The Costs Of Breaking An Act

Want to know how much it costs to break an act on a major label? How about a cool $1 million, according to a report from UK's IFPI. Advances, recording, marketing and promotion are the largest part of that figure. According to that same report, record labels around the world invest up to $5 billion a year on talent alone.

The IFPI also states that there are currently more than 4,000 artists on major label rosters, 25% of them signed over the past year, with 30% of all revenues plowed back into marketing and 16% spent on A&R and R&D.

The entire world-wide music sector, which includes radio, publishing, audio equipment and live revenue, is estimated to generate $160 billion annually, and employs more than two million people.

The music industry is having it's problems for sure, but it's still huge. There's a lot of money out there, but just like water, it's seeping into places it's not been before and finding a new level. What scares everyone that's been entrenched for a while is the way the balance of power is changing. But that's a good thing as the industry certainly needs a reshaping.

Music has gone stale. How much of it will be played 10 years from now? Probably not much. That $5 billion (yes, with a "b") that's being spent on talent is being spent on chasing the last hit and the next pretty face rather than developing true artists and innovators like the way it was done when music was vital and culturally significant.

That $1 mil to break an act is being spent on a legacy promotion system that returns so little for such a large investment, because the entire music eco-system is undergoing a change - some sectors more rapidly than others.

Lest I sound like I have it out for record labels in general, I understand that there remains a need for them, perhaps now more than ever before. An artist can only take the Do It Yourself route so far before he needs the infrastructure than only a label can provide to take things to the next level.

But the way business is done in 2010 should be way different than in 2000, and the label of today must become the label of the future - the one that understands Music 3.0 and the synergy of the artist and his fans - if it expects to survive.

I'm still waiting for a new label with some innovative ideas and fresh blood to take the industry by storm. Maybe tomorrow.

The Music Industry And Legal File Sharing

The music industry is still sticking to the old CD paradigm and apparently will go kicking and screaming into Music 3.0. The Telegraph recently ran an interesting article regarding a recent survey that exposed some major flaws in the current strategy of the majors.

Before we get to the numbers in the survey, the conclusion was that the best way for the music industry to combat online piracy was to promote legal online sales, something that the industry so far has failed to do. These numbers are startling:

• Of the almost 2000 people surveyed in the UK, 4 in 10 couldn't name a single online music service (there are about 20)

• 9 out of 10 consumers that are aware of online music services are only aware of 2: iTunes and Amazon.

• The IFPI (the UK music trade organization that's the equivalent to the US RIAA) estimates that 95% of music downloaded last year was illegal, a figure that seems way high to me, but whatever the real figure is, it's certainly high.

Now the reality is that the CD is still pretty profitable when a sale actually occurs, a lot more so than the single song download that predominates today, and even though CD sales are down some 55% since 2000, it's still a really big business that won't go away soon. Yes, I know, CD's are dying, they're old technology, they're not hip, etc., but they're still sold in huge numbers, so the last thing the music establishment wants to do is to hasten it down the road out of town.

The other thing is that the major labels generally hate the fact that they've lost the battle of distribution to a computer company, namely Apple, which still calls the shots on pricing. I have a feeling that some of the people that run the majors would rather drink tainted milk than give in to Steve Jobs again, so the idea of sending business his way probably makes them wretch just as much.

I'm not sure how much merit the idea of promoting legal file sharing to prevent piracy really has though, since the 40% who couldn't name a single online service probably aren't computer hip enough to illegally download either. But sooner or later, it will behoove the record industry to finally promote online music, so it might as well be sooner.

5 Tips For Building Your Email List

Your email list is a major component for marketing to your fanbase. It's widely overlooked since most artists believe that their Facebook friends and Twitter followers are enough, but you email list allows you to reach out and personally connect with the fans and control you message while you're doing it.

A well thought out email blast allows you to do the following:

1) Engage your fan on a more 1 to 1 basis
2) Design the communication without the constraints of a social network
3) Add a call-to-action

This makes it easier to inform, market and sell to your fan in a manner that the true fan (superfan, uberfan, Tribal member - whatever you want to call them) enjoys, if you do it well.

Here's a short video about the best way to harvest those valuable email addresses.

The State Of The Internet Video

Here's an excellent video that's a fun watch that depicts the current state of the Internet. Get ready for some staggering numbers.



JESS3 / The State of The Internet from JESS3 on Vimeo.

Management Secrets Of The Grateful Dead

It's quite popular to believe that the hippie movement of the 60's was only about sex, drugs and rock and roll, but you'd be surprised that many of the core principles of social networking and Music 3.0 were promoted back then by the pied pipers of that movement - the Grateful Dead.

Indeed, it's now believed that the Dead were visionaries in providing what we today call "customer value," social networking (but real human social networking), and strategic planning that might rival that of today's MBA's, this according to a recent article in The Atlantic.

The band has just donated their 40 years of archives to University of California Santa Cruz, primarily because one of its professors, Frederic Lieberman, is a Dead scholar and teaches a course about them at the school. But if you think that's a curious musing at a notedly eccentric college campus, think again. Even an organization as esteemed as The New York Historical Society will open an exhibit of the Dead's archive's this week, and more and more universities around the country are instituting Dead courses of their own.

So what of the band's business vision? They were smart enough to incorporate early on, then established a board of directors with a rotating CEO position, something that many corporations could learn from today. And it wasn't just the band members who were on the board. All the members of their organization, including the road crew, were made an integral part of the company.

They were one of the first bands to understand the value of merchandising and founded a sales and licensing division that was not afraid to sue anyone who violated their copyrights. And they were one of the first acts to permit fans to tape their shows, understanding that fans sharing tapes would widen their audience, just as digitally pirated music does today. As a result, the Grateful Dead eventually became one of the most profitable musical acts of all time, despite having relatively meager album sales compared to those of their contemporaries.

Never in my wildest dreams did I ever think that the business techniques of the Dead would be considered hip, but yet, here we are.

15 Biggest Baby-Boomer Brands

If you ever wonder why so much advertising money is spent on teen buyers instead of the demographic that actually has some money to spend (baby-boomers), the answer is that once you've established a buying pattern, you'll continue to buy that product for life.

That's why Judann Pollack's recent article in Ad Age regarding the 15 biggest baby-boomer brands is so interesting. All the products came of age just as the boomers did, and the boomers have never strayed since. I'm surprised at a few of these, and even more surprised at their ranking, but having lived through that era I can understand the choices.

15 Biggest Baby-Boomer Brands

1) Levi's

2) Harley Davidson

3) Volkswagen

4) Slinky

5) Noxzema

6) The Beatles

7) L'eggs

8) Pepsi

9) Absolut Vodka

10) Saturday Night Live

11) Facebook

12) Fry Boots

13) Coach Bags

14) Club Med

15) Clairol

My Music 3.0 Interview on Musician's Cooler

Dave Jackson of Musician's Cooler was kind enough to interview me for his podcast regarding my Music 3.0 Internet music guidebook.

To hear all about the different stages of the music business, social media management, and measuring your online success, check out the podcast.

Click on the podcast link right above the picture of the book.

Thanks, Dave!

Dismal Returns For Streaming

You'd think that a song popular enough to get tens of thousands, hundreds of thousands, or even millions of plays would generate some substantial income for the performer. You sell in substantial mass and get compensated accordingly. That's not the case, according to Billboard's annual Money Makers report.

It seems that the income to the artists from all those streams are shockingly low. Of the top 100 musical money makers of 2009, only 10 made more than $2,000 from interactive streams, with Beyonce topping the list with a mere $5,000!

What's more, only 25 artists made more than $1,000 from on-demand streams, with Michael Jackson topping the list with $10,000 (these figures are US only and don't include publishing).

But there's still some real money in digital album download sales. 13 artists generated sales of over $200,000, again led by The King Of Pop with $800,000, and another 26 made more than $100k. And single track sales pulled in the kind of money you'd expect a pop star to generate. 3 acts generated more than $1 million in digital track sales, with Lady Gaga leading the pack, and 33 others made at least $100k from digital single track download sales.

Streams from subscription services like Rhapsody actually paid off a little though, with 26 earning more than $100,000, led by Nickelback, Michael Jackson, and Taylor Swift.


So what does this all mean? Even though we think we've figured out how to monetize music in Music 3.0, it's still a moving target. There are still many holes in the system, with the artists still taking the brunt of any shortfalls that occur. Because even if subscription music takes hold in a big way and the income stream of the industry takes a big leap forward, there's still no guarantee that the money will find it's way into the artist's pocketbook.

Piracy And Copyrights 2010

  My buddy Richard Feldman, who's president of the American Independent Music Publishers (AIMP), a Grammy-winner producer and songwriter, and owner of Artist First publishing, wrote an interesting post on the AIMP blog the other day.

Richard takes a look at the current state of music copyright and music piracy and has some interesting numbers that can be downright scary or hopeful, depending upon your outlook for the business. Among the numbers:

• Illegal P2P trading is estimated to be close to 90 million files per year, according to the IFPI's 2009 report.

• Worldwide music sales for 2009 were $16 billion, again from the same IFPI report.

• If just 10% of illegally traded songs per year were monetized (that adds up to 9 billion songs per year), $6.75 billion additional dollars could be injected into the industry if the income from song were 75 cents.

• The technology doesn't exist to actually catch someone in the act of illegal file sharing (this was a surprise).

Digital piracy is not the only reason that the music business is in trouble these days, but if only a portion is converted to real sales, the music industry could change almost overnight. Check out Richard's post at the AIMP blog.

6 Surprising Social Media Stats

Sometimes we assume some things about the Internet that just aren't true. We think that it's a tool primarily for the young, but that's not necessarily so. This became a personal revelation when my 80 year old father found my parents new home by surfing the web. No realtor, no word of mouth, and none of the traditional tools, just a browser.

Briana Kerensky crunched some numbers from 19 different social media sites, including Facebook, LinkedIn, MySpace, Twitter, Delicious and StumbleUpon, to come up with some surprising numbers in a post on Pingdom.com, that verify that it's not teenagers and young adults dominating the social media sphere - it's their parents. The following is from Briana's post.

1. A quarter of social media users are between the ages of 35 and 44. According to Pingdom, people of middle age are the most "social" age group out there, because they were the generation of people in their 20s when online social networking took off in the mid-1990s.

2. 61 percent of Facebook's users are middle aged or older. While Facebook was originally created with college students in mind, older users have since taken over. According to Pingdom's study, 61 percent of Facebook's users are aged 35 and over, with the average age being 37. A full 64 percent of Twitter's users are over the age of 35 as well, with the average age of 39.

3. College-age people do not dominate any particular Web site. Pingdom's study revealed that no single Web site is the premiere choice for today's 18-24 year-olds.

4. The 17 and under crowd dominates Bebo. The only social networking site to have any kind of grip on the under 30 group is Bebo, which has an average age of 28. On Bebo 44 percent of the users are below 17 years of age. Owned by AOL, Bebo offers many of the same benefits as Facebook, but with more options to personalize profiles. It also offers space to promote music and original written works. Myspace also had a young group of users, with 33 percent being under 17.

5. Senior citizens have not caught on to social media yet. Folks aged 55-64, and 65 and over, are not heavy social media users. Pingdom attributes this stat to various factors, including seniors' lack of technical prowess and interest in the Internet. There's also the fact that social networking sites tend to be pretty time consuming for users. The older generation, which wasn't raised with home computers or phones with Internet (and got along with life just fine) just isn't used to using the Web as frequently as others.

6. Classmates.com has the largest amount of older members. Classmates.com had the largest number of users over the age of 65, at 8 percent. Another 78 percent are over the age of 35. Classmates.com, which has been on the Internet since 1995, allows users to find, connect with, and keep in touch with people from throughout their lives. While it may just sound like a more nostalgic version of Facebook or MySpace, in 2008 Nielsen Online rated the Web site as number three in unique monthly visitors. In the United States and Canada alone, there are 40 million active Classmates.com members.

All this doesn't have a lot to do with music except for the fact that you can't assume anything when it comes to the Internet and social networking. Knowing your audience is still of prime importance.

Why The Controlled Composition Clause Hurts Artists In The Pocketbook

Here's a great video from New York entertainment attorney Wallace Collins describing the two copyright arrangements (performance and mechanical publishing royalties) that keep the music business churning. What's even better, he describes the Controlled Composition clause that severely limits the mechanical royalties that an artist who writes his own songs gets.

This is a clause that not well-understood, but Wallace does a great job explaining how it works as well as the possible negotiating strategies with a label. Yes, it's legal, but it's easy on the ears as the explanation is very simple and straight-forward.

Monitoring Your Online Presence

Heath Close posted a great video on his In The Box Production blog called "Monitoring Your Online Presence."

It has some great tips for finding out who's writing about you or your band on Facebook and Twitter. While you still can't beat the granularity of Google Analytics, Stat Counter, Youtube analytics or Tynt Tracer for your website and blog, Heath's techniques give you a pretty good idea of exactly what your penetration is in the most widely used of the social networks, albeit without the precision of the fore mentioned tools.