The Music Royalty Ecosystem

If you ever wondered why an artist with a massive number of views or streams (or even sales for that matter) is receiving what seems to be a pittance in royalty payouts, then this overview infographic from Music Reports of the royalty payment infrastructure might explain it.

At the very top of the graphic is all the potential sources of income from digital, while the very bottom shows all the potential revenue sources from analog. Take notice how few lines actually lead to the performer or songwriter. There are a lot of fingers in the payment pie and unfortunately the artist's are the smallest.

This is one of the reasons why it's so attractive for an artist to go DIY, yet the real problem is you still need the infrastructure of a record label and publisher in order to get any traction, especially if you're a new artist. This is a dilemma that will continue to vex artists for a long time, I'm afraid.

That said, the graphic is very instructive and worth a minute or two of study.

Prince Comes Back To Warner Bros And Shows The Boundaries of DIY

The rallying cry of many musicians today is “Do It Yourself” or DIY, meaning that it’s now possible to do so much of the grunt work necessary to make it without the help of a record label. For instance, you don’t need a label to act as a bank to supply money for recording any more, since most every musician has a studio at home these days that’s far more powerful than what The Beatles used in their heyday. You don’t need the label to manufacture your product, since it’s now possible to print limited runs of CDs if necessary, and virtual products cost very little to distribute. As far as promotion, social media and YouTube play such a big part in getting the word out, and so much of that can be done directly by the artist.

DIY is indeed a viable option until the point where the artist rises to the level of star, then all DIY bets are off. In order to break on through to the other side of international superstardom, the marketing infrastructure provided by a major record label is almost a necessity. A DIY artist can opt to try to reinvent the wheel, or go to a label with experience and expertise to make things happen on a larger scale. 

This is exactly where superstar Prince finds himself, as his recently announced new deal once again returns him to the Warner Music fold, a surprising move that many industry observers thought could never happen. Warners was the label that originally launched Prince into stardom, but the falling out between the parties became so vile that Prince labeled himself a “slave,” then changed his name to that unpronounceable insignia as to create a new trademark that would not promote his previous Warner releases. Read more on Forbes.

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Getting On The iTunes Home Page

iTunes Home Page

Almost every artist wants to have their song or album placed on the iTunes home page as that can make a big difference in getting a lot of buzz, exposure and sales. It's the equivalent of a CD display near the entrance of record store. The problem has always been finding a way to get there.

A recent article in Billboard interviewed various industry execs on the factors that get an act that sort of home page placement. Believe it or not, iTunes doesn't provide placement based on the artist's name, reputation or past sales. Instead, they look more at what the promotional plan is going to be, as well as the career arc of the artist.

This is actually pretty smart on iTunes part, in that they try to make sure that the artist will have an on-going relationship with the iTunes audience, and that the release will have significant additional promotion beyond the iTunes home page, which will also help the iTunes sales.

The problem is that most DIY artists don't have the wherewithal to develop the type of marketing plan that iTunes deems acceptable. That's one of the reasons that signing with a large indie or a major label can sometimes be an advantage, although an experienced management team could also make that happen. Just having music that people like is not enough.

One final item on the subject - it doesn't matter where you're placed on the home page, just that you get there. Apple has all the stats to prove that placement anywhere on the page is equally powerful.

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Indies Labels Now Have 34% Of The Market

Once upon a time the music world was dominated by the major labels, who had the vast majority of market share. Today that's no longer true as the mid-year numbers from A2IM reports that indie labels now own 34.4% of the overall market share. This is based on the number of masters, not distribution, but it's still a radical departure from the days when the majors rules and such an idea would have been laughable.

It's truer than ever that you don't need a major label to get ahead in the music business. As an example, here's the top selling indie artists so far this year:

Mumford & Sons - 1.1 million albums (combines total of all their releases)
Macklemore & Ryan Lewis - 670,000 albums
The Lumineers - 660,000 albums
Taylor Swift - 650,000 albums
Jason Aldean - 310,000 albums
Vampire Weekend - 275,000 albums
Alabama Shakes - 250,000 albums
Queens of the Stone Age - 150,000 albums

We are definitely in a DIY age. It's not just a dream anymore

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What's Learned In 30 Years Of The Music Biz

As everyone knows, the music business has changed substantially in the last few years. One of the things that's evolved has been the fact that the artist is able to do so much without the help of a record label and still have a chance for at least some modicum of success. That could never happen way back when, where if you weren't embraced by the "music business," you were essentially left out in the cold with no hope for ever getting ahead.

Wayne Coyne of The Flaming Lips has seen it all over the band's 30 year run, and in this video he explains not only how things have changed, but how the band was always against the grain business-wise, as they operated more DIY before it was even popular or possible. The lesson here is that sometimes trading money for artistic freedom can be worth it.

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Is Trent Reznor Selling Out?

Trent Reznor has been an ongoing inspiration to DIY musicians everywhere, as he's written the blueprint for addressing your fans via social networks, tiered merchandising, unique marketing, and so much more (it's all illustrated in the Music 3.0 book). His announcement last week that he was going back to a major label raised some eyebrows, since signing to Sony Music is such a great departure from what he was all about for the last 3 or 4 years.

Now he recently announced on Facebook that he was collaborating with the horrendous Beats By Dre, the money play by Dre and Jimmy Iovine where they sell hi-priced yet inferior headphones to unsuspecting listeners in the name of "better sound quality." Here's his statement:

Some of you may have read that I have begun working with Beats By Dre. For the past year I have indeed been involved with Dre, Jimmy Iovine, Luke Wood, and the rest of the team on a number of very interesting projects that will start to emerge next year. I have been wanting to experiment and focus my energy and creativity in some different directions, and Beats has afforded me that very opportunity. The process has been challenging and fascinating and as much as I'd like to tell you about the things we've dreamed up... I just can't.Not yet...(I can tell you it's probably not what you're expecting!)

The Trent Reznor we know and love stands for principle and a "I'm doing it my way regardless what you think" attitude. Collaborating with Beats smacks of selling out for a payday. I guess he needs the money, but it's sure disappointing. TR was my shining example of the best of the DIY world. Time to find another hero.

If you really want to make a better sounding headphone look like Beats, here's how.

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Trent Reznor Returns To The Big Label Fold

While we're constantly inundated with opinions that the major labels are on their last legs, that's simply not the case. Though we may yet see another step in the evolution of the majors soon, there's always going to be a place for at least a few of them. Case in point, the return to the major label fold by the poster boy for DIY, Trent Reznor.

Reznor described the reason for his newly minted agreement with Sony Music recently with David Byrne:

"In the last tour, we're playing Prague, we're walking around and playing that night at Prague.  But I see flyers up for Radiohead playing the same place we're playing, but six months from now.  And I walk into the record shop, and there isn't a section that says Nine Inch Nails.  And there's no kind of presence that we're even there.   

And I start to realize, the last few years all we've done... you know Mr. Twitter Bigshot with my bunch of followers right, but it's preaching to that choir of people that are important, but it's that camp.  The world's become so fragmented, you can tune into what you like, and a lot of things don't break though that, or cross over. 

And we're literally putting our records out on our own, and not using the labels.  And I don't know what the cool record shop in Prague is, and I don't know the good blog that comes out of there that I can give some attention to.  And I don't really want to do that, but there's a part of me that can't stop, so I get obsessed and I start thinking about marketing and I think, 'there's other people I can hire that can market this stuff, but no one else can write the songs I can write.' 

The great part of self-releasing has been controlling your own destiny.  Nobody having any approval.  Finishing a song at midnight and putting it out the next day.  Getting fans excited with no leak, because you have the only copy, and you uploaded it and you hit publish.  And wow, that's fun, it felt great particularly after a long career in the weirdness of labels. 

But to answer your question, it was to have a team of people that are better at that than I am, worldwide.  That felt like it was worth slicing the pie up, monetarily, but our main agenda of the moment was to make people aware of it in the right context versus a little more money we might or might not make.  And that's what it came down to, and so far, it's been pleasantly pleasant, actually having people that know what they're talking about and having a team, that's nice."

The above sounds more like Reznor was more tired of the DIY thing than anything else, and that's fair enough, but the fact of the matter is that the major labels are the only ones that have the infrastructure capable of either elevating an artist to, or maintaining superstardom. If an artist is going to break world-wide, that's still the way to go.

Now I don't want to come off as an apologist for the major labels because I'm far from it. I believe that until you're at a point in your career when you have some leverage, it's best to stay away from a label and do as much as you can yourself. Signing too early does an artist no good. But if you have a measure of success, that means that you can certainly be in a position for not only a better deal, but more attention from the label as well.

Not only that, after doing so much of the grunt work yourself, you're so much better at determining if the label is doing a good job or not, and helping them to do the best they can. It can be a win-win under the right circumstances.

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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.

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

Major Label Death Predictions May Be Premature

Could everyone's predictions about the demise of the major record labels be premature? What we've heard over and over in the press (and sometimes on this blog) is that the major labels were floundering in red ink, about to go belly up any second. While revenue for the industry is less than half of what it was at it's peak, and profits did take a hit for a while, it appears that everyone has missed the point that the labels have been evolving with the business, and they're pretty healthy as a result.

Case in point - according to Billboard, in the first six months of 2012 Universal Music Group, Sony Music and Warner Music Group had together reported profits of $356 million. Yes, that's profits!

Now take into account that EMI doesn't disclose their finances at the moment because they're privately held by CitiBank (at least until the sale to Universal is finalized), and the CEO of BMG Rights Management has said that their profit would be over 250 million Euros this year (about $325 million), and you can see that no one inside the big music corps are worried about their bonuses.

Then the fact that we're heading into the strongest buying season of the year makes analysts think that the major labels will make over $1 billion in profits in total for 2012.

Here's the fact as it stands today - DIY is great for any artist that's either starting out to even a star level, but if you want to break into superstardom, you still need a major. They're the only ones with the infrastructure to take an artist to those heights, at least at the moment.

That said, the more you DIY and the stronger your audience, the greater your bargaining power is. It's almost like there's no middle ground these days when it comes to making a major label deal. Either you're completely at their mercy with a 360 deal or you have all the leverage because you've built an audience without them.

Whatever the case, the major labels are not going away any time soon. Now if only we had a new crop of indies.

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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.

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

Pixie's Manager Richard Jones Interview

We're going to start the new year off with a clip from Topspin CEO Ian Rogers' excellent web show This Week In Music. This is with Richard Jones, the manager of The Pixies, who discusses DIY even for a band with international visibility.

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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.

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