The Shattered Hit Record Model

We've all heard the complaints about the current Music 3.0 music industry model: physical product doesn't sell anymore, download sales don't make up for the shortfall, and streaming music cannabalizes sales and pays a pittance in royalties. Then lets heap on the accusation that music today is so formula and soul-less and generally a shadow of what it once was.

A lot of industry vets actually believe this, and like everything, there is a hint of truth in it all.

But then how to do you account for Mumford and Sons new album Bable being the biggest release of 2012 so far with sales of over 600,000 in the first week of release? How do you account for the fact that there's been over 8 million listens of the album on Spotify so far, shattering the record for number of streams in a week? How do you account for the fact that new records by superstars Green Day, No Doubt, Justin Beiber, Nicki Minaj, Madonna and Pink have only sold a quarter (if that) of what Babel sold, despite wider ranging publicity campaigns? How do you account for the fact that the Mumfords did this all without a hit single?

When it comes right down to it, there are two principles at work here that are perennial. They've worked in the previous eras of the music business and they work now:

1) Your music is your marketing. I preach this in the Music 3.0 Internet music guidebook and it holds true on any level. An artist can only build a brand by repeated listens, either through radio airplay, torrents, piracy, streams, downloads and anything else you want to put in here. The more people hear your songs, the more likely you'll find an audience for them.

Music is a marketing tool for the artist. If no one hears it, they won't buy it, or buy merch, or go see an artist in concert. If you limit the way they listen, you limit your marketing ability.

It's important to remember that most major artists never made their fortunes from the sales of music itself. In fact, there are numerous studies that show that record sales were never more than 5% of a major artist's revenue stream. For an artist to cut off Spotify because of the peanuts for royalties pay scale totally defeats the purpose of the service to an artist's brand, as Mumford experience brilliantly illustrates here.

2) Best-selling, long lasting music goes against the grain. Record labels love to follow trends, but they rarely set them. Music history is made by artists who refuse to follow the "hit" formula and choose to follow their hearts and their art instead. Most major artists that have a long lasting career are initially outliers that the industry broadly rejects (the biggest case in point is The Beatles), only to be found by the audience directly.

The English folk music of Mumford and Sons is so far away from the mainstream that the fact that they've had a hit with their first album (Sigh No More) and look to have an even bigger one with Babel is a shock, but it proves the point. The audience found the music before the industry did, and the music doesn't following what's currently considered the norm.

And how about Adele? Her 21 now has sold over 24 million worldwide and is about as far away from what's considered the mainstream today as you can get. But people the world over love it because for exactly that reason. It comes from the right place - the heart.

The moral here is that so many of the industry "truisms" aren't actually true at all, but the two above do seem to stand the test of time.

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4 Rules For Crowdfunding

Here's a post from a couple of years ago that I thought I'd repost, given the every increasing interesting in crowdfunding.

Crowdfunding is becoming a popular way to finance a recording project, thanks to sites like Kickstarter, MyBandStock, indiegogo, Rockethub and Sellaband, among others. Regardless of which site you use, the idea is the same - it allows your fans to pool their money in order to fund your project.

If crowdfunding is something that you'd like to pursue, here are 4 rules to help your campaign be successful.

1) Choose an attainable goal amount. Everybody would like a $100,000 budget to work with, but unless you have a large fan base to begin with, you're probably dreaming if you think you can raise that amount. Even a once-huge selling band like Public Enemy had to cut their goal from $250k to $75k, so be realistic in both what you need and what you can raise.

2) Concentrate on low price points. Kickstarter's data indicates that $50 is the optimum investment point, closely followed by $25. While most artists also include amount in the thousands as well, don't count on these being filled.

3) Make sure the investment reward is sufficient. Remember that you're not getting a donation, it's an investment and your investors will expect something in return. Check out this list of incentives from Hind as an example. Of course, one of the most brilliant list of incentives comes from Josh Freese (Perfect Circle,  Nine Inch Nails, Devo, Weezer). A lot of it was meant to be funny for promotion's sake, but people took him up on it anyway.

4) Keep the campaign short. Kickstarter has found that the optimum campaign is 30 days, with longer campaigns performing significantly worse. The biggest periods of investment come right in the beginning and right before it closes, with everything in the middle a somewhat "dead period." If that's the case, you might as well make the campaign short since there's no advantage to dragging it out.

Kickstarter has some great additional info and data on a recent blog post that's also worth checking out.

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What Sony/ATV's Direct Negotiation With iTunes Means

In a move that may signal a change in the way business is done in the music industry, music publisher Sony/ATV Music will soon negotiate directly with iTunes, Amazon and every other online music distributor directly. In effect, they're cutting out the traditional performing rights organization middlemen of ASCAP, BMI and SESAC.

Sony/ATV with begin this new policy with The Beatles catalog, which obviously carries considerable leverage; so much so that The Beatles now have their distribution deal directly with iTunes that bypasses their record label EMI (let's see how long that lasts now that EMI is owned by Universal Music).

It should be noted that the direct negotiation is only for online distribution and doesn't apply to broadcast performance or physical product mechanical royalties.

By bypassing the PROs, Sony/ATV sets a precedent that the PROs should be very wary of. One of the things about online music distribution online is that the detail of information is high. You know exactly where every sale is coming from and can easily have that info at your fingertips. The PROs have a stranglehold on the analog world in that they do blanket deals directly with the broadcasters then pay out to publishers and songwriters by their own complex formulas, since the royalty data is a lot more nebulous.

While it seems a bit far-fetched that any publisher would even dream of cutting a PRO out of the picture, you have to believe that at some point the airplay info will become granular enough that they may begin to wonder why they need a PRO in the middle of everything.

Then again, The Beatles are such a unique case that they still warrant special handling. Regardless, keep an eye on this since it may be a harbinger of things to come down the road.

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

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The Label Implications Of Neil Young's New Pono Music Service

As you may or may not know, Neil Young gave a brief peak at his new Pono high-resolution music service last week on the Letterman Show (see below). Young, who has railed against the quality of MP3s for years, wants to bring audiophile quality to consumers in what Neil is calling SQS, or Studio Quality Sound.

Pono is basically a cloud music service is combined with a new music player that seems to have the simplicity of an iPod, but with higher audio circuit quality. The recordings reportedly have all been transferred to 192kHz/24 bit, which while not as good as analog, does sound really good (CD resolution is 44.1kHz/16 bit).

Supposedly the Universal Music, Sony Music and Warner Brothers are totally on board for launch next year, and why wouldn't they be? There are so many up sides and not many downsides for them.

First, Neil has a lot of credibility within the industry and press as being a maverick who does things his own way. He's not beholden to anyone, could care less about being commercial, and has a high profile when he chooses to use it. That's a win.

Second, this is finally a way for labels to do something they've been wanting to do for a long time - sell you the music you already own yet one more time. If it really does sound that much better (it should, but there are caveats), there is a group of people that will buy yet another version of the records that they may have purchased several times already. That's a win for them.

And finally, there's been word that Warners even invested in the project with Young (and licensed 8,000 albums to Pono as well), which might not be such a great thing. The tech world is littered with projects that a major label has invested in to protect its interests, only to have it eventually fold because the project was better for the label than for its customers. That said, Young is ferocious in his independence, so maybe Pono might turn out to be something truly groundbreaking.

High-quality audio. Imagine that. For more on the tech side of Pono, see my post at The Big Picture Music Production Blog.

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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.

What Is A Brand?

Whenever I speak at a college, I always ask the audience what their brand is. I usually get a blank stare back. Now I totally agree that business terms like "brand" will make a musician's eyes glaze over faster than an air guitar contest, but it's important to be self-aware about what your brand is.

One of the things that an artist or band hears a lot these days is the need to promote "your brand" in order to get ahead in Music 3.0. That's all well and good, but it's hard to promote your brand unless you know exactly what a brand is. So what exactly is a brand?

Here's an excerpt from the Music 3.0 Internet music guidebook that describes it perfectly:

"A brand is a promise of quality and consistency. No matter where in the world you go for a McDonald’s hamburger, you know what to expect. No matter what product you purchase from Apple, you can expect sleek high-tech design and an easy to understand user interface. Brand management is protecting the image of the brand and carefully selecting how to best exploit it.

For an artist, that means a consistency of persona, and usually a consistency of sound. Regardless of what genre of music the artist delves into, the feel is the same and you can tell it's the artist. Madonna has changed directions many times during her career but her brand remained consistent. Here persona remained the same even as she changed to and from the "material girl." The Beatles tried a wide variety of directions but you never once questioned who you were listening to. It was always fresh and exciting, but distinctly them.

On the other hand, Neil Young almost killed his career with an electronic album called "Trans" that alienated all but his hardiest fans, and the well-respected Chris Cornell may have done irreparable harm to his long-term career with his recent album with Timbaland ("Scream") even though it was the highest charting of his career. Why did this happen? For both artists, the album no longer "felt" like them. Both Young and Cornell built their careers on organic music played with a band, and as soon as their music became regimented and mechanical, they lost their brands. After Trans, Young returned to his roots and slowly built his brand back to superstar level, but it's too soon to know what will happen with Cornell.

How do you determine what your brand is? It's easier said than done.

In order for an artist to successfully promote their brand, they must have a great sense of self-knowing. You must know who you are, where you came from, and where you're going. You must know what you like and don't like, and what you stand for and why. And you must have an inherent feel for your sound and what works for you.

And that differentiates a superstar from a star, and a star from some who wants it really badly but never seems to get that big break."

For additional excerpts from Music 3.0: A Survival Guide For Making Music In The Internet Age and my other books, go to bobbyowsinski.com.

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Neilsen Says Music Discovery Still Led By Radio

In a new report by Nielsen called Music 360, most people still discover their music most frequently from radio, but teens listen to music through YouTube more than any other source. Among the other findings is that 36% of teens have bought a CD in the last year, and 51% of teens have purchased a music download.

Here's a sampling of what's found in the report:

Radio is still the dominant way people discover music

• 48% discover music most often through the radio
• 10% discover music most often through friends/relatives
• 7% discover music most often through YouTube

More teens listen to music through YouTube than through any other source

• 64% of teens listen to music through YouTube
• 56% of teens listen to music on the radio
• 53% of teens listen to music through iTunes
• 50% of teens listen to music on CD

Positive recommendations from a friend are most likely to influence purchase decisions

• 54% are more likely to make a purchase based off a positive recommendation from a friend
• 25% are more likely to make a purchase based off a music blog/chat rooms
• 12% are more likely to make a purchase based off an endorsement from a brand
• 8% of all respondents share music on social networking sites, while 6% upload music.

Music player apps are most prevalent, followed by radio and music store apps

• 54% have music player apps on their smartphones
• 47% have radio apps on their smartphones
• 26% have music store apps on their smartphones

Males purchase rock music most often, while females prefer top 40

• 38% of males purchase rock most often
• 15% of females (compared to 9% of males) purchase top 40 most often

Digital music is seen as a slightly better value than a physical CD

• 63% of purchasers identified digital albums as a very or fairly good value
• 61% identified digital tracks as a very or fairly good value
• 55% identified physical CDs as a very or fairly good value

Younger consumers who do buy digital tracks, are more likely to purchase new music immediately after its release

• 33% of teens purchased a digital track within one week of release
• 21% of persons 18+ purchased a digital track within one week of release

18-24 year olds are most likely to attend a music event (among those who attend any type of live event)

• 7% attending once a week or more
• 30% attending once a month

Although 18-24 year olds attend more live events, teens are more likely to purchase T-shirts and posters while there.

• 54% (compared to 46% of 18-24 year olds) of teen attendees purchase concert tees
• 14% (compared to 7% of 18-24 year olds) of teen attendees purchase concert posters

Even though Nielsen has done great research for years, there are some things that I have to question in Music 360. For instance, it's hard to believe that most people still discover music through the radio and not from YouTube, which is the predominant way that most people under 30 listen to music. Other things, like the type of music purchased and when, haven't seemed to change for years.

What the report does illustrate is that we often don't really know what we think we know. If you listen to the media, the music world has turned completely upside down. After looking at this report, it's not as different as we're led to believe.

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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.

7 Ways To Improve Your Site's Navigation

One of the main premises of my Music 3.0 book is that your website should be the center of your online universe, not Facebook, ReverbNation, Ning, Tumblr or any social network.

The reason why is that you control everything about your website, where if you're on another platform, you're at their mercy. If they change their terms of service, the parameters of their user interface (i.e. Facebook), navigation, or anything else about the platform, you have no choice but to go along. A website can be custom designed for your brand, and everything else should feed into it.

That said, many artist websites are quickly designed with little thought. Even if you have a website that's due for an update, consider these 7 tips to improve its navigation, courtesy of Searchengineland.

1. Keep it consistent. Consistent navigation from page to page in both how and where things appear on the site promotes ease of use and increases your visitor's ability to find relevant information more quickly.

2. Divide categories clearly. All categories must be clearly and visually defined, with category headings separated visually from sub-categories.

3. Make all navigation elements clickable links. All major category headings should be clickable links, even though you may have a drop-down menu with sub-categories.

4. Use accurate navigation titles. Visitors need a general idea of what they should find on a page even before they click on a navigation link.

5. Ensure every clickable image has ALT text. Every image should include the ALT attribute (the alternate description of the graphic) complete with descriptive text. This is so everyone who views the page knows what the link is, regardless of how they view your site.

6. Ensure that your search feature works. You do have a way to search your site, right? Be sure that it always produces relevant results. No one likes a "not found" result.

7. Always test your site. Make sure that every link functions correctly before it goes live. This not only ensures a better user experience, but a better search ranking as well.

These are very simple points that will lead to a much better user experience, which is what we all want from a website.

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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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The 9 Top Music Pirate Countries

We hear less about it these days because online music streaming has become the hot button issue, but there's still a good bit of music piracy that goes on all over the world. Musicmetric has compiled a report called The Digital Music Index that found that there were over 400 million illegal downloads after watching Bittorrent for the first 6 months of the year. They broke it down by country, and here's what they found.

1. US - 96.68 million.
Most downloaded artist: Drake

2. UK - 43.26 million.
Most downloaded artist: Ed Sheeran

3. Italy - 33.15 million.
Most downloaded artist: Laura Pausini

4. Canada - 23.95 million.
Most downloaded artist: Kenye West

5. Brazil - 19.72 million.
Most downloaded artist: Billy Van

6. Australia - 19.23 million.
Most downloaded artist: Hilltop Hoods

7. Spain - 10.3 million.
Most downloaded artist: Pablo Alberan

8. India - 8.96 million.
Most downloaded artist: Billy Van

9. France - 8.39 million.
Most downloaded artist: Sexion d'Assaut

I'm actually surprised at how low these numbers are. If you listen to the RIAA, they should be about 20 times higher, but here we have empirical data that shows that while pirating still continues it's not to the level that the music industry tells us.

Still, if you're a record label, it must be distressing that 400 million potential sales were left on the table. That said, how many of those would've been turned into a sale if piracy were eliminated? My guess is that it wouldn't have been even half of that total, and spread out world-wide, the potential revenue is a drop in the bucket compared to what major record labels deal with every day. If anything, this study shows that streaming music is beginning to take hold and piracy is decreasing.

It will be interesting to visit this again next year. I bet the numbers will be a lot lower.

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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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This Is Why Artists Hate Major Labels

The prevailing wisdom in today's music business is that any artist signed to a major label (and many indies as well) will get shucked and jived out of hard-earned royalties in that rare case when an artist has a hit. It was certainly like that way back when the record business began, and even though artists have made great strides since then in protecting themselves, it's still happening now.

Case in point - iconic balladeer James Taylor. JT is suing his former label Warner Music Group (WMG) for several million dollars, and even after several audits where his accountants have found over 50 contract improprieties, he's still having trouble collecting. This is all laid out in a wonderful article over at Digital Music News by Paul Resnikoff called "52 Ways To Screw An Artist."

It takes a long time to get through every one of the points, so I'll summarize them here.

JT's accountants first did an audit way back in 2004 and found that he was underpaid by $1,692,726. After Warner's and Jame's representatives got together to hash things out, they settled on a figure of $764,056 and WMG immediately cut a check for only $97,857. After trying to get the balance paid over the next 8 years, WMG finally decided to officially dispute the remaining amount, claiming they owed just around $147k instead of the $666k balance, but of that money that even the label agrees is owed, they paid a grand total of $0.

So basically it turns out that JT finds that WMG owes him $1.6 million, they settle on a figure of $764k and pay him $97k and let him twist in the wind for the balance ever since.

What's funny is how blatant some of the royalty "mistakes" are, from charging manufacturing costs (which is on the label) as recording costs (which is owed by the artist) to paying a royalty rate under the agreed amount of points, and on and on.

But it doesn't end there. In 2010 JT initiates a second audit, and this time discovers that he's owed $1,147,559 for the three year period between 2007 and 2010. WMG basically blew him off and never responded to the audit inquiry. And that only appears to be the tip of the iceberg, as there were several additional revenue sources where royalties should have been paid that the auditors couldn't find.

The bottom line is that if James Taylor's high-powered accountants and attorneys can't get paid, you have almost no shot if you're a new artist. And the labels still wonder why artists want to go the DIY route?

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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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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.

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A Look At Apple's Music Streaming Plans

We're learning more and more each day about the planned Pandora-like streaming service planned by Apple (see this post for more info). It appears that Apple is still in discussion with the major labels on the license fee that they'll be paying, which is complicated by the fact that Apple wants to implement some interactive features in the product to distinguish itself from either Pandora or iHeartRadio. This is a complicated issue on so many levels, but suffice it to say that Apple wants to pay the least it can while the labels want the most.

It's been reported that the labels are also demanding a couple of things besides the license fee:

1. A way to refer listeners back to the iTunes Store (like a "Buy" button) to stimulate sales so that the streaming doesn't cannibalize it. I'm sure that Apple would like the same thing, but once this streaming cat is out of the bag there's no reason to own the song any more. In fact, Pandora has the same thing and it's been reported that it hardly throws off any revenue.

2. The ability to program tracks to fit the listener's profile, which they can't do now with Pandora.

2A. There's been some talk of even allowing programming on a geographic basis, which is perfect for an indie artist or band just building an audience.

You can bet that this is going to happen sooner than later despite the fact that Pandora has a huge head start. iTunes has a global customer base of 465 million users, and there are 335 million iPods, iPads and iPhones out there, so their potential reach eclipses everyone else in the market. The problem is, this will be another nail in the downloadable music coffin as consumers get more and more used to renting music instead of buying it.

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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.

Top 20 Most Profitable Merch Pieces

Here's a great chart that comes by way of Digital Music News and merchandise manufacturer Jakprints on the 20 most profitable merch pieces. As you can see, patches and stickers have the largest profit margin, normally costing 20 to 40 cents and selling for $3 to $4, but they're also a great giveaway as they're small, which makes them an ideal promo item. Unfortunately, most artists/bands think of T-shirts first when it comes to merch items, while some of the other items on the chart can be a far better promotion and better revenue source.

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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.