At the South by Southwest interactive, music and film festival last week, we saw some lean bands and some lean start-ups. What do we mean?
Everybody who hasn’t been living on Mars for the past ten years knows that the music business has been fundamentally transformed by the Internet — by streams and downloads. For each new way of listening to music on the Internet, there are probably thousands of artists who have seen the livelihood from their art form harder to come by as a result.
So, what can the lean bands learn from the lean start-ups that continue to change the way we consume and pay for musical entertainment? Start-ups like Napster, Pandora, Spotify (and the re-born Apple, of course) brought us free downloads (often pirated and illegal), 99 cent music on iTunes, and free music (with ads) on streaming sites from Spotify to Grooveshark. Yes, the landscape for professional music-makers has changed, and is still evolving rapidly.
If You Can’t Beat ‘em You’d Better Join ‘em
We spoke to several entertainment lawyers, well versed in the music business, and asked them about the advice they’re giving their clients these days. We’ll hear more from them on this week’s podcast, but for now we can reveal that everyone agrees being an artist is not simply about being creative, it is about running a business as well. In the words of lawyer John Bradley: “There is no music without the business”
Traditionally, the largest segment of revenue for bands (and their labels), was the now-humble record. From LP to cassette to CD, bands sold physical records, fans bought the music and everyone made some money.
That old game has changed forever. With the ability to buy single songs inexpensively, or stream whole albums and playlists for free on the Internet, record sales have fallen rapidly. And what is being sold is bringing in less money.
In this new landscape, iTunes is emerging as an artist’s friend. Why? It’s clear that Apple will keep $0.29 per $0.99 download. Sure, this means far less money for the artists than if they were to sell a physical record, but it’s something. And predictability is comforting.
On the other side, Spotify is an unknown quantity; how the site works with respect to revenue streams is still mysterious and unpredictable. There are also sites like Grooveshark who don’t pay anyone anything.
On top of this, there’s the sad estimation that 95% of all music downloaded is done so illegally. In other words, the entire recorded music industry’s digital sales revenue comes from just one out of every twenty songs downloaded.
So, with access increasing and spending falling, how do you make money in this industry?
Record labels are catching up with the times by offering bands so-called “360″ contracts. What this means is that the label takes a cut from each revenue stream — album sales, shows, tour and merchandise.
What, then, should bands be doing?
1. Don’t ignore the Internet
The Internet is how people learn about music and how it spreads.
Yes, you might only make $0.79 per song from iTunes, or a little less than half a penny from Spotify, taking content away from where people want it will not boost sales. In fact, making your content available will boost sales elsewhere, and as a recent piracy study explains, taking it away will do more harm than good:
When NBC removed its content from the iTunes store for about nine months in 2007 and 2008, there was an 11.4 percent increase in piracy, but no increase in NBC’s DVD sales — a loss of close to $20 million, given 23,000 lost sales per day at an average price of $3. And when ABC added its content to Hulu in July 2009, piracy dropped by 30 percent. Likewise, when a major book publisher stopped selling new Kindle titles on Amazon in 2010, there was no increase in hardcover sales, and when the Kindle titles were finally made available, their sales were 50 percent lower than they otherwise would have been.
Moreover, new additions to the Spotify platform will include the ability to sell concert tickets and other merchandise. But it all starts with the availability of the music.
One of the fastest ways to start running your band like a business is to make it a legal entity. By doing so, you’ll have to make the hard choices about who owns what and why. This can really save you from misunderstandings, arguments and losses later. It can also give your band business credibility. Being incorporated erects a wall between your band as a business and the members of the band personally. Incorporation will protect you from accidents that occur at a show, like an amp falling on someone and crushing them ! Plus, many venues now want to see an EIN number. Don’t limit your chances of getting booked, and don’t put yourself in unnecessary danger.
These rights management societies are like unions for artists. They’ll help you out and get you a little money on the aside, even from Internet radio plays.
4. Get a licensing deal
Find a firm small enough that they’ll be able to focus on you and your music. Same goes for getting a manager. Choose wisely, and stay empowered.
5. Don’t be afraid to challenge the system
There really isn’t just one way of doing things anymore. If you want to blog, or make viral videos and do fun covers — great. Do what you’re inspired by and forget about the rules (because if there was a surefire recipe for success, we’d all be rock stars).
6. Go on TOUR
This is key. It’s where the money is, and it’s where the vibrancy is too. If you have a 360 record deal, the labels are winning big. If you don’t, try not to sign this away.
7. Sell merchandise
Price it fairly — take a look at what other bands are doing — and this is always a great money-maker, plus free marketing !
8. Sell through multiple channels
Following on from not ignoring the Internet, don’t be afraid to have a presence on iTunes, Amazon, Grooveshark, Spotify, 8 tracks etc. The more the better.
- Spotify Exec Ken Parks On “Windowing”: Mind-Boggling, Very Bad, Hostile (fastcompany.com)
- Napster founder Sean Parker: ‘Spotify will overtake iTunes in two years’ | News | NME.COM (huguesrey.wordpress.com)
- Spotify on the future of streaming music: ‘We want to cannibalize piracy’ (theverge.com)