To Do List 2012

Jan 12 2012

There’s never a busier day on the publishing calendar than the day after a holiday, and the first working day after New Years is the mother of them all.  Having had a nice two week break to sit and contemplate the future of music, the inadequacies of their present situation, the wealth of unexploited future classics sitting in their song catalogs, and the disturbing similarity between their circumstances this year and last, songwriters the world over wake up on the first day of the new working year with one single mission forefront in their minds:

CALL PUBLISHER!

I know this because I used to be a songwriter, and I did the same thing.  Every year.

Of course, it’s only natural to want to reassess, re-organize, and restructure in order to get a fresh start on the new year. It’s what we should be doing, whether we’re songwriters or publishers.  But often it’s too easy for songwriters to bring a list of complaints and goals to the conversation, without providing any ideas as to strategy. Likewise, too many publishers are prone to offer up a plan that’s amounts to more of the same—“keep writing, keep pitching and let’s hope we get that big break”. Both approaches leave a very good percentage chance that songwriter and publisher will be having the very same conversation next year.  And no one needs that.

So what does it take to move things ahead in 2012?  Of course, the detailed strategy will vary for every writer and publisher in every genre across every part of the world.  Nevertheless, there are a few resolutions we can almost all agree to make, that will pay off regardless of our professional level or musical market.

In lieu of a champagne toast, I offer you a no-cost kickstarter for the new year:

12 Resolutions for 2012!

1.  Get the paperwork right.

When I moved from being a songwriter to a music publisher, one of the great surprises was to see first-hand how much songwriter and publisher income vanishes every year due to paperwork errors, omissions and general sloppiness.  Settle your split disputes, check your song registrations around the world, read your royalty statements, make sure your PRO (BMI, ASCAP, SESAC, PRS, etc) has your correct address.  There’s no excuse for a paperwork error in publishing. Paperwork is pretty much what publishing is.

2.  Expand your territory.

When investment-backed companies like BMG Rights make billion dollar investments in the music-publishing sector, one of the key motivators is the anticipated expansion of the global music market.  And yet many songwriters and publishers, particularly in genres like country, hip-hop, r&b, and even rock rarely think about the world outside their own borders.  Beef up your sub-pub relationships, check out internet radio to familiarize yourself with markets outside of your own territory, use YouTube and other tools to find talent all over the world. There’s almost always more than one geographical market for any type of music.

3.  Don’t demo.

Songwriters are the only ones left still using the word.  Rough work tapes for reference are fine. But when you record, make masters. That way you can license them to film & television, commercials, video games and other venues.

4.  Live the single life.

Please…. no more unknown artists making their “album”.  At this point, superstars are struggling to sell albums.  We live in a singles market, so make singles—one memorable “hit” song will move your career further than a thousand interesting album tracks.  Unless you’re Radiohead or Adele, put your focus on making singles.

5.  Tighten your belt.

The tragic truth is, there’s a lot of money that’s gone out of music publishing over the past five years, and it’s not coming back. Plummeting mechanical income, some ugly days at the bargaining table for ASCAP and BMI, the complete bungling of the negotiations for the rates on “streaming” services, and wild, cutthroat competition in the sync world all add up to one thing: less. Less money for everyone, so get used to it. We’re all going to have to cut waste, reduce overhead, and eat fewer lunches at Bice.  Let’s start with the cutting waste and reducing overhead part.

6.  Loosen your grip.

Publishers like control—it’s our nature. But with more and more of the entertainment universe being covered by blanket licenses, rather than specific song by song licenses, we’re going to have to be willing to put our music out there, with less and less control over how it will be used. Whether it’s a homemade YouTube video made by a stranger or a mix on turntable.fm, songs are being used all the time—we’re just not being asked for permission. Those uses are what keep songs alive, even if it’s not yet something remotely profitable. But squeeze those songs too tight and you’ll kill ‘em.

7.  Don’t sweat the small stuff.

In a world in which the income for publishers and songwriters has been cut drastically, we cannot continue to waste time on meaningless matters. Does the split dispute get settled at 17.5 percent or 20 percent? Unless the record goes 4x platinum, it just doesn’t matter.  Someone changed a line in the lyrics without permission? Just hope a listener is paying enough attention to notice. What matters is what makes money. All else can be ignored.

8.  Put your head in the clouds.

For better or worse, the industry is embracing new cloud-based streaming services like Spotify, which means that iTunes will soon be going the way of Tower Records.  Given that this technology didn’t exactly sneak up on us, one might have hoped that the same mistakes made with mp3s might have been avoided this time around. Incredibly, the record companies managed to get this one right, while the publisher’s income seems to be lost somewhere in the grey, murky ether.  But publishers are going to have to figure out how to turn this technology into something profitable, or the only clouds we’ll be seeing will be those we pass as we plummet to our demise.  This is the battleground for the next five years.

9.  Don’t lose that syncing feeling.

Welcome to the only game in town. In the past ten years, the focus of publishing has shifted almost entirely, from records and radio, to film, television and advertising.  At this point, the transition is complete, and the sync world is the one that every songwriter and publisher has to be a part of. Depending on the style of music you work with, it might be video games, advertisements, source music libraries, branding campaigns, television spots or web-based advertising programs. But your business has to have some strategy for licensing your music in sync uses.

10.  Get the money in.

Easier said than done. It now seems that every record label uses songs without mechanical licenses in place, theater shows routinely drop songs into a revue without clearing the dramatic rights, advertisers sign sync licenses long after ads are on the air, and everyone pays late, if at all.  It takes a new kind of tenacity to get paid, and only those who are the most persistent, the most unrelenting, and the nastiest will get their money. You can’t just put your registrations in place and wait for the payment to show up.  Those who snooze will be abused.

11.  Move your business beyond music.

Despite a slightly better year in 2011, the writing is on the wall: the music business is in an almost permanent state of contraction.  It simply is no longer the singular cultural defining force that it was 30 years ago.  The good news is, the entertainment business as a whole is growing constantly, from new cable channels to internet tv to virtual worlds to a myriad of different venues for live entertainment.  The best news is, music remains a vital element in almost every entertainment form. Sometimes it’s okay to be the supporting actor. Music publishers who rely solely on the music business can’t survive. Better to be one small part of the larger industry of show business.

12.  Move your music beyond business.

Clearly 2011 was the year of Adele. Coming out of an environment knee-deep in Dr. Luke sound-alike records and generic auto-tuned voices over a Euro dance track, “21” was a breath of fresh air that above all else, sounded honest.  Public taste always swings like a pendulum and one can be sure that whatever is popular in 2011 will change to at least some degree in 2012.  But Adele’s triumph signals a move away from things that sound blatantly contrived. Songwriters are going to have to be more subtle, more daring, and dig a little deeper. Music that sounds more like a marketing strategy than a song may be on its way out.

 

Everything always looks good at the start. I’m sure that for all of us, 2012 will have its high points and low points, and enough inspiration and frustration to keep us all battling for the next 12 months. Still, now is a moment to make some plans beyond just calling your publisher, or assuring your songwriter that this could be his or her big year.  Here’s to making, not letting, things happen in 2012. Happy weaseling in  the new year!

 

 

 

 

Having vowed to keep the blog positive and focused on the new developments that could actually save the industry, I’ve decided to do what any cynical old music business weasel would do:

I’m calling on people younger and smarter than myself. (Doug Morris—wake up from your nap and take note.)

In what may be the best marriage yet of music and social networking, turntable.fm debuted this summer to rave reviews. One of those instant fans was my A&R colleague at Shapiro Bernstein, David Hoffman. Having educated our office on the endless possibilities of this new service, David recently sat down with my Berklee intern, Jorge Oliveres, to share the good news—two young guys looking at one exciting new facet in the future of music:

turntable.fm

Turtntable.fm is a virtual nightclub in which users are the DJs. The website is divided into “rooms” that play different styles of music. Users can chat with each other and bob their avatar’s head by clicking an “Awesome” button if they like the song that is being played or they can click the “Lame” button that, if pressed by enough people, skips it. DJs can choose the music they are going to play from a huge database or they can upload it themselves.

David Hoffman, Director of Creative Services at Shapiro Bernstein & Co., Inc., began using turntable.fm since soon after it was launched and he is extremely excited about its potential. I had a chance to talk to David about all the opportunities a service like turntable presents for both music publishers and songwriters.

David Hoffman

I heard you are very interested in turntable.fm.

I’m interested, almost slightly addicted to it. Probably a month ago now, a good friend of mine who is also in the music industry and one of the most knowledgeable music people I know, emailed me about turntable.fm. He said, “You have to check it out.” He’s also a DJ and I have, from time to time, guest DJed on his show–so we know each other’s music tastes pretty well. When he told me to check out turntable, I went on it immediately and was hooked. The next day I came to the office, stood up in front of everybody and was like, “You have to check out turntable.fm!”

I follow the digital music industry and the future of the music industry through blogs and reading up on the trades, and this, turntable.fm, [represents] the potential that I see for the new cloud services that are coming up. Hopefully, it’s something that will stay around for a while. Even if it doesn’t, it will show the potential of how great music discovery can be with the right website and the right digital tools.

What do you think of the legal implications of turntable.fm? I was reading that right now they claim they are protected under the Digital Millennium Copyright Act.

Like Pandora, and a few other services, they are operating under the DMC Act of 1998 that allows Internet radio to exist as long as it operates within the confines of the law. If you spend a lot of time on turntable.fm, you’ll notice that there are some interesting little rules that they don’t tell you are rules. For instance, if you go into a room, you can’t listen to music just by yourself. As with Pandora, if you want to hear the latest Beyonce single, it’s not necessarily going to play that first; it’s going to give you other music. That basically limits the listener to what is now Spotify. [On Spotify], you call up the song and listen to it, but Spotify is a service you have to pay for. Right now you can get it for free if you have an invite, but eventually you’ll have to pay. There are other rules too: you can’t play an artist more than a certain number of times in an hour.

Last week turntable signed agreements with both ASCAP and BMI. That’s really great news because I think a lot of these services didn’t originally sign with the PROs because they figured they didn’t have to. Turntable.fm signing with them is a big step in the right direction.

I think the only problem they’ll have moving forward, and it’s a big one, is the fact that you are able to upload your own music onto turntable.fm. That’s where the waters get a little bit muddy. If I create a mashup of a song and I don’t get permission from the publishers to create that mashup, that piece of music is technically one big copyright infringement. I’m able to upload that song and play it for people, and I believe once you upload a song to turntable.fm, it stays there. And those are the most popular rooms–the ones that play these mashups and remixes.

It’s going to come to a point where they’re going to have to do some licensing like Apple has done with the cloud services and Spotify has done. I hope they can really get it together. I also hope that the music industry realizes the strength of turntable.fm. I think they do.

What do you think is its potential? How could publishers take advantage of this?

Publishers can take advantage of it in a lot of different ways. Number one: for music discovery. It used to be, back in the day, music lovers would go to record stores. You’d go to a really good one (for me it was always some of the Ma and Pa cool shops or going to the Tower Records on West 4th Street). You’d go in and just thumb through the records. If I was into jazz that day I’d go to the Miles Davis section and say “Oh, wow, this is a CD I hadn’t seen before,” an interesting import CD or something, and I’d buy it. For music discovery [today], aside from word of mouth and what you read on blogs, the organic element of actually discovering something for yourself is kind of lost.

Turntable is the perfect place [to recover this] because you’re combining word of mouth (you’re learning from someone that you’re virtually meeting or someone that you know because they’re on turntable) and you’re listening to it. You’re talking about the music, you can link from it, and that, from an A&R perspective, is the closest thing to that original sense of discovery.

As publishing companies seek out talent, they can go into the cool room on turntable.fm, figure out who the DJs are going to be, and actually listen to it, learn about it and be on stuff before anybody else. I can’t tell you how many bands I’ve heard on turntable that I’d never heard before. When you are in a great room and the DJs are really going with the vibe, there could be a song that may not be your favorite song if you just heard it out of context. But when you hear it within the context of songs that are along the same vibe, [it] makes a big difference to someone who has a good ear for music and is out there to scout talent.

Not only publishers, but also record labels, managers, publicists, booking agents; everyone [can take advantage of this] to promote music. There was a band who was inviting people to a turntable.fm room for a listening party to debut their new CD. If one of our artists or songwriters has a new album or a new song, instead of sending out random emails or taking every music supervisor out to lunch and handing them a CD, I can invite them to a turntable.fm room. I’ll know if they’re there or not, see that they’re bopping their head, thinking it’s “Awesome” or not, and I can actually talk to them about it within the chat room. You’re basically creating a virtual listening party. I think that more and more bands are going to take advantage of it, and I think publishers will as well. There’s definitely the potential to have music supervision and A&R rooms.

I was also wondering about the potential it has on the other side, for emerging artists. Do you think it’s a good platform to promote new music?

I think it’s one of the best platforms. Whenever I speak on panels, people ask, “How do I get my music into the hands of the gatekeepers?” I say, “The best way to do it is to give it to someone who knows that person.” The analogy I like to use is [this]:

I’m in my apartment in NY and I hear a random Chinese food menu come underneath my door. It’s from the local Chinese place and I’ve never heard of them before. I take it and throw it out. But if Eric [Beall], my colleague, says to me, “Hey, this great new Chinese place opened down the block from me, you should check it out, ” I’ll probably go there the next day.

I take pride in listening to most stuff that comes to our office. But if I’m learning of music because I’m getting a random email, I’m thinking “OK– most of the stuff that comes randomly is not very good.” But if I’m learning of the music at turntable.fm from someone I know, or even someone I might only know virtually, it’s a different situation. If they’ve played a few good songs that I liked, and they say “Check this out,” I’m going to listen with open ears.

It seems like a really cool blend between social networking and music. I’m surprised something like this didn’t come out before.

I agree with you. It’s such a simple idea. Yet the potential is massive. Think about colleges. Since it came out in the summer, it hasn’t made its impact on college yet. Once the fall semester starts, you’re not only going to be at a party and listening to awesome music— you’re going to be playing the music. You’ll bring your laptop, we’ll get up on turntable.fm and start our own room. And while we’re partying, we’re also going to be DJing. If I were in college, I’d probably do that about 14 hours a day.

Right now [turntable has] limited capacity to 200 people [per room]. I think that will eventually expand. It’s going to become more like satellite radio. It will be an Internet radio station playing in the background, somewhat like Pandora because you’re choosing your overall theme, but more like satellite radio or traditional radio with great DJs. In fact, you might personally know the DJs.

What about when turntable has an application? What about when automobiles are wired with wifi? Once it’s on your phone and you’re able to DJ on your commute to work, you’re going to say, “This is really tremendous.” There are so many ideas I’ve been reading about, like an external “Awesome/Lame” button. You can be hosting a cocktail hour and secretly, in your pocket, hitting ”Awesome”.

Also, the link with Spotify is fantastic– turntable and Spotify go together like peanut butter and jelly. You’re discovering [music] and immediately clicking the Spotify link so that you can learn more about the band later. When you’re DJing, you can call up and research songs on Spotify—it’s a better interface than turntable for that.

Turntable.fm is the first thing in a really long time that’s made me very excited about music discovery. Instead of being an old curmudgeon saying, “Back in the day it was so much better,” this is the sort of thing that [has me] thinking, “Wow, this is amazing!”

David Hoffman is the Director of Creative Services at Shapiro, Bernstein & Co., Inc., one of America’s oldest independent publishing companies. At Shapiro Bernstein he is an A&R rep, TV/Film/Advertising placement person and song plugger amongst other things. The catalog ranges from classics including “In The Mood,” “On The Sunny Side of The Street” and “Ring Of Fire” to current hits by David Guetta, and current indie-darlings Savoir Adore. David is also a music supervisor who has worked on indie films like “Still Bill” a documentary on Bill Withers, and advertisements for Apple and Puma. Prior to becoming a full time publisher, David was a professional drummer with the popular instrumental jazz/funk/jamband ulu, touring upwards of 220 nights a year. Before hitting the road, David worked at BMI and Giant Step Inc.

David has been a featured speaker/panelist for CMJ, ASCAP Expo & ASCAP Night School, AIMP and others and DJ’s regularly on EastVillageRadio.Com.

Follow me on twitter @EricBeall

Hello Mr. Brightside

Jul 25 2011

I’ve been waiting about 5 years to write this particular blog. I can’t say that it’s done with total confidence. Like a person in the desert finding a fresh pool of water just ahead, I’m a little afraid that what I’m seeing is just one more mirage. It’s not written with much joy either. There are far too many talented music people, on both the creative and business sides of the industry, who are still out of work to unabashedly celebrate the moment. But with all the caveats and caution, I still think it’s time to go on record:

There’s light at the end of this deep, dark tunnel that we’ve been in.

After almost a decade of what has seemed like irreversible decline in the music industry, with each year bringing declining sales, more consolidation, less creative growth, and a growing irrelevance in pop culture, we might finally be turning things around. Over the past several months, there’s been not just random bits of good news, but an emerging pattern that would seem to indicate, dare I say it, positive momentum for a recovery that can reinvigorate the record labels, publishers, artists, songwriters, producers, live industry and all the thousands of other music-related businesses that have been suffering through this long slog through the wilderness.
Here’s a few of the things that have weasels smiling these days:

• The emergence of new technologies that are legal, licensable, and viable – and fun to use!

The appearance of Spotify, Turntable.fm, and iCloud, along with the continued growth of services like Pandora are showing that it is possible to make music available in a way that’s attractive and profitable. Of course, there will continue to be winners and losers in what seems to be an ongoing story of overnight sensations and quick, brutal endings (say goodnight, MySpace). But the convergence of streaming services and social networks, and the cooperation between labels, publishers and technology services in making the music available legally, is a model for a more promising future.

• A growing government concern about piracy and illegal file sharing.

I’ve been predicting it for years: once the technology of file-sharing reached the point of endangering the movie and television industry, we’d start to see a change in the US government’s willingness to step in and get involved. The truth is, politicians couldn’t care less about the music industry. It’s too small, too controversial, too disorganized, and too youth-oriented to matter, and as a result the industry has lost virtually every battle it’s entered, whether it with the broadcasters, restaurant and bar owners, or internet service providers (ISPs).

The movie business is a whole different animal. It is the big dog of American entertainment, and the companies that are built on movies, like Disney, Viacom, and Universal Pictures are among the crown jewels of the American corporate world. Now that they’re being threatened by illegal file-sharing around the world, the US government is sending signals to internet service providers both here and abroad that they will be held responsible for copyright violations occurring on their networks. In return, ISPs are showing a willingness to consider some type of punitive action toward consistent copyright violators, as well as a surcharge that would compensate rights holders. Thanks to Hollywood, what was deemed utterly impossible when the music industry asked for it five years ago is starting to look like a reasonable compromise.

• The revitalization of the CD catalog business.

Again, I’ve been at this one for awhile now—in “Living In the Past Beats Dying In the Present” I used the example of the German music market to argue that the short-term future of music was “selling old product to old people”. With its new $5 CD program, Walmart is taking that formula to the bank, selling CDs of classic music to older, mainstream consumers. Not surprisingly, it’s revitalized the catalog business, which especially for major record labels, is absolutely essential for a return to profitability.

• The opening of China.

This week brought more good tidings from abroad, where it appears that a consortium of the major US labels, called One-Stop China, and Baidu, China’s primary online Google-equivalent, have reached a deal that will allow Baidu to provide users with free ad-supported music streams. In turn, Baidu will pay the labels and creators of the music, as well as crack down on illegal sites that infringe copyrights. While it’s unlikely to generate any significant income for 5-8 years, this first crack in the Chinese fortune cookie could be a massive long-term step toward breaking into a potentially massive market of consumers. The prospect of monetizing markets like China, India, Eastern Europe, and Southeast Asia has been one of the primary factors fueling the hedge fund interest in purchasing publishers and music catalogs. It now seems that may have been right.

• The success of Adele.

Doesn’t seem right to discuss a resurgence of the music industry without even mentioning music itself. Given the divergence in tastes among any random group of listeners, as well as the constant creative rise and fall in each different musical genre, it’s possible at any time to make an argument for the proliferation or the imminent demise of “good music”, whatever that means. Still, one has to take note of the fact that just this year, Adele has sold more than 5 million copies of her album and set the record for the longest stretch at #1 of any female artist. Those kinds of numbers weren’t supposed to happen anymore in our post-album, singles-dominated, market-fractured, ADD-addled music world.

Adele

But the fact that it was done by a real singer who is neither a fashion model, television star or an ongoing gossip-column soap opera; who is not a winner of any TV talent contest; who doesn’t rent her music to advertising campaigns; who doesn’t Twitter; whose music is not aimed at Top 40 radio trends—these are signs that can’t be ignored. Add in other new artists like Mumford & Sons and Florence & The Machine, and one begins to sense a shift. This is not to demean Katy Perry, Kei$ha, or Rihanna, all of whom make great pop music for a demographic that loves and lives that kind of music. But it means that there are alternatives, and that there is more than one audience and one road to building a very substantial, and lucrative business around your music.

Of course, it would be foolish to ignore the equal number of warning signs flashing in the distance, or any of the huge potential pitfalls that could easily derail the resurgence of the music business:

• The major labels continued reliance on over-age, tired, and narrow-minded chief executives

• The brewing meltdown of many of the world’s performing rights and mechanical collection organizations

• Our continued inability to update and streamline copyright law to keep pace with technology and globalization

• The inescapable reality that music is no longer a primary pillar of youth culture, but rather shares that role with social networking, gaming, fashion, and a million other diversions

Yet even some of the worst news in the business, like the mass layoffs at Universal Records, or the continued consolidation of the major labels, has a positive aspect. At least it shows people making changes that in many cases were either inescapable or long overdue. Restructuring an industry is never pretty, and much that’s good is inevitably lost in the slash and burn of clearing the way toward the future. Nevertheless, it has to be done.

There is a time for criticism, and this blog has often pointed out the looming problems, mis-direction, or just plain dumb decisions throughout the music industry. But there is also a time for letting positive energy feed upon positive energy, re-establishing a sense of optimism and untapped potential. This business was never easy, nor was it meant to be. As I said in last week’s blog: the only thing that can truly kill you in show business is cynicism. Once that deadly element sets in, it’s over.

As we head into the 4th Quarter of 2011, this blog is going to try to focus on the good news, and what we can do to take advantage of the positive developments in the music business. With the help of my standout Berklee intern, Jorge Oliveres, I’m also looking forward to highlighting some of the people who are making new things happen, or who have a particular expertise that can help music publishers and songwriters exploit the new opportunities we’re seeing.

I think we’ve finally turned a corner in the music business. Now, it’s time to step on the gas and head toward that light at the end of the tunnel.

Follow me on twitter @EricBeall

Here’s a shocker: Billboard reports that Germany has now overtaken the UK as the #1 European market for music.

This is while obscure, little-known UK acts like Adele, Tinie Tempah, and Taio Cruz are sitting at the top of the charts around the world– and the biggest selling track in Germany last year was by Unheilig. How is this happening? How can the country that gave us the Beatles and the Stones fall behind the country that gave us Falco and Milli Vanilli? And what does it mean to the future of civilization?

Adele

As in most things statistical, there is more than one way to read these numbers. The IFPI (the international music trade group) reports that the trade revenue generated by sales of recorded music in the UK dropped 11% in the past year to $1.38 billion USD, while Germany generated $1.41 billion USD, which clearly gives Germany the edge. However, the UK remains a considerably bigger consumer of music per capita than Germany, with Brits buying 1.93 albums per capita compared to 1.32 for the Germans. But the more interesting stat was the one that explained the difference in revenues between the two countries:

The primary reason for the relatively stronger performance from Germany in 2010 was the continued dominance of the CD in that market, where physical sales still account for 81% of recorded music purchases. This contrasts with the UK where the move to digital music, whether it’s iTunes purchases or services like Spotify, is much further along. In the UK, physical sales are only 67% of total sales.

Bottom line: you generate a lot more revenue selling CDs than you do selling downloads.

Putting a positive spin on their fall from glory, UK experts (and quite a few US experts as well) explain that because Britain is further along in the transition to a digital market, their country is actually better positioned for the future, even if they are lagging a bit in the transition period. To put an Easter spin on it, you gotta die before you can be resurrected– therefore, the sooner you die, the better off you are. Of course, if digital sales stall (which they have started to do) and the coming Cloud actually brings less income than the physical business that’s been cleared away, well then… there is no resurrection. You’re just dead.

This may be one of the lessons in the turnabout between the Brits and the Germans that’s worth noting:

Anytime you encourage the new kid, you’re discouraging the old one. Of course, one wants to support the future, and it’s only natural that the music industry should get behind successful digital distribution channels like iTunes. But we have to remember that by doing so, we only hastened the demise of the old, brick and mortar retailer on the corner. It might have been worth asking if iTunes really had the potential to make us more than our old friend did. Likewise, an industry embrace of streaming services like Spotify will only fast-forward to the end of download sales. Are we sure that the income from streaming services, that vague mix of advertising revenue (which has been soooo profitable with YouTube) and subscriptions (which no one seems to buy) will beat 99 cents a download?

While the UK industry has sacrificed retailers like Zavvi, Borders, and though they’re still breathing, HMV, all in the name of progress, the German industry has continued to support it’s retailers with new product and packages. Explains Frank Briegmann, president of Universal Music Germany, “Over the past few years, we have repeatedly tried to generate impetus for the physical product without merely lowering prices”.

In return, the retailers have supported the local acts, and in particular, veteran artists, making local repertoire a dominant factor on both the German radio and sales charts. Pretty remarkable– given that it would be hard to name one genuine worldwide superstar in the German market. While the UK has compiled its numbers based on Adele, Tinie Tempah, JLS, and Taio Cruz, Germany topped them with the likes of Rammstein, Lena, Ich + Ich, and the Scorpions. What can it all mean?

Scorpions

It comes down to this one terribly unsexy truth:

The weasels that win over the next three to five years will be the ones that play to the past, not the future.

The writing is on the wall everywhere– even if no one particularly wants to read it. The top touring acts? Bon Jovi and U2. The top-selling albums of last year? Lady Antebellum, Susan Boyle, Sade, Michael Buble… all aimed at the adult demographic. Even Eminem and Alicia Keys are not exactly new faces. The reason people are bidding to buy Warner Bros. is not for their new stars (there aren’t many) but for their catalog. The same is true of Warner Chappell and EMI Publishing. Their value is in the classic songs, not in their current market share.

Roger Waters

Across Europe, it’s not only the Germans who are profitably investing in revitalizing or re-packaging their older superstar acts. In Italy for example, the charts continue to be dominated by names like Eros Ramazzotti and Vasco Rossi. Given the predominately aging populations of most of the major European countries, this trend won’t change anytime soon. In America, Rihanna has had an unprecedented string of #1 hits, and still can’t manage to mount a successful tour, while acts like Roger Waters pack arenas, without having had a hit record in more than a decade.

Rihanna

For music publishers, the older catalogs are far more profitable than chasing current hits. It’s the classics that show up on American Idol; the classics that get made into jukebox musicals like “Jersey Boys”, “Mama Mia”, or “Rock of Ages”; the classics that will bring the worldwide money with the advent of mobile music and video. As for me, I’m giving up my spot at Mercury Lounge or Rockwood and checking out whoever’s playing at Foxwoods casino.

If you’re in the record or music publishing business and you’re looking for safe ground, put your money on heritage acts. Old acts singing old songs to old people may not be the future of the music business, but it sure looks like the here and now. The generation that created lasting superstar acts like Bon Jovi and U2 is one that continues to support live music and buy CDs. Until something better comes along, that’s what keeps us all in business.

Like the Germans, you may only be holding off the inevitable Five years from now, all that investment in older acts might well put you out of position to face the future. On the other hand, if there is no future, you will have stayed alive longer than anyone else. Sometimes winning is just not losing. It’s better to be #1 than #2, even if it’s only for today. Just ask the Brits.

Life in the Slow Lane

Aug 12 2010

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.

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.

This week– a dispatch from Amsterdam, where I’m attending the Amsterdam Dance Event (ADE). As a side note– if you’re involved in dance music, I highly recommend this international conference, which is not so much an event as a long series of events– panel discussions, networking, and dozens of parties featuring all of the leading DJs from around the world. It’s very well-run and business-oriented– much more productive than the Miami Winter Music Conference and more manageable than Midem.

As luck would have it, I was on a panel discussion this week, but not one that I expected. Instead of the usual “Issues in Music Publishing”, which is what I am often faced with, this panel was called “The Truth About Flat-Rate Licensing”. Huh? I had no idea what this subject entailed when I took it on. As is probably true of most of the readers of this blog, I’m a “creative” guy. When it comes to understanding how we are receiving royalties from the thousands of different new media outlets, we’d really rather be in the studio, or talking about music and songs. Which is probably a big reason the music industry is in the situation it is today.

Flat-rate licensing, if you didn’t know (I didn’t), is the current buzzword in the industry to describe the myriad of efforts to offer the consumer access to music in a way that is easier, more comprehensive, and less expensive — so much so that it often feels “free” to the customer. Rather than the traditional iTunes model, where songs are purchased one by one, the flat rate aims to give the customer access to a whole catalogue of music, either to own, or to “rent”.

Commerce on the internet being what it is, there are of course hundreds of variations on this theme. Subscription models like Rhapsody and Napster charge a monthly fee in exchange for “all you can eat” access to music.
“Freemium” models like Pandora and the much-talked about Spotify offer free music streaming, and a premium subscription program that grants better sound quality and an ad-free environment for a small monthly charge.

Of course, “free” or almost “free” music is an attractive sales pitch (despite the fact that most music fans have been helping themselves to illegal “free” music for the past several years). The challenge is how to pay the creators of the music, the owners, and still have something left to keep the website in business. This has not worked out so well.
Most of the sites offering music at a flat-rate are generating income from a combination of subscription fees and advertising income on the site. Some, like the Sky and Virgin Music sites will be “bundled” with the internet service provider, so that when a customer opts in for the music service, it will appear simply as one more item on the cable bill. Nokia tried a similar “bundling” idea with their “Comes with Music” program, which added the music cost into the price of a phone and the mobile service.

Now some people are even advocating a surcharge, to be added onto the price of computers, mobile phones and other potential music players. The income from this surcharge would then be pooled and distributed back to the creative community, in exchange for genuinely free music for the consumer. The Green Party in Germany, always somewhat dubious about the value of copyright law anyway, is proposing a government-sponsored cultural “tax” that would compensate creators of content, but allow citizens to access and use as much music as they want at no cost. This is the “music as water” idea that I discussed in a previous blog.


It’s all very exciting, and holds great promise, as new untried ideas usually do. But for the creative community, which includes songwriters, publishers, producers, artists, labels, and musicians, the problem is that none of it seems to actually work. Many thought the subscription model would be the answer– today; AOL, Yahoo, and MTV have already given up on their attempts. Ad-supported models like Spiral Frog and Ruckus have also disappeared, YouTube is losing money, and Imeem is barely holding on. Pandora has yet to make significant profits, but appears to be solid, and Spotify seems to be wildly popular in Europe. However, even Spotify is making less than ten percent of its income from subscriptions– with most consumers opting for the free service instead.
It’s hard to run a business based on giving things away. The problem with all of the flat rate sites is that the combination of subscriptions (which no one seems to want) and advertising (these sites, and the internet in general, are a difficult sell to advertisers) don’t add up to anywhere near what is needed to pay songwriters, publishers, and labels the appropriate royalty for each song streamed.

Not surprisingly, the flat rate businesses have gone to the music industry to ask for special, low rates from the labels, and societies like ASCAP, BMI and SESAC, in order to get these businesses off the ground. By making it less expensive to provide access to music, the argument goes, we’ll all sell much more of it in the end. And if we don’t grant the access, the public will just steal it, like they are now.

It’s a tough call for the music industry, especially after having been so badly burned already by companies like YouTube, who just took the product, then came back to negotiate later. It’s also difficult because at the moment, very few of these ventures are generating any meaningful income for labels and publishers– while the time demands of licensing and negotiating with all of them is quickly becoming overwhelming.

Needless to say, the issue wasn’t settled in one forty minute panel in Amsterdam last week. But here are four quick points we need to keep in mind on this issue:

1. The best approach is slow and cautious. Right now, we are in the jungle. In the jungle, you don’t rush blindly ahead. You dip a toe in the sand, and see if you sink. We have no hope of predicting which of these services might catch on. We need to move slowly, with very short-term agreements and see what works and what fails. And we need to be sure not to undermine our other business partners while we do that. Which leads to…

2. We should support our allies and punish our enemies. Rob McDaniels for InGrooves estimates that it takes 150-200 streams of one song to equal the royalty income on a single download. Right now, our industry still relies on the sale of physical product (believe it or not, it’s still the primary source of revenue) and on digital downloads. Perhaps streaming is the future. Perhaps not. But we would be very unwise to cut ridiculously low-cost rates to a business model that obviously threatens both physical retailers and iTunes. Let’s take care of the people paying our bills. At the same time, we should continue to press ahead with legal efforts against things like Pirate Bay– efforts that are finally starting to show some results.

3. We need to recognize that “bundling” and ad-revenue sharing is a marriage, and it works both ways. If we bundle the cost of music access into the cost of a mobile phone or the sale of a computer, we’re now not only in the music business, we’re in the electronics business. Any economic factors that hurt the sales of phones and computers will now hurt us as well.

4. Most of all, we need transparency in the negotiations and setting of rates, so that everyone in the music community understands what they’re being paid and how it’s being calculated.

In preparing for this panel, I tried desperately to find out what the actual per stream royalty rate is, or what the percentage of ad revenue is for services from YouTube to Spotify.

Nobody knows. It’s certainly not easily accessible on the internet or in industry trades, nor can anyone at the PRO’s manage to explain it. If you’ve checked your royalty statement recently, you won’t find any explanations there, next to the 2 and 3 cent payments from YouTube settlements and the like. As the major labels begin to acquire financial stakes in companies like Spotify and Vevo, it becomes even more important for songwriters and publishers to understand exactly what the terms of the licensing deals are, and how the PROs and others reached that agreement.

If you’re thinking that it sounds like the same old story, with the songwriters and artists once again getting the short end of the deal, I share your pain. Much as we dislike it, we better take some time out of the studio and start learning about this stuff. If I could do it, you can too. “The Truth About Flat-Rate Licensing” is still being determined, and we need to play a part in that.