Living On The Edge

Oct 09 2009

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…

So I’m back from Los Angeles, where I spent last week at the ASCAP Pop Awards (big shout out to my friends Mikkel and Tor from Stargate, who were named ASCAP’s Songwriters of the Year) and at the ASCAP “I Create Music” EXPO. If you follow this blog, then you know from last week’s posting that the EXPO is the songwriting event of the year, drawing thousands of songwriters, A&R people, producers and artists to three-day convention that is rich in information, songwriting star-power, and networking opportunities. Despite the economic woes, this year’s EXPO seemed bigger and better than ever– a great opportunity to see a lot of friends, sign some copies of my new book “The Billboard Guide To Writing and Producing Songs That Sell”, and pick up some new insights and information from the panel discussions I attended.

I also participated in a panel entitled “Publishing Songs In An International Market”, along with publishers Ben Groff, from Kobalt Music, Ten Ten Music chief Barry Coburn, and star songwriter (and an old buddy of mine) Jeff Franzel. It was a good group of industry people, well-moderated by ASCAP’s Sean Devine, and I think most who were there found it informative and maybe a little eye-opening. So for those of you who couldn’t make it to LA, I thought I’d offer a quick summary of a few key points. It’s not quite the same as being there– but then again, you don’t have to fight the LA traffic to read it. Here are four themes that emerged in our discussion about spreading your business beyond your home territory:

1. To be in the songwriting or publishing business in 2009, you MUST be part of the international industry.

If you want to put it bluntly, there’s just not enough money left in any one territory, even one as big as the United States. If the fish are getting smaller, then you have to catch more of them, and the only way to do that is to cast a big, big net. We live in a global universe, and America’s Billboard Hot 100 reflects that, with a presence from Norwegian writers like Stargate, Swedes like Max Martin, British bands like Coldplay and Snow Patrol, French DJ’s like David Guetta and Latin artists like
Daddy Yankee

or Shakira. In the same way, European, Asian, and Latin charts feature songs by US artists, writers and producers, often in collaboration with writers from those foreign territories. Panelist Jeff Franzel had recently written a song with an Italian composer, to a lyric by none other than Pope John Paul II, which was sung by Placido Domingo and Josh Groban and released in Italy, and now all over the world. How’s that for a cultural mix?

If you’re a classical cross-over writer, you can’t ignore international stars like Bocelli or Charlotte Church. If you’re an urban writer, you bring a unique skill that writers outside of America struggle to replicate– you could do a huge business in Denmark, Stockholm and Tokyo. Country writers, with their finely crafted lyrics, often find a welcome home in England, working with acts like Westlife and Gareth Gates. American metal bands may find more favor in Europe than in the US, just as some American DJ’s are better known in Asia than in the US.

Most of the challenge of music publishing is finding where your catalog fits in the marketplace– and it may not be in the country in which you happen to live. Don’t limit yourself. Be aggressive in exploring all options, around the world.

2. Do Your Homework.

You’ve probably heard this one before from me. But this point came up again and again from every person on the panel. There’s no easy answer to the challenge of international music publishing. You’ll need to analyze and identify the most active international markets for your style of music, and the ones that are big enough, and organized enough to actually generate income. For instance, if your biggest market would be China, you’ve got a problem– no one has yet managed to collect money out of that territory. You need to look at the international charts in Billboard, check out some of the radio playlists or broadcasts from various countries (available online), and start to learn what sounds and styles work in each market.

Once you’ve picked your spots, then you’ll need to research possible partners to help you break that market. If you’ve already done a worldwide publishing deal with a major company, then it’s probably a matter of trying to contact the company’s local office in that particular territory. If you publish your own work, then you’ll need to reach out directly to A&R people in the foreign territory or find a sub-publisher in the region who is interested in representing you. You might want to attend an international conference like MIDEM to make some of those initial contacts, or check out MySpace.

3. You better be mobile.

Having identified a particular international territory where you think your music can work; you can pitch songs yourself, reach out to sub-publishers, or try to establish contacts with the creative community in that country. But if you really want to break in, the best strategy is to get on a plane and go there. There is simply no substitute for a first-hand understanding of a particular market, a familiarity with the production sounds and an empathy with the cultural sensibility of the audience. First, try to lay the groundwork by making a few contacts in the A&R or songwriting community via the telephone or internet. Then, think about scheduling a writing trip to actually spend some time collaborating with local writers and soaking up knowledge of the market.

Without question, the most successful example of conquering a foreign market in which I’ve ever been involved was Stargate’s spread into America, about four years ago. Already well-established hit makers in Europe and the UK, Stargate began their attempt to move into the US market with a trip to NYC, largely organized by Sony ATV Music Publishing. During that first trip, Stargate managed to work their way onto the radar screen of virtually every NY A&R exec– more importantly, they had a chance meeting with Ne-Yo, which resulted in “So Sick”, which would become their first major US hit. What made the trip work was (a) a small, but committed team on the ground in the new territory, combining the efforts of Sony ATV and Stargate’s amazing management team of Tim Blacksmith and Danny Poku, (b) the dedication of Stargate themselves to spending significant time in the territory, staying a month at a time on a regular basis (c) a studio “homebase” that was already a center of activity for songwriters, artists and producers, in this case a studio at the Sony Studios complex (d) a willingness to work with a wide variety of collaborators and to develop and adapt their “sound” to the local market.

Of course, the benefits to Stargate and Sony ATV of crossing Stargate into America are obvious. But there are similar stories every day, albeit on a smaller scale. US writer Jodi Marr bolstered her songwriting catalog by doing Spanish translations in the Latin market, and then hit it big by breaking her artist, Mika, in Europe. UK writer Steve Robson has become a Nashville songwriting star through his work with Rascal Flatts. Italian composer Leo Z has had repeated success with US artist Josh Groban. US urban writer Teron Beal has just launched his own artist career— in Scandinavia!

Somewhere there’s a place for your music– you just have to find it. A willingness to think beyond your own borders is essential to a successful songwriting and publishing career. It’s time to get out and see the world!

So I’m back from Los Angeles, where I spent last week at the ASCAP Pop Awards (big shout out to my friends Mikkel and Tor from Stargate, who were named ASCAP’s Songwriters of the Year) and at the ASCAP “I Create Music” EXPO. If you follow this blog, then you know from last week’s posting that the EXPO is the songwriting event of the year, drawing thousands of songwriters, A&R people, producers and artists to three-day convention that is rich in information, songwriting star-power, and networking opportunities. Despite the economic woes, this year’s EXPO seemed bigger and better than ever– a great opportunity to see a lot of friends, sign some copies of my new book “The Billboard Guide To Writing and Producing Songs That Sell”, and pick up some new insights and information from the panel discussions I attended.

I also participated in a panel entitled “Publishing Songs In An International Market”, along with publishers Ben Groff, from Kobalt Music, Ten Ten Music chief Barry Coburn, and star songwriter (and an old buddy of mine) Jeff Franzel. It was a good group of industry people, well-moderated by ASCAP’s Sean Devine, and I think most who were there found it informative and maybe a little eye-opening. So for those of you who couldn’t make it to LA, I thought I’d offer a quick summary of a few key points. It’s not quite the same as being there– but then again, you don’t have to fight the LA traffic to read it. Here are four themes that emerged in our discussion about spreading your business beyond your home territory:

1. To be in the songwriting or publishing business in 2009, you MUST be part of the international industry.

If you want to put it bluntly, there’s just not enough money left in any one territory, even one as big as the United States. If the fish are getting smaller, then you have to catch more of them, and the only way to do that is to cast a big, big net. We live in a global universe, and America’s Billboard Hot 100 reflects that, with a presence from Norwegian writers like Stargate, Swedes like Max Martin, British bands like Coldplay and Snow Patrol, French DJ’s like David Guetta and Latin artists like
Daddy Yankee

or Shakira. In the same way, European, Asian, and Latin charts feature songs by US artists, writers and producers, often in collaboration with writers from those foreign territories. Panelist Jeff Franzel had recently written a song with an Italian composer, to a lyric by none other than Pope John Paul II, which was sung by Placido Domingo and Josh Groban and released in Italy, and now all over the world. How’s that for a cultural mix?

If you’re a classical cross-over writer, you can’t ignore international stars like Bocelli or Charlotte Church. If you’re an urban writer, you bring a unique skill that writers outside of America struggle to replicate– you could do a huge business in Denmark, Stockholm and Tokyo. Country writers, with their finely crafted lyrics, often find a welcome home in England, working with acts like Westlife and Gareth Gates. American metal bands may find more favor in Europe than in the US, just as some American DJ’s are better known in Asia than in the US.

Most of the challenge of music publishing is finding where your catalog fits in the marketplace– and it may not be in the country in which you happen to live. Don’t limit yourself. Be aggressive in exploring all options, around the world.

2. Do Your Homework.

You’ve probably heard this one before from me. But this point came up again and again from every person on the panel. There’s no easy answer to the challenge of international music publishing. You’ll need to analyze and identify the most active international markets for your style of music, and the ones that are big enough, and organized enough to actually generate income. For instance, if your biggest market would be China, you’ve got a problem– no one has yet managed to collect money out of that territory. You need to look at the international charts in Billboard, check out some of the radio playlists or broadcasts from various countries (available online), and start to learn what sounds and styles work in each market.

Once you’ve picked your spots, then you’ll need to research possible partners to help you break that market. If you’ve already done a worldwide publishing deal with a major company, then it’s probably a matter of trying to contact the company’s local office in that particular territory. If you publish your own work, then you’ll need to reach out directly to A&R people in the foreign territory or find a sub-publisher in the region who is interested in representing you. You might want to attend an international conference like MIDEM to make some of those initial contacts, or check out MySpace.

3. You better be mobile.

Having identified a particular international territory where you think your music can work; you can pitch songs yourself, reach out to sub-publishers, or try to establish contacts with the creative community in that country. But if you really want to break in, the best strategy is to get on a plane and go there. There is simply no substitute for a first-hand understanding of a particular market, a familiarity with the production sounds and an empathy with the cultural sensibility of the audience. First, try to lay the groundwork by making a few contacts in the A&R or songwriting community via the telephone or internet. Then, think about scheduling a writing trip to actually spend some time collaborating with local writers and soaking up knowledge of the market.

Without question, the most successful example of conquering a foreign market in which I’ve ever been involved was Stargate’s spread into America, about four years ago. Already well-established hit makers in Europe and the UK, Stargate began their attempt to move into the US market with a trip to NYC, largely organized by Sony ATV Music Publishing. During that first trip, Stargate managed to work their way onto the radar screen of virtually every NY A&R exec– more importantly, they had a chance meeting with Ne-Yo, which resulted in “So Sick”, which would become their first major US hit. What made the trip work was (a) a small, but committed team on the ground in the new territory, combining the efforts of Sony ATV and Stargate’s amazing management team of Tim Blacksmith and Danny Poku, (b) the dedication of Stargate themselves to spending significant time in the territory, staying a month at a time on a regular basis (c) a studio “homebase” that was already a center of activity for songwriters, artists and producers, in this case a studio at the Sony Studios complex (d) a willingness to work with a wide variety of collaborators and to develop and adapt their “sound” to the local market.

Of course, the benefits to Stargate and Sony ATV of crossing Stargate into America are obvious. But there are similar stories every day, albeit on a smaller scale. US writer Jodi Marr bolstered her songwriting catalog by doing Spanish translations in the Latin market, and then hit it big by breaking her artist, Mika, in Europe. UK writer Steve Robson has become a Nashville songwriting star through his work with Rascal Flatts. Italian composer Leo Z has had repeated success with US artist Josh Groban. US urban writer Teron Beal has just launched his own artist career— in Scandinavia!

Somewhere there’s a place for your music– you just have to find it. A willingness to think beyond your own borders is essential to a successful songwriting and publishing career. It’s time to get out and see the world!

Hands Off

Mar 25 2009

In case, you haven’t heard, the grand new era of Guy Hands at EMI officially ended this week– not simply with the British financier bowing out of EMI, which he’d already done some time ago, but by Hands actually resigning the CEO position at Terra Firma Capital Partners, the firm he created. It doesn’t take a great deal of investigative reporting to get to the real story behind the press release It’s pretty clear that (a) no one gives up control of their own firm happily (b) despite the numerous problems for any financial firm these days, the EMI acquisition was clearly the straw that broke the backers’ back, and knocked Mr. Hands off his feet. And all this after only 2 years…

It’s hard to believe that it was only two years ago that Hands engineered the $2.5 billion dollar purchase of EMI, promising a new era of re-invention, cost-cutting, prudent, financially-savvy management, and a mission to bring a more mature, sensible approach to this business we call show. Of course, paying 2.5 billion for something worth probably half that amount was not a great start. Hands later acknowledged that Terra Firma was shocked upon acquiring EMI to learn how little of the company’s income came from current artists, as opposed to the old catalog. It seems that a financial capital firm’s due diligence does not include asking a couple of random music execs at the Soho House about the company’s prospects. After all, virtually any music weasel could have easily explained that aside from Coldplay, Radiohead and
Robbie Williams (he’s quite big in the UK)

, EMI hadn’t been able to buy a hit record since the Beatles. It was not a well-kept secret.

Nevertheless, Hands took over the teetering ship, made a number of oft-quoted and lofty announcements, took a rather quixotic approach to hiring (putting a UK A&R man in charge of the US, and a former Procter and Gamble exec in charge of him) and promptly began to feel the water rising up around his nose. Artists started lambasting him, Radiohead went off to release its album through the Internet for nothing, Robbie Williams bid adieu, and recorded music sales dropped like a brick. Earlier this year, Terra Firma disclosed a $1.78 billion dollar write-down on its investments, thanks largely to Guys’ foray into the world of rock ‘n’ roll. And now, we begin the wind-down, as second-level execs assume their positions, bow their heads, and prepare to submerge. The whole thing lasted just about as long as the equally ill-fated Sony-BMG merger. Come to think of it, that AOL-Time Warner thing didn’t do much better either.

There’s a pattern here. Show business, whether it’s the movie business or the record business, has a long and hallowed history of fleecing the money guys. Inevitably, a wealthy financier blows into town, trailing money, and expounding on his determination to “re-make” the industry, or perhaps more precisely, to hang out with rock stars, their model girlfriends, and aspiring young actresses, while re-making the industry. Of course, this impulse is understandable (not necessarily the hanging out with rockstars and actresses part, although that’s understandable too) since the world of show business is one of the most illogical, inexplicable, nonsensical, and utterly insane business environments in existence. Inevitably, people from the financial world (or even anyone who can do high-school math) take one look at a business like music and conclude that all of the current executives are idiots, and that anyone with actual business acumen could easily better their dismal performance. To be fair, a lot of musicians and songwriters look at most music executives and think pretty much the same thing.

Remember that recent movie Grizzly Man, about the guy who lived with grizzlies in the wilderness? He thought they were his friends. In fact, he was so confident of his kinship with the grizzlies that he started filming his own experiences with them. And then one day, that ate him for lunch. It’s not all that different from a night at Spago in Hollywood.

The problem with real “business” people in the music business is that they’re inevitably sure that the secret to success lies in somehow eliminating risk, cutting costs, improving marketing, reigning in the artists, and making the whole thing more like other more predictable industries. It’s a nice thought. But all of history points to the fact that show business is reliant not on efficiency or prudence or common sense, but rather the completely unpredictable science of finding hits, based on open ears, a little luck, a lot of gut instinct, and plenty of chutzpah.

Most major players in the music industry are very limited in their executive skills. Most have almost no ability to contain costs, plan for the future, or create an efficient operation. However, the ones that survive generally do know how to accomplish one all-important thing: they know how to recognize a hit song or a hit artist. Most MBA-toting, professional CEO’s can’t do it. So far, none of the “too cool for school”, zeitgeist-reading advertising gurus or new media guys have figured out how to do it. Many artists can’t do it, which is why so many artists’ label ventures fail completely. One thing you have to say about the music biz sharks– when they hear a splash, they recognize the sound of opportunity calling. And they know how to take advantage of it.

There is no greater skill than the ability to recognize a hit song. It will cover up a multitude of sins. It will sustain you despite market meltdowns and marketing mishaps. A real, genuine hit song can’t be stopped– even by all the stupidity of the record and radio industry– it has a life of its own. The ability to create, or at least to understand the principles that go into creating a hit song, is what my new book,
The Billboard Guide To Writing And Producing Songs That Sell

is all about. If you understand what makes a hit record, you’re better positioned for success than 90 percent of the people with more money, more business connections, more artistry, or more book knowledge of how to run a company. It may not be fair or just, but it’s just how show biz works.

So now that the latest savior of the music business has tossed in the towel, where do we turn? If not Hands, then who? Certainly, there’s no denying that the music business needs fixing. Here’s my idea:

Rather than turning to an outsider, whose claim to fame is turning around a gas station chain, why not look to the survivors of the industry, those who have been on the inside, and have managed to find success over and over again? On this score, my vote goes to
Barry Weiss

the President and CEO of the Zomba/RCA label group within the Sony Music hierarchy. Barry will probably never be the head of a multi-billion dollar financial capital company. I can’t see him buying gas-station chains or running Procter and Gamble. He’s not even likely to become a high-profile personality revered by the record-buying public, like Clive Davis or Simon Cowell.

But having grown up in the record business, Barry understands what actually matters. He knows the fundamentals of getting records out into the market place. He knows how to make his numbers, both on the cost side, the calendar side, and the sales side. Most of all, he knows that a company survives in this business by making hits, pure and simple. He’s not always eloquent, or politic, and he doesn’t specialize in finesse. Nevertheless, Jive Records continues to turn out hits, year after profitable year. Call me crazy, but that might be a guy we could learn from. I say, with Hands down, this year let’s Weiss-up, and look at the people that have proven they can get it right.