New Rules For The Music Industry

By George Howard & Jeff Price
(follow George on Twitter)

FOR THE MUSIC INDUSTRY:

1) BE TRANSPARENT – No more hiding behind complex royalty calculations.  Man up. Be honest.  Provide clear and accurate accounting.  The digital world makes it easier than ever to do this.

This applies to labels, distributors, ASCAP, BMI, SESAC and anyone else you can think of.  They can all be transparent if they choose to be.  Right now they choose not to be.

2) PAY ON TIME! – No more artificial royalty accounting periods.  Returns and co-ops are a thing of the past.  Pay out and account on one way no return sales that you have been paid in the same month you get them.

The only reason to hold on to the money is to make bank interest on it.  If this is what you are going to do, see #1, BE TRANSPARENT and tell artists you are doing this.

3) NO MORE SUGARCOATING AND HIDING REALITY – Seriously.  Stop promising things you know you can’t deliver.  Not everyone is going to be a star.  Be honest, tell the truth,.  Let the musician and artist know the realities of the market so they can have a better understand of what needs to be done to succeed or why things are not going the way they want them to.

4) ACKNOWLEDGE YOU WORK FOR THE ARTIST, NOT THE OTHER WAY AROUND – Without the artist none of us will have jobs.  They are the ones with the talent.  They create culture and write songs that have an impact on the world.  They are allowing us to serve them, not the other way around.  This philosophy and culture must permeate everything you do.  Turn this industry from one that “exploits” the artist to one that serves the artist.

5) ONLY OFFER SERVICES YOU CAN ACTUALLY DO – No more asking for rights or income from things you can’t contribute towards.  If you are a label and want more money from other areas (i.e. merchandise, songwriter income, gig income etc) you actually have to provide a service that does something to earn that right.  There are others out there that are specialists in these areas, can you do what they can?

6) UNDERSTAND THE ARTIST NOW HAS CHOICE – Unlike the old days, artists can now succeed without you.  Labels have gone from a “must have” to a “might need”.  Be clear in what you have to offer and create a fair and equitable deal in exchange for the services you are offering.

7) COMMERCIAL RADIO AND MTV NO LONGER SINGULARLY BREAK BANDS – It used to be that print, commercial radio and MTV were the three ways to break a band, no longer.  Fans themselves have this power via social networking.  Find ways to speak to fans directly and don’t use a middleman.  Empower and excite them and they will follow.

FOR THE ARTIST

1) STOP ASKING FOR BIG ADVANCES – Understand that the economics of the business have changed for both the artists and the labels.  The goal for artists and labels must be the same: create sustainable working relationships for both parties.  Disproportionate advances only add tension (economic and otherwise) to an already tense dynamic. Create financial working relationships based on realistic expectations of ROI.

2) EDUCATE YOURSELF – It’s no longer acceptable (or charming) to be the un-informed artist who doesn’t know the difference between a mechanical royalty and a mechanic.  You can’t claim that you’ve been taken advantage of by anyone at this point; the information you need is out there, and it’s not that hard to find.  Learn it, once you have this knowledge you can then make informed decisions and decide if the other entity is doing its job.  Not to mention, the labels etc already know this info and so should you.

3) TAKE RESPONSIBILITY – Stating that there is any person or thing standing in the way of you and success is a cop out.  No longer can you say, “If only my records were in stores, people would buy them,” or, “If only people could hear my music they would love it.”  The gatekeepers have vanished; the gates are open…go through them.

4) TAKE ACTION – Waiting for a booking agent before you tour? Waiting for a producer before you make a recording? Waiting for a label before you distribute or promote your music?  Guess what, someone else isn’t waiting for anyone, and he or she is leaving you in the dust.  The worst thing you can do is nothing.

5) SELL – Get over the fact that you’re the artist, and asking people for money in exchange for your art is awkward.  The reality is that if your work is good, people will want to compensate you for it. You must not only give them the opportunity to do so, but make it easy for them.  Be clear and transparent, and tell your customers that your music is valuable, and that if they want to ensure that you are able to keep creating the music that they enjoy, that they must pay for it. Then give them a wide variety of things to buy at different prices.

6) GIVE WITHOUT ASKING FOR ANYTHING IN RETURN – It’s not all selling, of course, and we are all in this together.  Look for ways to help other artists. Share information, share resources.  This is not a zero-sum game; the overall pie can expand, and we will all benefit proportionately when it does.

7) DEMAND ANSWERS – if you don’t understand something, ask.  If the person you ask can’t give you a clear, understandable answer then he or she is either clueless or trying to hide something.   Demand a clear, understandable answer or walk away from the deal.

8)  MARKETING DOES NOT ALWAYS EQUAL SUCCESS – The major labels spent hundreds of millions of dollars marketing and promoting bands.  Only 2% of them succeeded, the other 98% were deemed failures.  If marketing = success, they would have had a 100% hit ratio.  The reason an artist succeeds is because the music caused reaction.

9) LEAD TIME FOR STREET DATES MATTER LESS – It’s not like the old days where you only had a limited time for prime real estate in a retail store and if the CDs did not sell they would be returned.  In the new model you can release music today, and market later, with little detrimental impact.

10) IT’S ABOUT A CONSTANT STREAM OF MUSIC AND MEDIA, NOT A ONCE A YEAR ALBUM RELEASE ­  – The new world moves fast.   The best strategy is to roll out songs, videos, pictures, blog postings, tweets and anything else you can think of on a constant basis.  This keeps your fans engaged and stops you from losing momentum and going stale.

11) IT’S GLOBAL – The new music industry is a global one.  At the click of a button your music is available to buy, share, stream and download around the world.  Keep this in mind when you think about where your money is being held, generated and how to get it.

12) YOU ARE NOT POWERLESS – Music is not food, shelter or clothing, but everyone likes it and needs it.  The music industry currently generates around $30 billion dollars a year.  The entities and people getting this money is shifting from the legacy companies to you.  Within another five years the collective power of you will be bigger than any of them.  You have the power to change things, and you already are.

As just one example, in the past two years, TuneCore Artists have earned over $170 million in gross music sales and have sold over 400 million songs by paid download or stream.  TuneCore Songwriters have earned over another $120 million dollars.

As you sell more, they sell less.

13) DEFINE YOUR GOALS – Know what it is you are tying to accomplish.  Are you looking to be the next Vanilla Ice or just sell some music without touring?  Is your goal corporate sponsorships or having others cover your songs?  Whatever it may be, have a goal in mind and then work towards accomplishing that objective.  With that one conquered, you can move on to the next.

DON’T EXPECT SOMETHING FOR NOTHING

It’s going to take work to make things happen.  Either you need to do the work or you must hire someone else to do part, or all of it, for you.  If you understand your rights, how money is made, and how much you should make, you can make educated decisions.

Got more rules?  Post them here!

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George Howard is the former president of Rykodisc. He currently advises numerous entertainment and non-entertainment firms and individuals. Additionally, he is the Executive Editor of Artists House Music and is a Professor and Executive in Residence in the college of Business Administration at Loyola, New Orleans. He is most easily found on Twitter at: twitter.com/gah650

Is Winning Really Losing?

By Jeff Price

We get hit up by a lot of people and companies asking us to promote “Battle of the Band” contests to TuneCore Artists.  The “winners” receives the grand prize of getting signed.

And I have to tell you, 99.9% of time, I pass on the opportunity, I just don’t feel right marketing and promoting a contest to artist that has the “winner” assign or give up rights and/or ownership of their copyrights to another entity.  I’m not so sure that’s “winning.”

On the other hand, I have always tried to be neutral in regards to opportunities­– who am I to tell artists what they should or should not do.  I certainly have my opinions (the themes of which always revolve around the music industry being transparent, honest and fair), but I believe TuneCore should provide information to educate.  Artists, armed with this knowledge and information, can then pick and choose what they want to do.

So I ask you, what do you think?   Should TuneCore market and promote more of these “Battle of the Band” type contests to its artists?  Where should the line be?  Should there be pre-set criteria allowing some through or should we keep it as is?

We want to know what you think.

Cartel On Getting The Music Out And Label Releases vs. Independent Releases

Atlanta-based band Cartel has had experience with both sides of the music industry.  The band, made up of musicians Will Pugh (vocals), Joseph Pepper (lead guitar), Nic Hudson (rhythm guitar), and Kevin Sanders (drums), has worked with several labels but are now releasing their music independently. With their new, independently released single “Lessons In Love” on iTunes and an EP in the works for September, Cartel is finding success by doing things their way.

Without using the words “alternative,” “pop,” or “rock,” describe your sound.
I would say we draw from a lot of different influences both current and past to arrive at our “blend” of genres. It can vary from Southern Americana to unabashed Pop Punk. From time to time we tend to delve into our “prog” side too but that has a certain tact necessitated to be able to pull it off.

You have over 260,000 facebook friends! To what do you attribute to your large social fan base?
We’ve always been very keen on the fact that the demographic we’re associated with is always “connected” to various social media outlets. With that observation, we committed ourselves at the very onset of the band to maintaining and grooming our fan base in a viral sense. In this day and age, you really have to be constantly updating your profile and notices so that fans and others don’t forget that you’re around. It’s a very ADD generation simply because of the amount of stimulus that kids are exposed to on a daily basis. So if you’re not bombarding them with the status of your band then you’re probably being somewhat forgotten. On the contrary, if you keep blowing up their media feed with updates you might very well lose interest in the same way. Social savvy is an interesting skill that every band needs to have permeate their marketing landscape.

You’ve had several releases through labels, and are now self-producing your albums. Why did you decide to release the last single independently?
We’ve been around the block a few times with labels and each experience has been different. It always sounds bad that a band has been with so many labels but I think it’s a new reality that people must accept. If you’re successful with one label then you’ll get upstreamed and tossed around until you find a home. After all the different situations we’ve been through, the most important thing we’ve learned is what not to do. Not saying that anyone in particular has screwed the pooch but we aren’t naive to the fact that we would have done a few things differently, if at all, had the choice been completely up to us. Now we don’t have to worry about any of that. We have a dedicated, albeit modest, fan base that can completely support our endeavors as long as they’re activated and motivated to support (purchase) our music. We feel that the best way to do that is to connect them with the band directly via an individual “responsibility” we’ve placed on the fan to dictate our future. If nothing else, we can say that we did it EXACTLY how we wanted to within our budget; and we won’t ever begrudge ourselves that opportunity again.

What kind of adjustments have you made since switching to independent releases?
Well, budgets are obviously a lot smaller. When we have to come out of pocket for every little facet of the production it can get a little hairy. So we’ve made adjustments to our expectations. We knew we’d have to do most of the work ourselves as far as the recording goes. I have a modest recording rig that gets the job done on everything but drum tracking. We enlisted the services of Matt Malpass and his studio to track drums then took the sessions back to my house to finish out. With all the advents in technology over the last decade, all it takes is a little know-how and a love of waveforms to get it sounding great. Mixing and Mastering of the record took the priority in our budget since the only knowledge shortfall was in those arenas. We’re paying seasoned professionals to smooth out whatever mistakes we make and ultimately arrive at a competitive product. I think we’ve done very well for our first attempt and we’ll only get better at it in the future.

How do you continue to grow your fan base?
It’s tougher now than it’s ever been. Especially now since we’re getting up there in the age department. I think consistency is the only way we can grow what we already have. We have to invigorate our fans and get them involved in our band so that they feel a sense of ownership of the whole thing. We’ll do that through our continued dedication to quality music and presentation as well as getting on the road and out in front of people. We’d like to help the fans of our genre remember that underground music is only successful if people will come to shows and participate. That’s what it’s all about. Every show is a one time event that only the attendees can witness. It’s a special thing that I’ve been a part of that really can’t be expressed without the firsthand experience.

What kind of management and publicity team do you have now?
We’re working with Ozone management and have been for the past couple of years. With clout like that, we don’t need a label publicist banging down doors for opportunities and exposure. Of course, some of that will be necessary but we’re hoping that a few things fall in our lap because of it as well. On top of that, they’re great people who are fun to work with and really make the whole business side of music a much more pleasurable experience.

You’ve had a great early response from the release of your latest single “Lessons In Love.”  You must have gotten a lot of press! Did you have a marketing plan in place for its release?
Believe it or not, we didn’t really have a lot of press and we really don’t care. Our goal is to make sure our fans know that we have music available and to make sure that they promote it on their own a little. We’ll have a full scale marketing plan for the release of our EP later this year. The beauty of the way “Lessons In Love” was released is that it shows precisely why we are self-releasing our material. I had an interview with “The Gunz Show” on idobi radio and he aired the song for the first time. Once that stream hit the internet, people were going to rip it and download it. As a reactive measure, we bumped up our release plan to accommodate that fact. We uploaded the song on Saturday for a Tuesday release and I think that efficiency helped in making the release a success. It’s awesome to know we can just put something out that quickly without having a label say “wait a few weeks until we can get some ads up on various sites.” I think that mentality has attributed to the current stagnant status of release cycles. There’s absolutely no reason it should take 2 years between releases or for a few 100 ads to hit media outlets before it’s “ok” to put something out. It’s borderline ridiculous.

How do you replicate the marketing/publicity/exposure/opportunities you got when under a label, now that you’re releasing independently?
It’s about going with what you know works. We’re all fans of music and purchase things as consumers. There’s a little intuitive knowledge of marketing just by being in that position and examining it logically. Our budget would never compare to a traditional label’s marketing plan, but that doesn’t mean it can’t be effective.

What projects are in the works for Cartel?
We’ll be releasing our EP in late September after which we’ll do some touring. I {Pugh} will also be working on a solo project after the release as well. Our plan is to keep generating releases as quickly as possible to keep our fanbase excited and ready for new materi

Download Lessons In Love on iTunes

Become A Fan On Facebook

Follow Cartel On Twitter

Gadgets We Like: Daytrotter App Lets You Listen To Sessions Recorded On The Road

Emerging bands driving from show to show take a 2 hour break to record a Daytrotter Session at The Horseshack studios in Rock Island, IL.  During these sessions, they play on borrowed instruments grab some grub, and then hit the road again.  The product of their sessions?  Four songs that entirely represent the passion of the artists in that exact moment.

At the best price, free, you can get the whole Daytrotter session library as an app for the iPhone, iPod Touch, iPad, and now the Android.  Along with the tracks recorded in the session are the feature articles, original artwork, and set list. These sessions recorded on the road can now hit the road with you.

Many TuneCore Artists have recorded Daytrotter sessions including: Thieving Irons, Fang Island, Harry and the Potters, Eef Barzelay, MGMT, April Smith And The Great Picture Show, Best Coast, Brett Dennen, David Berkeley, and Matisyahu.

Download the free Daytrotter App on iTunes

Learn more about Daytrotter

The Many Hands In Your Money

By Jeff Price

In the last newsletter I posted an article about how back-end distributors use a copyright “slight of hand” to actually take a higher % of an artists money then they state.

One comment on the TuneCore blog made by someone named Matt stated: “It would be good to have some pie charts showing the different scenarios regarding music copyright and royalties U.S. / non U.S. etc…”

Good idea, Matt.  So here you are, a whole bunch of flow charts that show how money is paid out.

Some important preamble:

First, there are a number entities being paid:

–      An artist signed to a record label

–      A record label

–      An artist that is his/her own record label

–      A songwriter

–      A songwriter who has transferred some of his/her rights to another entity – usually called a “Publishing Company”

Second, there are the entities that generate, collect and distribute the money.  All of these entities have an impact on your bottom line as each take a cut. These entities are:

–      A digital music service

–      A Performing Rights Organization (like BMI/ASCAP)

–      A Mechanical Royalty Collection Organization (these exist outside of the United States)

–      And if you transferred your rights, a “Music Publisher”

Third, there are two types of ways the music is sold that are represented in these flow charts:

–      Digital Download – like buying a song from iTunes

–      Interactive Stream – streaming a song on-demand from Spotify, MOG, Rhapsody etc…  This does not include a stream from Pandora or other internet type “radio.”

Fourth, the way money is paid out, and to whom, is different in the United States than it is everywhere else. So you have two categories to distinguish how the money is paid out:

–      In the United States

–      Outside of the United States

Fifth, there are three possible income streams:

–      One goes to the entity that owns the “master” (the recording of the song)

–      The second is for the “mechanical royalty.”  This goes to the songwriter.  If the songwriter transferred his/her rights then it goes to an entity called a “Music Publisher”

–     The third is for the public performance royalty.  This money goes to the     songwriter.  If the songwriter transferred his/her rights to a third party Music Publisher, then it goes to the songwriter AND the Music Publisher.

There are some industry terms being used here: Public Performance, Mechanical Royalty, Master, Performing Rights Organization, and others.  You can about each one here.

But suffice it to say, if you wrote the song (the lyrics and the melody) you get paid money owed to the songwriter and/or publisher.

If you own the recording of the song, you get paid the money owed to the “record label.”

And if you are the songwriter, and have not transferred any of your rights and own the “masters” (meaning you are the record label), you get all three.

Just note all the hands that get pieces of your money before it gets to you–quite the exorbitant service fee!
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Let’s start with what might be the easiest ones.

An artist/band gets signed to a record label.  Each time the recording of the song(s) sell, the artist/band gets paid.  In most cases, the artist/band received an “advance” of their royalties, therefore the money they get paid gets “recouped” until the artist/band has paid the label back after which point the money begins to pass through again.

For a $17.98 full length CD, the artist/band traditionally got paid $1.40 – $1.70 for each CD sold.

Important note – this royalty is for the artist/band that recorded and performed the song(s), it is NOT for the person that actually wrote the song (lyrics and melody)

This first chart is for an artist signed to a record label.


This chart represents an artist that uses TuneCore – in effect, the artist is the record label.

Now we turn to the royalties owed to the songwriter.

There are TWO royalties owed to the songwriter – these are:

-Mechanical Royalties for the “Reproduction” of the song
-Public Performance royalties for the “Public Performance” of the song.

Who gets this money varies based on if it happens inside the U.S. or outside of the U.S.

First up is the easiest one – the songwriter controls all of his/her rights and a song of his or hers is bought via download from a U.S. based service.  Note how the store pays the label and the label has to pay the songwriter.

Next up, assume the exact same scenario with one change;  the songwriter transfers his/her rights to a publisher OR enters into an administration deal with an entity to work for him/her (called a Publishing Administration deal).

Now let’s go with the exact same scenario only the song is bought via download from a music service outside of the United States.  Note how when this happens, the mechanical royalty is paid to a copyright organization that collects mechanical royalties.  There your money sits unless you hire someone to get it for you.  If you don’t, they give your money to Warner, Sony, Universal, EMI and others.  (TuneCore’s new songwriter service can get this money for you before they give it away).

Also note, outside of the U.S., the mechanical royalty rate is not $0.091, it is now a % of the sale price. Also, outside of the U.S., mechanical royalties are paid to these organizations for both streams AND downloads (it’s slightly different in the U.S.).

Finally, and this is really important, note that in this scenario, you would need to be affiliated with the organization that has your mechanical royalties.  If you are not, the money does not make it to you.  As there are many of these organizations around the world, and many will not let you register with them for one reason or another, the money sits and then is given to Warner, EMI, Sony and Universal unless you hire someone to get it for you.

Next up, assume the exact same scenario with one change:  the songwriter transfers his/her rights to a publisher OR enters into an administration deal with an entity to work for him/her (called a Publishing Administration deal).

Now here is where it gets even more confusing.  Publishers can find themselves in the exact same scenario as the songwriter.  That is, there are some copyright collection organizations that will not allow a publisher to become a member to get the money.  Therefore, the publisher does one of two things: either hires another middle-man in that country to get the money from the local collection agency OR starts their own separate company in that country to be the middleman to get the money (in which case the publisher “double-dips”).

This scenario shows what happens when a publisher collects the money but then has to hire a “sub-publisher” to get it for downloads or streams outside of the U.S.

From here we now move to how the mechanical royalty is calculated and paid on an “interactive stream” in the United States.  Note how in the rest of the world BOTH the download and streaming mechanical royalty are paid to the copyright organization.  In the U.S., the mechanical royalty from a download is paid to the record label to pay the songwriter.  However, the mechanical royalty from a STREAM must be paid directly to the entity that controls the copyright to reproduction (either the songwriter or publisher).  Note also that the mechanical royalty rate on streams in the U.S. is based on a ridiculous formula as opposed to a flat rate of $0.091.

Now we move onto the last of the royalties: Public Performances.

First, in the United States, the law states that an “interactive stream” is a public performance, therefore the songwriter and publisher must get paid.    Note that in the U.S., a download is NOT considered to be a public performance, so no royalty is owed on that.

Second, when a public performance organization collects the money, it takes a % off the top for itself and then splits whatever is leftover 50/50 between the songwriter and the publisher.

If the songwriter has NOT done a deal to transfer his/her rights to another entity (the “publisher”) then the songwriter would get both payments from the Performing Rights Organization.

Here is the exact same scenario, only this time, the songwriter has done a deal to transfer his/her rights to a publisher.

And finally, we end with the grandaddy of them all.  This scenario shows what happens if there is a public performance generated by a non-U.S. based music service.  Unlike in the U.S., in many countries BOTH a download AND a stream are considered public performance (in the U.S., a download does NOT generate a public performance royalty).

Note how the foreign performing rights organization collects the money and takes a %.  Then, due to something called the “Berne Convention,” an international agreement governing copyright, the foreign performing rights organization passes the money back to another performing rights organization.  This second performing rights organization takes another % of your money.

If the songwriter transfers his/her rights to another entity (the publisher) then the publisher would take a % of the 50% it gets paid after the two performing rights organizations take their cut.

If the songwriter has not transferred his/her rights, then there would be no % taken by a publisher and the remaining money would go to him/her.

I am certain there are more permutations to come up with beyond what you see here.  And to be blunt, this is more representative of the “legacy” industry, as opposed to the new emerging digital music industry.  The new industry allows for more money to make it back to more artists and songwriters more quickly, and with more–and here is the key word–TRANSPARENCY.

In the new digital industry, there is no need for all of the middlemen, all of the mystery, all of the inefficiency.  Digital services track in a way the old school industry never could.  The efficiency is already there, it’s the business model that is out of date.  It’s what all of you are changing.  And it’s the focus for us at TuneCore moving forward: more money more quickly to artists and songwriters with more transparency.

And it’s the reason we launched the new TuneCore songwriter service.  More information will be rolling out on it in the next month…

Jeff