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The New Millennium and
Changes In The Music Business
by Christopher Knab - Fourfront
Media & Music - September
2000
Back to Music
Business 101
Note: In late 1998, I wrote a column about the changes facing the independent
musician in the late 1990's. Well, things are evolving and changing rapidly these days, so I felt it was time once
again to update some of the significant changes going on in the music industry. This month's column then is a revamped
version of my earlier column. But, as I write this introduction, what is happening today that could be added to
my list of developments? That is for you to keep up on. I suggest subscribing to the daily free email newletters
available from www.mi2n.com and www.webnoize.com
Introduction
As the new millennium begins there are many changes facing musicians when it come to marketing their music. Even
more daunting perhaps is how difficult it can be for musicians to keep on top of all the changes and challenges
taking place in today's music industry. But, for any musician wishing to grow their career from the start, or gain
a wider acceptance from their existing fanbase, keeping up on new technologies and changes in music business practices
is a necessity for one and all.
Beginning in the latter half of the 1970's a trend began, which has slowly evolved over the last twenty years,
and has proven to be the most effective way to attract Major Label attention. Releasing your own record simply
is the most realistic method of establishing your music career, or getting a label deal, as well as the best way
to prepare for any contract negotiations. The more successful an act becomes the more say they can have a say in
any contract negotiations
A surprising number of artists and bands are enjoying the benefits of owning their own label these days. Ani DeFranco,
for example, would not have it any other way. Once the economics of the Major Label contracts are studied, a homegrown
independent label is more appealing every day to many musicians.
The artist, who is 'shopping' a bunch of songs to a label without any experience of making and selling their own
independent releases, is an artist waiting to be exploited.
Let's take a look at some examples of artists and bands who developed their own careers over the last decade, got
signed, and if they have something in common with each other.
Before signing to RCA, The Verve Pipe released 2 independent records that sold over 40,000 copies, and they spent
over four years touring and securing a strong fanbase who bought those CDs. Mojo Records recording artists Reel
Big Fish, built their solid fanbase on playing only all-ages venues, and working up to securing better gigs with
bigger name ska bands in Southern California. Ben Folds Five worked the live gig scene as well as courting the
underground press, and then releasing their first record on Caroline Records, before signing with Sony.
From 1986 to 1995 Country artist Michael Peterson traveled the U.S. singing 200 nights a year at clubs and schools,
playing any kind of venue that would pay him to perform. He didn't choose to sign with Reprise Records until he
felt his songwriting was strong enough. That meant he had some work to do if he was going to impress a publishing
company, and impress them he did by making and selling his own CD, and selling them at all his live gigs. His reputation
as a songwriter grew so that he eventually got an offer for a deal with Warner Chappel Publishing, which eventually
led to the Reprise deal.
After releasing their own Indie record 'Fush You Mang' San Francisco Bay Area based Smashmouth got lucky when the
song "Walking On The Sun" got to the ears of an L.A. radio station programmer, and the rest is history;
as Interscope Records turned that record into a mega hit.
The list goes on. Whether or not all these artists remain in the public eye is beside the point. What matters is
that these acts got a shot at success by taking command of their careers.
Rewards For Developing Your Own Career
Once an artist has the attention of the record labels, there are other
benefits to controlling your own destiny. According to many entertainment law attorneys the deals once given as
'standard' deals to new artists can change significantly when a band is being sought-out by a label, The following
recording contract issues are more negotiable than ever, if an artist has done some development of their own:
- Better royalty rates: Artists are paid for the records they record from
a percentage of the sales of that record, based on a percentage of the list price of their records. A high rate
just a few years ago for a new act was 14-16 points whereas 'Buzz Acts' (the name given to acts that are in demand
by labels,) can get up to several points higher, if they are in demand.
- Ownership of masters: When an artist can buy back the master recordings
they made for a label after their contract has expired, or after the label drops them, they are more in control
of their destinies than artists who cannot do this. It can be easier to negotiate a speedier reversion of master
ownership if a label wants the artist.
- Creative control issues: Many artists are concerned about labels deciding
key issues regarding selection of material, producer, graphic images etc. If these issues are important to you,
take the time to develop your career.
- Non-recoupable issues: 'Buzz Bands' have more say in what a label can
claim as 'automatic' recoupable expenses (promotion costs, videos, % of touring budgets etc.)
- Controlled Composition Clauses: In a nutshell, this is a clause that
labels insert into their contracts with most new artists that reduces, to 75%, the amount of money due to the songwriter
and publishers for the songs on the record from product sales. The standard rate, (currently 7.5 cents per song,
per record or 'unit' sold) is more negotiable with 'Buzz acts'.
These issues are more than enough reasons for artists to examine their methods of securing recording contracts.
The more time an act takes to build a modicum of success on their own without a label's help, the more they secure
a position of power when dealing with recording and publishing contracts when they present themselves
Challenges and Changes For Developing Artists
Artists and bands getting into the recording industry today have many new tools to help them on their way to recognition.
At the same time, the music industry is a state of flux unlike any other time in history. Change is everywhere,
from the choices available to record music, to marketing and promoting it. Some of those changes are challenges
to the old traditions that help create the music business we know today. Others are new opportunities that await
the enterprising artist/entrepreneur. Check out some of the most important developments that are going on:
- Like a bullet out of a 38 Special, the era of downloadable music has
exploded on the scene. Compressed audio files in the form of the MP3 phenomenon arrived on the scene in the late
90's, and with file sharing technologies like Napster, Gnutella, Freenet and others now available, the business
of music will never be the same. Any musician with the goals of making money with their music will have the new
challenge of deciding how to survive in an era when the value of music in the eyes of the consumer is changing.
Why pay for a CD when you can now download almost anything ever recorded, and either store it on your computer,
or 'burn' your own CD in the privacy of your own home.
- In early 1999, a meeting of the Major Label minds in the form of the
SDMI (Secure Digital Music Initiative) was born. The initiative was concerned with finding ways to challenge the
threats to copyright ownership by using what is called 'encryption' and 'watermarking' of downloadable music (so
that musicians and labels can prohibit unauthorized usage of the music, as well as trace where an illegally distributed
song file came from), and developing realistic policies that protect the record labels, the artists, and the distributors
and sellers/traders of music. However, while the bigshots were huddled in meetings for months on end, enterprising
computer nerds and music fans were ahead of the game, writing the software that became the file-sharing technology
known as Napster. There are multi-millions of downloads of unprotected songs being traded and exchanged over the
Internet every day now. For all practical purposes if you do not care about owning a plastic box with some paper
containing artwork on it, and just want to build a collection of past, present, and future music, there is no reason
to buy a record anymore. All you need is a computer with a good sound card, speakers, an MP3 player, and a large
hard drive...and preferably, a broadband connection to the internet. Let's face it, these days you can have a free
collection of music without having paid a dime for any of it. (I will not be your conscience when it comes to the
morality and/or ethical issues involved in copying copyrighted material. That dilemma is for each and every one
of us to wrestle with.)
- In addition to MP3 and Napster phenomenon, other downloadable music
technologies have established themselves over the Internet. Liquid Audio is the most successful of these. Their
system, unlike MP3, includes protective devices for controlling the copying of copyrighted music. For a while it
looked like AT&T's a2b system would contend with Liquid Audio, but they seem to have vanished from the scene
rather quickly. Microsoft's Media Player, and Real Networks Real Jukebox have also found favor with many downloadable
music lovers.
- For a couple of decades now the major labels, once known as the Big
Six, have had control of about 80% of all the record sold in America. But we live in the era of corporate buyouts,
and the big six became 'The Fat Cat Five', when the Seagrams Co. purchased Polygram Records land all it's affiliated
labels in late 1998, adding to Seagram's existing ownership of Universal Music. The deal gave them the largest
share of the record pie, once dominated by Time Warner's WEA. In 2000, Universal/Seagrams was sold to a European
company Vivendi. To complicate matters, Time/Warner recently made a bid for EMD, the distribution arm of Capitol
and EMI, and the other members of the cartel, BMG, and SONY are vulnerable to similar consolidation moves. The
'Big Four' are now with us, but for how long?
- Artists wanting to sell or promote their CDs over the Internet have
many choices these days. One of the most innovative and effective methods is the www.amazon.com/advantage program
mentioned above. Artists can have a strong presence on this leading e-commerce site by joining up for the free
program and creating their own selling page with graphics and CD information on it, plus sound samples from the
record. In addition there are over 50 other e-music retailers online who will help musicians sell their music over
the Internet. This does not mean that an artist should not consider selling their music from their own websites
through a secure service. That is a very valid alternative. ( For a deeper discussion on e-music distribution,
read my August 2000 Indie 2000 column)
- While it is getting harder for independent artists and bands to get
commercial airplay for the reasons already mentioned, the Internet has hundreds of new Internet radio stations
playing a wide variety of music. Streaming audio software has made it possible for anyone and everyone interested
in being a DJ to broadcast their favorite music as a web radio station. This is great news for developing acts
that have a strong niche following of one kind or another. Stations like www.live365.com and www.broadcast.com
are just two of the many websites that host Internet stations.
- The disturbing trend of major corporations buying out other major companies
is not relegated only to the record labels. Radio station ownership continues to narrow, as more and more big media
companies continue to buy up more radio properties. In Seattle, Washington for example, in the mid 90's, there
were around 25 commercial radio station general managers in town representing 25 different owners. Today there
are 6. Companies like Entercom and Infinity own several stations each in that market and in most radio markets
in the U.S. This affects the aspiring musician, because one company now owns the stations that once were in competition
with each other, and the music and program directors at these stations work together to decide what artist or song
is right for their stations as a whole. Prior to the mid 90's a label could play one competing station off another.
That is no longer true.
- 'Pay For Play' is here, and the chances of getting your music on commercial
radio are getting slimmer by the hour. 'Pay For Play' is the ultimate Radio Station General Manager's dream-come-true.
The Sales Department can now play a significant role in determining what gets played on some commercial stations,
because now record labels can legally buy the airtime to have a song played for a certain number of times, or pay
for announcements right after the airplay of a song. With the revenues available to radio ownership groups, like
Chancellor, they can sign 'Pay For Play' contracts with labels for over $25,000,000 a year. Break into your piggybanks
aspiring musicians!
- The corporate merger syndrome has also infected the live performance
industry. SFX Entertainment sold its radio station holdings in the mid 90's to get into the concert venue ownership
business. They now have control of over 60% of the largest regional concert promotion companies (PACE, Delsner/Slater,
Bill Graham Presents etc.) As one industry pundit put it: " We are now dealing with the Wal-Mart of the concert
business". So, want to open up for some touring major act in your hometown? Sit back and take a deep breath.
Or, how about getting a tour once you are signed to a label. Will your booking agent and manager be walking arm
in arm with SFX? If not, what could happen to that national tour you were hoping to get?
- When it comes to music marketing issues, there are a lot of 'dots' finally
being connected regarding who buys music and how to reach them. It took the better part of one hundred years for
the industry to realize that a person who reads a book might also enjoy music, and visa versa. When Borders Books
and Music connected that dot several years ago it unleashed a waterfall of creative thinking about where to sell
music. Today you can buy music at sporting good stores, coffee/espresso shops, grocery stores, clothing stores,
airports, hospital gift shops, alternative health care provider locations, shoe stores, and just about any other
retail type store you can imagine…in fact an artist has to, if they really want to saturate the marketplace with
their music.
Conclusion
Challenges and change are here to stay for the independent musician, however, any dedicated musician can benefit
from the bevy of ideas and new opportunities being introduced almost every day. No one ever said being a successful
musician would be easy. With every bad news that comes along regarding the control of the media and the exposure
of music, there is some good news for those curious enough to explore where few have gone before. So, what unique
ideas can you think of to get your music in front of a potential fan?
Open up your imagination...there are countless ways to expose, promote, play, and sell independently produced music.
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Christopher Knab is an independent music business consultant based in Seattle, Washington. He
is available for private consultations on promoting and marketing independent music, and can be reached at 206-282-6116
or by email at: Chris@Knab.com
Visit the FourFront Media and
Music website for more information on the business of music from
Christopher Knab.
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