By Jeff Price

There was recently a blog posting by an NPR intern stating  that she does not buy music.

What I want is one massive Spotify-like catalog of music that will sync to my phone and various home entertainment devices. With this new universal database, everyone would have convenient access to everything that has ever been recorded, and performance royalties would be distributed based on play counts (hopefully with more money going back to the artist than the present model). All I require is the ability to listen to what I want, when I want and how I want it. Is that too much to ask?”

In other words, she loves music but values the convenience of having access to it more than the music itself.

This in turn caused David Lowery, founder of Camper Van Beethoven and Cracker, to respond, suggesting the intern had lost her moral compass and did not properly understand the value of music nor properly support the artists that made it:

“Ultimately there are three “inconvenient” things that MUST happen for any legal service:

1.Create an account and provide a payment method (once)

2.Enter your password.

3. Pay for music

So what you are really saying is that you won’t do these three things. This is too inconvenient.  And I would guess that the most inconvenient part is….step 3.

That’s fine. But then you must live with the moral and ethical choice that you are making to not pay artists. And artists won’t be paid. And it won’t be the fault of some far away evil corporation. You “and your peers” ultimately bear this responsibility.”

This back and forth took off on the net with thousands of comments across a multitude of sites, a NY Times on-line article and discussion in the Bob Lefsetz newsletter,  some taking the side of the intern, others taking the side of David Lowery.

I agree with both the intern and David.

First the intern.

Whether artists or labels like it or not, the industry has to cater to the whims of the consumer. If consumers don’t like how they have to get music, they aren’t going to get it.  For the music consumer, at a certain point, convenience trumps the value of art. As an example, look at what happened to cassette sales when Sony introduced the Walkman.  This low sound quality piece of tape, with tiny album cover art and limited liner notes, went from 4% of the market to over 45% of recorded music sales within 18 months, because music consumers liked the convenience and features (in this case a hardware device that made music portable) more than sound quality and big album cover art.

Fortunately, this dovetailed perfectly into the existing music industry so they could monetize it the same way they monetized vinyl, and in the future, CD sales—physical things being sold on physical shelves.

This major music industry control of the distribution pipeline broke down with the advent of the Net and digital music, however, the fact that the industry must provide music to the masses via the delivery vehicle the masses prefer remains true. Want more proof?  Go buy a mini disc.

Now onto David Lowery.

I completely agree with David Lowery as well.  Artists should be properly compensated for the value of what they create.   What is “proper” is the debate and where the tension lies.

However, my issue with David’s article is not his overriding message (artists should be paid), it’s that he uses factually incorrect statements in his article that ultimately work to discredit the true overall point.  He also suggests that the traditional industry was better for artists than the new industry.

Well here’s some truth about the old industry that David somehow misses.

Previously, artists were not rolling in money. Most were not allowed into the system by the gatekeepers. Of those that were allowed on the major labels, over 98% of them failed. Yes, 98%
.

Of the 2% that succeeded, less than a half percent of those ever got paid a band royalty from the sale of recorded music.

How in the world is an artist making at least something, no matter how small, worse than 99% of the worlds’ unsigned artists making nothing and of the 1% signed, less than a half a percent of them ever making a single band royalty ever?

Finally, as much as I hate to say it, being an artist does not entitle the artist to get money. They have to earn it. And not everyone can.

Here are some specifics from David’s posting where he just gets it wrong.

David states:

“But most record contracts specify royalties and advances to artists. Advances are important to understand-a prepayment of unearned royalties. Not a debt, more like a bet. The artist only has to “repay” (or “recoup”) the advance from record sales. If there are no or insufficient record sales, the advance is written off by the record company. So it’s false to say that record companies don’t pay artists. Most of the time they not only pay artists, but they make bets on artists.  And it should go without saying that the bets will get smaller and fewer the more unrecouped advances are paid by labels.”

This is not correct.  Advances are paid to artists.  The artist uses the advance to record the masters and then assigns ownership or control to the label.  The artist does not “own” the thing he/she created.  If they do recoup, they still do not own the masters.

In addition, the majority of the advance goes into recordings, not into the artists’ pockets (with rare, rare exception).  Managers, and in some cases, lawyers, also take a % of the advance as a “fee.”

Now add to this that labels include marketing, video and tour expenses as part of an advance that needs to be recouped.

Now add to this the dubious accounting…

David States:

“Secondly, by law the record label must pay songwriters (who may also be artists) something called a “mechanical royalty” for sales of CDs or downloads of the song. This is paid regardless of whether a record is recouped or not. The rate is predetermined, and the license is compulsory.“

Not completely true.  First of all, there is a provision in record label agreements that allows mechanicals not to be paid on free goods and promotional copies.

Second, there is a reduced rate and a song cap in the agreements.

Third, many times there are multiple songwriters on one song, meaning the royalty he is describing gets split between multiple people.

Finally, there is an assumption that these royalties are actually being paid in a timely and accurate fashion (they are not).

David States:

“Also, you must consider the fact that the vast majority of artists are releasing albums independently and there is not a “real” record company.”

Someone better tell The Civil Wars that they are not a “real” record company, even with over 3 million units sold.

David States:

“The idea was the artists would make up the loss through recorded music sales.”

This line is just flat out false.  In the words of Monty Python, “it’s a dead parrot.” It was the exact opposite. Artists did not expect to make money off of the sales of their recording but via all the other income streams (gigs, merch, endorsements, etc.).

David States:

“Over the last 12 years I’ve watched revenue flowing to artists collapse.”

This is empirically false. Revenue to labels has collapsed.  Revenue to artists has gone up with more artists making more money now than at any time in history, off of the sale of pre-recorded music.

Taken a step further, a $17.98 list price CD earned a band $1.40 as a band royalty that they only got if they were recouped (over 99% of bands never recouped).

If an artist sells just two songs for $0.99 on iTunes via TuneCore, they gross $1.40.

If they sell an album for $9.99 on iTunes via TuneCore, they gross $7.00.

This is an INCREASE of over 700% in revenue to artists for recorded music sales.

David States:

“Recorded music revenue is down 64% since 1999.”

And volume is up over 10,000%

“Per capita spending on music is 47% lower than it was in 1973!!”

Yes, this appears to be true. In 1973,VCRs, DVDs and video games weren’t competing for the same dollars (remember the RIAA campaign in the 80s – ‘Music More Value For Your Money?’).

David States:

“Of the 75,000 albums released in 2010 only 2,000 sold more than 5,000 copies.”

This statistic reveals that people shifted how they consume and buy music from albums to singles (or streams). People don’t buy 8-tracks anymore, either.

David States:

“Without going into details, 10,000 albums is about the point where independent artists begin to go into the black on professional album production, marketing and promotion.”

Not true.

David States:

“And believe it or not this is where the problem with Spotify starts. The internet is full of stories from artists detailing just how little they receive from Spotify.”

Let’s go back to the heyday David is talking about. How many of those artists would have made anything?

None…

I could keep going, but it’s enough.

I agree with the point that music has value, but David needs the right ammo to fight the battle.

Critics of David’s overall point that artists should be properly compensated are able to pick apart his supporting underlying incorrect points to create a smokescreen that causes most to bypass the issue of  an artist’s compensation.

This got George Howard and me thinking about comparing how it used to be for artists with how it is today.

Take a look, let us know your thoughts.  Which is better? Or does it net out to the same with some of the levers changing?

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