Spotify Discovers Music Discovery Isn't Social

Last week Spotify introduced its updated user interface, something that users have been awaiting for some time. While this might seem all about the the features of the service, it's really a concession to the way people discover music when it comes right down to it.

If you've read Music 3.0 or attended any of my seminars, you know that there's always a section at the end called "What Next?" where I outline the coming technology and how it will affect our online lives in the near future. One of the predictions in this is section is "a new set of influencers" that people will follow to help them discover new music. In the traditional media past, that was the job of a radio DJ in the old beginning of FM days, or a selected reviewer in a music magazine. Soon that job will flow to a few trusted online sources, like Pitchfork, for instance.

Up until last week, Spotify flew in the face of that theory, figuring that music discovery was more of a social event. If you're friends liked something, chances are you would to listen as well. Their view on that has changed however. At the press conference last week, Spotify founder Daniel Ek acknowledged,

"Social has always been a very big part of what we do at Spotify. But finding people who can introduce you to music you care about has been hard. There are only a handful of people who are expert curators of music."

Ek goes on to say that these curators will be "journalists, trendsetters, and the artists themselves.....not just your friends, but really anyone on the music graph."

Yes, it's the "tastemakers" that we tend to discover music from, not our friends, at least much of the time. Ek goes on to say,

"For me, music is not social but is, in fact, the most personal cultural artifact imaginable. So when Spotify has shown me what my friends are listening to, I just realize this - I love my friends, but I hate their music."

The service will now suggest music to listeners not based on what their friends are listening to, but more on what they have listened to in the past, as well as known tastemakers. These new features are in beta testing now, and are slated to roll out at the beginning of the new year.

Seems like a step in the right direction, as long you follow the right influencer.

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Top 10 Earning Women In Music

Shakira - #10 on the list

Forbes just released their top "10 earning women in music" list and the results are far from surprising. If you look at the pop charts you'll see that's it's mostly dominated by women, and the major artists are easily able to take advantage of that popularity with touring and endorsements. One of the things to take notice in this list is the number of music women who have their own fragrance lines, something that isn't as readily open to men.

Here's the Forbes list:

1. Britney Spears - $58 million, thanks to touring, endorsements and a new fragrance line.

2. Taylor Swift - $57 million, from $1 mil a show and endorsements from Covergirl and Sony.

3. Rhianna - $53 million, from touring and endorsements.

4. Lady Gaga - $52 million, from touring, fragrances and music sales.

5. Katy Perry - $45 million, from touring and music sales.

6. Beyonce - $40 million, and she was mostly inactive this year. Doesn't include her new $60 mil endorsement deal with Pepsi.

7. Adele - $35 million, from touring, sales and publishing from her 25 million album sales of 21.

8. Sade - $33 million, thanks almost exclusively to touring. Maybe the biggest surprise on the list.

9. Madonna - $30 million, endorsements, fragrances, shoe line and royalties.

10. Shakira - $20 million, endorsements, touring and fragrances.

As you can see, there's plenty of money to go around once you enter the superstar region of the business. The big problem is being able to get to that point, of course, and it never seems to get any easier. Each of the above is a fairly large business unto themselves and requires a commensurate infrastructure, so the star's ultimate bottom line is far lower than their income. There are a lot of 5 and 10 percent deductions along the way.

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Psy Makes $8 Million By Giving It Away

Psy's "Gangnam Style" is an international phenomena that only comes around once a decade or so. Artists lucky enough to catch the tiger by the tail tend to become one-hit wonders ("Macarena" anyone?), and that's why you hope that the artist cashes in - it may be the only chance they'll ever have. In these days of fewer record sales and more streaming, there's an ever greater chance that the revenue from a huge hit will be smaller than ever. In many cases, the artist (more accurately their management) goes for tight copyright control to squeeze every last dime out of the song, which in these Music 3.0 days can be short-sighted.

That's not the case with Psy, however, who's hands-off attitude to copyright infringement has led to at least $8 million, not counting any concert or appearance fees he's collected. Here's how it works, according to an article in the Associated Press:

YouTube
"Gangnam Style" now has over 880 million views and counting, but Psy has over 1.3 billion views of all the videos on his channel. His income from that is about $870,000 according to estimates by TubeMogul, but don't forget that he has to split that with the company selling ads, then his management takes a piece as well. That's not all that much money for the huge number of views involved. Surprisingly enough, the US leads in views of the song.

Digital Music
The song sells for $1.29 on the iTunes Store and has been downloaded nearly 3 million times, which after Apple's split equates to around $2.6 million.

In Korea, subscription music is much more the norm than in the US, and most people pay around $10 per month. The song was streamed over 40 million times and downloaded around 3.6 million, but that only amounted to around $60,000.

CDs
Psy has sold 102,000 CDs in Korea which earned him only $50,000 (sounds low to me), but given that CD pirating runs rampant in Asia, you can bet that there were a lot more sold that he never saw a dime from.

Commercials
This is where the big payoff comes from. Reported Psy has made around $4.6 million for commercials for Samsung (he's the face of their new refrigerator) and mobile carrier LG Uplus.

Touring
There are no figures on this but you can figure that whatever other revenue he's made is dwarfed by his performance fees, probably by at least a factor of 10 even on the conservative side.

Other
The irony of all this is that Psy actually comes from money as his father, uncle and mother own a large chunk of a South Korean semiconductor manufacturer. Guess what? As soon as Psy hit #1, the stock more than doubled, and the family had an unexpected windfall.

So the take-away is that by using the song as promotion and not worrying about anyone stealing it for the gazillions of parodies, "Gangnam Style" became a global sensation that continues to pay off for Psy. The time he can ride this is limited, but he's managed to maximize the hit in every possible way. But he's not even the biggest grossing K-Pop artist, believe it or not, at least until his new album comes out in March.

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Even Music Celebrities Go Bankrupt

There's an interesting study on The Economics of Making Music put together by Bear Share that outlines just how difficult it is to make a buck in the music biz unless you happen to be a big corporation. As you can see by the chart on the left (which comes via MinorityFortune.com), there's a lot of money being made in the business, but the musicians who make it all possible are benefiting poorly, typically taking in only $23.40 for every $1,000 earned.

The study goes on to outline some shocking details regarding some major stars with giant earning power that were forced into bankruptcy, in some cases as a way to be released from an unfair contract. According to the study:

"Some music lovers are surprised to hear news of their favorite artists going bankrupt, but it does happen - and not always because the artist went on a wild spending spree. Bankruptcy is one of musicians' only defenses against bad record contracts. 

Despite TLC's overwhelming success as an R&B group in the 90's, they were for forced to file for bankruptcy due to the massive overhead costs they weren't able to pay. They earned less than 2 percent of the $175 million dollars generated by CD sales - about 40 times less than the profit that was divided among their management, production and record companies. Likewise, Toni Braxton declared bankruptcy in 1998 after generating $188 million dollars from CD sales; her record contract paid her less than 35 cents per album. 

The Goo Goo Dolls have generated $2 million in album sales, but filed bankruptcy because they owed so much money to their record label. Bankruptcy has become increasingly common over the years, even with many successful musicians. Even Jerry Lee Lewis and Michael Jackson, both members of the Rock and Roll Hall of Fame, have filed bankruptcy. 

Sometimes legal troubles, debts or taxes are to blame for famous musicians filing bankruptcy. Other times; however, it is simply a way to get out of a contract. The Recording Industry Association of America (RIAA) is lobbying to change bankruptcy laws, making it more difficult for artists to file bankruptcy for the sole purpose of getting out of a contract."

Music has never been an easy business to make a buck in. Go back a hundred years and stories abound how an unsuspecting musician made pennies on the dollar for their work while someone else benefited. Even today with artists having a greater awareness and access to expert legal council doesn't necessarily mean that the outcome will be any different.

The best way to protect yourself is to be in the business for the right reason in the first place, and that's for the music, but you still have to surround yourself with the best team of professionals that you can afford.

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Zappa's "Roxy By Proxy" Promotion

I love Frank Zappa and spent a fair amount of time with him when he was alive (check out my Black Page and Waldorf Astoria stories if you're interested). Frank's family has been valiantly trying to keep his name alive since his passing, and son Dweezil has done a great job evangelizing his music with his Zappa Plays Zappa tours. Then came the Roxy By Proxy promotion.

The Zappa Project/Object of your Dreams: Roxy By Proxy! is the Zappa Family Trust's effort to raise at least a million dollars to fund the making of a film of Frank's 1973 performance at The Roxy in Hollywood. In order to do that, they're offering 1000 fans the right to become official "CD distributors." That means you pay a license fee of $1,000, receive a duplication master, and then have the right to manufacture and sell as many CDs as you wish, although you still have to pay a royalty of $1.20 on each one that you sell.

I love the idea of thinking outside the box here, and this is almost a clever way to do it, but the whole idea of being a "distributor" just doesn't cut it, in my opinion. First of all, if you "the distributor" expect to make money when you're competing with 999 other distributors, sorry, but it's never going to happen. I'm sure that Zappa fans still purchase CDs, but there's just not enough of them of them out there, especially when your competition is undercutting your price just so they can make their investment back.

What would have been better is if the Trust just came clean and said, "We're trying to raise money to fund a film that we know you want to see. Contribute and we'll send you an exclusive CD, and we'll even give you the right to give to your friends if you want." At least that feels a little more based in reality. After all, we see this same approach hundreds of times a day on Kickstarter and Indiegogo. In fact, if they would've gone more towards the crowdfunding route, they might have added a few more tiers where they could've actually surpassed the amount they're looking for.

I understand that the Trust feels that they don't need to go to a crowdfunding site and pay them their cut since they already have a rabid fan base that they can readily access, but this whole issue of leading a potential donator into thinking that they might be able to duplicate and sell some CDs and make their money back is probably misplaced.

That said, I sincerely hope that they raise the funding to get the movie made. Can't wait to see it myself.

What do you think?

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Help support this blog. Any purchases made through our Amazon links help support this website with no cost to you.

You should follow me on Twitter for daily news and updates on production and the music business.

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