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The Music Biz

The Music Biz

Sunday, September 25, 2011 • User Submitted

In the old music industry, there were only three media outlets that could cause an artist to "break" nationally: MTV, magazines like Rolling Stone, and commercial radio. Today, of these three outlets, only commercial radio is left, and the major record labels, in collusion with the station owners, control it.

Originally posted @ TUNECORE BLOG

In the old music industry, there were only three media outlets that could cause an artist to "break" nationally: MTV, magazines like Rolling Stone, and commercial radio. Today, of these three outlets, only commercial radio is left, and the major record labels, in collusion with the station owners, control it. Simply stated, if an artist is not signed to a major label the probability of getting airplay on a Top 40 or Hot AC station (or any other format that has an impact) is right up there with Congress getting along. It's just not going to happen.

There are a few important things to take away from this:

First, as of 2011, despite the still powerful (but diminishing) impact of commercial radio, and the stranglehold control on it by the major labels, the majors still have a 98% failure rate on their releases. Therefore, having access to commercial radio, or even getting played on it, does not guarantee success. Now some good news: artists no longer singularly need commercial radio to "break"- there are other way to do it, in particular, social networking via YouTube, Twitter and Facebook. Using these new outlets, many artists - such as Boyce Avenue, The Civil Wars, Lecrae, Jesus Culture, Blood On The Dance Floor, Kelly, Dave Days, Ron Pope, Chase Coy, Colt Ford, Ed Sheeran, Jon Lajoie, Rucka Rucka Ali, and tens of thousands of others - are achieving varying levels of success

Next, the potential money artists/songwriters can make from commercial radio is not limited to artist royalties from CD and other music sales. As a matter of fact, over 98% of artists signed to a major label never see an additional penny of artist royalties beyond their first advance. The additional money they can make from commercial radio play is tied into a copyright the songwriter controls, called "Public Performance."

Under U.S., and most international law, the moment a song leaves your head and becomes tangible (meaning it has been recorded and/or written down) you get six legal copyrights. One of these six copyrights is the exclusive right to "Public Performance." The right of public performance means that no other person or entity can publicly perform your song without a license from you. Radio play is a type of public performance.

All radio stations must get a "public performance" license from the entity that controls this right. The songwriter controls this right unless he or she has done a deal transferring it to another entity called a publisher or a publishing administrator. Almost all songwriters and/or publishers outsource the job of issuing public performance licenses to third party organizations called Performing Rights Organizations. These organizations deal with and license this one right on behalf of their members.

In the United States there are three performing rights organizations: BMI, ASCAP and SESAC. Radio stations get public performance licenses and pay these organizations on behalf of the songwriter and/or publisher. Each time a songwriter's song is played on the radio, the songwriter/publisher is to be paid by the performing rights organization from the money it collected from the radio station.

Until the advent of television, the largest income streams for songwriters/publishers from public performances collected and licensed by the performing rights organizations came from commercial radio play. With the introduction of TV (a song being played in a TV show is a public performance), more public performance revenue was paid and the pot got bigger. However, this just meant more money for the artists/songwriters who had their songs marketed and promoted by major labels.

As you move into the late 70's, cable TV came into existence. At first, the performing rights organizations dismissed cable TV as irrelevant in regards to generating revenue for public performances, over time this changed. With the maturity of cable TV, and the arrival of MTV, the swatch of artists making money from public performances finally began to get a little wider.

As you move through the 90's, the music labels entered their "golden years;" their control over market share and commercial radio was supreme. In addition, CD sales, revenue, and numbers of releases were at a record high and it was still the artists/songwriters, and their songs being marketed by majors, that almost exclusively made significant revenue from public performances.

Which leads me to the next point: what happens when commercial radio as we know it goes away and the last control point for the labels is gone?

The power of commercial radio is already diminishing, listenership for music-programmed stations is down. Stations that used to play music have flipped to talk radio formats (news, sports, commentary) and advertising revenue is not what it used to be. The final nail in the coffin will be when cars come with built in connectivity to the Net. At the moment, there are over 200 million cars in the U.S. with just about none of them wired to connect to Net. But that's changing. And as soon as "connectivity" becomes as common as air conditioning, commercial radio as we know it will be dead. This is not a matter of "if," it's a matter of "when."

The impact can already be seen. Oddly enough, over the past decade, as revenue and market share for the major labels and listenership for commercial radio have gone down, revenue collected for public performances has gone UP over 70%, and it's not chump change.

Currently, the three U.S. performing rights organizations ASCAP, BMI and SESAC collect over 2.3 billion dollars in public performance royalties. The increase in revenue for public performances is coming from more places paying the performing rights organizations for public performances. Connectivity combined with a proliferation of hardware devices like smart phones, iPads, the Roku, Apple TV, computers, and so on have significantly increased the volume of public performances and the entities that need to pay for them. There is just more money in the pot. In addition, the legal definition of public performance has been expanded to include a stream. Every single time a song is streamed - be it in a YouTube video, via Pandora, Slacker, LastFM, Spotify, a website etc., - money is to be paid to the songwriter/publisher for a public performance.

In the old world, songwriters made public performance money when their music was played on the radio. In the new digital world, the songwriter generates revenue each time their song is played on devices via a plethora of interactive and non-interactive music services (think Pandora, LastFM, Slacker, Spotify, Mog and so on).

Unlike commercial radio, the majors do not control the future digital streaming music industry, consumers do. This means that although there will still be some mega superstars earning a disproportionate amount of public performance revenue, for the first time there will also be hundreds of thousands of new artists/songwriters making money of some significance from public performances. Each time anyone listens to a song via a stream, the songwriter of that song is owed money.

The problem then becomes getting these artists/songwriters their money. Unfortunately, the traditional performing rights organizations are not very good at this in the digital world. There is no transparency as to what is being charged and/or collected, and there are huge gaps of time between when they collect their money and when it is paid out. In addition, as they do not have an efficient way to pay out money to songwriters that have earned below a certain threshold, they have earning minimums,

With the shift in public performances moving from terrestrial based radio to the world of digital streaming, there must be a system that gets songwriters more of their money more quickly, with transparency and an "audit" trail to assure accuracy. For example, if an artist's recording streamed ten times, the songwriter should be paid for ten public performances.

This to me is the future of the music industry, and this is why TuneCore is now spearheading this change on behalf of the new emerging music industry. It's crucial for artists to understand that, whether they like it or not/whether they want it or not, they're increasingly in control of their destiny. The motto of the new music industry is transparency. Via unethical practices like Payola (see George's article), and the inability to adopt to technological transformations, the labels and the old school systems are no longer efficient and have lost and/or abdicated much of their power. Those artists (and the members of their team) and new companies who both understand the emerging landscape and embrace its opportunities will fill the power vacuum.

Tuesday, February 8, 2011 • BSR Admin

One of the interesting unintended consequences of the trend away from albums and back towards singles is that there is now less mechanical income being generated for writers.

Originally posted at: TuneCore | Written by: George Howard
 
One of the interesting unintended consequences of the trend away from albums and back towards singles is that there is now less mechanical income being generated for writers. Remember, a label must pay the copyright holder of the song (i.e. the writer and/or publisher) for the right to "mechanically" reproduce the writer's song on the label's release (be it on CD, vinyl, download, etc.).
 
The current rate, as set by statute, is nine point one cents ($.091) for songs under five minutes in length. Labels often insert a clause into recording contracts that reduces this amount when the artist signed to the label is also the writer; this so-called controlled composition clause reduces the mechanical royalty that is paid by the label to the artist by as much as 25%.
 
Whether the writer receives the full-rate or a reduced rate, this mechanical income is very material. Typically, mechanical payments must be paid to the artist from the label from this first record sold, and these payments should not be cross-collateralized against the artist royalty. What this means is that, as is the case for many artists signed to labels, even if an artist's account is un-recouped (meaning they have not made back in sales what the label has paid to sign, record, and (often) promote their record), the label still must pay the writer of the song(s) a mechanical royalty. This mechanical payment is thus often the only money a writer sees from the label.
 
During the album era, if you wrote all of the songs that were released on the album - and for easy math assume the typical album had ten songs on it, and that you were getting a reduced mechanical payment of seven point five cents per song - this meant that for every record sold, you, the songwriter, were owed seventy-five cents (the reduced mechanical of $.075 for each song multiplied by the ten songs on the album). If you were to sell a hundred thousand records, you were owed $75,000. This is not chump change, and there is a compelling argument to be made that the true benefit to signing with a label was that they were the promotional engine that drove mechanical royalties.
 
The advantage of this for the songwriter during the album era was, of course, that there may have only been one or two songs that captured the public's imagination - the hits on radio, for example - but the writer still got paid for all of the songs on the album that she wrote, even if the majority of people bought the album just for those one or two songs.
 
Even during the 7"-single era (i.e. small vinyl), savvy artists and managers would make sure to put a song they had written on the b-side so that when the record was purchased because of the a-side, they made some (or double) the mechanical income. This strategy of putting an original on the b-side of a single with the a-side as a cover is in some respects the reason why The Rolling Stones, for example, began writing their own compositions.
 
Today, we've largely left behind not only the full-length album, but also the 7"-inch single. Customers download specific individual tracks. In so doing, this results in non-single tracks on the album not being downloaded, and thus not generating any mechanical royalties for the writer.
 
Certainly, there are artists who still sell "albums"; i.e. their customers either still buy the full-length CD (or vinyl) and/or download an entire album, but clearly the trend is towards à la carte downloads (or streams) of singles.
 
This impacts, of course, not only those performers who are signed to the label, and also write their own material, but also writers whose work is covered by a performer. Unless this writer's song that is covered is the single, the chances of generating the type of mechanical income that was derived from sales during the album era is pretty much nil.
 
It will be interesting to see how this economic reality impacts the creative output of artists. If there is less economic incentive to write material that is unlikely to be a "single," will artists write less or write differently? It's frightening to think that in today's single driven market (one without even b-sides) that the Stones might have contented themselves with being a cover band - never writing - and releasing records only so they could tour.
 
What are your thoughts? Does the "album" concept still matter, given the lack of economic incentives? Leave your thoughts in the comments.
 
George Howard is the former president of Rykodisc. He currently advises numerous entertainment and non-entertainment firms and individuals. Additionally, he is the Executive Editor of Artists House Music and is a Professor and Executive in Residence in the college of Business Administration at Loyola, New Orleans. He is most easily found on Twitter at: twitter.com/gah650
 
Tuesday, January 11, 2011 • BeatsBySwiss.com

Distributors are responsible for selling, positioning and marketing a record label's or artist's music with any outlet where music fans buy music including traditional retailers, online download services, online subscription based services, ringtone providers and mobile downloads.

 
Distributors are responsible for selling, positioning and marketing a record label's or artist's music with any outlet where music fans buy music including traditional retailers, online download services, online subscription based services, ringtone providers and mobile downloads. Most major music outlets, traditional and online, won't deal directly with record labels or artists and order exclusively through distributors. Distributors range in size from those owned by the big 4 record labels to independents to those that only distribute to online outlets. They typically charge the labels they distribute a percentage of price the retailers pay, 20% for example.
 
Inventory and billing management are keys to a distributor's success since retailers can return unsold inventory they purchase at any time. It is not uncommon for a retailer to return an order to the distributor prior to their invoice coming due then turnaround and place the same order they just returned. Since the distributor must accept any and all returns from retailers they typically require exclusive distribution agreements with the record labels they distribute. Retailers also typically want to deal with only one distributor on a CD release so they know who to order from and where send returns to as needed. Distributors must manage their inventory levels to make sure they can fulfill orders from retailers but not have too much inventory in stock that's not selling. They must coordinate shipments to and from both record labels and retailers. Many times distributors will also coordinate the manufacturing of the CD's for their labels since they can often times get better pricing due to the volume of CD's they can produce.

Retail Sales & Marketing

Distributors have sales people who call buyers at the retailers and get them to order inventory of their labels CD's and stock them in their stores. Retailers will often tie the amount of inventory they order to the amount of money the distributor is willing to pay in marketing programs and advertising with them. These marketing programs include special product placement within the retailer's stores, listening posts, giveaways and promotions, and often include print and online advertising. Distributors have a staff to coordinate the retail marketing programs with their labels, agree to marketing budgets, get ad artwork and send retailers the artist one sheet summaries of the release and promotional CD's to the buyers at the retailers. The costs of these marketing programs are charged back to the record labels and usually become a recoupable expense against the artist's royalties from sales .

Digital Distribution

Distributors must keep up with the constantly growing options for digital music and make sure their content is appropriately licensed and distributed by the wide array of digital music outlets available to music fans. Distributors who sell music through digital retailers and mobile providers must build and maintain an accurate database of each track and its related metadata (artist, album, track name, art, publisher and related information.) and create an ISRC code for each track in their catalog. The tracks and metadata must then be formatted to meet the format standards for each digital retailer and mobile provider before transmitting a file to them since there is not an industry standard that has been developed. Many distributors have developed web-based tools that allow each record label they distribute to upload their catalog and new releases directly to the distributor's database.
 
Today there are a growing number of companies who have bypassed the traditional retailers and focus all their efforts on digital distribution like the IODA Alliance.
 
CONTENT PROVIDED BY SWISS BOY @ BEATSBYSWISS.COM
 
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