Slicing The Profit Pie

Here's an interesting pie chart that can be quite disturbing to a new artist or band (can't remember where I found it). It's not entirely accurate, but it's enough to give you the idea that working at McDonalds might be a better career choice than the music business.

Let's break it down:

• If you're signed to a label, most new acts will have a deal that will give them about 15% of the net sales revenue. Now this isn't as good as it sounds, since the label has a variety of ways to make it seem like they've never made a profit even though your record might've went Gold (500,000 sales), but for now we'll assume they're straight up about everything (which only happens in your dreams).

So your left with 15%, but that figure can be as much as 25% if you financed it and produced it yourself and just licensed it to the label. Whatever the amount you're left with, here's how it's split.

• In the case of this chart, the band had a deal before and still owes the previous label money. Maybe they can get out of this and maybe they can't. In this chart, it looks like it amounts to about 1 point (percent) of your 15. You're down to 14 points. (I don't know why the agent is on this chart since he only gets paid on gigs, not record sales.)

• The band didn't have any money, so it made a "spec" deal with a studio that really believed in them. Spec means speculation, which means that they agreed to pay the studio probably another 1 point if the album sold. You're down to 13 points.

• The normal producer deal is 3 points, although it may be as high as 4 if the project was on spec. You're now down to 9 points.

• The manager is making 20% of your gross, which means he takes another 3 points, and you're down to 6.

• You didn't have any money to pay an attorney, so he did a contingency deal with you, meaning that he makes 5% of the gross of any deal that he negotiates. 5% of 15% is another .75 of a point. If you also have a business manager that has the same deal, that's another .75 of a point. That means 1.5 points of your remaining 6 and you're down to 4.5.

• That means that if there are 5 people in the band, each one gets .9% of the income from the record.

Now if the album went gold with sales of 500,000 copies (which rarely happens these days) at a wholesale of $7.50 each (also high for the times), that means the label brought in a total of $3,750,000. Assuming that there was no hanky-panky with the accounting (in your dreams only), that means that each member of the band made $33,750. This doesn't include any tour expenses and the fact that you probably worked pretty hard for a couple of years before this check came in.

Still feel good about the music business?

Of course, if you were a songwriter, you made money on mechanical and performance royalties, and the band may have made some money on gigs and merch.

But you're not going to get rich even under the best of circumstances, and they hardly ever happen these days.

That's why the only reason to be in this business is because you love the music. You've got to do it because it's what you live for, and you're willing to make the sacrifice in lifestyle that it will take to pursue the dream. If you're worried about the money, go back to school and get your MBA.

-----------------------------------

Follow me on Twitter for daily news and updates on production and the music business.

Check out my Big Picture blog for discussion on common music, engineering and production tips and tricks.

10 Most Disastrous Music Industry Deals

The every insightful and entertaining Digital Music News had a great article today on the 10 most disastrous music industry deals, that I thought was worth sharing.

-----------------------------------
It's been a rough decade. Digital Music News dove into the archives for the ten most disastrous deals of the past ten years....

(1) Terra Firma's acquisition of EMI, $4.7 billion (2007)
Even Guy Hands (the embattled chairman of private equity investor Terra Firma) admits he made a colossal mistake on this one. One of the last super-leveraged buyouts before the bust, EMI has now become a $4.7 billion-plus toxic mess for Terra Firma.

(2) CBS' acquisition of Last.fm, $280 million (2007)
Scrobbling is cool and all - and this is still a very cool site - but few would "recommend" this deal today. Amidst predictable ad monetization challenges, the company has since switched to pay-only in certain European countries, outsourced full-length videos, and bid adieu to the original founders.

(3) Bertelsmann's investments in Napster, $100 million (2000-onward)
In retrospect, Bertelsmann was the forward-thinking maverick. But in the moment, that stance created a legal sinkhole for the company, accused of facilitating widespread infringement by keeping the P2P alive. The in-fighting lasted years before expensive settlements torpedoed Bertelsmann with hundreds of millions in losses.

(4) MP3.com acquisition by Vivendi, $372 million (2001)
Before MySpace was even conceptualized, MP3.com was setting huge records for IPO valuations, label lawsuits, and band profiles. Problems quickly followed the inflated purchase, and the site was quickly dumped by Vivendi Universal in 2003.

(5) The Robbie Williams 360-Degree Deal, $160 million (2002)
Williams loves being able to walk the streets of Los Angeles without being recognized. EMI, which structured the pricey deal, is somehow less thrilled by that freedom.

(6) The Sony BMG Joint Venture (2004)
The 50-50 JV (joint venture) was like "tying two sinking rocks together," according to one executive, and this seemed like a dead weight from the beginning. Bertelsmann walked away, and the combination was ultimately purchased by partner Sony Music Entertainment by 2008.

(7) WMG's Investment in Imeem (2009)
"We do not intend to make more digital venture capital investments," WMG chairman Edgar Bronfman told investors after suffering a $16 million write-off on Imeem in 2009. MySpace subsequently scooped the property for well under $1 million.

(8) WMG's Purchase of Bulldog Entertainment, $16 million (2007)
Bulldog Entertainment Group was best known for coordinating tony concerts in the Hamptons. The company eventually cratered with estimated losses of $30 million.

(9) Any Deal Involving PlaysforSure...
This was a mistake that caused endless suffering, for music service (Yahoo Music, MTV Urge, Wal-Mart), player (Sony, SanDisk, Samsung), and consumer alike. In fact, even Microsoft bailed on its DRM-heavy solution with the launch of Zune.

(10) Best Buy's Exclusive on Chinese Democracy...
Some comebacks are better than others, and Best Buy was left carrying a truckload of Guns N' Roses CDs. That did little to kill the big box exclusive, however, as plenty of big-name artists have used the concept to shift serious tonnage.

-----------------------------------

Follow me on Twitter for daily news and updates on production and the music business.

Check out my Big Picture blog for discussion on common music, engineering and production tips and tricks.

Royalty Complexity - But The Attorneys Love It

Musicians and songwriters are often a bit baffled by the complexities of the music business, especially the various royalty streams that they may or may not be participating in.

Let's count a few - on a record label level we have physical sales, licensing, download, streaming and foreign royalties.

On the publishing side we have performance, licensing, mechanical, and streaming, not to mention royalties on physical merch and even image licensing. And there's more; a lot more. If you're getting income from all of these than you're probably doing very well.

But the music business is a complex world that gets more tangled with each passing year.

As an example,  the UK's Pure radios recently release a new service called FlowSongs, which allows anyone listening to to a song to click on a button to get all of the song's details and even buy the song. A great idea if there ever was one, but it seems that the technology surrounding the service was the easy part. Things really get dicey when it comes to sorting out the artist royalties.

At the FlowMusic launch, Pure’s CEO Hossein Yassaie shared a slide showing the complicated mess his company had to decipher when it came to paying out royalties to the various parties involved. He said the slide on the left took three hours to be explained to him, and it's been dumbed down!

“I didn’t believe it at first… being an intellectual property company we understand licensing,” Yassaie said. “But I have to say I have never seen anything as complicated at this.”

This is why music attorneys still remain a part of the music business that continues to thrive. The way things are going, they'll be forever employed.

-----------------------------------

Follow me on Twitter for daily news and updates on production and the music business.

Check out my Big Picture blog for discussion on common music, engineering and production tips and tricks.

The History Of The Music Video

I have a book coming out next year called The Musician's Video Handbook that gives a musician all the tools he needs to create any number of videos that are now integral to an artist or band's career.

Here's an excerpt from chapter 1 that traces the history of the music video.
-------------------------------------------------------

Music with picture goes back a lot further than you might think. With the arrival of the synchronized film sound in 1926, many bands, vocalists and dancers of the era were viewed as excellent demonstration content for the new medium and featured in short musical films by the Vitaphone company. Then in 1932, in what was perhaps the first music video, blues singer Bessie Smith appeared in a two-reel short film called St. Louis Blues which featured a dramatized performance of the hit song. Moving into the 1940’s, musician Louis Jordan made short films for his songs that also foreshadowed many of today’s performance-style music videos.

In the 60’s, music videos started to become more experimental. One of the premier prime-time television shows of the time was “The Adventures of Ozzie and Harriet” that frequently featured the guitar playing and singing son of Ozzie and Harriet, Ricky Nelson. In a departure from the typical performance video where the artist played to the camera, patriarch Ozzie Nelson directed and edited the video of the Ricky’s hit song "Travelin' Man" and featured images of various parts of the world cut into the performance. This was certainly not even worth a second thought by today’s standards, but it was groundbreaking at the time. I can remember thinking how distracting those images were when I watched it back then, but the video was the precursor of things to come.

One of the earliest directed performance clips was the promo film made by The Animals for their breakthrough 1964 hit "House Of The Rising Sun", which was filmed in a studio on a specially-built set and featured an edited sequence of tracking shots, close-ups and long-shots, as singer Eric Burdon, guitarist Hilton Valentine and bassist Chas Chandler walked around the set in a series of choreographed moves. Heavy stuff for the time!

We’ll put the breakthrough feature films by The Beatles and others aside, since this book is focused on every kind of video a musician needs except making a feature film, but it should be noted that the Fab Four used video to their full advantage even back then. In 1965, The Beatles began making promotional clips (then known as "filmed inserts") for distribution and broadcast in other countries so they could promote their record releases without having to make in-person appearances. At the same time, The Byrds began using the same idea to promote their singles in the United Kingdom, starting with the 1965 single "Set You Free This Time". After seeing the success of this strategy, the floodgates opened and just about every popular group of the time including The Rolling Stones, Pink Floyd, The Kinks, The Who, Procol Harem, and even The Carpenters all did several videos of selected hits. In the late 60’s, Motown records was one of the first record labels to see the advantages of having video of their acts, with all of their artists making several clips available as needed for the various dance shows of the era like American Bandstand.

But music videos were changing. Instead of limiting themselves to strictly performance videos, many acts began to explore the abstract, led by the major acts at the time, Bob Dylan and The Beatles. The monochrome 1966 clip for Bob Dylan's "Subterranean Homesick Blues" shows Dylan standing in a city back alley, silently shuffling a series of large cue cards bearing key words from the song's lyrics in time to the music while his underground celebrity friends Allen Ginsberg and Bob Neuwirth converse in the background (the cue-card device has since been imitated in numerous music videos). Then in 1967, the clips for "Strawberry Fields Forever" and "Penny Lane" took the promotional film format to a new level as they used techniques borrowed from avant-garde films such as reversed and slow motion, dramatic lighting, unusual camera angles and color filtering added in post-production. As with their music, the Fab Four felt the need to break from the traditional manner of production and tried to depict a narrative or plot instead of strictly performance.

By the end of the 70’s, everyone was getting into the act, as even cult groups like The Residents and Devo (who’s videos actually helped them break out to mass appeal) found it useful to produce their own videos. Bands like the Swedish group ABBA continued to use promotional videos of their songs with great success instead of touring (although they eventually did one brief tour of the States).

But music videos were about to be taken to another level as ex-Monkee guitarist Michael Nesmith began to consider video an integral part of the music and composed both music and the video at the same time. This conceptual leap became Elephant Parts, which was the first video album and first winner of a Grammy for music video. That being said, the biggest evolution in the marriage of video and music was about to come.

The atomic bomb of change in music video came with the arrival of MTV in 1981, but not many know that we have the evolution of technology to thank for its sudden surge in popularity. If it wasn’t for the fact that cable TV became widely available at that time, and the arrival of fairly affordable videotape recording and editing equipment (everything was shot on film to this point), the music video revolution wouldn’t have been nearly as rapid or bombastic. Suddenly there was an outlet that focused exclusively on the promotional video, and both MTV and their music fans couldn’t get enough of them. Almost overnight, MTV became a powerful force in the music industry, launching or propelling the careers of superstar acts like Madonna, Culture Club, Peter Gabriel, Dire Straits, Queen, and The Police, a fact that did not go unnoticed by the major record labels.

But perhaps the most dramatic event for both MTV and music video occurred in 1983, when the most successful and influential music video of all time was released, the nearly 14-minute-long video for Michael Jackson's song "Thriller." While the video set new standards for production (produced and directed by film maker John Landis at a reported cost of $500,000), Thriller, along with earlier videos by Jackson for his songs "Billie Jean" and "Beat It", was instrumental in getting music videos by African American artists played on MTV. Up until that time, the network’s content was centered squarely on rock. MJ made it not only acceptable for black music to be played on the network, but set the stage for the hip-hop revolution that it would help propel into the mainstream. 

Many critics of MTV and the music industry feel that music changed for the worse as the network’s viewership grew and the videos became ever more sophisticated. Because MTV had become so important in breaking an act, the major labels began to look for artists with a well-honed image and good looks that translated well to TV, while the emphasis on the music became less of a concern. Perhaps this kind of thinking eventually led to the fact that the subsequent “hit” artists became less unique and more homogenized as constant video viewing was no longer the attraction that it was when MTV debuted. In order to maintain or even increase its viewership, MTV slowly morphed into a lifestyle channel for the young, today rarely playing videos at all.

You’d think that with a major distribution outlet like MTV virtually out of the market videos would have a diminished importance, but today video music has become an essential element in the modern musician’s arsenal of tools. With the rise of the Internet, an artist has more video distribution avenues than ever before thanks to sites like YouTube (and about 250 sites like it), music and video blogs, various social networks, and the artist’s own website. If used properly, a video can even be far more important for outreach and connection to fans than any other artist to fan communication method ever used before. Where once upon a time an occasional video was reserved as promotion for a hit by a best-selling act, video is now an integral part of the game plan of any serious musician now that the costs of production are so low and there are so many avenues for distribution. 

-----------------------------------

Follow me on Twitter for daily news and updates on production and the music business.

Check out my Big Picture blog for discussion on common music, engineering and production tips and tricks.

Metadata And The Album Release

I recently came across an excellent article on the musicianswages.com website called The DIY Musician's Pre-release Checklist by Cameron Mizell. There were a lot of great tips, but the ones I liked the best were about the ever important metadata.

Metadata is data about your data, which in this case amounts to all the information about your album. The article suggested that you create a document that has all the information about the album in one place so it's easy to access when it's later needed.

This data should include:

The Album Basics:

• Album title
• Artist name
• UPC or barcode

The Track Basics:

• Track titles
• Track timings
• Writer/composer and publishing credits
• Performer credits if they differ from track to track
• ISRC (International Standard Recording Code)

The Rest:

• Performer credits for the entire album (however you would list it in the liner notes)
• Additional liner note credits inluding recording, mixing, and mastering engineers, designer, photographer, etc.
• The legal line, or the information that shows up in small print on the back of your CD
• The rest of your liner notes, such as thank you’s, essays, or any other words
• Marketing blurbs, or short descriptions you plan on using online or in press packets

The more information that you upload with your music, the more likely it will be searched for, which can bring you potential new listeners. You may not be the object of the search (it could be your producer, engineer or art director), but you never know how you can benefit from a search for them that brings them to you.

Also, a lot of this information can be embedded into your MP3 files, and should be. Never leave a field blank if you can help it, because anyone curious about your music will want this information.

-----------------------------------

Follow me on Twitter for daily news and updates on production and the music business.

Check out my Big Picture blog for discussion on common music, engineering and production tips and tricks.