future— all over again. Just when the music industry had finally started to almost get the hang of selling mp3s on iTunes (even if we still haven’t figured out how to sell music from around the world, which blows my mind) the weather shifts and suddenly our new technology is dead.

“Gone is the MP3!” all the headlines are reading, and indeed, for the first time, the sales growth of digital track downloads dropped drastically this year, from a growth rate of 26 percent in 2008 to only 8 percent in 2009. Apparently all of us who were waiting for legal downloading to make up the revenue lost to the death of the CD had better find a new dream to embrace, because this once-new technology appears to be over before it began. What once was the future now appears to be officially “past”.

What makes it official of course is Apple– as we all know, it’s Steve Jobs’ world and we’re just living in it. When the big Mac shells out money to purchase the start-up venture Lala, with its whopping 100,000 person customer list, something must be bubbling. As we enter a new decade, it now appears that bubbling sound is the music stream, which is bringing you the next big thing:

Cheap music!

Uh… wait. Don’t we already have cheap music? NO! This will be cheaper still!!! While iTunes, that old-school relic of yesteryear, still wants to sell you a download for a dollar, services like Lala will allow you to stream the same song once for free and then give you unlimited access for 10 cents a track. The hitch of course is that the music doesn’t really “belong” to you. It’s more like a library book that you never have to return– which is close enough to ownership for me. Rather than shelves of CDs (like your grandparents have) or iTunes folders full of MP3s, the listener can access a full collection of music from the Web-based “cloud”, for either a per-song fee, or perhaps a monthly subscription (as in the Spotify model).

In a perfect illustration of the new technology approach to finance, Lala, a company started with $35 million of venture capital (provided in part by Warner Music) generates revenues under $10 million dollars, but is purchased by Apple for somewhere between $17 million (not too great a deal for Warner) and $85 million (which seems completely inexplicable). The general consensus is that Apple did not buy the company with the intention of replicating Lala’s current business model, but rather using the start-up’s technology and executive talent to launch their own Apple streaming service, which if they do it really well, could render iTunes obsolete.

Interestingly, the one hitch in Apple’s plan, and the one silver lining for the music industry, is that the current music licenses allowing Lala to offer legal music streams are not transferable as part of the sale. This means that Apple will have to re-negotiate the licenses with the major labels and publishers before they can launch their new service– a prospect that has label executives digging in for their last real chance to save their industry (and their jobs). While it would appear that the general licensing framework on the publishing side has already been laid by the recent agreement with the DMA (see the blog “Triumph or Turkey”), both the labels and publishers are determined to protect their interests within whatever business model Apple eventually constructs. If songs downloaded from iTunes will now be kept in a permanent online “locker” from which they can be streamed at any time on any device, labels will want a higher price per download, a fee for each stream, and a cut of any fees that Apple gets to increase the size of the locker. Publishers will expect a “mechanical” royalty for the stream, as provided in the new DMA agreeement, and ASCAP and BMI will certainly consider the “stream” a performance.

http://ericbeall.berkleemusicblogs.com/?s=triumph+or+turkey#

That’s all good– provided the model catches on. Not too surprisingly, the jury is still out on that one. So far most streaming models have proven very popular when the music is free, but far less so once that whopping 10 cents per track price tag is attached. Subscription models have not caught on either. Spotify offers a premium subscription at 10 GBP per month. So far, only about 10 percent of their customers buy in.

The inescapable fact is that until these services become profitable, the money for music-makers and music licensors will be pretty paltry. On the positive side, Apple has proven quite adept at figuring out how to make money off of music. The danger is that the new streaming service kills off iTunes, which is just starting to make some real money for the music business, and replaces it with something that earns ten percent of what iTunes did.

In general, it’s hard for me to be overly optimistic about the technological trend. First, we replaced the CD, which sold for as much as $15-20, with a product that sold for a dollar. Now we’re poised to replace the service that sells music for a dollar with a service that sells it for 10 cents. That’s not a great direction for music publishers, music labels, artists and songwriters to be headed. Given the precarious position of major labels like EMI, collection organizations around the world, and the thousands of small and large music publishers who saw as much as a 30 percent drop in income last year, we MUST collectively drive a hard bargain with Apple. That won’t be easy. Then, once an agreement is in place, we must continue to take legal action against unlicensed services that undercut Apple and other legitimate business partners.

If streaming is the future, and it likely is, then we need companies like Apple to make that business profitable. We also need to see a fair share of those profits. Otherwise, our vision of the future will indeed look a lot like a cloud– gray, ominous and full of hot air.

EXT. A MOUNTAIN CLIFF DAY

OUR HERO hangs on the precipice, clutching at the rocky ground.

PULL BACK TO REVEAL:

It’s worse than we thought. OUR HERO is dangling from the edge of a cliff—
—- twisting in the air, arms extended, hands clawing at the ground to keep his grip. HE looks down to see:

A RUSHING RIVER, hundreds of feet below…

CLOSE ON:

OUR HERO’S HANDS, covered with dust. His fingers are slipping off the rocky edge, as his hold starts to give way…

HIS RIGHT HAND pulls off as the rocks and ground begin to crumble. Now it’s only the LEFT HAND still hanging on… but his strength is fading… one finger slips off the ledge… then another…

CUT TO:

EXT. THE MUSIC BUSINESS TODAY

We’ve all seen that scene in the movie– now we get to live it in real life. You know, the inevitable scene where the action hero is hanging on the ledge, fighting for his life. Unfortunately, there are no stunt-men to call in this time around, as we prepare to take a very big plunge. These next several months in the music biz look to be a moment of reckoning, when the illusion of business as usual can no longer be sustained.

What’s got everyone in the industry on the edge of their seats, quite literally, is the imploding debt situation with EMI Music, one of the four major multi-national corporations in the business. EMI, which was purchased (inexplicably) by the investment firm Terra Firma for $4.7 billion dollars two years ago, is in a genuine and highly publicized liquidity crisis, from which it might not escape. And it’s primary creditor, Citibank, which financed much of the Terra Firma takeover, is in no position or mood to renegotiate the financing terms.

With a debt load of nearly $5 billion dollars, EMI has found itself repeatedly unable to make the required loan payments to Citibank, and in grave danger of defaulting. With severe cash problems of its own, Citibank has shown itself to be very unwilling these days to take the usual measures of re-negotiating the terms of such loans. Insiders are speculating that Citibank’s willingness to force Escada, the German fashion house, into bankruptcy last month, as well as its current hard line with Valentino, the Italian fashion company, indicates that Citibank may likely opt to force EMI Music into bankruptcy if the British music company can’t meet the debt payments it has missed, and the new ones looming ahead.

That’s scary stuff. In more than twenty years in the music industry, I’ve seen plenty of bankruptcies– over-extended indie labels, individual musicians or writers with life-savings that went up their nose or into the pocket of their business manager, indie record distributors who left dozens of labels and artists with no payment for records already pressed, shipped and sold. But I’ve never seen a major multi-national music company go bankrupt, or ever really contemplated it. Nor have most people in this industry. This is genuinely unchartered territory. In the worst case scenario, what happens?

If I had to guess, I would predict a marriage– of the shotgun variety. EMI Music has long been the target of Warner Music, who may finally have the old girl right where they want her– tied to the railroad tracks with the train bearing down. The question is whether another major music company, most likely Warner or Universal, would have the means to buy EMI– given that none of the music powerhouses are looking very powerful these days. It’s questionable whether someone in the industry, already struggling with their own business, seeing clearly the structural problems that will continue to drag down earnings, and being of somewhat sound mind, would want to acquire another record company. Almost certainly, anyone who did buy the company would shutter the label, save the valuable catalog of masters, and focus on the music publishing division, which is the only thing still making money.

More frightening than that, it is possible that EMI could simply go bankrupt. If that were to happen, it would not only spell the end of one of the most important historical legacies in the music industry (particularly for the United Kingdom), but it would drag the lives and finances of hundreds of artists, producers, publishers, independent labels, recording studios, and songwriters right off the cliff. Anyone who was owed royalties or production fees, anyone who had distribution arrangements with Caroline, anyone who had outstanding invoices could find themselves in a very long line, somewhere behind the Beatles, Coldplay, Robbie Williams and of course, good old Citibank. In such a situation, it’s hard to know if the small players, like songwriters, producers and publishers, would ever get paid. It certainly would be a disaster that would take years to resolve.

This is not a situation for which I can offer up much brilliant advice. It’s not something for which there’s much precedent, nor are there any sure-fire solutions. But given that this is the way our world looks in the music business of 2009, with once-invincible companies sliding quickly into oblivion, I will offer up a few lessons that can be learned from our predicament:

1. Patience is not always a virtue. This is not a time to let things linger. If you are owed money by any label, distribution company, publisher, production company, etc., go out and get it. Fast. A bankruptcy by a company like EMI will have massive repercussions for everyone in the music industry, from Harry Fox Agency to small independent labels to individual session musicians. If you’ve ever tried to collect a debt in the music business, even if it was only a simple studio invoice, you know that it can mean months of collection efforts. You’ve also probably learned that whoever screams loudest (particularly if the words being screamed include “lawyer”, “lawsuit”, or “Suge Knight”), usually gets paid first. Make sure your paperwork (song registrations, billing info, payment addresses, etc.) is in order, then start calling and don’t let up until you get a check. Don’t let anyone hold onto your money for any longer than a contract allows.

2. Don’t talk to strangers. Make sure you know who you’re doing business with. If you’ve got a contract on the table, or a distribution offer, or any kind of long-term agreement in front of you, you need to do your homework–not only on the individuals with whom you’ll be working, but on the company that will be paying the bill. EMI’s problems have been well-publicized since the Terra Firma purchase, as were BMG’s, prior to their exit of the music industry a year ago. Ignorance is not bliss in times like these. You need to be reading Billboard, Variety, and watching the financial pages of the newspaper, and thinking through the implications of today’s news on those with whom you’re doing business.

3. When cash is king, sometimes it makes cents to take the money and run. It’s always been a maxim of the major players in the music business that you don’t sell copyrights. Publishers and labels have always resisted the idea of selling catalogs, even in the toughest economic situations, believing that the business was built on acquisition and ownership of more and more copyrights. For many years it’s proved a profitable philosophy, as the value of most hit songs or master recordings continued to climb. Until now.

The lesson of the past five years is that there is a time for buying, and also a time for taking your profits. The songwriters and publishers (and there were many of them) who sold their catalogs three years ago, at the height of the flood of investment money into the music publishing industry, made a killing.Those prices would be far lower today, and probably will remain so for at least the next five years. If corporations like Sony or EMI had sold off their recorded music divisions five or six years ago, they could have still received a reasonably favorable price. Today, they would have a hard time finding any takers at all.

As Kenny Rogers put it, you have to know when to hold ‘em, and know when to fold ‘em. If you think your songs, recordings, studio, music publishing business, or independent label is at the top of its value in the market, that’s usually a good time to make an exit, smiling all the way.

4. Don’t mistake size for security. It’s always easy to feel safer when you’re dealing with a company that everyone knows, with a big office building and a CEO who shows up on the front page of Billboard. It’s all a sham. These days, there are small, lean, smart independent labels who are far more secure than any of the Big Four. In fact, if you’ve set up an effective business model for yourself, you may be better off putting out your own recordings, managing your own publishing and booking a steady calendar of live dates than being signed to a major label. Better to collect your own money and manage your own affairs than to find yourself a pawn in a game that is out of your control.

Don’t be fooled by music industry glitz. If the EMI death-watch teaches us anything, it should be that the bigger they are, the harder they fall, and the more people they take with them. Clearly, Terra Firma, despite the reassuring name, is on very shaky ground. Don’t stand too close to the edge…

Alright, to be fair, I haven’t gone on a really vicious rant since I tackled the subject of YouTube all the way back at the beginning of the summer. I’ve tried to be patient and positive and encouraging and educational and not get sidetracked on a subject that frankly, just completely sets me off. But I’ve hit the wall tonight. Look away if you’re easily offended or your feelings get hurt easily. I’m on the warpath.

It all started innocently enough. This evening, as on probably about 7000 other evenings of my life, I went out to what I thought was a showcase performance of a singer/songwriter who had sent me a couple of promising songs. Not hits really, but songs that showed enough potential, both in the writing and the performance, that my curiosity was sparked, and I felt it was worth an hour to go see what the artist could deliver live.

I’m still waiting. Because what I saw left me scratching my head. I don’t know what I saw. It was at a club that ostensibly features live music and charges money, so I assume that it was a performance. On the other hand, the artist seemed to view it more as some kind of therapy, in which she could drag all her friends to listen to her as she sleepily worked out her career path, artistic direction, set list and relationship challenges in public. The back-up band clearly viewed the evening as the rehearsal that they had not had previously. I saw it simply as my own personal hell, in which I watched yet another evening drift into some horrible nightmare of missed cues, false starts, wrong notes, poor song choices, and some hapless manager or attorney telling me how much better last week’s show was if only I’d seen that one.

I did see that one. I’ve seen them all. I’ve endured enough showcases to fill a YouTube channel, except that no one would watch them. I can’t take it anymore.

One seems to read constantly these days that the future of music is in live performances– that’s where the money is to be made, as it’s the one thing that can’t be stolen. It’s all about the live show. If what I’m seeing at showcases recently is the future of the industry, God help us all. The only thing we can be sure of is that no one will figure out how to steal it. No one would want to.

In the past five showcases I’ve attended (some of these presented for major record labels, others at major NYC clubs, all with industry A&R in attendance) I’ve seen the following:

One band, having generated interest at a major label based on an EP of material, played a set-list with an entirely different musical direction than that of the EP. In fact, they played only two of the six songs on the record.

A singer/songwriter chose to play three almost entirely inert ballads in a row, somehow oblivious as the entire audience was lulled into a slumber.

Another singer-songwriter managed to hit six obvious wrong chords in a thirty-minute set, forget a lyric, and had to start one song all over again– all on songs that he had written himself. If you can’t play your own songs, what can you play?

All of the performers proved unable to manage even one interesting, provocative, amusing or insightful spoken introduction or bit of banter with the audience. Most were inaudible, which was a plus. The others opted for things like “How you guys doin’? Is everyone having fun? This next one’s about a girl I knew back home…” Wow. That sounds really fun.

What the hell is going on? How has the standard for live performance slipped so low that most of the artists I’m seeing can barely struggle through a six song set? Could even 10 percent of the acts playing at The Living Room, or The Bitter End, or Mercury Lounge, or the Whisky in LA draw even fifty paying customers if you excluded close personal friends, relatives, and industry people who were coaxed there? Does anyone ever see a performance that truly wins over a crowd, the way Elton John did at the Troubadour or Springsteen did at the Stone Pony?

I’ve heard all the explanations. I’m always reminded that most of the young artists playing these showcases are still developing and defining their sound. They need to experiment. Of course, I totally agree that there is a place for development and experimentation. It’s called a rehearsal studio. More bands should use one. I also agree that the costs of maintaining a band, finding a rehearsal space, and setting up a show are growing more and more overwhelming. Which should mean that artists make sure the performances that they do give actually mean something. It might also suggest that rather than showcasing at pay to play venues, they should concentrate on actually building a live following of people who will pay to hear them.

Here’s the bottom line, for those artists who have not yet come to this realization:

We are not simply in the music business. This is the entertainment business. Musicians do not simply compete with other musicians for opportunities and an audience. Music competes with television, movies, sports, video games, social networking, a dinner out, and anything else that fills the average person’s time when not at work. If your musical performance is not more fun, or more interesting, or more emotionally satisfying than those other things, you will not be successful. Eventually, friends will get tired of coming out of a sense of duty. You will need to entertain them. Here’s four tips as to how:

1. Ponder your pacing.
Every form of entertainment, from movies to theater to sports is focused on grabbing an audience’s attention, holding it by raising the tension and the intensity, then releasing it at the end with a big climax. How then does a songwriter offer up three ballads in a row? When you think of the time and effort that goes into editing a feature film, how can a band get onstage and think to work out the set list on the spot? Broadway shows spend weeks in previews, just trying to fix those few moments where the energy lags. Any performer should put that same amount of thought into his or her set list, to grab hold of the crowd and not let go.

2. Practice at home.
If you can’t play your guitar without looking at the frets, or the piano without looking at the keys, or remember the words or the chords to your song, there is a very simple solution available, and it works for everyone. Sit alone in your room and do it over and over again until you can do it perfectly. No one watches John Mayer or Alicia Keys and wonders if they might hit a wrong note. This is because at some point in their existence, they spent hour after hour learning to do what they do. There are no shortcuts and no excuses. Practice. In private.

3. Don’t speak, unless or until you have something to say.
If you have a funny story, or a witty aside, or feel like saying something outrageous, by all means speak up. But remember, if you are awkward and uncomfortable and prone to mumbling things that can barely elicit a titter of laughter from a group of your friends, it’s very easy to hide it. Just don’t say anything. Know your set list, move immediately from one song to the next, and let the music speak for itself. No one ever complained that Bob Dylan didn’t speak onstage. There’s a power in silence. Use it.

4. Compete.
Put any two great performers together, whether it’s Billy Joel and Elton John, or Tina Turner and Mick Jagger, or Jay-Z and Kanye, and you’ll get a war. An entertaining war, but a battle nonetheless. Great performers take the stage as if they own it, are sure that they’re the best band or artist on the bill, and will not stop until they have won the audience over. No audience has an obligation to listen attentively, or give you a chance to express your feelings. You have to grab the opportunity and make believers out of people. The music business is not a self-help group or an open forum for all interested parties. It’s a jungle, with thousands of aspiring artists fighting desperately to cut through the clutter and reach an audience. Superstars understand that it is a world of “kill or be killed”. You have to be ready to compete.

It would be easy to assume from the description of some of the recent showcases that the artists themselves simply weren’t talented. Unfortunately, that’s not the case. In fact, that’s what makes the whole thing so frustrating.

There are always lousy bands or untalented singer/songwriters, and there always will be. From an industry perspective, they really don’t matter much, as they rarely get far enough to get on anyone’s radar screen other than their immediate family. What has set me off on this tirade is the sight of talented people, with real potential, giving poorly-planned, under-rehearsed, low-energy performances that don’t do justice to their own gifts. No one minds watching a bunch of grade-school kids on a playground playing a sloppy basketball game. But when you go to an NBA contest, and see great players playing without strategy or focus or desire, you want your money back. More than that, you go home depressed, to have seen people who didn’t respect themselves or their craft enough to put in a solid effort.

I read an article recently that talked about the tradition of opera audiences openly booing performances that they feel are sub-standard. Someone commented that it’s rude and hurtful to the performers. Which it probably is. But sometimes, for some performances, it’s the only appropriate response. At least it shows that the audience understands the standards, respects the art form, and cares about what is being presented. Next time you’re at the Bitter End and you hear a loud “boo” coming from somewhere near the bar- you’ll know I’m in the house.

It’s probably safe to say that no one knows more about your bad habits and the stupid things you do than your neighbor. With the advantage of a little distance and the protection of a backyard fence, your neighbor has the perfect post from which to catalog all your most annoying and perplexing idiosyncrasies. Of course, you’ve probably got a pretty good list of your neighbor’s annoying habits just to balance things out.

Consider this then an open letter from one neighbor to another– from a music publisher, albeit one who has also worked in the record industry as a songwriter, producer and A&R person, to the guys across the street, the multi-national, major label record company. As we head into what is looking to be a dismal fourth-quarter in what may be one of the worst years in history for record companies, and we take into account that the previous five years have been pretty disastrous as well, it’s hard not to shake your head at the utter cluelessness of a once profitable industry. More amazing still is the record industry’s complete unwillingness to change, despite almost a decade of falling income.

Naturally, it’s always easier to see the sliver in your neighbor’s eye, rather than the log in your own. Of course, publishers do a lot of dumb stuff as well. But at least the publishing business is making money. When the NY Times is running a story that officially declares your industry “dead” (as happened recently), it might be time to re-examine the way you’re doing business. So from the old, slightly worse for the wear, in need of a paint job but still standing house that is the home of music publishing, I’ve got a couple of questions for the record company guys next door, who are padding around a twenty-room mansion that is now half-empty, unheated, with a flooded basement, a leaking roof, and an overgrown yard:

1. Why are record companies still obsessing about “leaks” from albums or singles in advance of a release date?

For those not involved in the everyday, back and forth of the music industry, it would come as a complete shock to know how much energy is devoted to guarding against the dreaded “Leak” of music. Executives are summoned to the boss’s office to listen en masse to mixes or comment on running orders, because no one trusts a VP of A&R to be left to listen alone, without supervision. Every mix that absolutely must be circulated is carefully water-marked. Publicity campaigns and efforts to place music in advertising campaigns, television shows or films prior to the album release are hamstrung, as overprotective label execs refuse to provide music to anyone, including music supervisors, until days before the record comes out.

And then the record comes out– and no one cares. God forbid a radio station starts playing a single a week before the official release. But of course, a week later, labels will pay exorbitant amounts to get the same station to play the record– and most of the time it doesn’t work. Labels will spend hundreds of man-hours hunting down leaked versions of a song circulating on the internet, but then, one month later, spend a fortune in advertising to get the same consumer excited about that artist’s upcoming album.

Of course, there are different kinds of leaks. No one is excusing the unauthorized release of works in progress– circulating unmixed, early demos of a song leaked from the recording studio. Artists have the right and even the responsibility to control how and when their work is ready to be presented. But the furor that exists at record labels over “leaks” of finished singles that find their way onto the radio or the internet a couple of weeks prior to the official “street date” is something else entirely. From what I’ve seen, over-exposure is not a problem that most labels need to worry about. With 95% of major label releases, the core problem is that no one cares about them in the slightest. Labels should probably be glad anyone is interested enough to seek out a leak of the new single, or play the record on their station. Which leads to a second question…

2. Why are record labels continuing to make albums at all?

Most of the issues with “leaks” exist because labels continue to insist on controlling the flow and packaging of product, adhering to the age-old formula of a first single release six weeks in front of an album, followed by an album release and second single, followed (usually) by a swift descent into oblivion. In an age of digital distribution, there is no need to package music in an album format. One could put out an endless stream of singles, or a grouping of four or five songs every six months and eliminate the 6 month to a year disappearing act that has always been such a liability for artists between records. Why should there be one piece of product and a corresponding publicity campaign? Why not a steady flow of product and an ongoing publicity effort that never wanes. Which leads to another pet peeve…

3. Why do record labels not make all releases available worldwide simultaneously through iTunes and other digital distributors?

As perhaps their greatest fan this side of the Atlantic Ocean, several months ago I tried to download the new album from the Pet Shop Boys, a UK-based act. Not possible, I’m afraid. iTunes could only make the album available in Europe, as the record had not been released yet in the US (it has now). Uh… isn’t this the “world-wide web”? The same thing happened almost a year ago with the album from The Script, a massive hit in the UK just now receiving a release in the US.

Why the restrictions? Why the delay in release dates? Why would a label not wish to sell product to any consumer in the world that wanted to purchase it at any time the consumer wanted to purchase it? Isn’t that the goal? Given the almost astounding inability of US labels to break even superstar-level international acts in this country (call it the Robbie Williams principle), wouldn’t it be easier to stop with the half-efforts and unmotivated marketing campaigns promoting a year-old album in a new territory, and simply make the record available to fans everywhere, all at once?

Of course, the problem with a screwed-up neighbor is that his or her problems quickly become your own. When the guy next door doesn’t cut his lawn for a year, it only detracts from your own property value. When you decide to have band practice at 10pm in your basement, the doctor who lives on the second floor shows up the next day at the operating table with bloodshot eyes and a case of the shakes. Likewise, the idiocy of the major record labels is hurting publishers as well, who have seen mechanical royalties (the royalties paid for the sale of recorded product) plummet by as much as thirty percent this year. Most publishers are hoping that record execs will wise up before it’s too late– according to the NY Times, it may already have gone past that point.

Other publishers are taking an active role in trying to step into the void, by creating master recordings and distributing them on their own. It’s worth remembering that in the beginning of the music industry, back in the late 1800’s, the “product” was sheet music, and music publishers controlled both the production and distribution. Of course, publishers made their own share of mistakes back then, including not understanding the impact of recording technology. No one is short on embarrassing history. But at the moment, the entire music community is being dragged down by one particular sector of the industry that just can’t seem to operate with even a minimal amount of flexibility and common sense. It may be time for publishers not only to note and learn from the mistakes of the guys next door, but to actually expand the scope of the music publishing business and take advantage of opportunities in the other guy’s back yard. It’s time to take back the neighborhood.