4 posts tagged “label2.0”
Just read this article from the New York Times about the “new model” for record labels, called 360 or multiple rights deals.
“…artists share (with labels) not just revenue from their album sales but concert, merchandise and other earnings in exchange for more comprehensive career support…..In return for that bigger share, labels might give artists more money up front and in many cases touring subsidies that otherwise would not be offered. More important, perhaps, artists might be allowed more time to develop the chops needed to build a long career…”
I know from experience that the 360 deal is very much in fashion in the music industry, and for obvious reasons. A “developing” act would not be signed to a major or major-affiliated indie today without one of these kinds of deals in place because of the death-throes of the CD as the industry’s cash-cow.
There’s a very simple problem with these deals:- there’s almost nothing of value in it for the artist. Let’s look at the items mentioned above that the artist will receive in return for giving up percentages in their until-recently exclusive revenue streams:
- More money up front: Great! Get yourself further into debt with the label and deeper in recoupment and further from making a profit or royalties from your record – and since you’re now giving a chunk of change from your merch sales to the CEO, what are you going to live on? And how is this an answer for already cash-strapped labels?
- Touring subsidies: This is the same as more money up front. Whereas a solid touring act could keep 100% or revenues before, now they’ll get more indebted to labels and have label execs pushing them around on everything from who mans the merch table to who designs the t-shirts.
- Artists might be allowed more time to develop: Excuse me? Isn’t this supposed to be the point of a label? A label should have faith in the artist and not base their success on a poorly-received record, a truth sadly destroyed by the hit-driven behemoths the labels turned into in the 90s. There’s a healthy skepticism among most managers and artists about whether this leopard can so easily change it’s spots - “You can speak to me that you’re going to work a record for 18 months. You’re going to work a record for 18 months when it’s selling 420 copies six months from now? Come on — really?” says one manager in the NYT article.
As always, the devil’s in the details. The article gives us some numbers to work with
“…Atlantic’s document offers a conventional cash advance to sign the artist, who would receive a royalty for sales after expenses were recouped. With the release of the artist’s first album, however, the label has an option to pay an additional $200,000 in exchange for 30 percent of the net income from all touring, merchandise, endorsements and fan-club fees.
Atlantic would also have the right to approve the act’s tour schedule, and the salaries of certain tour and merchandise sales employees hired by the artist. But the label also offers the artist a 30 percent cut of the label’s album profits — if any — which represents an improvement from the typical industry royalty of 15 percent…”
Although there are certain reasonable assertions here, we can’t forget that this is the music industry we’re dealing with.
If you’ve followed this blog at all, or read some of the prominent music industry books available, you’ll know “creative accounting” is an institutionalized norm in this business.
Reducing the monies paid to artists by “deducting” costs of free-goods given as promotional items, breakage of product in transit (even on digital product!) and the infamous controlled composition clause are just some examples of clearly unfair business practices that are “the norm” at many labels. What’s to stop similar practices from surfacing when calculating the labels’ cut of tour monies? Or more stringent deductions reducing the new increased royalty on CD sales to make the increase negligible? This may sound paranoid, but if we don’t learn from history, we’re doomed to repeat it.
The sad fact is that there’ll always be artists who feel that these deals offer them a better opportunity for success than a direct approach – and indeed some bands like Paramore (mentioned in the article) may not exist at all without these kinds of deals – but I can’t see how this will end well for them.
I’ve seen first hand the damage caused by the combination of a label with an exploitative deal and an artist hungry for validation. The 360 deal is not the answer, and I’m hoping with Penny Distribution, and other Label 2.0 models, that there can be less of these kinds of casualties in the future.
Update: Bob Lefsetz has some quality vitriol about this article over at the Lefsetz Letter:
"It’s the artists’ move. Want to make a deal with your computer genius buddy down the hall? Someone who will go to every gig? Be my guest. Throw in with the establishment because they WERE the establishment… You’re fucking ignorant."
and
"The sooner young ‘uns reinvent this business, the better it will be for artists and fans." Couldn't agree more, Bob.
Can’t believe it’s been so long since a post…although it’s not that I’ve been idle. Just a few of things that’ve been happening lately:
- Final preparations for the two debut releases from Penny Distribution on 10/29/07
- Mistake, Do Over E.P. by The Terribles (Buy or Preview at iTunes, eMusic, Rhapsody & Napster.)
- OR pop on over to LastFM, Pandora or other streaming widget to get your fix for free.
- Redesigning PennyDistribution.com – with plenty of Web2.0 bells & whistles. Coming in November!
- Even though I wasn't there, Penny Distribution was represented at CMJ this week! Woot!
- Talking to the next Penny acolytes – bands with punch, power and potential - and lots more “P”s. Still talking, so word on that soon.
- Further definition of the Plan – things are really shaping up. If you’re a band, artist or manager looking for a powerful online marketing package, shoot me an email.
- I was at Digital Music Forum West in Los Angeles. As I’ve come to realize from these gatherings, the panels (where speakers and moderators discuss pre-defined subjects) hold little real value. The subjects are often well-worn (social media, P2P, labels future) but there are rarely any radical ideas from the panelists. The ideas of Yahoo! Music head Ian Rogers were particularly succinct, but nothing we didn’t already know. The problem, as always, is lots of people describing the problem with little attempt at finding a solution.
But like other events, there was some real progress, optimism – and most of all – great ideas when I got to talking to attendees outside of the panels. The most interesting sentiment was that everybody is moving on without the major labels. “If your business model revolves around licensing content from major labels, give up now”, was how one music 2.0 business owner put it. I even spoke to a number of Major label employees who were there to learn more about digital music so they could jump ship as quickly as possible.
As it was my first time in Hollywood, it would only be right to go out and get hammered, bump into Nicole Richie in the bathroom, right after watching Robbie Williams as a surprise guest on stage with Mark Ronson (remember that cover of Radiohead’s “Just”?). There’s a reason they call it HollyWeird.
Of the most impressive displays at the conference was the keynote by Mark Gunheim of www.WiredSet.com – there wasn’t a lot of coverage of this detailed, prescient and most of all useful presentation, probably because of the start time (8:45am). I firmly believe companies like Mark’s will be at the vanguard of the new music industry and will be, if not a replacement for labels, at least participants in a large share of the Music Industry 2.0 market. His presentation is available here
- And of course, then there was Radiohead. As my regular readers will attest (hi, mum!), the move is clearly in line with a radical change of perspective I’d posted about back in July, and also a fairly hefty nod in the direction of Chris Anderson’s idea of “free”. I’ll not comment any more, as enough has already been said (As the Onion put it, “Radiohead sells 1.2 million downloads, Generates 1.2 million commentaries”)
I will point you to the one post on the subject, throughout all the regurgitated hubbub, that really struck a chord, from Andrew Dubber’s New Music Strategies:
http://newmusicstrategies.com/2007/10/03/bits-and-pieces-of-radiohead/
And one commentary that gets it comically wrong:
http://blogs.guardian.co.uk/music/2007/10/thanks_radiohead_for_making_it.html
Out!
Just spent a very interesting two days at San Francisco’s Bandwidth conference.
I’ll just skip to the (many) bits & ideas that rocked my socks. All of this will take much digestion, and maybe it’s the beer talking, but there’s an absolute gold-mine in here. I’ll highlight a different point or two over the next few posts.
The Economics of Abundance or Give All Your Music Away for Free
As you may know, I’ve been intrigued by this proposition lately. At the ‘E-Merging Labels’ discussion (basically a panel about Label 2.0 ), I brought up the idea and was roundly shot down by the speakers:
- IODA’s Marketing Chief
- Real Networks/Rhapsody Indie Music head
- GM of Label Quannum Projects (Blackalicious, Lyrics Born, DJ Shadow)
- Founder of Label/Social Network, Fuzz.com
That was not the end of it the matter, though. At the final panel about “The Future of Music”, the theory raised it’s head again, although it was passed over very quickly. The panelist who raised it?
Pop Culture & Entertainment editor of Wired magazine, Nancy Miller.
The same Wired magazine who’s editor, Chris Anderson, proposed the “Long Tail” theory and is currently finalizing a book, “Free”, on the subject here at hand. And yes, he’s giving it away.
I pressed Nancy at the bar afterward, and her response was basically, you need to sell you. Sounds silly, but it’s really the Russell Simmons model. An extreme example? A locally popular New Orleans band started their own business, branding their product with their name.
CDs? Not a chance.
They’re making (and selling) Hot Sauce.
Ridiculous cross-promotion tactics aside, this raises an interesting question: For a small, unknown label, giving all music away as a "growth-of-market" tactic makes sense. But if you were Rounder (who’s got about 500 Sound Recording copyrights) or even my employer: How do you suddenly tell them that the very thing that brings value to their company, as it stands, is essentially worthless in today’s music economy?
And another thing that just hit me: What does it say that at a conference that is largely attended (and populated) by people who rely on the monetization of digital media, that this idea is largely ignored? HEY! It's MY blog and I can make a stretch once in a while, OK? ;-)
Here's more on the Economics of Free.
Coming up – The Death of Artist “Mystique”, Warner Bros. VP dodges questions about DRM/Scarcity, Celebrity Deathmatch! - Pandora’s Tim Westergren Vs. SoundExchange’s Jon Simpson at the Streaming Rates Panel, The Vinyl Boom: Here to Stay?, Collapsed Copyright, The “Science” of Online Marketing and The DEATH of DRM. Whew!
My job has me conflicted. Working for a record label is a love/hate relationship. I love it because it keeps me working with music and technology, exploring the new music landscape, working with good people and helping to bring great music to the world.
I hate it because it’s very much Label 1.0, and even in the five years since I’ve worked here, I know I’ve developed habits that only hamper my ability to bring success to a Label 2.0, like Penny Distribution.
It’s a strange feeling then, when I feel lucky to have only been “exposed” to Label 1.0 for five years.
The veterans of this industry, who’ve had a great time of it over the last 15-20 years, continue to make fools of themselves when they describe their plans for the future.
Edgar Bronfman, CEO of Warner Bros., seems to be completely confused about how to approach scarcity in regard to Music 2.0. (check out my last post for a brief explanation). His “plan” is to restrict the amount of digital deals Warner signs this year and next, claiming that it’s the ubiquity of music that’s killing the recording industry. His argument: If we make the music less available people will have to pay more for it.
If you’re a music fan, it’s clear that this is exactly what not to do.
Sadly, it’s true of my employer, just as it’s true of Warner Bros. The one thing they want desperately is control. And as any good file-sharer will tell you, The “how, what, when, where and how much” of music is firmly in the hands of the consumer.
The results of this approach, i.e. pissing off consumers, shrinking the market, providing opportunities to companies that embrace the ubiquity of music, are obvious to everyone who’s ever downloaded a file (paid or unpaid), shared a playlist or had their world routinely rocked by all the great music they’re hearing.
It’s not obvious to Edgar Bronfman, a full 8 years after he raved about assembling an army of lawyers to destroy file-sharing and Napster in a megolomanical speech for the ages.
And these ideas, admittedly on a smaller scale, are part of the policies of my own employer, because experience has made it so. And I have to ask if that’s a good influence on me, or not.
Update: In a post on 8/13 Paul Resnikoff, editor of Digital Music News, details the control issues at labels. Maybe E.B. Jr. should take a read and catch himself on.
Update 2: As if by magic, Universal are also trying to manufacture scarcity. As this article explains, they're threatening to sue US retailers who sell Import copies of Amy Winehouse's debut CD (which they plan to release state-side on Nov.7) While retailers try to sell an in-demand CD, Universal are suing them and all the while, seemingly unbeknownst to the Corporation, the music is freely available via P2P. It absolutely defies any kind of logic...
