Music Pages Reign On Facebook, But Are Big Numbers Enough? [Best Of Hypebot]

It’s clear by now that music is huge on Facebook. So huge in fact, that 7 of the 10 most liked pages on Facebook belong to musicians, averaging 43 million likes. Additionally, the top 250 artists on Facebook have a total of 2 billion likes, and the most “liked” artist on Facebook (Rihanna with 47.7 million) has more likes than the top five athletes combined.

That’s according to a recent study conducted by RootMusic, creators of the largest music application on Facebook, Bandpage. In their study, they found that of the top 1,000 pages on the Facebook platform, the most common types of pages belong to musicians and bands.

Further findings include:

• 89% of the top 250 artists use music apps to share their tracks and tour dates
• 88% of the top 250 artists are posting at least once a week on their page
• 78% of touring musicians use the platform to promote their shows
• Two thirds of artists use their wall or BandPage to greet fans
• The top 250 artists average 1.6 posts a day

#GetActive

While these figures may come as no surprise to the majority of readers, it's worth mentioning that these large numbers of active fans must be properly engaged in order to be fully capitalized upon. As large of a group as the 88% of the top 250 artists comprises, one post a week is simply not enough to properly engage a Facebook audience. Considering that the majority of active Facebook users log in at least once a day, one post a week will account for a very low percentage of the amount of engagements a single user has in a given week.

Posting once a week isn’t doing any favors for your EdgeRank, either. The more your fans comment, like and share, the higher your EdgeRank - meaning the more often your page’s content will display in a user's news feed.

"Actively posting and engaging your fans leads to more people talking about you, leads to more new fans, leads to more people at your show, leads to more cash in your pocket, leads to a sustainable career as a musician." – RootMusic

In many ways, people are beginning to “live” on Facebook by augmenting their realities with regular status updates, tags, and location check-ins. And it's only going to intensify as the mobile experience becomes more and more integrated into our daily lives. 

Posting once a week is like being a parent that only comes home once a week for 15 minutes to spend time with their family – how do you expect to build deep and lasting relationships that way? If you don't have the time to monitor your own Social Media properties, and budget permitting, outsource to someone who specializes in Social Media Management. It's important to note however, that there will never be a complete substitute for your own voice. 

Your Fans Are Your Family

Today and forever moving forward, artists are wise to begin thinking of and treating their fans as though they were as close as family; a family that must be nurtured in order to build solid, long-term relationships with over time. In return for your nutriment, they’ll support you when times are tough, they’ll be there to celebrate your greatest victories, and they’ll do all that is in their power to share the joy that is you and your art with the world.

 

Audiosocket Launches Music Licensing Storefront, New Indie Artist Revenue Stream

Audiosocket has entered the second phase of its Music as a Service (MaaS) suite of offerings with the launch of MaaS: Storefront. It takes the music licensing service they've provided via API (like Vimeo Music) and turns it into a plug and play solution for digital media companies and for sites featuring user-created content. In the process, they've expand the potential licensing revenue for indie artists.

I spoke yesterday with Jenn Miller, the President and Co-Founder of AudioSocket, who filled me in on the new product, the bigger picture and what it means for indie artists. Today's announcement describes MaaS: Storefront as:

"delivering Audiosocket's well vetted catalog of more than 33,000 pre-cleared songs from emerging artists to communities that need legally licensed music for their content creators. Hosted and managed by Audiosocket, MaaS: Storefront is completely customizable, with no integration requirements. Once deployed, communities will be able to easily search for, discover, and license songs for non-commercial or commercial purposes."

The launch of MaaS: Storefront includes partnerships with IndieFlix, LearnCreate and The National Film Festival for Talented Youth.

As you can see in the below control panel screenshot, the Storefront is designed to service music based on a variety of characteristics which is a key element in helping those with licensing needs sort out the growing library that includes music from "more than 1900 emerging bands, composers and record labels."

LearnCreate MaaS: Storefront Control Panel (Click to Enlarge)

Miller revealed that they are only accepting 2 to 3 per cent of the music submitted and their emerging critera is based on what they're actually placing. I have to admit, when I previously wrote about the Vimeo Music Store, I was a bit dubious about how well musicians would do, given that their flexible pricing at Vimeo includes $1.99 tracks for noncommercial use. As it turns out, many artists are doing quite well.

Miller shared the information that out of the last two check runs they paid one third of the artists. Payments have ranged from $15 to $20,000 since licensing options do include high end placement in such outlets as commercials. But what really struck me is that some artists are making over $1000 a month off licensing for use in noncommercial videos and that the limited $98 commercial licenses are also showing positive results.

In addition, some artists are finding that new fans are discovering their music through its use in such videos. While yet another opportunity for discovery may cause one's eyes to glaze over, the fact that discovery is coming through paid placements is a significant development.

Launching plug and play storefronts that can be setup within 24 hours or less means that the terrain available for music licensing can be greatly expanded. In addition, Audiosocket has plans for numerous variations on this theme tailored to specific communities that need affordable licensed music.

For example, folks shooting videos of weddings have very specific needs including licensing that allows their clients to post wedding videos on sites like YouTube. Though one might stretch current offerings to include those needs, by targetting specific communities and tailoring pricing to those communities, Audiosocket will be able to reach a much broader market in the long run.

This development means that Audiosocket will become an increasingly powerful means of revenue generation for artists whose work is regularly licensed. Though they are focusing on recruiting musicians directly via their own A&R team, you can submit your music at the site at any time and then be included in the pool of music powering both current and future licensing channels.

Could Apple ever really work like a record label?

 

The digital music revolution has left a lot of roadkill on the side of the information superhighway. For every seeming digital success story like Lady Gaga offering an album for $0.99, thousands of artists — signed and unsigned — have seen virtually no benefit from digital music. Sure, it’s easier than ever to make material available, even if you don’t have a deal with a record label, but that doesn’t mean being a music artist is any easier today than it was back before iTunes came along.

Speaking at the inaugural John Peel lecture at the 2011 Radio Festival in Salford, Pete Townsend called on Apple to do more to

support musicians and support their career development in ways that used to be performed by record labels and publishers.

 

“Is there really any good reason why, just because iTunes exists in the wild west Internet land of Facebook and Twitter, it can’t provide some aspect of these services to the artists whose work it bleeds like a digital vampire [..] for its enormous commission?” Townsend asked.

Townsend outlined several suggestions for ways Apple could help support artists, including having Apple select 500 artists the company felt were particularly worthy of attention and supporting them with free computers as well as assistance with marketing, copyright, and distribution, perhaps with the assistance of 20-or-so talent scouts from “the dying record business.” Townsend also suggested iTunes should enable artists to share their music “like a local radio station.”

 

The good old days

The crux of Townsend’s argument is that when you hear a three-minute song via the Internet, you’re not just hearing something an artist tossed off in three minutes. Simply recording and producing that track probably took hundreds of hours and (at least) thousands of dollars in studio, engineering, and mastering fees. And let’s not count the years artists put into learning and honing their crafts. Record labels used to help with that: Labels would seek out raw, undiscovered talent and — in exchange for a percentage of future earnings — foster artists’ development. That could mean setting them up with music directors, engineers, producers, studio time, and A&R people; heck, sometimes it meant setting them up with a place to live and groceries. Assistance could also mean vocal coaches, songwriting partners, and what Townshend called “creative nurture” — enabling artists to continue with their own development without having to worry about whether the lights were going to stay on. When an artist got closer to market, the label would also help out with marketing and copyright, as well as the raw work of distribution and setting up tours.

To be sure, many record deals were nasty pieces of work that would only have been signed by naïve and drug-addled dreamers. Many artists never got out of “label debt” from their deals and walked away (or were kicked to the curb) with little more than the shirts on their backs. But the point — Townsend’s point, at least — is that the labels at least tried to develop artists and an industry. In contrast, service like iTunes handle two things and only two things: distribution to a single channel, and royalty payments.

 

iTunes’ money

Townsend’s focus on iTunes is understandable: Apple’s iTunes Music Store controls about three quarters of the market for legal digital music purchases worldwide. iTunes music sales are still growing, boosted by a general uptick in music sales so far in 2011 — fueled perhaps by the shutdown of Limewire and and the addition of the Beatles — which iTunes picked up exclusively almost a year ago. The average price of music tracks is higher than ever, labels are bundling together enhanced versions of albums at premium pricing, and 2011 is starting to look like a year when the U.S. music business, at least, will see an increase in sales.

How big is iTunes’ business? Apple doesn’t break out music sales specifically in its financials, but digital music sales were about $5.2 billion in the United States alone during 2010; 2011 looks to be on track for about $5.7 billion. iTunes controls about three quarters of the digital music market, so in the U.S. alone let’s say iTunes handles about $4 billion in digital music sales, of which it takes a 30 percent cut, meaning Apple pockets over $1 billion a year from U.S. digital music sales alone. That puts Apple’s U.S. digital music revenues in the same league as the Big Four music labels (Warner, Universal, Sony, and EMI, although EMI is probably going away).

 

How does that work out for artists?

Townsend’s argument is that Apple’s iTunes music business is essentially leeching off the efforts of artists, taking an “enormous” commission and investing none of that money back into artist development. He has a point: Talk to anyone in the music business and they’ll tell you record labels long since stopped looking for acts they can develop and craft into money-makers. They’re looking for already-honed and packaged performers, preferably with an album already produced and paid-for out of their own pockets. They can simply sign and drop it into distribution and marketing channels with as little labor as possible. Most artist development now comes at the artists’ own expense, while record labels and iTunes continue to pull in real money.

It’s tempting to claim that services like iTunes, Spotify, and Pandora make things easier for artists by removing “middle men” like record labels and enabling artists to reach out to fans and customers directly. And, to an extent, that is true: musicians no longer need to be signed to a record label to make their material available via iTunes.

Although the exact percentages of artists’ deals vary, depending how they choose to get their music into digital music services, whether they have a distribution deal, etc., the basic breakdown is as follows:

 

	$0.99 Single	$9.99 Album
iTunes	$0.69	$6.90
Amazon MP3	$0.69	$6.90
eMusic	$0.30	$2.60
Spotify	$0.004 per play	$0.04 per full album play
Pandora	(royalty determined by performing rights agencies)

To the best of our knowledge, these represent best-case figures.

 

Don’t spend it all in one place

Amazon’s and iTunes’ numbers are a 70/30 split with artists. In reality, most artists don’t see the full 70 percent of sales revenue, because even independent artists almost always have to go through a distributor to get their music into iTunes. Those distributors charge a flat fee (like CD Baby‘s $9.95 per single or $39 per album) or a percent of digital sales, sometimes both.

Nonetheless, those 70/30 splits represent the best deal out there. With Spotify, an artist needs listeners to stream 1,000 songs (or their album 100 times) to earn about $4. Users can, of course, stream music from Spotify for free, but there’s no indication that subscribing to Spotify in any way increases the revenue artists see from allowing their music to be streamed. This probably accounts for why a number of independent labels have left Spotify.

Pandora pays licensing fees to performing arts agencies like ASCAP, BMI, SESAC, and SoundExchange for the music it streams; those agences are, in turn, responsible for distributing royalties to artists. While these agencies collect millions of dollars every year and funnel a great deal of that money back to record labels and publishers, it’s extremely rare for independent artists to realize any significant royalties through these agencies, let alone royalties from streaming.

As an example, I’ve been registered with leading performing arts agencies for over two decades; music for which I am eligible for royalties has been regularly distributed via film, television, radio, the Internet — heck, I’ve even heard it in Starbucks and via Pandora. The amount of income I have received from these agencies in my entire career to date wouldn’t pay for an iPod.

Payments to artists who have deals with record labels also vary widely. If an artist receives (say) a $20,000 advance to finish production on a debut album, the label will take that $20,000 (plus interest) off the top of any revenues generated by the artists. Many artists never earn back this so-called “label debt,” and $20,000 is a pretty low figure. The marketing budget alone to push a pop single is routinely in the million-dollar range. Artists who don’t earn back their label debt often wind up surrendering future royalties or publishing rights to the label in perpetuity to get out from under the deal. The process is the same as the old-school record contracts that famously left performers and songwriters without any rights to their recordings and material.

This discussion also omits publishing revenues. If an artist covers a song written by someone else, in theory the original songwriter(s) will also receive a portion of the revenue so long as that material is still protected by copyright. This is usually handled by rights agencies.

 

Should artists be fostered?

Success in the music world is a complicated topic, and involves much more than rates paid for digital singles, albums, and streaming.

However old-school Pete Townsend’s thinking might be about artists needing recording companies or firms like Apple to serve as patrons to foster their talents and enable their creativity, he does have a point. For all the democratizing power of the Internet, the odds of a musician being able to earn a living from music sales are probably equivalent to going from playing high school basketball to being drafted by the NBA. For most artists, it’s just not going to happen, and the advent of digital music hasn’t changed the equation very much.

However, the explosion of digital music has shifted the economics of the music industry. Some of the money has disappeared, and some of it has gone to Apple and its ilk. After years of declining sales of physical albums (digital sales have yet to really make up the difference) record companies no longer seek out and develop talent. Instead, they’re mainly on the hunt for ready-to-go, highly-marketable acts that have already bootstrapped themselves into the industry. They aren’t going to take a chance on a quirky act that could become extraordinary, artists won’t get an album or two to find their legs and develop a voice. Either they’re ready to go from day one, or they’re out in the wind.

But here’s the thing: it’s called the music business, not music philanthropy. Almost everyone in the industry is in it to make money. That includes everyone from instrument makers to engineers to producers to record companies to tour managers to publishers to distributors like Apple. Sure, they all enjoy music and most believe in music, but none of them are doing it for free.

Except the artists. Townsend said it himself: “A creative person would prefer their music to be stolen and enjoyed than ignored. This is the dilemma for every creative soul: he or she would prefer to starve and be heard than to eat well and be ignored.”

Ultimately that means all those artists who don’t make the cut are going to be exploited by all those other people in it to make money. Same as it ever was.

 

29 Revenue Streams for Musicians

by Future of Music

Here at FMC, we tend to think a lot about changing business models for musicians. Certainly, many artists are still making the majority of their money from selling CDs, merch or playing gigs. Yet we’ve come to realize that musicians’ access to potential revenue — especially in today’s digital landscape — expands far beyond that.

Recently, FMC started ponder all this in a more organized fashion: just how many different ways are there for musicians to earn money? We’ve come up with 29 so far, which we list below.

In some cases, the internet makes it easier for a musician to take advantage of new opportunities. Take, for example, artists reaching out directly to fans to finance new recordings. While the patronage concept is centuries old, the internet and new services like kickstarter.com make it much easier for artists to approach fans, advertise incentives, build a supporter base and distribute the final product.

In other instances, new technologies and new policies have resulted in brand new revenue streams. Thanks to the Digital Performance Rights in Sound Recordings Act of 1995 (DPRSRA), performers and sound recording copyright owners receive a digital performance royalty when their songs are played on webcast stations or satellite radio. That revenue stream didn’t even exist thirteen years ago (and it still doesn’t exist on terrestrial radio!). Then there  are technological developments like ringtones and song placement in video games. Thanks to innovation in consumer technology, music is being used in dozens of new ways, many of them monetizeable. (Well, that’s the theory, anyway.)

As you read the list, remember that a song has two copyrights: (1) the musical composition, which includes the notes and lyrics, and (2) the sound recording, which is the performance of a musical composition. So if you hear Patsy Cline singing “Crazy” which was written by Willie Nelson, Willie created the musical composition when he wrote down the notes and lyrics. Patsy created the sound recording when she performed Willie’s song, and it was captured on tape. As you browse the list, it’s important to keep these distinctions in mind since there are many times when different parts of the creative team are paid differently. Don’t worry if it feels like too much to keep in your head at once — we get confused, too! Just take a deep breath and dive back in.

So, without further ado, here’s our list. Please let us know in the comments if you think we’re missing something.

––—

A. If you are a composer or songwriter (again, think Willie Nelson from our example above), here are possible revenue streams from your musical compositions:

1. Retail sales: Mechanical royalties from physical sales of recordings of your songs at stores, concerts or via mailorder
2. Digital sales: Mechanical royalties from digital sales via online services (CD Baby, iTunes, Amazon, eMusic, Rhapsody, MySpace Music)
3. Sheet music sales
4. PRO royalties: Royalties for the public performance of your work (airplay on radio, TV, movies, jukeboxes, live performance and foreign royalties ? and home recording and foreign levy payments) distributed to you by ASCAP/BMI/SESAC
5. Advances from publishing companies during a publishing deal
6. Payments from publishers for litigation settlements
7. Commissions for works

B. If you are a performer (think Patsy Cline), possible revenue from sound recordings:

1. Digital performance royalties: Royalties for the digital performance of your recordings — airplay on satellite radio, webcast stations, cable TV stations — distributed to you by SoundExchange.
2. Advances from record labels that are not just reimbursement of recording or touring expenses
3. Label payments for tour support or recording expenses
4. Payments from labels for litigation settlements
5. AARC royalties: collected for digital recording of your songs, foreign private copying levies, and foreign record rental royalties, distributed to US artists by AARC
6. AFM payments: Payments from the Film Musicians Secondary Markets Fund to performers on recordings used in TV and other secondary uses
7. AFM payments: Sound Recording Special Payments Fund to performers for the sales of recorded music
8. AFM/AFTRA payments: Payments from the AFM/AFTRA Intellectual Property Rights Distribution Fund (distributes recording and performance royalties to the non-featured artists)

C. Possible revenue from licensing your musical composition or your sound recording:

1. Ringtone sales: Mechanical revenue from ringtone sales
2. Synch licenses: Synchronization royalties based on master rights licensing your song to TV/movies/video games/commercials
3. Sampling licenses: Licensing fees from other musicians sampling your songs

D. If you’re a performer, possible revenue from live performances:

1. Touring and shows: compensation for playing live shows or performances, including busking

E. Revenue from a performer’s brand:

1. Merchandise sales: t-shirts, posters, etc
2. Sponsorship: or tour or of a band/artist
3. Direct financial support from fans/patrons
4. Ad revenue or other miscellaneous income from your website properties (click-thrus, commissions on Amazon sales, etc.)
5. Acting in television, movies, commercials
6. Product endorsements
7. Other licensing of your persona (to video games, comic books, etc.)

F. Revenue from an artist’s knowledge of the craft:

1. Work for hire/hired as a studio or live musician or composer
2. Work as a music teacher
3. AFM/AFTRA session payments: Session payments for recording sessions, TV appearances, and performances flowing from synch licenses
4. Producer: income from producing or music direction

G. Other ways a musicians’ work can be funded:

1. Government grants
2. Nonprofit/foundation grants

OK, granted some of these items — like licensing your persona to a video game — are only relevant to the tiny percentage of music superstars, but we wanted to be as thorough as possible when we put together this list.

What has the digital revolution actually done for musicians?

by Matthew Stone

There are few industries that have felt the move to digital and online more acutely and publicly than the music industry. The rise and fall of Napster, the move from CDs to mp3, viral sensations, piracy, the iPod, iTunes, Spotify. Many have fallen and floundered in the change, others have fed and flourished. As established ‘music industry’ revenues sit at record lows, Apple’s rise to one of the most successful companies in the world counts the success of the iPod as one of its primary turning points. While Lily Allen throws in the towel, claiming one cannot make money as an artist in the face of rampant piracy, Lady Gaga has earned over US$60-million in the last year, quickly becoming one of the world’s most successful ever artists.

There is a difference, however, between the music industry and music artists. While the music industry is clinging to the hope that Spotify may rescue its ailing business model, music artists are more numerous, varied and empowered then they have ever been before. At the same time, they have to compete with their primary ‘product’ being uncontrollably and freely replicable, through file-sharing. For better and for worse, being a music artist in the 21st century is a very different kettle of fish to the past.

Independent versus Major Label
For clarification: this is roughly how they music business has traditionally worked. The major labels (currently Universal, Sony, Warner and EMI) own 70 percent of the recorded music industry, through themselves and their subsidiary labels. They use scouts to find artists that they think have the potential to go big, or have already gone big. They approach them with a multiple album record deal and wow them with an impressive advance of cash.

Once signed, the label sets the artist up with the appropriate producers, engineers and specialists to groom them for mainstream success and put them into a recording studio to record their first major album. They license the album for whatever regions they wish to sell it in, promote it using their contacts and distribute it to the various music stores (now including online stores and streaming services.) The revenue brought in by the album first pays for all the label’s costs, and the artist’s advance.

After this, the artist gets a small percentage after the sales, usually about 3-15 percent of the retail price. The record label also usually owns the rights to the music licensing, collecting royalties “on behalf of the artist” and claiming a large cut of that too. Before music went digital, this was pretty much the only way to find international success as an artist. Of course, then there was Napster.

Napster showed the world that media distribution costs on the internet can be near neglible. With the rise of affordable (and piratable) music production software, production costs have plunged. Especially with electronic music, amateurs can create professional sounding tracks from their bedrooms.

With the proliferation of the social internet, a web of connections that forms the most effective media propagation tool in history, massive spends on promotion are no longer necessary to find audience outside of your hometown. Slowly, but surely, the label model is becoming less appealing to artists.

CD sales are in free fall, less then 40 percent of what they were about a decade ago. Digital singles sales through online stores are showing strong positive growth, but not nearly enough to make up for the drop in album sales. The slow dissolution of the album format cuts label margins dramatically.

They are now competing not only with a thoroughly established and well resourced culture of piracy (albeit one that’s focus has shifted from music to film and television) but also an ever-growing mass of independent music artists, with bands like Radiohead and Arcade Fire finding major label scale success independently.

The licensing and copyright model finds itself continuously at odds with a social and media rich internet. Regional licensing is not appropriate on a global internet, music cannot be commoditised when it is freely accessible and replicable, licensing costs are strangling music start-ups that might otherwise take a new and innovative approach, especially with regards to music sharing. The label response to tightening budgets is consolidating their capital into their “sure bet” artists, and focus their resources on fighting piracy.

Choice
Music artists now not only have a fairer financial choice between labels and independent success, but also have a plethora of choices on how to use the net to their advantage, a list so long that it cannot even fit here. Tunecore and other aggregators can put you into all the label spots (iTunes, Amazon, Spotify, Rhapsody, Pandora) or you can use indie storefronts like Bandcamp or CD Baby. Being on iTunes means having the largest potential reach for a music store ever. Rhapsody and Napster allow fans to stream your music on demand.

Pandora, Last.fm, Turntable.fm, 8tracks, playlist.com and numerous other music discovery sites help find you new fans. Spotify, Rdio and MOG allow listeners to stream your music on demand from their desktops or on mobile. Multiple Direct to Fan platforms like Reverb Nation, Topspin, VibeDeck, BandZoogle and Nimbit empower them to sell and engage directly with their fanbase.

The internet is packed to the brim with music services. Not to mention the social platforms like Facebook and Twitter that also work as fan communication platforms.

So the question is this: Why isn’t it the best time for music artists? Surely if artists are equipped with everything they need to make it themselves, then why are so many struggling? There are a number of points that contribute to the difficulty in music online:

• Region locking

The vast majority of major services are limited to North America and Europe, almost solely because of licensing issues. Even for artists from these locations, this severely limits your audience, artificially.

• Micropayments

With single sales replacing album sales, music services inevitably face microtransactions. These are heavy on transaction fees (which can be over 30 percent on a US$1 transactions).

• Too many choices

To succeed as an independent artist online, you not only need to be an expert at your craft, but also at choosing and managing your online presence. Knowing how to harness the digital music and social media landscape is itself a full time job. Specifically, you want to channel your fans to as small a selection of portals as possible, while still taking advantage of as many of the resources.

• Music selling/sharing

The act of selling music in a modern world is difficult, as songs are simultaneously your promotional tool and product. No-one buys your music until they have listened to it enough, and allowing them to freely listen to it doesn’t incentivise them to buy it. Try sell your music and you don’t gain support (or people will pirate), give it away for free and struggle to make money. Finally, no matter what you do, people can always download your music for free if they want to.

• Profit share

Streaming cloud based services like Spotify are all the rage these days. As a previous Memeburn article illustrates, however, these services provide minimal, and I mean minimal, revenue to artists, even unsigned artists. The prime reason behind this is the structure of these services tends to be overly customer-centric. Streaming is even more difficult to commoditise than downloads.

• The album model

Albums used to make sense. They were guided by the physical limitations of the medium. With the move to digital, this has changed. Not only are there no such limitations, but music listening has changed. Songs are predominantly listened to on random, or in playlist format, rather than as a CD. Music needs to adapt appropriately.

The current landscape, however, is torn halfway between the single track and the album, with only a few truly incorporating this into their music creation.

There is little doubt that the tides are slowly shifting away from major label control, nevertheless, their influence still empowers the vast majority of mainstream music. Furthermore, the labels are now scrambling to find a solution for their dwindling profits. While Spotify might serve this purpose for them, it will not do so for individual artists who cannot subsidise their income with worldwide touring, merchandising and sponsorship.

The modern online landscape allows independent artists to find success comparable to major labels. It is clear, though, that it requires far more than musical talent to do so. An understanding of how to harness the marketing potential of music is more useful to gaining online traction, even if the expertise itself is outsourced. Even then, to replace a regular salary with income from online music sales and subscription services is still very difficult.

Study: Global Digital Music Revenues To Almost Triple By 2015

 

We anticipate that global digital music revenues will more than double from $7.4bn in 2010 to 20.1bn by 2015, growing at a CAGR of 22.1% over the period. Subscriptions will be the fastest growing segment, growing at CAGR of 60.8% over the forecast period.

In terms of market value, the US, Japan, UK, France, and Germany are the key digital music markets, together accounting for 79.5% of the global market in 2010. India, China, and Mexico are the upcoming digital music markets, which present strong growth potential.

Globally, ISPs are entering the battle against music piracy, primarily driven by the collective efforts of music companies and local government's support. In 2010, France, Ireland and South Korea took steps to curtail music piracy, while others including the UK, New Zealand, and Malaysia are aiming to do so in 2011.

Introduction

This report examines developments across the rapidly evolving digital music industry. It analyzes the evolving value chain and business models; provides market sizing and forecasting by segments, paid users and geography; underlines key players strategies and industry stakeholders' initiatives to curb piracy; and provides actionable insight on how to best approach this fast-changing market. And for $2,800.00 this report could be yours:

www.companiesandmarkets.com

 

The Clash of Cultures:

The disconnect continues between rights owners and tech companies

Posted by Rick Riccobono

 

I was at a conference this week (that I highly recommend; Music 4.5 focuses on being refreshingly informative). There were rights representatives and digital music services represented. One of the music services put forth that there is nothing beyond “business” in the equation of rights licensing and they are just trying to get on with digitally distributing music. It is an interesting point since business does require a number of things to get up and running.

When you need electricity you look for a plug; water, a tap. The bill comes at the end of the month. With music; where’s the plug? Where’s the toll free number? Music is not a utility and should not be treated like one. The big boys in the “business” of digital music distribution are looking to secure rights to music in order to attract and maintain customers and they want a toll free number and a monthly bill. They will also use their muscle to push governments to get there. So if music technology companies need content as part of their business and the music business needs to keep in line with the ways that their music is delivered to the consumer, I ask, why can’t we all just get along? The disconnect started decades ago. When Microsoft for instance was constructing a music offering it looked around the campus for a couple of minutes and put the onus of contacting the labels on a techie. You love music, right? Go out and get us the rights.

At the same time hundreds of hours where spent on building the Microsoft culture while little or no thought was given at all to the fact that there might be a music business culture. What should have been a series of great bedfellows ended up a contentious mess partly fed by arrogance (on both parts) but in the end it was just a lack of respect. Cut to the era of ring tones licensing, where the disconnect was forced wider when digital distributors either grossly under reported or didn’t report content use at all. With the assets rushing out the door for free, what is a rights owner to do? Once again, the people in technology who became responsible for bringing the music to the people turned their back on to the people who facilitate the creation of that music.

The consumer is King. We used to say content was King until technology outstripped the ability of social structures to make rules against piracy. Technology trumped content. Morality was left up to the individual. Self-regulation in these matters doesn’t always work. So the music business declines and declines and the artist suffers. Hargreaves (knowingly or not) and the major players looking to cut fire sale deals for music rights are kicking the industry when it is down. Why can’t we all just get along? Like Aretha says, it’s about R-E-S-P-E-C-T. If techies and their business partners would just respect the rights owners enough to bring them into the business model creation process BEFORE the last screw is tightened the relationship would change from contentious to cooperative. In the good old days the labels supported their distributors and retailers. After all if a record store didn’t sell the product they could return it AND BE RIMBURSED. What a deal.

Nowadays the labels are struggling to make ends meet financially, making it impossible for them to throw money at a new on-line or mobile digital music service provider models. But the value they can add is being proactive in the building of the product that provides a superior service to music consumers, because that is what they have always been in the business of doing. When was the last time a head of digital at a label was asked by a licensing hopeful, “what kind of a model have you been dreaming of”, or “how do you see the future” or ” let’s build something together”? Instead, the new music models are often created in a vacuum by well-intentioned smart folks full of hope; but without any regard for the culture of the rights owners who are so desperately needed in the equation. Disrespectful in a way; you can see why wounds don’t close.

I also heard at the 4.5 conference that rights negotiations shouldn’t be good ‘ol boy’ sessions but rather hard cold and aggressive negotiations. I don’t agree. If you know your rival negotiators’ way of thinking, culture, you have a much better chance of coming to some agreement even if it means agreeing to agree. I have proof. Some deals I have made for new experimental licenses could not have been made if I didn’t have colleagues/friends at the board level and above all approached the process with respect for the culture of the other side. All too often the rights owners grit their teeth when the phone rings as one of the usual subjects wants to set a meeting to hammer away at the rights structure with little regard for the culture or the sanctity of the intellectual property at stake. And for the future of music and all who love it, that has to change.

News Flash: Your Music is Not Your Product

from hypebot by Kyle Bylin

This post is by singer / songwriter Jeff Macdougall (@jeffmacdougall).

I'm tired.

I'm tired of having the same conversation over and over again.

The conversation about how we should go about dealing with "thieves" and "pirates" "stealing" our "product" like so many shoplifters. I'm just gonna say it.

It's absurd.

Music is not, and never was, a product. 

When a label executive tells you that they are "not in the business of selling discs", (or vinyl, tape, t-shirts, etc.) and that they are actually "selling music," they are, at best, fooling themselves, or at worst, lying to your face. Moving plastic, vinyl, paper and/or any other tangible good they can dream up is exactly what the recording industry has been about since it was established.

Sure, the labels spend money and time trying to infuse their products (CDs, posters, etc.) with content (music, album art, etc.) to raise its intrinsic value, but it's still the CD or poster that they are/were selling... not the music itself.

Still, I'm always shocked at how very few people (and these are music professionals we're talking about) seem to understand such an obvious point.

This attitude is not that surprising coming from the recording side of the music industry. After all, if the premise that "music is an actual thing" were true, then there would be hope of putting the derailed train back on its proverbial track and everyone could get back to doing business as usual. So for the RIAA and the majors to frame the problem this way makes a certain amount of sense (at least, initially). But digital music is not real. (I'm going to write that again so that everyone understands that I didn't make a typo.) Digital music is not real.

The experience of hearing it is real, true. But the music itself isn't real. It's an audio hologram.

In any other market, if a player in a space (or even an entire section of an industry) takes a poor position by believing something is false when really the opposite is true (or vice-versa), the market simply corrects their behavior by allowing the competition to win out, forcing them to adjust if they want to stay in the game -- but not the recording industry. Which begs the question... Why?

I blame you.

Yes, you (my fellow musician/label/songwriter/PRO/music business professional) have made things worse by buying into this inept idea -- hook, line and sinker.

By choosing to believe, whole-heartedly, that "music is a product" and anyone who hears it without permission (i.e. file sharing, YouTube, hearing it on a radio station or podcast where it hasn't been sanctioned, etc.) is stealing, you've empowered the entire industry to take us all down the drain.

And while copyright law has been pushed and stretched over the years to legally say that such an act is indeed "theft", no right-minded consumer is going to buy into that load of crap. Ever.

Some say, "So what? Copyright is in our favor and 'the law is the law.' Sooner or later, we will come up with a format that will have enough added value and people will "buy." But guess what...

They won't.

Generally speaking, people don't want to buy music. And here's the ass-kicker... they never did. True fans, audiophiles and collectors buy CDs and other merch. They always have and that's not going to change. But for everyone else, it's really about 'time-shifting.' Most consumers bought and still buy music so they can time-shift it (play it back when, where and how they want). I don't just mean now that everything is digital either. That's why the average music listener has always purchased music - not because they wanted ownership but because buying an album or CD was the only way to time-shift their musical experience.

The days of consumers purchasing music, en masse, are gone.

I'm here to tell you that the emperor is naked, to ask -- no beg -- you to change how we view our work. To view our work, our music, for what it really is... an experience. Almost all experiences that we can and do pay for (an amusement park ride, a massage, etc.) are viewed as a service. We need to view our work in the same way.

To be clear, I'm not saying we need to stop trying to sell digital downloads or that we all need to start our own subscription service. There isn't going to be one way to make your money and every artist's recipe for success will be different. What I'm saying is that it's time we stop framing this problem around IP and ownership and start framing it around listener experience and satisfaction.

We need to get honest with our fans – and ourselves. We need to start looking at music as it really is, an experience NOT a product. Only then will we find the solutions for which we are so desperately seeking.

- Jeff MacDougall

 

10 Things Every Musician Should Do Online Every Day

BY: Michael Brandvold 

Do you or your band have a daily online routine? You better. At the speed this world moves you can’t afford to miss even one day of what is happening. Your competition is not sitting still, so you better be out there. But as a band you have to find a balance that is not going to hinder your ability to be a band. You need to write, rehearse, record, perform… if you don’t do any of those things, being online won’t mean much.

So I thought I would take a look at my daily online routine and maybe you can apply to it your routine.

10 Things Every Musician Should Do Online Every Day

1. Quick Email Scan. – When you wakeup, you’re a band, so whatever time of the day this might be is fine. Grab your iPhone or smartphone and do a quick scan of your email for anything important or urgent. Respond to those very urgent emails right away. You will know what they are when you see them.

Click to read more ...

Where Local Music Ecology Goes When It Dies

from hypebot by Kyle Bylin

The record industry is dying. That's what we're told.

The corporate behemoths have for too long gouged music fans and screwed over artists.

Thus, the digital revolution is equal parts murder and suicide. 

Major labels shot themselves in the face and everyone else dug their grave. Yet behind the scenes of this tragedy, something much worse looms.

Our local ecologies of music culture are vanishing. And the landscape has been tilted against their development. This is the natural, living part. 

And unlike the record industry, it can die. 

It's important to remember that the fantasy of rock stars and coke-addicted executives isn't the real thing. Our social ecology is the genuine ecosystem.

It exists in real places where people actually live.

It's the local record stores, music shops, radio stations, and venues that took decades to develop and grow; they've embed themselves into our communities.

The record industry cultivates and funds talent, but they aren't nature. Musicians emerge from environments. Local ecologies produce real artists and culture.

Once dismantled, these ecosystems can't simply re-form from the ground up.

The record industry is just one part of a larger mechanism. If destroyed, no amount of money can bring them back. These local ecologies matter.

Save them. Or don't. Whatever.

Spotify: "URL Will Become Universal Music Format."

from hypebot by Kyle Bylin

Spotify's Jonathan Forster thinks 2011 will bring us one-step closer to this. The URL becoming the new universal format for music. We won't send out MP3s or links to YouTube videos, the URL itself will be the primary way that fans are exposed to music. You click it and music plays – not for thirty or ninety seconds, but the whole song – every time.

Imagine reading to ebook for 1001 Songs You Must Hear Before You Die and being able to click on every song and hear it as you read. If song URLs are ubiquitous, we can do that. It's possible that the URL will become more widely used than the MP3 file. Regardless, music's final resting place will be digital.

Thinking about this, I'm left wondering whatever happened to MusicDNA. That music format was supposed to be the next big thing by now. To my memory, MusicDNA is centered around richer metadata and true metadata portability.

The company behind it, BACH Technology, envisions a music format that has the lyrics and other online data encoded directly into the file. This would enable major labels to send notifications to users who have downloaded songs and tell them about new developments. All of these features would be disabled the moment that a file found its way onto BitTorrent. I've argued that it will be difficult to get something like this to catch on – especially if it costs more. There's certainly value in improving the consumer experience of the MP3. Making it more desirable to fans and shifting the nature of the format so that it can be used as a pull marketing mechanism. However, I don't see it becoming as ubiquitous as URLs.

Is Music Moving From Rip & Burn To Watch & Share?

from hypebot by Bruce Houghton

Last week Forrester analyst Mark Mulligan tweeted: "Need some help: if 'Buy & Listen' was 20th cent. music consumption, 'Rip & Burn' the 1st digital generation, what's it for Digital Natives?” The question was part of research Mulligan and his team are doing for an upcming study "Digital Natives, the Generation Music Product Strategy Forgot". Some early conclusions:

While record labels focused their energies on converting CD buyers and file sharers to digital, Digital Natives were left without music services that meet their needs, according to their findings so far. "The Millennials used digital to reinvent analog behaviors (such as replacing the CD with the paid or free download), according to Mulligan. "But Digital Natives are creating their own rules of social context, experience and visuals."

"The result is that YouTube emerges as digital music’s killer app," says Mulligan.  "Which is why I’ve opted for ‘Share and Watch’ as the tag line for the Digital Native’s."  

10 Websites Every DIY Musician Needs to Know

The playing field is now leveled.

We all have access to the same online tools, the same websites, and preach the same message, ‘Hey! Come check out our band.’

So how is your band going to be effective on the web when everyone is given the same vantage point? How are you to know which online tools are valuable and which ones are inconsequential?

Well, first off, it’d probably be best to know how the music industry got leveled in the first place.

A couple of weeks ago, George Howard at Artists House Music wrote an article called Coin a Phrase: The Leveling. He explains the three technological barriers that have been broken to let indie artists thrive without the need for a record label.

The first moment of leveling occurred with the advent of Pro Tools. No longer did one need to collateralize their creativity in exchange for funds from a record label to create a competitive recording.

The second moment of leveling arose via firms like TuneCore. No longer did one have to be signed to a label to have distribution.

The third moment of leveling revolved around the emergence of social media. While not completely obviating the need for traditional promotion, the rise of social media certainly shifted the power away from people like publicists and into the hands of the creator.

I’m going to focus on the second and third moment by providing a list of websites your band should visit to stay ahead of the curve.

Some sites are organizational tools, some are means of communication, while there others that relieve the tasks a band manager usually performs. And the best part about the following sites? You don’t need to be the most tech savvy person in the world in order to use them. It just takes some diligence and of course, creativity.

Anyways, I hope you find a couple of the sites to be useful.

ArtistData: The more accounts you sign up for, the more places you need to update. ArtistData relieves this pain by giving you one central location to update all your social networking profiles! Enter a tour date, and watch it appear on your accounts at MySpace, Facebook, Twitter, SonicBids, etc… You can import rss feeds for your news and blogs too, and has a very user-friendly interface.

Band Metrics: Band Metrics is a web application for the music industry that collects, analyzes and displays dynamic popularity and trends about musicians and bands. Hey it could even help you plan your next tour!

Bandize: Bandize helps managers and band members collaborate on all the critical data related to their work, from merchandise sales to event schedules to important contact information.

You can schedule tour dates and track how much money you’ve made with merchandise sales. But one feature that sets Bandize apart is the ability to track how well each piece of merchandise is selling at each venue. You can see if one T-shirt tends to be more popular than another when your band plays in Austin so you can plan to bring more of that same merch the next time you have a date there.

You can also use Bandize to manage your contacts. If someone is associated with a particular venue, you can tag him or her with that venue, and when you print out day sheets at each venue, his or her contact info will be included. If you already have a lot of contacts, you can import them from various sources like Outlook, Google Contacts or a vcard. There are a bunch of other smaller features like poster printing, file storage, and more accounting and contact management tools.

The cost is $15/month but you can get a 30-day trial for free.

CDBaby: CD Bay is online distributor both in the physical and digital world. Not only is it the perfect company to give your CD too, but they’ll offer services such as CD duplication, web hosting, a UPC barcode, and digital download cards.

As a side note, there are plenty of other great music distributors to choose from. I like CD Baby because it is both digital and retail. RouteNote, a digital music distributor posted this comparison chart. It might be worthwhile to do a little price shopping before choosing a means of distribution.

OurStage: OurStage is an online avenue for indie artists to get exposure to a wider audience. Artists and fans alike can create profiles which serve as a homepage for their artistic work and a dashboard for their ratings, groups and everything else community related. Users judge artists in hopes of their favorites landing a spot in the “Best Of” community. Judging works by comparing two songs or videos side by side and simply choosing the one you like the most. The highest rated artists eventually go on to win prizes such as Cash, Media Exposure or a slot at a big show.

ReverbNation: Fan Relationship Management System, Social-Media Marketing, Widgets & Banners, EPK, Profile Syncing, Twitter and Status Updates, Street Teams, Web Site Builder, Direct to Fan Commerce, Digital Distribution, and Concert Booking and Promotion. Does this sound like something you might be interested in?

SonicBids: The big feature at SonicBids is the EPK. It allows you to quickly and easily compile all of the info a promoter wants to see — your music, bio, photos and more — so you can connect with the opportunities that are right for you. Their gig listing is also pretty great.

TubeMogul: Similarly to AristData, TubeMogul lets you import your video only once to upload to the top video sharing sites. It offers rich analysis on who, what and how the videos are being viewed.

Twitter: No need to explain what Twitter is, so I will simply link to one James Studio Manifesto posts from last summer. Musicians Guide to Twitter.

Youtube: How many times have you searched for a song on youtube, only to find a really great cover of that tune? Hailey Legg is a great example. She probably has 50+ videos of covers utilizing appealing video techniques. This is her cover of Colbie Caillat’s Bubbly. Pretty cool stuff. You’ll notice at the top of all her videos she has links to buy her CDs and website. That’s a great way to drive traffic to your own creations.

10 Truths About The Modern Recording Industry

The record industry built a huge economic engine around an idea of this system, and now it's going away. The backbone of the record industry was that fans discovered music through the same mediums that major labels promoted new music. There are no specific delivery mechanisms for music and the symbiotic relationship between the audience and the record industry is now dead. The mediums that fans rely on for music aren't ones that major labels can't control

2. The Music Consumption Is Broken.

The current music consumption system is optimized for a different era than the one we are living in today. The Internet has promoted ranges of social behavior the young and the digital which are incompatible not only with the old system, but with the assumptions that the record industry currently operates under.

In the digital age, there will be many different consumption systems, promoting evermore complex and different ranges of social behavior. The system has broken, for good.  And, by treating it as if still defines how fans consume music, we are only denying ourselves access to the ongoing redesign of the system.

3. The Barriers To Consumption Have Fallen.

In the span of about ten years, the proliferation of the personal computer; the shift from Dial-Up to high-speed Internet; the increased processing power and hard drive space in computers; the falling cost of media storage; the widespread use of CD burners; the social phenomenon of the iPod and iTunes; and the epidemic of file-sharing occurred.  And, with these societal and technological shifts, all of the barriers that defined music experiences of previous generations and the act of collecting it fell. Those who attempt to rebuild that barriers to music likely will fail.

4. Too Much Choice Decreases Satisfaction.

As counterintuitive as it may be, more music is less.  That as the number of cultural options goes up, the amount of satisfaction that a fan derives out of any given choice will be lessened as a result; it may even cause them to opt out of the decision making process all together.  In culture, the effect of overwhelming choice has the potential to cause fans to opt for the same old songs as a way to avoid facing unlimited options online and off, to rely on filters rather than on themselves, and to become ever more passive participants in their cultural lives.

5. The Hype Cycle Kills What It Creates.

The media hype cycle has accelerated.  The Internet has amplified the speed of word of mouth and music publications have interlocked themselves in never-ending competition to see who can champion an aspiring artist first. And with a seemingly endless supply of new artists to advocate for, publications no longer need to worry as much about the merits of the subsequent albums by artists who have since lost their buzz. On the other end, fans shy away from artists that are quickly popularized, perceive them as a fad, and likely file-share their short-lived music instead of buying it. The hype cycle creates stars, but it kills them too.

6. Attitudes Toward Technology Impact Ecology.

In the advent of the digital revolution, a more genuine, yet chaotic social ecology of music culture is now starting to re-form itself on the web, but this ecosystem, that took decades or more to develop offline, isn't just going to reappear overnight online. Our attitudes toward technology have a great impact on the new digital ecology. From the major labels to the artists to the fans, what matters most is their attitudes toward technology. How they choose to integrate web technology into society and the music industry is important. It will take embracing as chaos as they can stand, to some degree, to allow for a new digital ecology to form.

7. The Music World Now Centers On The Fan.

The record and music industries have shifted from being artist-centric to revolving around the fan. The focal point of the traditional consumption system used to be the artist; it was up to the fan to do the rest. They had to track the information.

Now, the fan doesn’t have to keep track of the radio stations and publications that might happen to feature their favorite artists. They track only the ones that their most interested in. Instead having to visit the various sites of artists, concert promoters, and ticket retailers, fans can subscribe to artists and be notified of their activities as they happen in real-time. The music world centers on them.

8. File-Sharing Culture Is Hard To Change.

The RIAA and the record industry can't mandate cultural change. Thus far, litigation has proved to be failed method of changing mass-behavior and a costly strategy with questionable results. They'll never force fans to stop file-sharing.

If neither social institution is willing to evolve themselves, no meaningful behavioral shifts will occur. The only chance they have at gaining back an entire decade worth of fans is to innovate and update the current music consumption system to reflect the behaviors of fans—until then, they will choose not to use it.

9. The Sky Isn't Falling, Just Record Sales.

Throughout the history of recorded music, new technologies have arrived and the record industry has worked in concert with lobby groups to thwart innovation.

They've gone to war with everything from the phonograph to player pianos to home-taping, claiming that these technologies would effectively kill music. "Of course, each of those sky-is-falling alerts from the music industry over the last century was a false alarm," says author Greg Kot. "With each technological innovation, music became more accessible and more lucrative than ever."

10. Music Would Suck Less If Fans Savored It More.

More important than any of these inferences may be the simple, yet powerful notion that fans need to savor their music. There's quality music out there, fans just need to take the time to experience it. Distracted by the calling of their always connected lives, fans aren't willing or simply aren't able to make a true time investment in their music. This means, much like it does at the dinner table. They need to set down their forks and taste the food that’s in their mouth.  Same goes with the iPod.  Set it down, forget all the added choice, and just listen.

4 Reasons Why Fans Are File-Sharing Your Music (And Why They Can't Be Changed)

BY: Kyle Bylin 

Last time, we looked at four reasons why fans are file-sharing an artist’s music—that they can change. These are simple solutions that any artist can act on and ensure that their fans aren’t motivated to file-share their music for reasons such as being unaware of alternative and legal options to consume their music or unable to hear the entire album before they buy it. Furthermore, new fans may not trust the artist because they don’t have enough name recognition or the artist has since changed their sound. Lastly, there may simply be too many “hoops” or clicks to jump through before fans can download or buy their album, so they resort of file-sharing it because it’s a proven, effective, and easy to use interface that works every time and is only a few clicks away; it’s also habitual.

These are all causes of file-sharing that artists can acknowledge and take steps toward preventing. In some cases, it’s simple solutions that matter. Educate your fans on the ways they can legally access your music, for free; allow them to stream albums before they buy them; build trust with your current audience and potential fans; and ensure that buying your music from your website or iTunes is the most quick and easiest way to access paying for music. If these general needs aren’t met, it could lead fans to download music that they may not have otherwise. Trouble is, these aren’t the only reasons why fans file-share. Here’s the four reasons fans file-share that artists can’t change:

1. Biased Mediums

Technology is biased. It encourages different ranges of social behavior. For instance, when a fan is buying CDs and is looking for a booklet to hold them, they don’t select the five hundred disc holder. They pick the one that is slightly bigger than the collection they imagine having. If a fan has fifty-five CDs and can imagine that in a year or two, that they might have eighty—that’s the storage container they buy. iPods are storage containers. They are often times much bigger in their capacity than the person buying one needs.

As humans, we fill containers. It does not make any sense that a fan can get an iPod that takes $30,000 to buy the music necessary to fill it. This is not to say that large iPods should be banned. It’s simply the most glaring reason why fans are file-sharing music. MP3s are abundant and if they come from your friends—free. As Chris Anderson argued in his latest book, “Free can encourage gluttony, hoarding, thoughtless consumption, waste, guilt, and greed.” MP3 file are taken because they’re there, not necessarily because fans want them. Yes, fans do want free music and would gladly go without paying. But, the iPod is a container and MP3s, when abundant, promote that behavior.

2. Decision Paralysis

“Decision paralysis,” in the words of Made to Stick coauthor Dan Heath, “is a finding from psychology that says: The more options that we’re exposed to, the more likely we are to kind of freeze up and go with the path of least resistance.” When a fan is faced with a multitude of options, all of which they deem to be as desirable as the rest, immobilization is possible. Rather than trying to differentiate between the options and deciding which is the best bet (i.e. making a purchase) they either opt out or file-share the music they desire instead. To them, file-sharing becomes the “path of least of resistance”—a coping mechanism for decision paralysis—where they can preview all of the options at once and forgo the symptoms that we associate with choice overload. The problem with this, beyond the legality of file sharing, is that once they do have all the options at their disposal, choice overload does not go away. The fan still has to make a real decision.

After experiencing all of the options, and probably having considered additional ones, they may still opt out entirely and simply choose not to choose at all, buying no music at all.

3. “Me” Economics

A number of fans file-share music for reasons that have nothing to with not being able to afford it or because they think the record labels are greedy. Fans have established their own Internet law of economics and can implement it because so much music is readily available for free. To them, it all balances out. But some fans are less fair than others.

For instance, if an album is grossly overpriced or they want payback for music that they bought that they felt was unsatisfactory; they’ll file-share it. “That is,” Nick Bilton writes in I Live In The Future & This Is How It Works, “sometimes [they’ll] buy a couple of songs and then download others, figuring that the total [they] paid balances out to a fair amount.”

When fans buy an entire album and feel that a majority of it was below acceptable, they feel cheated because there’s no way to return it. Next time around, they won’t trust that artist and may file-share their latest songs, in an attempt to breakeven. Now that music isn’t scarce and can be found anywhere online, fans are less willing to accept paying for something that they don’t like, thus, they even the scorecard—each in their own way.

4. Risk-Sharing

When a fan goes into a record store and buys an album, they’re taking a risk. Once they take the plastic wrapper off, the album is theirs. If, by chance, the record industry or artist pushed a questionable album into the market with few good songs and the rest is filler, fans don’t have insurance against that. Anyone who buys albums on a regular basis has ended up with more than a few titles that are either outright terrible or below expectations.

The net offers fans insurance against the record industry and the artists themselves.

They’re willingness to purchase an album and become stuck with it has lessened. Part of the reason fans file-share music is to minimize the amount of risk they undertake in their purchases. In the most extreme cases, the record industry produced acts that aligned with business efficiencies more than they did listener preferences. Record labels wanted to sell millions of copies of albums; a feat that had more to do with mass marketing than of the quality of music. In their hubris, labels created a scenario where fans undertook risks of buying an album that outweighed the benefit of having them find and develop musical acts, because fans ended up with a higher ratio of bad albums than good ones.

In the market today, fans are assuming more risk than ever and protecting themselves by file-sharing before buying; this theory was pioneered by Umair Haque in a 2004 essay.

Why They Can’t Be Changed

The digital music consumption systems and technologies promote different ranges of social behavior in fans; it’s part of the ongoing evolution of social music. Traditional systems and tech encouraged certain conduct, such as the gradual development of musical tastes and the act of collecting music in the physical form—both of which the record industry profited handsomely from. A new age brings new systems, technologies, and behaviors, to think fans and business models are frozen in time—untouched by these changes—is a fool’s errand. So too, there’s more choices in music now than ever and discerning which adds the most value to one’s life isn’t easy. Such an overload leads fans to pursue coping mechanisms like file-sharing. And, when fans fail to make good decisions, they feel burned and look for ways to even the scorecard with the industry and artists that brought those choices. That fans are getting more cautious about their purchases is a result of having more risk pushed onto them. To protect themselves from buying something that they didn’t want—they file-share music to mitigate the added risk and are so willing to do so that they put themselves at great legal risk in the process.

Does the "Freemium" Model Work for All Artists?

Album Sales Hit SoundScan Era Low—Again

By Keith Caulfield

While Eminem’s “Recovery” returns to No. 1 on the Billboard 200, celebrating its sixth week atop the list, the rest of the album market isn't quite partying it up.

Overall album sales in this past chart week ending Sunday, Aug. 15 totaled 4.95 million units, marking the lowest weekly sales figure since Nielsen SoundScan began tracking sales in 1991.

It’s also only the second time the weekly album sales total has dipped below 5 million. The first time it occurred was with the week ending May 30, when 4.98 million were sold.

At the time when Billboard reported on that back in June, we only had accessible archival SoundScan data going back to January 1994, so we couldn’t verify that it was the lowest sales week since SoundScan started in 1991. But since then, we’ve been able to confirm that statistic. (Nothing like verifiable bad news, right?)

Perhaps this week’s slate of new releases will perk up the overall album sales sum next week.

The Billboard 200 is aiming to welcome top 10 debuts with new sets from Kem, Iron Maiden and Ray LaMontagne — all with first-week sales projected to be in the range of 60,000 to 75,000 according to industry prognosticators. Kem’s new “Intimacy” looks like it will be the highest new entry and could shift around 75,000 according to industry prognosticators.

This past week, the highest bow came from the “Camp Rock 2” soundtrack, which started at No. 3 with a rather tepid 41,000.

Songs to be sold through mobile phone and PC manufacturers in future

by Thomas Heuzeroth

Berlin – Adam Kidron loves going on tour like a rock star: Milan, Berlin, Paris, Madrid – round Europe in six days. He stands in his tour bus in an unbuttoned shirt and makes weighty pronouncements like “We will set music free.” He even has a date for this: 10 October 2010. He calls it “Insurrection Day.” There are plenty of weirdos in the music business who want a revolution but never get heard. Kidron is not one of them. People know him. One of the native Brit’s achievements was to make former US president George W. Bush fume with rage. In 2006 he produced a Spanish-language version of the US national anthem which some people, such as President Bush, took offence at.

Kidron’s latest idea is called Beyond Oblivion and he is taking it on the road. He has already won over News Corporation. Rupert Murdoch’s media empire has taken a stake in the start-up. But the hard work is still in front of him; now Kidron has to convince everyone else.

His idea is that in future users should no longer pay to own music, although what Beyond Oblivion seeks to do is just hide the costs. The plan is to incorporate these in the cost of buying the device the music is played on: mobile phones, computers and televisions. There will be a flat rate for music for the life of the listening device, paid once only with the purchase price.

Now Beyond Oblivion has to persuade the device manufacturers to charge this amount on top of their sales price and pass it on to the firm. “Right now we are in discussions with eight of the twelve largest manufacturers,” says Kidron. Flat-rate music could make devices painfully more expensive. The prices being talked about range between USD 5 and USD 65, depending on the region and the type of device. Kidron intends to pass on most of this amount to artists and producers, depending on how often their music is played. He is guaranteeing a payment of at least 40%, even if an “exempt” Smartphone never plays a song. To limit his own risk, Kidron will stop paying when 92% of the flat-rate sum has been reached. Since all devices are on-line, it is possible to measure precisely how often a song is played. This is much fairer than previous remuneration models, claims Kidron. “The value of music is not its purchase price, but how often people listen to it.”

As a matter of fact, the four large music labels (EMI, Sony Music, Warner Music and Universal Music Group) are now more amenable to new business models. “We have signed a declaration of intent with two of the labels,” notes Kidron. By the end of August agreements should be in place with all four music companies. Talks are also said to be under way with the performance rights organisation GEMA.

Kidron is presenting himself as the saviour of the music industry. “95% of all digital music downloads are illegal,” he states. “Those songs are never coming back.” Even when these songs are played on “exempt” devices, Beyond Oblivion plans to pay the artists. He aims to pass on over USD 100 million to the music companies in the first five years. “Our target is to sell 20-30 million licences in the first year.”

The plans are on a grand scale. Beyond Oblivion claims to employ 60 people in the USA and the UK – in New York, Salt Lake City, London and Silicon Valley. Insurrection Day is planned for 10 October, when the service will gradually start in the USA, Germany, Italy, the UK, Spain and China, before really getting under way next March. Beyond Oblivion has a name for that date too: “Liberation Day.”

The State of Internet Music on YouTube, Pandora, iTunes, and Facebook

"More people are engaged with music than ever before," said Tom Silverman, founder of Tommy Boy Records and the New Music Seminar. "It's a hockey stick going up; it's an incredible opportunity that so far has eluded us." Silverman was speaking this morning at the New Music Seminar in New York City, where he and Eric Garland, CEO of Big Champagne (who also unveiled the Ultimate Chart today), gave a State of the Music Industry address. Even if you aren't a player in the industry and only an avid music listener, the figures that Silverman and Garland culled will surely surprise you. Here are a few of their key findings.

A shift from albums to singles

Of the some 100,000 albums released last year, 17,000 of them sold only 1 copy; more than 81,000 albums sold under 100 copies. In fact, just 1,300 albums sold over 10,000 copies, an astonishing figure given that these numbers combine physical and digital album sales. And for physical sales alone? According to Garland, only 2% of new albums on Soundscan sold over 5,000 copies--that's a skydiver's plummet from the golden era of the music industry. This chart shows you how much the industry has changed:

"The music business historically has been built around albums," explained Silverman. "This album-centrism is like saying the sun revolves around the Earth. We don't listen to albums now; we listen to collections of songs."

Of course, the reason for significant single-growth and slowed-album sales is due in part to iTunes hawking every song as a single for 99 cents. "Historically, the price of an album was five times greater than a single," said Silverman, who believes setting the price at a tenth of an album's cost was a mistake and that even $1.29 is too low. "It should've been a $1.99, and then we would've seen higher digital album sales because it would've been a bigger discount for buying an album." But both Silverman and Garland agreed that this is changing, citing the fact that about 14% of all of Universal Music's digital sales are for iTunes "Complete My Albums," a program where you receive credit for having already purchased the single, but have the option to upgrade and purchase the full album. This suggests the $9.99 price-tag is becoming approachable for consumers.

Facebook, Myspace, and Twitter: Track your FFF number

According to Garland, industry folks today are obsessed with "FFF numbers"--that is, an artist's friends, fans, and followers. "It's a race, but to what end?" he wondered. Garland showed through a series of charts how Twitter and especially Facebook are ballooning in popularity for artists like Lady Gaga, while once popular Myspace's numbers are stymied.

However, Garland points out that Facebook recently forced most users into converting their profile favorites into "fan" data, which arbitrarily inflated the social network's numbers. For example, Garland tells the story of how when Susan Boyle's performance first blew up, a friend of his added the YouTube star to his Facebook profile. When Facebook imported this data though, he instantly became a "fan" of Susan Boyle. "[He] had no interest in it--[he] liked her for like 30 seconds, once!" Garland relates. "It doesn't really indicate any consumer activity--it's automated," added Silverman.

Garland's story serves as an indicator of just how difficult it is to figure out the influence of an artist through his or her FFF number. After all, even if Lady Gaga starts losing friends on Myspace, that's less of an indication of her popularity, and more a sign of Myspace's falling use.

Google and YouTube more important than iTunes?

Interestingly, it wasn't Apple that Garland viewed as the most important name in music, even though the company's iPods, iPhones, and iTunes indicate otherwise. "YouTube is increasingly the category killer," argued Garland. "When people ask me what is the biggest name in music in my opinion, they want me to say Apple. I usually answer: YouTube."

Garland told audiences that if you actually look to where people are listening to music--not even just looking at videos--consumers are turning more and more to YouTube, which he calls the "largest catalog of on-demand music on the Internet." If only Google could make this service profitable, right?

Internet radio: Pandora

Garland and Silverman pointed out that Pandora is now the most popular Internet radio service, with a 52% market share, close to 60 million registered users, and more than 1 billion stations.

And in a sign of just how much the Web has impacted music, Silverman told the crowd that Pandora now represents 1.7% of all radio listening--really a shocking figure to think about. Obviously, traditional music media is going away. But is the music industry ready for the change?

Harvard Study: P2P Responsible for 20% of Decline in Music Sales

When it comes to studies of the music business the ones regularly conducted by Harvard Business School are, in my opinion, the most fascinating and the most reliable. So when it revises an earlier conclusion that P2P has an effect “which is statistically indistinguishable from zero” to “no more than 20%” on the decline in music sales it’s worth sitting up and taking a closer look, if for no other reason than to be prepared for a music industry “I told you so.”

Researchers Felix Oberholzer-Gee and Koleman Strumpf (now of the University of Kansas) released the results of a new file-sharing study a few weeks ago that concludes that although file-sharing is responsible for a portion of the decline in music sales its effect has “not undermined the incentives of authors to produce new works.”

Aside from a modest 20% culpability (much more modest by the way than the 100% music industry execs would have you believe) they say that file-sharing has increased the demand for what they call “compliments to protected work” like concerts and concert ticket prices which encourage artists to tour more, “ultimately raising their overall income.” These sales, along with merchandising, etc., have added to artists’ income and partially made up for declining music sales.

More importantly, they argue that file-sharing has not “undermined the incentives of authors and entertainment companies to create, market and distribute new works.”

“Data on the supply of new works are consistent with our argument that file
sharing did not discourage authors and publishers,” they write. “The publication of new books rose by 66% over the 2002-2007 period. Since 2000, the annual release of new music albums has more than doubled, and worldwide feature film production is up by more than 30% since 2003.”

This reiterates the conclusion from an earlier study published last year that found “consumer access to recordings has vastly improved since the advent of file-sharing” and that the resulting “weaker copyright protection, it seems, has benefited society.”

They also take aim at the music industry’s assertion that every pirated copy represents a lost sale.

“In a sample of 5,600 consumers who were willing to share their iPod listening statistics, the average player held a collection of over 3,500 songs,” they continue. “A full 64% of these songs had never been played, making it unlikely
that these consumers would have paid much for a good portion of the music they owned.”

Precisely. A good deal of what file-sharers download is content that they would have otherwise not have purchased. I know of people with music libraries that are well over 300GBs. This amount equals around 51,000 songs. If purchased on Apple’s iTunes we’re looking at around a $51,000 tab. It’s safe to say that nobody would ever spend anywhere near that amount of money on music in their lifetime.

What’s really telling about the whole argument is the fact that artists usually make very little from album sales. Even on the increasingly rare occasion that an album does sell well they don’t see a dime until their record label recoups all the costs of producing, distributing, marketing, etc..

NPR CEO: Internet Radio Will Replace Terrestrial Within 10 Years

Speaking at the D: All Things Digital conference in California, NPR CEO Vivian Schiller predicted that Internet radio could replace traditional, terrestrial radio as soon as five years from now. Schiller said that over the next 5-10 years, Internet radio will take terrestrial radio's place, but for now, it is adding to their total audience. According to Barron's, Schiller said that online listening is not cannibalizing their on-air listenership and the idea is to simply have the widest reach. She added that she expects all cars to offer Internet radio in some form.

Schiller also noted that the company simply calls itself "NPR" now, not National Public Radio. NPR has no plans to charge listeners for online content. If the content becomes profitable online, stations could possibly be charged at some point, but the end user will never be charged.

Schiller revealed that the NPR app for the iPad has been a huge success, downloaded almost 300,000 times already. This is an impressive number, considering Apple just revealed that two million iPads were sold in the past two months, putting NPR on almost one in seven iPads out there.

Schiller also said that while she doesn't like doing pledge drives, and that no one really likes them, the tactic works and NPR raises $300 million a year from them. Only ten percent of NPR listeners currently contribute financially.