The Intern, The Artist & The Internet

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?


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?

Can Artists Get Rich In A Streaming Music Industry?

By Jeff Price

Now that CD sales have gone the way of Zima, the entire old school industry sits and wrings it hands around how/if it will make money in the new digital industry.

In the meantime, with the removal of the old industry middlemen, the new industry—the artist as record label/songwriter/publisher and performer—is making more money now than at any point in history.

But is the more money being made enough to sustain the world of artists?

The truth is, the model is still being sorted out, but I remain optimistic.

Here’s one piece of evidence for discussion…

In a May 30th, 2012 press release issued by Cisco about how the Internet is going to be four times as large in four years, one little bullet point stood out to me (and thank you to Todd Beals for pointing it out).

It reads:

Globally, Online Music is expected to be the most highly penetrated residential Internet service ― in 2011 there were 1.1 billion users (63 percent of residential Internet users); in 2016 there are forecast to be 1.8 billion users (79 percent of residential Internet users).

I understand this to mean that in 2011, there were 1.1 billion people using music services via the Internet to listen to music at home.  (This number does NOT include those using peer-to-peer services: Cisco has a separate number for that.)

Let’s run a model based on these numbers and see what sort of revenue this could possibly generate:

1.8 billion residential users – let’s say each listens to an average of 10 songs a day.

That’s 18,000,000,000 (18 billion) song listens per day.

18,000,000,000 (18 billion) listens per DAY

x 365 days a year

= 6,570,000,000,000 (6.5 Trillion) listens per year

That’s a lot of listens – I suspect a lot more than there used to be but no one knows as we never tracked listens (beyond AM/FM radio) before.  With digital you can.

So who gets money from these listens?

If these listens happen via a non-interactive service (i.e. Pandora, FM radio simulcast, Sirius Satellite) there are two royalty payments owed:

1) Songwriters/publishers get paid from every stream for the right of Public Performance in the composition (the ©).

2) A separate payment is made to the master holders (the entity that controls the right to the recording) for the right to Public Performance in a sound recording(the (P). – see George Howard’s article “Taylor Swift’s Big Machine Gets Paid” for more info).

If the listens happen via an interactive service (i.e. Spotify, Rhapsody, Mog, MySpace Music) there are three royalty payments owed:

Songwriters/publishers get paid from every stream for:

1 A) The right of Public Performance

1 B) The right of Reproduction (aka Mechanical Royalties)

2) A separate payment is made to the master holders (the entity that controls the right to the recording)

If the listens happen via some other model (i.e. iTunes Match) there are three royalty payments owed:

Songwriters/publishers get paid from every access for:

1 A) The right of Public Performance

1 B) The right of Reproduction (aka Mechanical Royalties)

2) A separate payment is made to the master holders (the entity that controls the right to the recording)

If these listens happen via paid downloads, a one time payment is made (as opposed to the above models where the copyright holder gets paid each time a song is listened to).

In the US, there are two royalty payments owed for each download:

1) Songwriters/publishers get paid from every download for the right of Reproduction (aka Mechanical Royalties)

2) A separate payment is made to the master holders (the entity that controls the right to the recording)

On a download outside of the US, there are three royalty payments owed:

Songwriters/publishers get paid for every download for:

1 A) The right of Public Performance (aka Communication)

1 B) The right of Reproduction (aka Mechanical Royalties)

2) A separate payment is made to the master holders (the entity that controls the right to the recording)

So, copyright holders get paid from these Internet listens.  How much will be generated?

Many of these payments will be micro payments, three places to the right of the decimal point.

As an example, on interactive streams in the US, the total royalty all THREE (master, public performance and mechanical royalty) generate together is about $.008 for each stream.

Do the math assuming these are all interactive streams (which they currently are not):

6,570,000,000,000 (6.5 trillion listens)

x $.008 (eight tenths of one cent)

= $52,560,000,000 ($52.5 billion dollars)

As a perspective, the traditional CD music industry in its heyday (late 90’s) was about a $35,000,000,000 ($35 billion dollar) industry.

Now factor in that according to Cisco, these are just for “residential” listens.

Now add in listens from cars, smart phones, etc.

Now add in Business listens.

Now factor in if the rate goes up by 1/1000th of a penny (which it will at a minimum) or more.

Now remove the middlemen taking a percentage of the revenue when the music is listened to.

What excites me about this model/exercise is it’s being run at the infancy of this new industry.  Listens and the revenue from these listens are on the way up. In addition, less of the artists’ earnings are being taken by middlemen.

And the assumptions in here, although a bit stretched (i.e. all the streams are interactive) are based on some real numbers but also leave out other revenue from traditional income streams—master use/synch licensing, merch sales, gig income, sponsorships, ticket sales, etc.  Add those in as well.

Do I think the world will awash in rich artists?  Absolutely not. I think the same rules of the old will apply; just as there are only a handful of successful authors, poets and filmmakers at any given time, there will always only be a handful of successful musicians/songwriters at any given time.

But those that are successful will be financially well off. In addition, I truly believe there will be a wider range of artists that make some form of income of some significance.  It will no longer be a world with two classes of artists: artists either making nothing or millions.  There will be a full spectrum across the board with a few more at the top, a lot at the bottom and a new class in the middle.

And if these assumptions are correct, then the issue that we should be focusing on is the pipeline that assures that these artists have a simple and efficient way to get the money they earned; right now, aside from TuneCore’s distribution and Publishing Administration services, there is no other.

Rock 'N' Roll Is King? (What Music Is Being Distributed And Bought Around The World)

We thought it would be pretty interesting to run some queries that identified the genres of releases being distributed by TuneCore Artists and then bought globally in the digital music services.  We’ve put together a few graphs below to show you what we found…

**To view the images larger, click on the text to download a PDF, or click on the image itself to enlarge**

TuneCore Artist Genre Distribution By Country – April 2011 – April 2012 (click to open as a PDF or click on the images below to enlarge)

An Interesting Observation: The US is remarkably well-distributed between genres. The UK and Canada buy more comedy and less hip-hop.

The 10 biggest countries by sales for TuneCore Artists are:


*The US has about 7.5x the sales in UK and 100x the sales in Italy

TuneCore Artist Genre Distribution June 2011 – May 2012

Top genres for albums are:

Hip Hop/Rap

Top genres for singles are:

Hip Hop/Rap

Genre Distribution, Sales Revenue for Active Releases, Last 12 Months

More Magic Money From iTunes Match (An Update)

By Jeff Price

In February, 2012 of this year we posted a blog article about the new money being generated for artists from Apple’s iTunes Match.

In its first three months of existence, it generated over $10,000 for TuneCore Artists, new money created from an innovative new service (you can learn more about iTunes Match here).

Now that a few more months have passed, and Apple has expanded iTunes Match into other countries outside of the U.S., we thought it would be cool to provide an update.

The end result: from Feb, 2012 – March, 2012 there has been another $90,000 earned for artists via iTunes Match, making a grand total of over $100,000 of new “magic” money. Not a bad start at all!

Check out the graphs below for the detail broken out by country…

(Click here to view larger as a PDF or click the image to enlarge)

11 Reasons Why Musicians Should Love Canada

By Jeff Price

There are a multitude of reasons to love Canada, but there are eleven in particular that musicians should take note of, and they all come from the Canadian performing rights organization, (PRO) SOCAN.

Although not perfect, SOCAN is a shining example of how a performing rights organization should work for songwriters. The rest of the world should sit up, take notice and follow its lead.

(For those not sure what a PRO is, read more about it here.)

1) SOCAN, like most PROs, is a not for profit entity that is owned by its publisher and writer members.  And this is more or less where most of the similarities stop with other PROs.

The 18 members of its Board of Directors are determined by open elections.  This does not mean that board members are voting to appoint other board members, or people are volunteering to be on the board. Any member of SOCAN in good standing can run to win one of the 18 spots on the Board.

Although other PROs have similar models, I’ve never seen a PRO have such an open process that did not substantially stack the deck in favor of pre-existing board members.

You can click here to check out the candidates and see the process in action; they are having elections this week.

2) SOCAN does not take any deductions on international incoming revenue.

If you are a member of SOCAN, and your song is publicly performed outside of Canada (lets say Germany), the German PRO (called GEMA) will collect the public performance money.  GEMA will then take a % of this money as its “admin fee” and then pass it back to SOCAN. SOCAN then pays it to its member.

Now here’s the amazing part: whereas every other PRO in the world (like ASCAP, BMI, PRS, GEMA, etc,) takes an additional second admin dip of about 3% – 6% of the songwriter’s foreign money that, SOCAN takes NO additional SECOND fee to get this money back to its members (the only other PRO I could find that does this is STIM, the Swedish PRO).

There is no law or requirement for SOCAN to do this, they just choose to.

This means as a SOCAN member, you will make more money off of foreign public performances than just about any other songwriter affiliated with their local PRO.

3) SOCAN takes no percentage of the songwriter’s money as a “cultural deduction.”

A “cultural deduction” usually happens with European PROs.  This is a discretionary deduction taken from a songwriter’s money by the local PRO to use for “cultural purposes.”  And yes, the definition of “cultural purpose” is about as vague as you think it is: parties, supporting local bands, promoting bands, or other things that may fall into shady categories.  The amount they choose to take, and what they choose to spend it on, is determined by their Board of Directors.  Songwriter members get no say, their money is just taken.

SOCAN (along with ASCAP/BMI/SESAC) takes no cultural deductions of any sort.

Kind of a no brainer to me.

4) SOCAN provides royalty calculators to help its members estimate and understand the royalties they will earn.

I can find no other PRO in the world that does this. SOCAN members can plug some info into an on-line calculator and it spits out how much money they should expect to be paid.  For example, enter how long your music appears on a TV show/station and if it’s theme music, background music, etc, and the rate calculator will estimate the royalties generated.

Members can use this info not only to know how much they should expect to be paid, but also to do deals.  For example, a member could choose to lower or raise the synch license as they see the income via public performance.

Not to mention when the songwriter’s statement shows up they can compare what they were paid with what they told they were going to be paid.

This is a huge level of transparency that no other PRO provides.

5) SOCAN also provides more transparency in its royalty statements.

On SOCAN’s on-line royalty statements, SOCAN members can see a deep level of itemized detail.  For example, they see a line listing of each and every individual TV public performance, and the amount each one of those performances generates.

In addition, the rates posted on SOCAN’s website appear to be the actual rates they charge the TV stations, retail stores, radio stations, internet services, etc.  There do not seem to be two sets of royalty rates—the ones posted on-line and the “real” ones that no one knows.

There is even a license fee calculator to help music users estimate license fees.

You can view SOCAN’s rates here.

6) SOCAN’s unidentified performances are posted online.

About 2% of what is reported to SOCAN for radio play is not indentified. This means that SOCAN cannot match the information to one of their members—they do not know to whom to credit it.

Unlike just about every other PRO in the world, SOCAN posts a list on its website asking for its members to identify whose public performances they are. Once that gets figured out, the songwriter gets paid.

7) SOCAN posts a “Missing in Action” list for the members they cannot find due to a change of address, death or some other issue.

You can view the current MIA list here.

May as well check to see if you’re on it.  If so, there’s money waiting for you.

8 ) SOCAN has no “black box.”

Black box money is money that a PRO has but does not know who the songwriters are that it belongs to, or where they are.  Therefore, the PRO gives this “unidentified” money away to other people or entities.  SOCAN does not do this.  The entire distribution pool is distributed each quarter with no money being held back to be given away later to the wrong people or entities.

God bless ‘em!

9) SOCAN has a creative suite of member benefits including houses in Los Angeles and Nashville donated by other SOCAN members. These are bedrooms in homes that are available for members at no cost to the member for up to two week stays (first come first served, and it must be booked in advance).

‘Nuff said.

10) SOCAN has online tools allowing its members to make and track queries.

For example, a SOCAN member learns his/her song is on TV in Greece and asks SOCAN to check it out for him/her.  The SOCAN member can track the progress of the query on-line.

In addition, SOCAN is actively pursuing ways to monitor international public performances on broadcast TV on behalf of its members.

This allows SOCAN to reach out to other PROs on behalf of its members to assure they are getting paid the right amount of money.

11) SOCAN made a freaking cool mobile app.

I’m just going to copy and paste from their website:

SOCAN has launched its new mobile app for iPhone, iPad, and Android devices, offering its members and licensees 24/7 access to a wide array of functionality wherever they are. SOCAN members can now browse their catalogues, calculate their performance royalties and review their statements on the go. Whether in the studio, in a hotel room, or traveling to a gig, members can access their SOCAN account anytime, anywhere.

SOCAN licensees can also use a unique “licence finder” tool to determine which ones apply to their situation, and easily calculate their licence fees.

SOCAN’s app will soon be available for Blackberry and Windows smart phones. As members’ and licensees’ use of its mobile app increases, SOCAN will adjust it according to their input, improving its features and capabilities wherever possible.

The end result is a PRO that is providing a higher level of transparency, accuracy and openness resulting in more money going into songwriters’ pockets and an understanding as to how much money these songwriters should expect.

These seem like such obvious basic things, and yet, in the world of PROs and the collection of songwriter money, they are unique concepts.

The question is why…

Referenced Links:

Board Member Elections

View SOCAN’s Rates

“Missing In Action” List

SOCAN Mobile App

Summary of Distribution Rules

Summery List of Documents