Part 2: The Melting Iceberg Syndrome, The Music Business And The Change Under The Couch Cushions

By Jeff Price

On the other hand…perhaps, since the beginning of the music business, more artists are earning some money for the first time as opposed to a few earning less.

In the old school model, an artist got signed to a label.  The label would agree to pay the artist a negotiated royalty rate on each CD sold; usually around $1.40 to $1.70 per album. The label would then advance the artist band royalties from their “to-be-earned-in-the-future-CD-sales.”  The artist would  take this money (their own royalty money) and use most of it to record the album that the label would own and control.


If the label advanced the artist $100,000, it meant that on the first 71,000 copies of the CD sold, the artist would get no additional royalty payment as the label already gave the artist the money (100,000/1.40=71,000).

In addition to the advance used by the artist to record an album, ultimately controlled by the label, the label would also stipulate that some portion of marketing costs — out-of-house press, video production, tour support, etc. — were also recoupable advances of the band’s own “to-be-earned” royalty money.

If a band did not “hit”, they never earned back the advance and therefore it did not matter to the artist’s bottom line if the label made $7 off an album or $.0003 from a stream — none of this money would ever make it back to the artist.  It’s the label that got hurt.

If the band did pick up momentum, than a label would pour more money into the project in hopes of getting it to hit.  More money pouring in means more money being advanced, means more CDs need to sell in order for the band to recoup.  Once again, there is no band royalty flowing back to the artist.  As a matter of fact, well over 98% of artists on major labels never recouped and never earned another band royalty aside from the initial advance and marketing spend. For the artist, it almost just did not matter how much the label made off the sale of the music; they simply never recouped back their advance, and they would make their money in other ways (gigs, merch sales, publishing income for the songwriter etc).

If a band became one of the fewer than 2% that became a “hit” (think Lady Gaga, U2, Led Zeppelin, etc), they would recoup and most likely get paid their band royalty unless their contract was up at which point they would demand HUGE royalty advances to “re-up” (i.e. re-sign) with the label.  For these elite few that actually do recoup and receive artist royalties, it is quite possible the amount they earn from streams will be less than the amount they would earn from a full $17.98 list price CD sale.

And this system existed for the few elite artists that got signed and were let into the system.  The other 99% of artists, tens of millions of artist around the world, never even got a chance to earn anything off the sale of their music… until now.

For the first time in the history of this industry, music stores like Amazon, iTunes, Spotify, Rhpasody, Napster, eMusic, Rdio, the forthcoming Google service and all the other digital music stores have the ability to “stock” ALL music by ALL artists, and they have the desire to do so.  And for the first time there is now a way for all artists to have their music available for consumers to find, listen, share, discover, stream and buy.

With access to distribution, for the very first time, hundreds of thousands of artists are now earning money from the sale or stream of their music that in the past would have earned nothing.

Now add to this the fact that today’s artist is also often the record label, the songwriter, the performer and the publisher.  Each one of these categories also earns money — each distinct from the other — that flows back to the artist/songwriter/performer/label/publisher.  Yes, each one of these income streams might be the equivalent of some change found under a couch cushion, but together they start to add up.  Now add one more upside: more artists are becoming famous.  Once you are famous, there are even more income streams that can be created: merchandise deals, gig income, fan club membership, on-line gig performances (like stageit.com), ad money, sponsorships, stem sales and so on.

I don’t see the big icebergs melting, rather I see them floating into new seas with new ways to make money.  I also see many more artists making some money, and in some cases, more money than ever possible in the old model.

Most radical shifts bring change, how you view and address this change (glass half empty or half full) has a lot to do with whether you succeed or fail.

Part 1: The Melting Iceberg Syndrome And The Music Business

  • http://www.anotherfineday.co.uk Tom Green

    The problem is in the numbers. To get anywhere near Amy kind if living wage, from streaming income, will require literally millions of people streaming your music, and the promo costs of getting to that point will stay well outside the reach if those 99% who won’t get a major label deal. Occasional virals( Rebecca black) aside, it’s just not going to happen. Various copyright reviews along the way may well mean that rates paid will be even less than now, since those operating the streams will have the power to force PROs to lower them, because at the moment, even with rates as low as they are, Spotify et al still aren’t in profit.
    Yes, we can all make and release music now. But those actually making a living will probably less than before, since only that top 2% will be making a profit. All those who used to make a tiny living from indie deals making jazz, world, and other niche genres, now won’t be able to- the margins just aren’t there.
    I do try to see the glass as half full – but I simply don’t see how the numbers can add up to anything good.

  • J.O.B.

    I agree with the writer. I believe the only losers in this revolution of the business of music, are the old Record Companies, that by now, are running like a chicken without a head, trying to figure out what hit them and how to make a buck in the future.
    Meanwhile, the musicians have a new hope. At least they can be heard and their music is available for listeners to buy it.

  • http://www.myspace.com/yvesvilleneuve Yves Villeneuve

    Streaming services could never capture as much market share as download services.
    To justify a $10 monthly subscription, a person would need to normally buy 8-12 albums per year at $10-$15 per album. These types of consumers are very rare. If you don’t believe me, ask around.
    For streaming services to capture a market share equal to download services at the moment, streaming services would need to charge $1-$2 per month, hence greatly reducing the revenue pie for everyone.
    The only logical and fair model is the download model where consumers spend on music based on how much music they consume.
    The naysayers of the download model are almost always the ones that consume vast amounts of music on a regular basis.
    If people can’t find your music at subscription services, fear not, they will find it a download services.

  • http://johnmontagna.com John Montagna

    I’ve been a full-time, professional musician for 15 years. All of my money – ALL of it – has been made playing live. Theaters, clubs, hotel ballrooms, people’s backyards, you name it. It’s real money, handed to you by real people for a real job that’s done in real time. I also have 3 CDs up on cdbaby, but chasing money down from even a simple business model like theirs is a task that I don’t have the time for. (Good luck successfully linking your bank account to theirs, BTW.) And paying $10 to ship $20 worth of inventory to Portland? Honestly.
    We’ve all gotta get up on stage to make a living. Period. Sitting back and collecting royalties on some shit you did years ago is a thing of the past, except for the luckiest few. Nice work if you can get it, and I congratulate those who have. But otherwise, get up onstage and put in an honest day’s work like everyone else, and stop whining about “the death of the industry.”

  • http://www.soundclick.com/petedowan Pete Dowan

    Some of us have no choice … I am medically disabled, unable to perform live or even use professional recording studios, and therefore of no interest to the major labels anyway. The ONLY way I can get my music listened to is via the Internet, and anything earned from that is a bonus.
    I like the fact that at least there is a possibility of my music being heard … it won’t be lost by being stored on a shelf in the basement. In some instances, once your song is on a site, it’ll stay there. Not everyone can “make it”, but everyone has a chance to “make it heard”. Who knows, something could garner attention years from now just because it’s available to be accessed.
    AND THAT’s GOOD !

  • http://bandwith.org Tony

    I don’t think anyone would disagree that the music industry is changing… but I think it is important to remember that while the big labels have lost market share, they are not going to melt completely away any time soon. They will be a part of the new music movement in some way shape or form.
    As far as the artists that are in that 2% making pennies on the download, I think they have to be open to new ways of generate income. By becoming YouTube Partners, taking advantage of new online marketing strategies, putting your product in front of more and more people by being smart/tireless about music placement, artists can expand their earning potential. The use of sites such as ReverbNation, Purevolume, and Bandwith.org can expand your fan base, adding a few pennies a month while costing you nothing (depending on which sites and packages used). These sites, in combination with larger music distribution and streaming sites, should be a part of every serious artist’s cyber-plan.

  • http://www.anotherfineday.co.uk Tom Green

    Either that, or for those of us who can’t do the live thing on a regular basis ( not all can) study the sync, library, and commission market, and hopefully do well enough there to act as the ‘dayjob’.

  • James

    Haha! WOW Tony, I like where your heads at! Live shows is what it’s all about man! While it is impaortant to do what we can in all areas of the industry; thanks for brining the focus back to where it should be… The stage… in REAL time, in front of Real people.

  • http://www.thelastpiano.com Dan Dwoskin

    Amen, John.
    The era of recorded music has been weakened by MP3s, period. Streaming or downloaded, recorded music now has a nano-second shelf life. And best of luck getting proper commercial radio play without the long arm of a record label. Though let’s not get too cynical, shall we?
    I still find much value in recordings, mainly because it allows us to hear music we never would have had access to in the past, and in vast amounts to boot. This is also a bonus to Streaming (remember, exposure is almost as good as money for an up-and-coming musician). But the medium has devalued music to the point where we are fighting tooth & nail to have our tunes in the next thirty-second iPod commercial so our audience will flock to their computers. 2% chance indeed.
    Not to bash TuneCore, because I am indeed a big fan, but we must earn our keep by playing show after show after show after show; This is the only way. MP3’s & CDs are more like a business card. I don’t mind it, because in the end it will weed out the real players from the ones who can’t cut it. Survival of the fittest, baby. Live is, and will always be, what separates the mice from the musicians.
    There is always a way to capitalize on great art. There always will be. Bank on live experiences…they are unique, tangible, and still in healthy stock for the time being…if Live Nation doesn’t kill us all :)
    d.d.

  • http://audioautograph.net AJ

    Recorded music is mainly just for promotion for the artist’s live shows, merch, etc.
    The Money is made from merch and gigs. The recorded music is just a promotional tool mainly. The recorded music generally is “Not” where the money is made, it’s what hopefully makes u fans that are willing to pay to see ur shows and buy ur merch

    • Greensleeves32

      recorded music is so much more than that… while you can’t replicate a live show through a CD, you also can’t take the show with you. Don’t be the guy that diminishes recorded music if you love music so much. If nothing else, try to understand and learn how much time, energy, expertise and money goes into making quality recorded music, then I wonder what your opinion on the value of recorded music would be… just think about it before saying it’s just for promotion…

      • Greensleeves32

         it’s sad that there’s no one lobbying for the artist or the regular person these days… it’s always for the companies and the “haves”… while 99% of us are the “have-nots”… Valentine Azbelle has the right idea imho

  • chuck

    It’s very refreshing to see these opinions published. There’s a snarky ‘cool’ factor with music fans and the music industry that doesn’t address the demise of music publishing. If you stick up for music copyright, the music fans shrug and call you a ‘square.’ Music fans expect FREE music today and they get it by the Terabyte.
    The supreme court rejected Google’s request to scan all books. Yet the telecoms and ISPs of the world profit on FREE music.
    A decade ago, it was common for a band distribute and sell CDs or vinyl independently and re-coup some money from the costs of recording and manufacturing. Now, I rarely see people buy CDs or vinyl even at concerts, forgettabout mailorder. It’s more common for them to say, I heard it on myspace already or I ripped it.
    Where does that leave TUNECORE? Seems like they are profiting from musicians wishing to promote themselves digitally in this new melting iceberg model. Part of the reason I’m writing this message is because it’s good to see a music promotion company that is taking the time to think deeply about music publishing and copyright.
    Thanks for reading my thoughts and cheers to Jeff Price. for speaking up.

  • paul proudlove

    can i change my global footprint?

  • http://itunes.apple.com/us/album/brakk-shop-single/id427223912 george

    I’ve had tracks played on the BBC and here in the states.
    I needed a way to market and sale my music world-wide; tunecore is the best way to do just that without all the razzle dazzle ! If your Garth Brooks or Christin rock, sale all the cd’s you want but the future is today and today the masses(if they re buying) are buy amazon and itunes…..o-and, not all listers go to live shows every time they would like to hear a favorite tune guys. lets stay on topic!

  • http://www.myspace.com/yvesvilleneuve Yves Villeneuve

    If I may add, performance venues have limited seating capacity while download retailers have unlimited shelf space and shopping convenience.

  • JIMMY NERO

    HALO MY NAME IS JIMMY AND I’M AN ARTIST IN NEED OF HELP TO LEARN THE BUSINESS SIDE OF THINGS AS FAR AS THE MUSIC INDUSTRY IS CONCERNED. IF ANYONE IS INTERESTED IN HELPING ME IN THIS MATTER YOU CAN EMAIL ME AT AND YOU CAN HEAR THE MUSIC THAT YOU WILL BE INVOLVED WITH AT . I HAVE TO BE HONEST WITH YOU I’M NOT FINANCIALLY STABLE TO PAY YOU UP FRONT. WE WILL HAVE TO NEGOTIATE ON PAYMENT AS WE GO WHAT EVER IS AFFORDABLE AND WHATEVER IS FAIR AS FAR AS ALL PARTIES ARE CONCERNED. AGAIN IF YOU ARE INTERESTED ON THE SPREAD OF THE GOSPEL WHICH IS BIGGER THAN MONEY NEVERTHELESS GOD DESERVES THE CREDIT ALWAYS. I WOULD RATHER THAT BE YOUR REASON FOR HELPING OVER THE MONEY NEVERTHELESS. WHOEVERS INTERESTED YOU CAN EMAIL ME AT . AND TO HEAR THE TYPE OF MUSIC YOU ARE GETTING INVOLVED WITH YOU CAN HEAR AT . GOD BLESS AND THANK YOU

  • http://www.mrmindz.net Frank ” Mr Mindz ” Jones Jr

    Ok its possible to make it but im more leaning to the upside of things . Music Has become less valuable . Point blank period . Decline in something usually means that the value of it has been lost and people found something else to invest in . To me I haven’t lost faith but now i have realize that music has become diminish in what it use to be ! No longer are we gone be able to just do one thing . We have to be all over the place and constantly be there . Streaming is the new revenue , No Indie artist gone be able to make any money to actually support theirselves . So the question is this ? Since the market has change drastically . And now the geeks aren’t ruling the internet no more . Now you have the big boys with no brains or talent of thought at all trying to do more than their allowed , Messing it up For us all . Music has became diminish over the years . This isn’t the nineties no more . This is 2011 where everybody with a laptop and a computer consider theirselves a producer or an engineer . As we move towards an technology age . We are slowly losing the art that we consider so special . We are becoming robots that will become useless only to follow orders . Maybe im thinking to far ahead of myself and maybe you wont understand what i just type to you . But let me sum it up in one sentence . MUSIC IS BECOMING WORTHLESS AND ITS NOT YOUR FAULT ! My Two Cents That Won’t Buy A Piece A Candy .

  • http://www.mrmindz.net Frank ” Mr Mindz ” Jones Jr

    Ok its possible to make it but im more leaning to the upside of things . Music Has become less valuable . Point blank period . Decline in something usually means that the value of it has been lost and people found something else to invest in . To me I haven’t lost faith but now i have realize that music has become diminish in what it use to be ! No longer are we gone be able to just do one thing . We have to be all over the place and constantly be there . Streaming is the new revenue , No Indie artist gone be able to make any money to actually support theirselves . So the question is this ? Since the market has change drastically . And now the geeks aren’t ruling the internet no more . Now you have the big boys with no brains or talent of thought at all trying to do more than their allowed , Messing it up For us all . Music has became diminish over the years . This isn’t the nineties no more . This is 2011 where everybody with a laptop and a computer consider theirselves a producer or an engineer . As we move towards an technology age . We are slowly losing the art that we consider so special . We are becoming robots that will become useless only to follow orders . Maybe im thinking to far ahead of myself and maybe you wont understand what i just type to you . But let me sum it up in one sentence . MUSIC IS BECOMING WORTHLESS AND ITS NOT YOUR FAULT ! My Two Cents That Won’t Buy A Piece A Candy .

  • http://www.moozi.cc moozi.cc

    Jeff, in your post above you say
    “… for the first time there is now a way for all artists to have their music available for consumers to find, listen, share, discover, stream and buy.”
    For any potential consumer/fan to find the music in the first place there needs to be some sort of marketing campaign (which takes times and money), and the streaming model, if it really takes off en-masse, will not incentivise fans to buy music as they will be paying a monthly flat fee and consuming music on an all-you-can-eat basis, earning the artist practically nothing.
    When you take into account any marketing costs I would say with 99.9% certainty that most, if not all bands, will be making a financial loss on every release. There would need to be around 100,000 streams of one song per year just to recoup the annual Tunecore distribution fee for that single piece of music! It is not a sustainable business model.
    I believe there will be a backlash against the streaming model from the artistic community. Let’s face it, there has to be. I would encourage all musicians to actively opt-out of streaming services thereby forcing fans to download songs if they really want them. I think distribution services like Tunecore need to make this easy and transparent as well, for example with a check box which states ‘Do NOT distribute my music to any streaming services’.

  • Dain

    I think that streaming services could be a helpful promotion tool if the artist could pick several songs that were to be streamed while the rest of their catalog remained purchase only. My understanding is your entire CD is up for grabs via the streaming service. In this kind of situation there is no incentive for someone who hears a song by an artist they like to go to I-tunes and purchase the rest of that artist’s music because they can get it through the streaming service for pennies a listen. I agree that this devalues the artist’s music, but there is a solution.
    My suggestion would be to set up a second tunecore account (I’m not affiliated w/tunecore) with one or two songs and place those songs with streaming services. Then, have the rest of your catalog just on I-tunes or whatever, so people can only pay to download them. Hell, title your CD, “you can purchase the rest of my songs on I-tunes” if you want. I’m not saying that this is a perfect solution, but perhaps if artists use streaming services the way record companies used to use radio (by releasing a single)it will encourage listeners to pay 99 cents for the rest of an artist’s songs. Of course it does not solve illegal downloading, but it is an idea.

  • chavarro_j_d@hotmail.com

    so people i ask where do you think music industry is going???

  • Valentine Azbelle

    OK. I read both articles and every comment. I must say I am a little troubled by the comments implying that only live shows are a measure of a true musician. The Beatles had not done a live show since 1966 and I don’t think anyone would dispute their musicianship. I don’t want to do live shows anymore. I mean occasionally I enjoy it but to have them as your sole means of income? To me that becomes routine and mundane just like any other day job. Might as well stay in IT where it pays consistently and much better. I like working in a studio and would hope to be rewarded for the hard work I do there through record sales regardless of the medium or means of distribution.
    Also please be careful with the whole “survival of the fittest” concept. If you think your instrument and vocal skills put you at the top of the music business food chain, I’m afraid you’re wrong. Ever since invention of the first phonograph the live music has been endangered. Most venues/events these days would opt for a DJ as opposed to a live band (especially an original – non-major – live band). And if DJ’s are able to stream music (as opposed to download to own it) that’s another blow to people who actually make the music.
    I’m surprised how easy people are willing to accept a raw deal. I read many comments where it says basically that the artist doesn’t make any money from record distribution and all of the money from live shows and merch sales. Well, if it works for you – great. But why no income from record sales? Perhaps something is wrong with the distribution model? Why not fight for it? Why give up so easily and just accept it as a given part of the reality?
    The money is not why we became musicians (at least most of us). Nevertheless we all need it to sustain ourselves and to be able to create. The current stream revenue for the artist is laughable. In my opinion the cost of a stream should be about 10th or 20th of the cost of a download to own and should be tracked per an individual consumer to the individual song/artist. Then if someone likes the tune and wants to listen to it more than 10-20 times they will have an incentive to download it. If not, then you get a fraction for streaming but it’s still something. Of course this model is unrealistic considering today’s mentality. The streaming services want to provide unlimited streaming for a monthly cost of a single CD, which basically means that now hundreds and potentially thousands of artists must divide a profit from a single CD between them. And the consumer is used to getting music for nothing and will not be easy to change that mentality back.
    The original article (part 2) says that now “many more artists making some money”. I believe that’s a little too optimistic. Because while that’s true, “some” money is still very little and not enough to make a living. Not to mention the cost of making new music and marketing it to the masses. I’m with moozi.cc (above): the streaming model is unsustainable for a professional full-time musician. And there has to be a backlash against it. Only I don’t think it will happen on its own. It needs to be organized. If there is a lobby to try and influence the legislature in favor of the artists I want in. I can bring my years of regulatory compliance and trade-assossiation experience (non-music related) and dealing with governmental structures. Let’s fight for what’s ours, people!

    • Greensleeves32

      YESSSIRRRR! We need actual representation and lobbyists! My musician brother is a lawyer if you need extra help on this! We need a few famous spokesmen like Tom Morello and Neil Young for instance to get involved… that’d really get things moving! Lemme know!

  • http://www.amazon.com/gp/product/B004JA9C74/ref=dm_sp_alb?ie=UTF8&qid=1299998082&sr=1-1 Erik Peter Hansen

    I am a simple man. I am mentally ill and disabled. I didn’t understand that I would spend 50.00 to get nothing. My album is very specialized towards classical new-age, and those who are interested in mental illness. I have less than any assets at all, and my children’s immediate needs right now are my priority. I now understand that my music is in an endless sea of media. Even my friends and family cannot hardly be contacted and bothered to find the album with all of their social typing away and the endless information and music they receive. Oh well! Life is hard. I guess only the very first of these comments will even be read as well. I don’t think I got ripped off, but it would have been nice to be educated first in what I have to do and pay to get it to work. I guess that would seriously effect sales.

  • http://www.colorfulmusicbabyblue.com Ernie Hines

    Gentlemen,
    To the writer of this timely article, for the valuable information and good sound advice, and for everyone who weighed in with honest opinions and thoughtful input, I thank you all.
    Now it’s up to me to use the facts and what has been discussed to the best of my ability to stay in the game and win the prize.

  • Broke but popular

    I’ve looked & looked, but I do not see “part one” of this article anywhere on this site. Hmmm

    Anyway, I never made money from recordings in the “old days,” yet I made a decent middle-class living as performing rock musician. I can’t do that now because there are hundreds of bands that will either play for free, or even PAY to play. I can’t sell many recordings because there are so many giving their music away. Sure, I have a few fans in Japan, Australia, Europe, etc that I may not have ever reached in the “old days,” but I made more money in one night of performing than I’ve made from all of these new “fans” put together. My music is purchased by one person somewhere, they like it, so they put it up on a torrent site. (I know this for a fact, seen it with my own eyes.)

    I can’t afford a lawyer to do anything about it, so thousands of copies of my music get downloaded, I don’t get paid for any of them. But, whoopee! I gotz fanz, yessiree.

    Can’t earn a living performing, can’t earn enough for a six-pack selling recordings, but man oh man, I should be thrilled to be alive during the best time ever to be a musician.

    • Anonymous

      sorry about that!

      we just migrated the blog from TypePad to WordPress and seemed to not yet brought over part one!

      We will get that corrected

      jeff

      • Broke but popular

        @jeff:disqus – thanks for adding the link. While articles like this are good at explaining the disruptions occurring in the music business, & they encourage us to “embrace” the changes, there is no solid answer to “how can I earn enough to pay my bills?” that will work for the majority of musicians in any of them. Yes, maybe 1,000 times as many musicians are earning a hundred bucks per year from sales of recordings as were 20 years ago, but so what? I can pick up an extra $20 per week by mowing a neighbors lawn, but that won’t be a living nor will it make me a professional landscaper.

        The real problem is supply & demand. There are millions of “wannabes” willing to perform for nothing & give their music away on the infinitesimally small chance that they’ll get famous. A few here & there might make a little news because of some novelty approach they have taken, but within minutes of their novelty getting a headline there will be thousands trying the same thing, and the originators will be struggling again within months. I’ve watched this cycle over the last 5-10 years happen with dozens, maybe hundreds, of friends & music industry acquaintances. None of us have been able to earn what we did as performing musicians 20 years ago, & I still have to meet anyone that is earning anything other than beer money from their sales of recorded music. I have ceased to care why. Sure knowing the “why” can sometimes help with the “how” in a fix, but when it’s pouring rain on my head, I don’t care why water falls from the sky. Just tell where I can get an umbrella or shelter, don’t tell me about atmospheric pressure, moisture capacity of air, temperature shifts, etc, while I’m getting soaked.

  • http://www.jmddistribution.com music distribution

    Independent artists now enjoy full
    marketing support and income generation from JMD Distribution’s digital online
    distribution platform at http://www.jmddistribution.com.

    More artists are now getting the
    breaks. Social media has given them windows from where fans can discover, see,
    hear, and share their music. And thanks to digital music distribution platforms
    like JMD Distribution, independent or unsigned artists now enjoy income from
    music downloads, sans a record deal.