EMI music is sold to Universal. We're down to three major labels.
bbc.co.uk
bbc.co.uk
There will still be a role for managing and promoting talent, but it will look more like marketing and less like distribution. It will have less dependence on intellectual property in the form of recordings (which are easy to reproduce) and more in the form of brands (which are hard to reproduce).
In startup parlance, the “moat” will be the artist’s brand, not the recording.
Piracy has been falling as a primary mover of free music for quite a while now.
The shifting of the market to branding and merch has been going on as long as I've been in the industry. I was a big part of it at Warner for a while, in our direct-to-fan initiatives.
The problem is where money in these companies is invested. They need to be technology oriented entities, but don't want to be. Apple cleaned the clock on that, and they let them.
I wouldn't be surprised if that income is quite substantial.
Probably costs more to account it to the artist than the actual royalty.
"Youtube partners will make in the range of $2.5 to $5 per 1000 video views The most popular stars will earn $5 per 1000 views. This can really add up if you have 1 million views per video. Nigahiga for example, will earn $5000 per video they put up. This range can vary depending on number of advertising clicks."
http://www.independent.co.uk/life-style/gadgets-and-tech/new...
"Shane Dawson's estimated earnings from YouTube advertising on his video clips in past 12 months: $315,000"
I'm sure it varies wildly based on content, how the users got there, etc
You could also go to their concerts, buy their gear, go to their appearances, etc.
This is how music industry works in Korea, where most all music is given away for free
Also, I don't know about you, but the idea that you should support musicians by buying "gear" (I assume you mean stuff like t-shirts) just seems very, very mixed-up...
Music was free before copyright came along in the last couple of centuries, and is natural for it to be free again now that distribution and sharing is even easier. Already there are plenty of people releasing their music for free, and there is no reason why everyone shouldn't do the same.
But in a way it's a shame for the labels, because while obviously there role as gatekeepers and distributors has been usurped, they do have extensive back catalogs which should now be more lucrative than ever due to the enhanced availability. Whereas before shops could only stock so many records, so most of the back catalog languished in obscurity or mail-order catalogs, nowadays it's on an almost equal footing with new releases. This was music the labels invested in and nourished for decades, but unfortunately due to the effects of piracy (including the white-flag cooperation with Spotify), they won't be able to harvest the fruits of their labour.
As for the artists themselves, frankly I think music is going to suffer. For established acts it might mean more freedom, and for fans more music, but the risk-reward relationship has been all messed up hence why despite having double the population we have nowhere near the quantity of great young songwriters launching careers as we did in the 60s. The 'get rich, be a star' allure has evaporated, replaced with the ordeal of American Idol / X Factor.
spare the rants about labels ripping of artists
With dwindling sales they seem willing to further exploit their one resource, the artist. Artists on twitter are talking about getting monthly cheques for ~7 cents from Spotify. Guess who made that contract?
I feel like we're about to hit a new low for professional career musicians. Their existing structure is falling apart (and it should) but the replacement is not quite ready. Today's professional musicians have to tour constantly to be profitable enough to survive, not to mention constantly churning out new tracks to remain relevant.
It's a tough gig. Signing to a major label is not a great move financially (cue the albini essay), they're in dire straits and will exploit you for every dollar you can generate, leaving you with little but debt.
I hope that in the future, the fat will be trimmed from the industry (good riddance) but a sustainable model will be created where the artists and minimal management make healthy livings without being run ragged just because they devoted their lives to making music.
I think this is just the nature of the beast, so to speak. Due to the large number of musicians, the very, very low cost of recording a track, and the global, nearly free distribution channel of the Internet, the value of a pre-recorded piece of music is practically $0.
However, going to a show, seeing a real performance, feeling the music, etc etc, is still worth $10 a ticket to me, even for music that isn't particularly good. You can't copy/paste that experience on to someone else's iPod.
Right now we have basically the two mentioned modes of contact with the artist: listening to their released music and seeing them perform live. Already big concerts have been adding revenue streams with things like VIP tickets or a chance to meet the artist, but what about more streams in the online domain? David Lynch is a bit of a pioneer in this space, from what I gather his website has a paid-subscription model where you get access to a ton of his work from finished pieces to random things he does through the day. If some of my favorite artists had networks like this I would consider subscribing.
If you really want to change the game, first change the vocabulary and context and the game will change itself.
The value remains the same; The sum of the marginal benefit of hearing the music each time, which is likely greater than the $0.99 that people pay for a song on iTunes (otherwise they wouldn't pay it). If you aren't willing to pay for the song but is willing to copy it from someone's iPod if given the option then the value of the song is the opportunity cost of doing the actual copying.
As a professional musician I think this is correct.
The biggest challenge that I face is in my career (besides the creative challenges of creating compelling music) is this: there are very few smart, talented people who have an initiative to help me develop my career AND the skills to do so.
My current annual income is X, derived primarily from concerts.
If I had the right people helping me this could easily become 6X, and I would gladly pay my team of part-time helpers a substantial percentage of equity to make it happen (rather do more than less, bigger pie to split).
But chances are the people with the talent to make that happen would rather do other things that will:
- make more money - will be more fulfilling than, say, cold calling venues or other less-than-edifying things that, ultimately, make or break a career.
When I read about the idea Derek Sivers had to get people to specialize in 'Muck-Work' I got really excited.
If someone created an oDesk for musician's specialized helpers that were good at a myriad of very limited, but important tasks, they could make a pile of money.
It's easier said than done. I think Derek realized this and that's why we're still waiting for Muck Work to launch...
Incidentally I just ran into https://twitter.com/RentARep - while seemingly rap-oriented they seem to be entering the market that you are envisioning.
I'm wondering if this business opportunity requires a physical encounter or could be done remotely. I actually would love to support musicians and other artists/talented people by doing their Muck Work. One of the problems I've encountered informally is that there are major trust issues! My job requires them to trust me and building that trust is not easy, even in person, since there are so many sleazy MBA fraudsters out there.
Fraudsters specialize in getting people to trust them. Honest helpers, however, specialize in helping. I find that the fraudsters are accorded more trust than me, even though I don't have a scammy bone in my body.
I find it highly rewarding to help others focus on and develop their talents by moving the furniture out of their way. I actually just love seeing artists express themselves and so that motivates me to do their Muck Work. (great word for it by the way)
Regarding trust issues, that is an excellent point. It is ironic that you would like to help, but can't for lack of trust.
The easiest way to overcome that is to make small promises, then keep them/over-deliver.
Most people who try to help musicians have good intentions, but are not actually effective. They make promises, then fail to deliver, leading to disappontment for all.
My two cents: a person who would like to help should just identify an area in which they have real experience, and focus on that, insted of 'dabbling'.
For example, I have professional photographers, sound engineers, designers who essentially donate their time, or work at a huge discount, as a way of supporting my work. I find that VERY helpful.
As a counter-example, I've had people offer to help cold-call potential clients, but these people have no experience cold-calling, so it has been a big waste of time.
oDesk has been infinitely more helpful in a matter of months than any of the 4-5 people in 1st world countries that I've had try to help over the years (which led, in turn, to me being extremely cautious about help).
The capital costs of producing and (more importantly) distributing popular music have fallen through the floor. The heavily-promoted music products people think of when they think of EMI or Warner are in large part contrivances that exist primarily to perpetuate EMI and Warner.
The future barely even belongs to independent labels like Matador. Eventually, the Internet and commerce are going to figure out how to let any artist effectively be their own "label", outsourcing every function served by a label today to some Internet startup.
This is one reason why "buying the whole music industry" would be a stupid decision by Apple. We're always staring so intently at the next 12 months, but if you move your gaze upwards just a few fractions of an inch you can see that none of this stuff is going to matter. Labels are a bad investment.
Matador for instance is distributed by ADA, who, guess what, is owned by Warner Music Group.
The music business is much, much more complicated and convoluted than any glib comments like "who cares?" can summarize.
TuneCore or The Orchard or CD Baby sort of do the same thing, but without international reach and without all the DSP relationships.
Stuff doesn't just magically show up on iTunes, Spotify, Rdio, MOG and god knows how many other places (including promos to radio, etc). It also doesn't automagically show up with cutouts and exclusive tracks depending on the retailer.
Also who do you think manages publishing catalogs for bands like Radiohead (Warner) or Arcade Fire (EMI)?
Best Buy will likely eliminate music from their planograms by next year. So will Target and Wallmart at some point. They mostly have. That doesn't mean that an upstart can disrupt the space. There are huge market barriers to entry.
I'm not bullish on the prospects for small music startups. I wouldn't start one. But that doesn't mean that the middleman roles in distribution and promotion aren't going to be taken by some new entrant.
Compare: Ticketmaster has what seems to be a mortal lock on the business of music performance. But concern promotion is a relationship driven business where firms compete to lock up exclusives with a few venues in each market. None of those venues are particularly interested in vertical integration. So Ticketmaster is likely to hold on to their market position until forced out of it by a huge company or government action.
Why, exactly, is Amazon or iTunes going to abet attempts by firms like Warner to lock up distribution? Amazon has already aggressively positioned themselves up against the major incumbents in publishing. Remember, all they have to do for music is to let more small labels interface with them; unlike the agency debates in publishing, they don't even have to fight the business model.
I just don't see it. However complex you think the music world is, so that we need firms like CD Baby to get artists listed on iTunes, I just don't see why 5 years from now a label like Kill Rock Stars is going to need the relationships it needs now to gets its products into the mainstream market.
It is going to get easier for companies like KRS, and harder and harder for firms like Warner. It just looks like it has to.
But they also do management. Without a startup that tackles the management side of things (which is pretty complex relationship wise, this includes relationships with venues and between producers and bands, just so much) attacking distribution is only half of the issue
- Management
- Tour support
- Publicity (photos, PR, etc)
- Radio promotion
- Video promotion
- Tour routing and agent of record
- Marketing
- Distribution and Sales
- Websites, fanclubs and direct-to-fan
- Merchandising (physical and e-commerce), including distribution/sales (Hot Topic, etc)
- Art
- Video production
- Online marketing and community management
- Partner relations
- Licensing management (sync, etc)
Not all labels do all of this, it is case to case. Even labels in the same parent corp (UMG, EMI, Sony or WMG) don't do all of these. Indies vary as well.
To be defensible, a major label should hold a significant competitive advantage in providing the service.
For instance, distribution and sales has been locked up by major labels for a long time because they have the infrastructure and relationships to strike deals with major retailers.
But direct-to-fan isn't defensible and websites aren't defensible.
To be viable, the service should matter 5-10 years from now.
For instance, video promotion is likely to be relevant for many years; it's expensive to produce an excellent music video and channels like Youtube mean they continue to matter.
Terrestrial and satellite radio promotion on the other hand is going to be irrelevant in 5 years.
So that may not be much of a lock-in for the big music labels.
So long as terrestrial radio matters, they can parlay their ownership of that channel into many other offerings.
But one by one, the things that major labels maintain structural advantages in are falling into irrelevance.
One day, and it won't be long from now, the last relevant thing that major labels own will fade into irrelevance. And then all the other things that major labels "do" will be "done" by lots of other companies, more agile companies, companies that focus on just those things. And that'll be the end of the major labels.
This isn't exactly insightful stuff, is it? I feel like you can pull case studies about it from the history of 20th century business.
Apple could use, say, a third of its cash and own the entire music industry outright? not that the labels would ever sell, but still. amazing how tiny that industry is given how much noise it makes.
A bit above $4bn total, according to the article: "recorded music unit" goes to Universal for $1.9bn (£1.2bn), "music publishing unit" goes to a consortium led by Sony for above $2bn.
EMI had been bought by its (now insolvent) owner in 2007 for $4.2bn, although it was apparently widely overpriced.
> Apple could use, say, a third of its cash and own the entire music industry outright?
Maybe less than that, a third of their cash reserves would be what these days, $26bn? The regulatory agencies would also have to agree, of course.
The business models are fundamentally opposed, and Apple's is winning. Buying the big labels wouldn't change that, it'd just be throwing a bunch of money at shareholders who hung on too long.
Their back catalogues have value, but Apple could just license them ad hoc.
Then again, by the time they do, they just might stop mattering altogether. I keep hoping for self-implosion, anyhow.
Can you give an example of a company that achieved and maintained monopoly control of a free market?
> With monopoly comes political power and this leads to crony capitalism.
I think it's actually the opposite: monopoly is born out of crony capitalism and political power.
The only monopolies I'm aware of (railroad, telecom, power) are government granted monopolies.
Anyway, I'd be curious if there are any free market monopolies because I've never heard of any.
Now you may argue that the OS market was not technically free (as none has been in history of mankind), but I don't see any reason that why a better product would not gain monopoly in free market, and then, barring any restriction, why would the monopolist not (ab)use its power to maintain monopoly.
Windows for all its market share, has still coexisted with Mac OS for decades. During that time computers have become more affordable, more prevalent, and more useful and having a dominant single platform seems to have been beneficial to many industries. So again, I don't see what the big problem is.
The only monopoly that seems genuine to me is (/was) DeBeers diamonds, although the fact they have no control over the sale of second hand diamonds makes me question its authenticity.
Can't we admit that monopolies are basically a myth? Why do people keep bringing them up as if there's numerous examples of monopoly abuse or monopoly-induced misery.
Exactly. The only monopolies that have ever existed in history are ones given monopoly privilege by government force.
Can you elaborate? I don't understand what you're trying to say.
On the otherhand, there are now a million indie labels, and lots of success stories from people using the internet.
Exactly. As long as there is free competition among labels (i.e. music producers) there will be continually lower prices (i.e. better contracts) for musicians.
And the "million indie labels" have brought much more competition.
I would say overall it is a great time to be a recording artist.
It's a great time to be a recording artist and be self sufficient. If you want to be the next U2 (or if you are U2) it's rather difficult and will remain so.
People speak about disruption. This industry is ripe for it, but it won't happen until a lot of the past is weeded out through attrition and better players take hold. It'll take an inversion in corporate structures.
Right now its too easy to never sign a band and just mine catalog for a long, long time. Hence the value in publishing assets, and the value in mechanical for catalog.
I also think the Internet is overhyped in terms of letting indie artists get heard. It makes a great news story but it's still incredibly rare, possibly even rarer than getting major label contract.
I'd say more competition at high levels is good, there's too much at the smaller level, and the web makes it easy for any schmuck to release music no one cares about. There has to be a better way!
When I was younger I used to be one of the schmucks releasing music no one cared about online so I'm allowed to say that haha.
These are small artists and small labels who often record music because they love to do it, and they chose to do it in whatever way is most comfortable for them. Not everyone in the music industry is in it for the profit.
Also, the Beatles are on Apple Records which was/is their own label (but still under the umbrella of another label, possibly Columbia, I think).
My broad strokes are correct but the details are questionable. I'm a big Beatles fan so I had to take a stab at answering your question. Keep those facts in mind on your search for answers.
It's a complicated arrangement, When in 1989 Paul McCartney wanted to print the lyrics to Eleanor Rigby and other songs for a tour, he discovered he'd have to pay a fee to Michael Jackson.
They broke this twice. Once in the 80s when they released music hardware, and in the 2000's when they founded iTunes. The Beatles weren't pleased about this contract breaking, so they denied permission to distribute the Beatles on iTunes.
Who knows what the industry will look like in 3 years. UNI might even decide to bail on the deal by then.
EDIT: changed the link to a non-paywall one
That said, I've seen friends of friends at iTunes start micro-labels that seem to focus more on online & concert only efforts.
I'd be more concerned about consolidation if it was the 90's again.
Update: Yes, you guys are right. I'm spoiled - I live in Austin "live music capital of the world" and have mostly non-pop taste in music.
In your world perhaps, but a lot of concert festivals and blogs have heavy involvement from major labels in promoting content. It might look like these blogs discover bands out of nowhere, but I promise you they are forwarded a ton of content from labels.
For example, take Mo'Wax from back in the day. Under James Lavelle they cultivated an impressive collection of up and coming artists in the electronica scene. Finding similar artists became a breeze by browsing through their artist roster. Similar things can be said about Breakin' Bread and Metalheadz
Problem is that record labels became to large and too broad. Their only real purpose to create revenue instead of giving exposure to artists.
It was something like 1:1:2:3 (e/w/s/u) weighted by catalog ("impressions"). Now it would be like 1:2:4 Universal controls the more than half of said impressions, speaking of western mainstream music.
(Luckily, they also seem to be the sanest of all four)
It seems like this industry is prime for disruption and I'm not talking about the kind of disruption the current startups are doing. I see a ton of startups focusing on getting music to the consumer but what about startups that focus on grooming new talent for the big time?
We've got YouTube, SoundCloud and the like that make getting heard easy but the onus is on the music maker to spread the word. No one will listen to your song on these sites unless they're being promoted. It would be cool to have a new kind of "major" label that gets you exposure in a way the majors do but without totally screwing over the artists. Most musical acts make burger-flipper salaries and do tons of exhausting work because the deals they sign are heavily favored toward the label.
Or maybe like a universal label like BankSimple (now Simple) but for music labels.
On second read, I think this sounds vague and kind of naive. Oh well. Is anyone doing anything like this that I don't know of or has it been thought of and found to be a bad idea?
Pick the most promising unsigned bands out of a set of applicants, and give them access to smart folks who have experience with being successful in the music industry along with other promising bands?
Bands don't IPO or get bought out, but a deal for percentage of revenue might still be viable, sort of like a manager/agent contract. I have no idea what the potential upside of a successful band is, so I don't have a clue whether the numbers add up to make the financial aspects of this work the way an incubator does, but it seems like it's worth exploring.
The band would still be in charge of their destiny, unlike with a major label or some more onerous types of management contracts. They would just have a access to a lot of insight and help toward achieving that destiny.
Before vinyl records people would pay money to see a live musical performance. Operas, musicals, concerts, a live event people can go to and enjoy. The concept of paying money to listen to a pre-recorded performance is a relatively new phenomenon. It only made sense during the short time window when the ability to copy pre-recorded music was expensive. Now that the cost of digital music reproduction is zero, there is no legitimate way for this industry to continue, and there is no real reason for it to continue other than if it is legislated to continue.
In 2010, vinyl sales were actually higher than in 1991, the last year the majors were distributing most releases on vinyl. 2011 looks like it could be up as much as 25% over 2010.
Why is this? Well, at least for me, it's a much better value proposition, despite being substationally more expensive. Full size art, much better sound quality, etc.