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EXCLUSIVE: INTERVIEW WITH DIY ARTIST SHMU

SURVIVAL STRATIGIES FOR EMERGING ARTISTS

Music

Chris Anderson’s

Journey into The Long Tail

BY DAVID BYRNE

The Theoretical Deal Spectrum

If Diy is Killing You Read This...


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CONTENTS

FEBRUARY 2013

F IF DIY IS KILLING YOU READ THIS p.38

A Look at the Theoretical Deal Spectrum for Upcoming Artists With more control comes more responsibility but also more opportunities License Deals Profit Sharing Deals

Just Distribution Deals

Standard Deal

More Corporate Investment

...But for most bands the

Less Corporate Investment

sweet spot

is somewhere in the middle

Equity Deals / 360 Deals DIY All The Way

Less Control

More Control

FEATURES

THE THEORETICAL DEAL SPECTRUM p.35 *blerb

The Dream: DIY your way into a decent funding situation: with enough fans, respect and leverage to develop a mutually beneficial relationship with a corporation, label or sponsor.

What Successful Musicians and Managers Know in 2012 Revenue producers greatest to least:

1 Touring

2 Merchandise 3 Licensing 4 Recorded 5 Publishing music royalties

The Majority of DIY Artists Juggle Multiple Roles 1594 1600 1400 1200 1000 800 983 817 1400

“Musicians are musicians because they play music, not because they love accounting or managing Facebook pages. But in the current climate, artists are now forced to play more roles than ever.” - Paul Resnikoff 388 130

THE LONG TAIL p.10

INTERVIEW WITH DIY ARTIST SHMU p.24

600 400

SURVIVAL STRATEGIES FOR EMERGING ARTISTS p. 29 200 0 41 18 1 role 2 roles 3 roles 4 roles 5 roles 6 roles 7roles 8 roles

- Future of Music Coalition 2012

Forget Conventional Cleaning.

DYSON VACUUM p.40 m

EDITORS LETTER/ ABOUT THIS EDITION CONTRIBUTORS p.06 p.09 005


Contributors

Chris Anderson is an American author. He was with The Economist for seven years, then joining WIRED magazine in 2001 where he was the editor-inchief until 2012. He is known for his 2004 article entitled The Long Tail; which he later expanded into the 2006 book, The Long Tail: Why the Future of Business Is Selling Less of More. He is the co founder and chairman of 3DRobotics, a robotic manufacturing company.

Multi-instrumentalist/singer Shmu — otherwise known as Sam Chown or the percussion half of Austin synth-prog duo Zorch — is about to make his solo debut in June with Discipline / Communication. Compared to the manic sensibilities of Zorch, Shmu brings a more chilled-out vibe with elements of pop and shoegaze, opting for some serious grooves rather than spacey synths.

Paul Resnikoff is the founder and publisher of Digital Music News, a premier industry source for news, information, and analysis. Digital Music News has quickly grown from its humble roots as a small, executive news service to the most widely read information source in the field. Prior to starting Digital Music News, Paul Resnikoff headed the digital music initiative at internet portal Lycos. In that role, Resnikoff managed relationships with several major labels, including the former BMG and Sony Music Entertainment. Resnikoff started out at Epic Records (Sony Music Entertainment) in New York, specifically within international and eventually worldwide

marketing. David Byrne’s impressive output over the past four decades reaches far beyond his work as a musician, most famously in Talking Heads and in numerous solo albums and collaborations. He is also a deep thinker on topics ranging from cities to bicycle advocacy to urban studies to art, neuroscience, architecture, and politics.

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An event celebrating a futureforward city, exceptional talent-huband global centre of business and innovation

The east Wintergarden Canary Wharf Tuesday November 20, 2012 For further information visit www.future-london.com or contact WIRED at: event@future-london.com

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Credits Editor-in-Chif Emily Dalton Art Director Emily Dalton Managing Editor Noah Schwartz Contributors: Chris Anderson Sam Chown Paul Resnikoff David Byrne Curated by Emily Dalton Photography - Ben Aqua Pictures: Deviant Art Flicker Copy Right Free Wallpaper Graphics by Emily Dalton Articals from: Wired Magagine Issue 12.10 & 16.01 Flabmag.com July 1st 2012 Digitalmusicnews.com May 1st 2012 emilydalton.ca

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From the Editor In this issue of Wired, we are diving deep into the DIY music revolution. The DIY music revolution has been facilitated by the internet and resulted in a dramatic shift in the music industry. The dream for modern musicians is this: DIY your way into a decent funding situation, with enough fans, respect and leverage to develop a mutually beneficial relationship with a corporation, label or sponsor. There are countless new platforms that artists can use with this goal in mind. There is file sharing, digital music stores, the modern copyright system, modern digital distribution, crowdsourcing and funding, social networks, online promotion and advertising. Create a album or song on a laptop using a digital audio workstation. Put the music on the web in several places such as Bandcamp, the iTunes music store, Facebook and Sonicbids. Email popular music blogs, post on Reddit and try to get some attention. If there is any money do some advertising, hire a PR person and a lawyer you trust. An artist cannot engage in all of these activities, they must find the proper balance between using these platforms and creating their art. The DIY music revolution is idealism, energy and creativity but it is often debt ridden and not a life of luxury. DIY is scraping by for money and living, a bootstrap lifestyle. DIY can be very painful financially and for body and soul. In this issue Chris Anderson explores the causes of DIY. Talking Heads frontman David Byrne explains the new business models. Paul Resnikoff investigates the perils and pitfalls and we interview an artist on the front lines, Austin Texas based Shmu. Dive into the new music revolution, sit back and get Wired.

Emily Dalton emilydalton.ca

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The Long Tail By Chris Anderson

Forget squeezing millions from a few megahits at the top of the charts. The future of entertainment is in the millions of niche markets at the shallow end of the bitstream.

In 1988, a British mountain climber named Joe Simpson wrote a book called Touching the Void, a harrowing account of near death in the Peruvian Andes. It got good reviews but, only a modest successz, it was soon forgotten. Then, a decade later, a strange thing happened. Jon Krakauer wrote Into Thin Air, another book about a mountain-climbing tragedy, which became a publishing sensation. Suddenly Touching the Void started to sell again. Random House rushed out a new edition to keep up with demand. Booksellers began to promote it next to their Into Thin Air displays, and sales rose further. A revised paperback edition, which came out in January, spent 14 weeks on the New York Times bestseller list. That same month, IFC Films released a docudrama of the story to critical acclaim. Now Touching the Void outsells Into Thin Air more than two to one. What happened? In short, Amazon.com recommendations. The online bookseller’s software noted patterns in buying behavior and suggested that readers who liked Into Thin Air would also like Touching the Void. People took

010


the suggestion, agreed wholeheartedly, wrote rhapsodic reviews. More sales, more algorithmfueled recommendations, and the positive feedback loop kicked in. Particularly notable is that when Krakauer’s book hit shelves, Simpson’s was nearly out of print. A few years ago, readers of Krakauer would never even have learned about Simpson’s book - and if they had, they wouldn’t have been able to find it. Amazon changed that. It created the Touching the Void phenomenon by combining infinite shelf space with real-time information about buying trends and public opinion. The result: rising demand for an obscure book. This is not just a virtue of online booksellers; it is an example of an entirely new economic model for the media and entertainment industries, one that is just beginning to show its power. Unlimited selection is revealing truths about what consumers want and how they want to get it in service after service, from DVDs at Netflix to music videos on Yahoo! Launch to songs in the iTunes Music Store and Rhapsody. People are going deep into the catalog, down the long, long

is going to be radically different from today’s

mass market. If the 20th- century entertainment about misses.

industry was about hits, the 21st will be equally For too long we’ve been suffering the tyranny of lowest-common-denominator fare, subjected to brain-dead summer blockbusters and manufactured pop. Why? Economics. Many of our assumptions about popular taste are actually artifacts of poor supply-and-demand matching - a market response to inefficient distribution. The main problem, if that’s the word, is that we live in the physical world and, until recently, most of our entertainment media did, too. But that world puts two dramatic limitations on our entertainment. The first is the need to find local audiences. An average movie theater will not show a film unless it can attract at least 1,500 people over a two-week run; that’s essentially the rent for a screen. An average record store needs to sell at least two copies of a CD per year to make it worth carrying; that’s the rent for a half inch of shelf space. And so on for DVD rental shops,

Now, with online distribution and retail, we are entering a world of abundance. And the differences are profound. list of available titles, far past what’s available at Blockbuster Video, Tower Records, and Barnes & Noble. And the more they find, the more they like. As they wander further from the beaten path, they discover their taste is not as mainstream as they thought (or as they had been led to believe by marketing, a lack of alternatives, and a hit-driven culture). An analysis of the sales data and trends from these services and others like them shows that the emerging digital entertainment economy 011

videogame stores, booksellers, and newsstands. In each case, retailers will carry only content that can generate sufficient demand to earn its keep. But each can pull only from a limited local population - perhaps a 10-mile radius for a typical movie theater, less than that for music and bookstores, and even less (just a mile or two) for video rental shops. It’s not enough for a great documentary to have a potential national audience of half a million; what matters is how


many it has in the northern part of Rockville, Maryland, and among the mall shoppers of Walnut Creek, California.

the tyranny of physical space, an audience at all.

too thinly spread is the same as no audience

Many of our assumptions about popular taste are actually artifacts of poor supply-and-demand matching — a market response to inefficient distribution. There is plenty of great entertainment with potentially large, even rapturous, national audiences that cannot clear that bar. For instance, The Triplets of Belleville, a critically acclaimed film that was nominated for the best animated feature Oscar this year, opened on just six screens nationwide. An even more striking example is the plight of Bollywood in America. Each year, India’s film industry puts out more than 800 feature films. There are an estimated 1.7 million Indians in the US. Yet the top-rated (according to Amazon’s Internet Movie Database) Hindi-language film, Lagaan: Once Upon a Time in India, opened on just two screens, and it was one of only a handful of Indian films to get any US distribution at all. In The other constraint of the physical world is physics itself. The radio spectrum can carry only so many stations, and a coaxial cable so many TV channels. And, of course, there are only 24 hours a day of programming. The curse of broadcast technologies is that they are profligate users of limited resources. The result is yet another instance of having to aggregate large audiences in one geographic area - another high bar, above which only a fraction of potential content rises. The past century of entertainment has offered an easy solution to these constraints. Hits fill theaters, fly off shelves, and keep listeners and viewers from touching their dials and remotes. Nothing wrong with that; indeed, sociologists will tell you that hits are hardwired into human

online services carry far more inventory than traditional retailers. iTunes, for example, ofers 20 times as many songs as Wal-Mart’s stock of 39,000 tunes. The appetite for iTunes more obscure traks (charted below in yellow) makes up the co-called Long Tail. Meanwhile, even as consumers flock to mainstream books, music, and films (right), there is real demand for niche fare found only online.

ANATOMY OF THE LONG TAIL

TOTAL INVENTORY: 28,000,000 SONGS

TOTAL INVENTORY 2.3 MILLION BOOKS

TOTAL INVENTORY 25,000 DVDS

Walmart Stocks around 39,000 CDs

6,100

Typical Waterstones stock around 10,000 books

typical Blockbuster store:3,000 DVDs

Average number of plays per month on iTunes

THE NEW GROWTH MARKET: OBSCURE PRODUCTS YOU CAN’T GET ANYWHERE BUT ONLINE 2,000 songs available at both Wall-Mart and iTunes 1,000 songs available only on Rhapsody TOTAL SALES TOTAL SALES TOTAL SALES

22%

57%

20%

POPULAR CDS & DVDS 0

Product not available in offline retail stores LESS POPULAR CDS & DVDS

012

39,000

100,000

200,000

500,000

Titles ranked by popularity


psychology, the combinatorial effect of conformity and word of mouth. And to be sure, a healthy share of hits earn their place: Great songs, movies, and books attract big, broad audiences.

at them with a question that visitors invariably get wrong: “What percentage of the top 10,000 titles in any online media store (Netflix, iTunes, Amazon, or any other) will rent or sell at least once a month?”

This is the world of scarcity. Now, with online distribution and retail, we are entering a world of abundance. And the differences are profound. But most of us want more than just hits. Everyone’s taste departs from the mainstream somewhere, and the more we explore alternatives, the more we’re drawn to them. Unfortunately, in recent decades such alternatives have been pushed to the fringes by pumped-up marketing vehicles built to order by industries that desperately need them. Hit-driven economics is a creation of an age without enough room to carry everything for everybody. Not enough shelf space for all the CDs, DVDs, and games produced. Not enough screens to show all the available movies. Not enough channels to broadcast all the TV programs, not enough radio waves to play all the music created, and not enough hours in the day to squeeze everything out through either of those sets of slots. This is the world of scarcity. Now, with online distribution and retail, we are entering a world of abundance. And the differences are profound. To see how, meet Robbie Vann-Adib, the CEO of Ecast, a digital jukebox company whose barroom players offer more than 150,000 tracks - and some surprising usage statistics. He hints Most people guess 20 percent, and for good reason: We’ve been trained to think that way. The 80-20 rule, also known as Pareto’s principle (after Vilfredo Pareto, an Italian economist who devised the concept in 1906), is all around us. Only 20 percent of major studio films will be hits. Same for TV shows, games, and mass-market books - 20 percent all. The odds are even worse for major-label CDs, where fewer than 10 percent are profitable, according to the Recording Industry Association of America. But the right answer, says Vann-Adib, is 99 percent. There is demand for nearly every one of those top 10,000 tracks. He sees it in his own jukebox statistics; each month, thousands of people put in their dollars for songs that no traditional jukebox anywhere has ever carried.

A hit and a miss are on equal economic footing, both just entries in a database called up on demand, both equally worthy of being carried. People get Vann-Adib’s question wrong because the answer is counterintuitive in two ways. The first is we forget that the 20 percent rule in the entertainment industry is about hits, not sales of any sort. We’re stuck in a hit-driven mindset - we think that if something isn’t a hit, it won’t make money and so won’t return the cost of 013


its production. We assume, in other words, that only hits deserve to exist. But Vann-Adib, like executives at iTunes, Amazon, and Netflix,

have to go somewhere else. Bookstores, the megaplex, radio, and network TV can be equally demanding. We equate mass market with quality

We equate mass market with quality and demand,when in fact it often just represents familiarity, savvy advertising, and broad if somewhat shallow appeal. has discovered that the “misses” usually make money, too. And because there are so many more of them, that money can add up quickly to a huge new market. With no shelf space to pay for and, in the case of purely digital services like iTunes, no manufacturing costs and hardly any distribution fees, a miss sold is just another sale, with the same margins as a hit. A hit and a miss are on equal economic footing, both just entries in a database called up on demand, both equally worthy of being carried. Suddenly, popularity no longer has a monopoly on profitability. The second reason for the wrong answer is that the industry has a poor sense of what people want. Indeed, we have a poor sense of what we want. We assume, for instance, that there is little demand for the stuff that isn’t carried by Wal-Mart and and demand, when in fact it often just represents familiarity, savvy advertising, and broad if somewhat shallow appeal. What do we really want? We’re only just discovering, but it clearly starts with more. To get a sense of our true taste, unfiltered by the economics of scarcity, look at Rhapsody, a subscription-based streaming music service (owned by RealNetworks) that currently offers more than 735,000 tracks. Chart Rhapsody’s monthly statistics and you get a “power law” demand curve that looks much like any record store’s, with huge appeal for the top tracks, tailing off quickly for less popular ones. But a really interesting thing happens

The potential book market may be twice as big as it appears to be, if only we can get over the economics of scarcity. once you dig below the top 40,000 tracks, which is about the amount of the fluid inventory (the albums carried that will eventually be sold) of the average real-world record store. Here, the Wal-Marts of the world go to zero - either they don’t carry any more CDs, or the few potential local takers for such fringy fare never find it or never even enter the store. The Rhapsody demand, however, keeps going. Not only is every one of Rhapsody’s top 100,000 tracks streamed at least once each month, the

other major retailers; if people wanted it, surely it would be sold. The rest, the bottom 80 percent, must be subcommercial at best. But as egalitarian as Wal-Mart may seem, it is actually extraordinarily elitist. Wal-Mart must sell at least 100,000 copies of a CD to cover its retail overhead and make a sufficient profit; less than 1 percent of CDs do that kind of volume. What about the 60,000 people who would like to buy the latest Fountains of Wayne or Crystal Method album, or any other nonmainstream fare? They 014


same is true for its top 200,000, top 300,000, and top 400,000. As fast as Rhapsody adds tracks to its library, those songs find an audience, even if it’s just a few people a month, somewhere in the country. This is the Long Tail. You can find everything out there on the Long Tail. There’s the back catalog, older albums still fondly remembered by longtime fans or rediscovered by new ones. There are live tracks, B-sides, remixes, even (gasp) covers. There are niches by the thousands, genre within genre within genre: Imagine an entire Tower Records devoted to ‘80s hair bands or ambient dub. There are foreign bands, once priced out of reach in the Import aisle, and obscure bands on even more obscure labels, many of which don’t have the distribution clout to get into Tower at all. Oh sure, there’s also a lot of crap. But there’s a lot of crap hiding between the radio tracks on hit albums, too. People have to skip over it on CDs, but they can more easily avoid it online, since the collaborative filters typically won’t steer you to it. Unlike the CD, where each crap track costs perhaps one-twelfth of a $15 album price, online it just sits harmlessly on some server, ignored in a market that sells by the song and evaluates tracks on their own merit. What’s really amazing about the Long Tail is the sheer size of it. Combine enough nonhits on the Long Tail and you’ve got a market bigger than the hits. Take books: The average Barnes & Noble carries 130,000 titles. Yet more than half of Amazon’s book sales come from outside its top 130,000 titles. Consider the implication: If the Amazon statistics are any guide, the market for books that are not even sold in the average bookstore is larger than the market for those that

are. In other words, the potential book market may be twice as big as it appears to be, if only we can get over the economics of scarcity. Venture capitalist and former music industry consultant Kevin Laws puts it this way: “The biggest money is in the smallest sales.” The same is true for all other aspects of the entertainment business, to one degree or another. Just compare online and offline businesses: The average Blockbuster carries fewer than 3,000 DVDs. Yet a fifth of Netflix rentals are outside its top 3,000 titles. Rhapsody streams more songs each month beyond its top 10,000 than it does its top 10,000. In each case, the market that lies outside the reach of the physical retailer is big and getting bigger. When you think about it, most successful businesses on the Internet are about aggregating the Long Tail in one way or another. Google, for instance, makes most of its money off small advertisers (the long tail of advertising), and eBay is mostly tail as well - niche and one-off products. By overcoming the limitations of geography and scale, just as Rhapsody and Amazon have, Google and eBay have discovered new markets and expanded existing ones. This is the power of the Long Tail. The companies at the vanguard of it are showing the way with three big lessons. Call them the new rules for the new entertainment economy.

RULE 1: MAKE EVERYTHING AVAILABLE If you love documentaries, Blockbuster is not for you. Nor is any other video store - there are too many documentaries, and they sell too poorly to justify stocking more than a few dozen of them on physical shelves. Instead, you’ll want to 015


join Netflix, which offers more than a thousand documentaries - because it can. Such profligacy is giving a boost to the documentary business; last year, Netflix accounted for half of all US rental revenue for Capturing the Friedmans, a documentary about a family destroyed by allegations of pedophilia. Netflix CEO Reed Hastings, who’s something of a documentary buff, took this newfound clout to PBS, which had produced Daughter From Danang, a documentary about the children of US

exclusive. Now Daughter From Danang consistently ranks in the top 15 on Netflix documentary charts. That amounts to a market of tens of thousands of documentary renters that did not otherwise exist. There are any number of equally attractive genres and subgenres neglected by the traditional DVD channels: foreign films, anime, independent movies, British television dramas, old American TV sitcoms. These underserved markets make up a big chunk of Netflix rentals.

You can find everything out there on the Long Tail. There’s the back catalog, older albums still fondly remembered by longtime fans or rediscovered by new ones. soldiers and Vietnamese women. In 2002, the film was nominated for an Oscar and was named best documentary at Sundance, but PBS had no plans to release it on DVD. Hastings offered to handle the manufacturing and distribution if PBS would make it available as a Netflix Bollywood alone accounts for nearly 100,000 rentals each month. The availability of offbeat content drives new customers to Netflix and anything that cuts the cost of customer

online services carry far more inventory than traditional retailers. iTunes, for example, ofers 20 times as many songs as Wal-Mart’s stock of 39,000 tunes. The appetite for iTunes more obscure traks (charted below in yellow) makes up the co-called Long Tail. Meanwhile, even as consumers flock to mainstream books, music, and films (right), there is real demand for niche fare found only online.

THE DOCUMENTARY NICHE ANATOMY OF THE LONG TAIL 20,000 15,000 6,100

GETS RITCHER TOTAL INVENTORY: 28,000,000 SONGS Walmart Stocks around 39,000 CDs

TOTAL INVENTORY 2.3 MILLION BOOKS

TOTAL INVENTORY 25,000 DVDS

Average number of plays per month on iTunes

DOCUMENTARIES AVAILABLE

More than 40,000 documentaries have been released, according to the internet Movie Database. TOTAL SALES TOTAL SALES

Typical Waterstones stock around 10,000 books

typical Blockbuster store:3,000 DVDs

10,000 2,000

5,000 1,000

songs available at both Wall-Mart and iTunes

40% songs available only on Rhapsody

THE NEW GROWTH MARKET: OBSCURE PRODUCTS YOU CAN’T GET ANYWHERE BUT ONLINE TOTAL SALES

22%

57%

20%

POPULAR CDS & DVDS 0

0

LESS POPULAR CDS & DVDS

3%

Product not available in offline retail stores

2% 500,000

39,000

Amazon.com

100,000

Netflix Titles ranked by popularity

Local Video Shop 200,000

016


acquisition is gold for a subscription business. Thus the company’s first lesson: Embrace niches. Netflix has made a good business out of what’s unprofitable fare in movie theaters and video rental shops because it can aggregate dispersed audiences. It doesn’t matter if the several thousand people who rent Doctor Who episodes each month are in one city or spread, one per town, across the country - the economics are the same to Netflix. It has, in short, broken

half the price. Same for independent films. This year, nearly 6,000 movies were submitted to the Sundance Film Festival. Of those, 255 were accepted, and just two dozen have been picked up for distribution; to see the others, you had to be there. Why not release all 255 on DVD each year as part of a discount Sundance Series?In a Long Tail economy, it’s more expensive to evaluate than to release. Just do it!

The same is true for the music industry. It should be securing the rights to release all the titles

Great Long Tail businesses can then guide consumers further afield by following the contours of their likes and dislikes, easing their exploration of the unknown. the tyranny of physical space. What matters is not where customers are, or even how many of them are seeking a particular title, but only that some number of them exist, anywhere. As a result, almost anything is worth offering on the off chance it will find a buyer. This is the opposite of the way the entertainment industry now thinks. Today, the decision about whether or when to release an old film on DVD is based on estimates of demand, availability of extras such as commentary and additional material, and marketing opportunities such as anniversaries, awards, and generational windows (Disney briefly rereleases its classics every 10 years or so as a new wave of kids come of age). It’s a high bar, which is why only a fraction of movies ever made are available on DVD. That model may make sense for the true classics, but it’s way too much fuss for everything else. The Long Tail approach, by contrast, is to simply dump huge chunks of the archive onto bare-bones DVDs, without any extras or marketing. Call it the Silver Series and charge in all the back catalogs as quickly as it can thoughtlessly, automatically, and at industrial scale. (This is one of those rare moments where the world needs more lawyers, not fewer.) So too for videogames. Retro gaming, including simulators of classic game consoles that run on modern PCs, is a growing phenomenon driven by the nostalgia of the first joystick generation. Game publishers could release every title as a 99-cent download three years after its release no support, no guarantees, no packaging. All this, of course, applies equally to books. Already, we’re seeing a blurring of the line between in and out of print. Amazon and other networks of used booksellers have made it almost as easy to find and buy a second-hand book as it is a new one. By divorcing bookselling from geography, these networks create a liquid market at low volume, dramatically increasing both their own business and the overall demand for used books. Combine that with the rapidly dropping costs of print-on-demand technologies and it’s clear why any book should always be 017


available. Indeed, it is a fair bet that children today will grow up never knowing the meaning of out of print.

consumers should pay more for the privilege of purchasing la carte to compensate for the lost album revenue. Ask consumers, on the other hand, and they’ll tell you that 99 cents is too high. It is, for starters, 99 cents more than Kazaa. But piracy aside, 99 cents violates our innate sense of economic justice: If it clearly costs less for a record label to deliver a song online, with no packaging, manufacturing, distribution, or shelf space overheads, why shouldn’t the price be less, too? Surprisingly enough, there’s been little good economic analysis on what the right price for online music should be. The main reason for this is that pricing isn’t set by the market today but by the record label demi-cartel. Record

RULE 2: CUT THE PRICE IN HALF. NOW LOWER IT. Thanks to the success of Apple’s iTunes, we now have a standard price for a downloaded track: 99 cents. But is it the right one? Ask the labels and they’ll tell you it’s too low: Even though 99 cents per track works out to about the same price as a CD, most consumers just buy a track or two from an album online, rather than the full CD. In effect, online music has seen a return to the singles-driven business of the 1950s. So from a label perspective,

So free has a cost: the psychological value of convenience. This is the “not worth it” moment where the wallet opens.

THE REAL COST of MU$IC Oneline music services dont incur packaging, distribution, and retail fees -and they should charge accordingly

Artist $1.50 Marketing & profit $5.00 Publishing $0.96

CREATION COSTS = $7.46

PRODUCTION COSTS Packaging $0.75 Distrabution $2.00 Retail markup $5.00

+

divided by 12 traks = 62c/track + 17c online delivery cost

= $7.76

per CD

$15.21

per song

79c

018


companies charge a wholesale price of around 65 cents per track, leaving little room for price experimentation by the retailers. That wholesale price is set to roughly match the price of CDs, to avoid dreaded “channel conflict.” The labels fear that if they price online music lower, their CD retailers (still the vast majority of the business) will revolt or, more likely, go out of business even more quickly than they already are. In either case, it would be a serious disruption of the status quo, which terrifies the already spooked record companies. No wonder they’re doing price calculations with an eye on the downsides in their traditional CD business rather than the upside in their new online business. But what if the record labels stopped playing defense? A brave new look at the economics of music would calculate what it really costs to simply put a song on an iTunes server and adjust pricing accordingly. The results are surprising. Take away the unnecessary costs of the retail channel - CD manufacturing, distribution, and retail overheads. That leaves the costs of finding, making, and marketing music. Keep them as they are, to ensure that the people on the creative and label side of the business make as much as they currently do. For a popular album that sells 300,000 copies, the creative costs work out to about $7.50 per disc, or around 60 cents a track. Add to that the actual cost of delivering music online, which is mostly the cost of building and maintaining the online service rather than the negligible storage and bandwidth costs. Current price tag: around 17 cents a track.

By this calculation, hit music is overpriced by 25 percent online - it should cost just 79 cents a track, reflecting the savings of digital delivery. Putting channel conflict aside for the moment, if the incremental cost of making content that was originally produced for physical distribution available online is low, the price should be, too. Price according to digital costs, not physical ones. All this good news for consumers doesn’t have to hurt the industry. When you lower prices, people tend to buy more. Last year, Rhapsody did an experiment in elastic demand that suggested it could be a lot more. For a brief period, the service offered tracks at 99 cents, 79 cents, and 49 cents. Although the 49-cent tracks were only half the price of the 99-cent tracks, Rhapsody sold three times as many of them. Since the record companies still charged 65 cents a track - and Rhapsody paid another 8 cents per track to the copyright-holding publishers - Rhapsody lost money on that experiment (but, as the old joke goes, made it up in volume). Yet much of the content on the Long Tail is older material that has already made back its money (or been written off for failing to do so): music from bands that had little record company investment and was thus cheap to make, or live recordings, remixes, and other material that came at low cost. Such “misses” cost less to make available than hits, so why not charge even less for them? Imagine if prices declined the further you went down the Tail, with popularity (the market) effectively dictating pricing. All it would take is for the labels to lower the wholesale price for the vast majority of their content not in heavy rotation; even a two- or three-tiered pricing 019


structure could work wonders. And because so much of that content is not available in record stores, the risk of channel conflict is greatly diminished. The lesson: Pull consumers down the tail with lower prices. How low should the labels go? The answer comes by examining the psychology of the music consumer. The choice facing fans is not how many songs to buy from iTunes and Rhapsody, but how many songs to buy rather than download for free from Kazaa and other peer-to-peer networks. Intuitively, consumers know that free music is not really free: Aside from any legal risks, it’s a time-consuming hassle to build a collection that way. Labeling is inconsistent, quality varies, and an estimated 30 percent of tracks are defective in one way or another. As Steve Jobs put it at the iTunes Music Store launch, you may save a little money downloading from Kazaa, but “you’re working for under minimum wage.” And what’s true for music is doubly true for movies and games, where the quality of pirated products can be even more dismal, viruses are a risk, and downloads take so much longer. So free has a cost: the psychological value of convenience. This is the “not worth it” moment where the wallet opens. The exact amount is an impossible calculus involving the bank balance of the average college student multiplied by their available free time. But imagine that for music, at least, it’s around 20 cents a track. That, in effect, is the dividing line between the commercial world of the Long Tail and the underground. Both worlds will continue to exist in parallel, but it’s crucial for Long Tail thinkers to exploit the opportunities between 20 and 99 cents to

maximize their share. By offering fair pricing, ease of use, and consistent quality, you can compete with free. Perhaps the best way to do that is to stop charging for individual tracks at all. Danny Stein, whose private equity firm owns eMusic, thinks the future of the business is to move away from the ownership model entirely. With ubiquitous broadband, both wired and wireless, more consumers will turn to the celestial jukebox of music services that offer every track ever made, playable on demand. Some of those tracks will be free to listeners and advertising-supported, like radio. Others, like eMusic and Rhapsody, will be subscription services. Today, digital music economics are dominated by the iPod, with its notion of a paid-up library of personal tracks. But as the networks improve, the comparative economic advantages of unlimited streamed music, either financed by advertising or a flat fee (infinite choice for $9.99 a month), may shift the market that way. And drive another nail in the coffin of the retail music model.

Rule 3: Help me find it In 1997, an entrepreneur named Michael Robertson started what looked like a classic Long Tail business. Called MP3.com, it let anyone upload music files that would be available to all. The idea was the service would bypass the record labels, allowing artists to connect directly to listeners. MP3.com would make its money in fees paid by bands to have

020


their music promoted on the site. The tyranny of the labels would be broken, and a thousand flowers would bloom. Putting aside the fact that many people actually used the service to illegally upload and share commercial tracks, leading the labels to sue MP3. com, the model failed at its intended purpose, too. Struggling bands did not, as a rule, find new audiences, and independent music was not transformed. Indeed, MP3.com got a reputation for being exactly what it was: an undifferentiated mass of mostly bad music that deserved its obscurity. The problem with MP3.com was that it was only Long Tail. It didn’t have license agreements with the labels to offer mainstream fare or much popular commercial music at all. Therefore, there

was no familiar point of entry for consumers, no known quantity from which further exploring could begin. Offering only hits is no better. Think of the struggling video-on-demand services of the cable companies. Or think of Movielink, the feeble video download service run by the studios. Due to overcontrolling providers and high costs, they suffer from limited content: in most cases just a few hundred recent releases. There’s not enough choice to change consumer behavior, to become a real force in the entertainment economy. By contrast, the success of Netflix, Amazon, and the commercial music services shows that you need both ends of the curve. Their huge libraries of less-mainstream fare set them apart, but hits still matter in attracting consumers in the first

place. Great Long Tail businesses can then guide

online services carry far more inventory than traditional retailers. iTunes, for example, ofers 20 times as many songs as Wal-Mart’s stock of 39,000 tunes. The appetite for iTunes more obscure traks (charted below in yellow) makes up the co-called Long Tail. Meanwhile, even as consumers flock to mainstream books, music, and films (right), there is real demand for niche fare found only online.

ANATOMY OF THE LONG TAIL“IF YOU LIKE BRITNEY, #3 ri 40 B S tney rs pea

YOU’LL LOVE...” TOTAL INVENTORY: 28,000,000 SONGS Walmart Stocks around 39,000 CDs

TOTAL INVENTORY 2.3 MILLION BOOKS

TOTAL INVENTORY 25,000 DVDS

6,100

Average number of plays per month on iTunes

Just as lower prices can entice consumers down the Long Tail, recommendation engines drive them to obscure content they THE NEW GROWTH MARKET: might not find otherwise. OBSCURE PRODUCTS YOU CAN’T GET ANYWHERE BUT ONLINE Typical Waterstones stock around 10,000 books

typical Blockbuster store:3,000 DVDs

2,000

songs available at both Wall-Mart and iTunes 1,000

#1,8

ink 10 P

TOTAL SALES

TOTAL SALES

TOTAL SALES

22%

songs available only on Rhapsody

53 #5,1

No

bt Dou

57%

20%

POPULAR CDS & DVDS 0

Product not available in offline retail stores

LESS POPULAR CDS & DVDS

,19 #32 200,000

5T

ele he S

cter

39,000

Amazon sales rank 100,000

500,000

Titles ranked by popularity

021


consumers further afield by following the contours of their likes and dislikes, easing their exploration of the unknown. For instance, the front screen of Rhapsody features Britney Spears, unsurprisingly. Next to the listings of her work is a box of “similar artists.” Among them is Pink. If you click on that and are pleased with what you hear, you may do the same for Pink’s similar artists, which include No Doubt. And on No Doubt’s page, the list includes a few “followers” and “influencers,” the last of which includes the Selecter, a 1980s ska band from Coventry, England. In three clicks, Rhapsody may have enticed a Britney Spears fan to try an album that can hardly be found in a record store. Rhapsody does this with a combination of human editors and genre guides. But Netflix, where 60 percent of rentals come from recommendations, and Amazon do this with collaborative filtering, which uses the browsing and purchasing patterns of users to guide those who follow them (“Customers who bought this also bought ...”). In each, the aim is the same: Use Long Tail.

and can reawaken a passion for music and film, potentially creating a far larger entertainment market overall. (The average Netflix customer rents seven DVDs a month, three times the rate at brick-and-mortar stores.) And the cultural benefit of all of this is much more diversity, reversing the blanding effects of a century of distribution scarcity and ending the tyranny of the hit. Such is the power of the Long Tail. Its time has come. Chris Anderson (canderson@wiredmag.com) is Wired’s editor in chief and writes the blog The Long Tail.

recommendations to drive demand down the This is the difference between push and pull, between broadcast and personalized taste. Long Tail business can treat consumers as individuals, offering mass customization as an alternative to mass-market fare. The advantages are spread widely. For the entertainment industry itself, recommendations are a remarkably efficient form of marketing, allowing smaller films and less-mainstream music to find an audience. For consumers, the improved signal-to-noise ratio that comes from following a good recommendation encourages exploration 022


These are the worlds, the visions, the stories,

that inspire us to dream to look beyond to boldly go

to believe


and entertaining solo record, Discipline/ Communication. I had the opportunity to throw a few questions his way about this project and the plentiful side projects he’s been involved in between Zorch tours and record releases. Here is what he has to say… FLABmag: What were you like as a child? I ask because judging from your musical preferences showcased on your shmusix.

com blog your shit is all over the place – in a good and jarring way (I checked out some of times was like, “Owww my head hurts!” or either super sheltered but inquisitive, and the bands you profiled on your blog and a few “Ahhh this is interesting…”). I mean you were once free from parental restraint went fucking extreme) expressions, or you were always way out there/ahead of your peers in your

bonkers headlong into all sorts of artistic (and

artistic and personal preferences. But that’s

FEATURED ARTIST: SAMUEL CHOWN Every once and a while a new band will come progressive, and entertaining and far in fact beyond the stuff that qualifies as any of the above, but truly isn’t anywhere near it. The Austin based duo, Zorch is unequivocally a progressive act that manages to (purposefully) be entertaining. And they are so far beyond the bullshit that passes for progressive or experimental music that they almost redefine both terms. So, it should be no surprise that vocalist/drummer (who also plays any number of instruments besides the drums) Samuel Chown has put together a truly progressive 024

as a child.

all supposition, so go ahead; tell us about you

Samuel (Sam) Chown: I was a very musical kid, my head was in a musical cloud all the time, completely oblivious to the real world and unmotivated to care about anything else other than the desire to be constantly composing music in my head. I would say I was always way out there, for better or for worse. I was very much a late bloomer in terms of learning how to be a normal person, doing normal people things. Like tying my shoe or ironing a shirt, ya know, basic things. It was as if the right hemisphere of my brain was on overdrive and the left more linear/ logical side was asleep at the wheel for a while. FLABmag: What did you study in college? output? Did it in anyway shape your current artistic

along and that band will be righteously and truly


I met Zac (from Zorch) in college, so that greatly shaped my current artistic output, otherwise Zorch wouldn’t exist. In terms of my solo stuff, I’ve always had a similar vision of what I wanted to artistically, so the older I got, the more refined and on point my musical vision became. It’s kinda hard to say whether or not my solo music would sound relatively the same if I went to music school or not. FLABmag: Zorch is known for far out musical expressions and hilarious in-concert hi-jinx. Did you guys develop an “act” to off set potential backlash or apathy from an audience?

Zac and I would go to a lot of shows and notice people weren’t moving around that much. We wanted to create an experience that was inclusive, where everyone at the show became (part of) the show, so it was like a communal experience. Our goal was to affect/stimulate each and every person on some level, whether it be emotionally and/or mentally by our music, visually by our lasers/projections, or they simply had a good time shaking a tambourine and getting lost in the moment. FLABmag: What has been the Do you foresee longevity for general response to the band?

Zorch as a band? Do you

guys even want that given

both of you are involved in

innumerable side projects? 95% of our side projects involve both Zac and I so that’s not an issue. Yes, I definitely see Zorch as a band existing for a long time. It’s really fulfilling when people come up to me after a show and express how moved they were by the music. The greatest compliment I’ve ever received, which has happened a few times, is when someone comes up to me and tells me how our show was a spritual/ religious experience for them. That to me makes all the hard 025


work we put into the project worth more than worth it. FLABmag: By the way I adore the Cosmic Gloss/E.M.F. EP – funky as fuck! It reminds

We usually come up with a concept and let that be the leading force into the creative journey. They’re usually concepts that we work off of. For example, do we want to make an Aqua (the Danish Barbie Girl pop group) cover album? Yes, I think we do, and we have, you should expect that sometime in the next 6 months! FLABmag: How long have you been working making it anyway? on the solo record? What was the impetus for I actually made that album 4 yrs ago, it’s really

me of some seriously tasty Earth, Wind and histrionics. I love the glistening keys and the poppy snare cracks right around the

Fire grooves mixed with late 80s R&B falsetto

five-minute mark (as you can tell I’ve listened to it many times). A few questions about the track: What is “Cosmic Gloss”? Second, is the that part as well? The bass is pretty sweet as And what was the inspiration for this song?

bass on the track sampled or did you also play well. Did you both share vocals on the track? I’m happy you enjoy it! What isn’t Cosmic Gloss? haha.  Zac and I wrote all the bass lines together; he’s playing those lines on his Moog, and I’m performing all the vocal melodies. “Cosmic Gloss” came from a couple of jams, as do most of our songs. It’s kinda difficult to pinpoint where inspiration comes from with each given song, we just jam a lot and then choose our favorite moments and turn them into something. We just follow our instincts of what we like in music. FLABmag: So about these side projects, I was wondering if that doesn’t, at some point, divide your attentions too much? Or does creating outside of Zorch provide an outlet for projects you’ve worked on lately (aside from successful – musically speaking?

old to me. I’ve always been making solo music, I’ve always been a solo artist, Zorch is actually the first serious band I’ve ever been in, and

that’s only two dudes. I’m working on new solo stuff right now, should be out sometime next year. FLABmag: The album showcases a wide

variety of styles and instruments, which are do you feel best exemplify your personal preferences and personality?

your favorite tracks, or put another way, which

There is no one track that best represents my personality. That’s why my solo stuff, and the stuff I write in Zorch sound so different, because they’re different aspects of my personality showing their faces. “Shadowgames” has always been a personal favorite of mine off the solo record. It represents a side of my personality very accurately, a side not often seen in Zorch. FLABmag: You seem to have some R&B and funk leanings. Are there any current or inspiration (aside from Prince, which is an obvious influence).

music that might not suit the band? And of the the solo record) which do you think are most The side projects are purely a means for us to get specific creative ideas out of our system that aren’t necessarily possible in the Zorch medium. Usually, it’s because we’re utilizing instruments and approaches outside of our traditional setup. 026

past artists in that genre that you look to for

70′s Stevie Wonder and 70′s Shuggie Otis. Check out Shuggie’s album “Inspiration Information”, it’s beautiful.


FLABmag: You’ve received some pretty good

press and review of the record. How does that make you feel, aside from good, which is also has been said so far? obvious, any reflections you can share about what I like how people seem to get that the album is an eclectic tapestry of sound. Redefine Magazine called each song a sonic equivalent of a 15-minute Adult Swim show. I’m very down with that description. FLABmag: Got any juicy or entertaining anecdotes you can share about the making of the record? My drum performance on the song “Impressions” are very subtle and chill. The reason for that is because the night before I recorded those drums at my apartment in Boston. I had a visit from the police, due to the fact that I was having a very loud jam sesh. This happened a few times. The way I would sneak back into playing at full volume would be to gradually play longer and louder each day; t hat was Day 1 after police intervention, therefore chill drums. FLABmag: Now for some drums-related questions; Was it your first instrument? No, piano was, but if voice is considered an instrument, then that would be the first. FLABmag: Do you think you have distinguished yourself on the kit? It’s very difficult to do so and not many have achieved distinction…so, do you think you have? How often do you practice if at all? 

I think I’ve developed my own distinct sound and style. I try to practice every day for an hour and a half, most of the time I do, sometime I don’t. FLABmag: Was there a point in your evolution as a drummer when you felt you had achieved full competency as a player?

Absolutely not. I always see my weak points and


aim to strengthen those aspects. I’m never gotta keep movin’ forward.

happy with staying in the same place, always FLABmag: What kit do you currently play? A 20′ (bass drum) Tama Silverstar. It’s a really beautiful sounding birch kit. FLABmag: Any current drummers out there I love Zach Hill, he’s amazing. He’s a perfect example of a guy who has released tons of quality records in different styles and shreds in the most interesting way. I love his grooves on the “Face Tat” record and I love the new Death Grips. Other than Zach, there are too many amazing drummers to name, but Zach Hill stands out as being a key inspiration in life. I think he is for a lot of people. From the old school, I’ve always loved Tony Williams. FLABmag: Moving back to your current projects, will you be touring in support of the record? that you admire? Any past players? And why?

comes out of the house that we had parked in front of, thinking I was a crackhead tresspassing on her property. I explained to her that her roommate said it was ok that we stay at her house. They obviously didn’t have a conversation about it. I grabbed Zac, we got the fuq out of there. The crowd at the Townhouse couldn’t handle an entire Zorch vs Religious Girls set and I don’t blame them. Pregnant played that night, he’s great, I love that guy. Check out “Life Hard: I Try”, fantastic album. FLABmag: I missed the show after driving like a maniac from Los Angeles just so I wouldn’t miss the show! But I nearly died from heat

stroke so there’s that…and I figure I will have guys live – at least I hope so. I hope you do!

another opportunity at some point to see you

solo record? When will Zorch release another Zorch is on the precipice of finishing a new record. It is unlikely I will tour on this record, Shmu is currently more of a studio project for me. FLABmag: And finally, you played Sacramento day and about 88 degree night. What did to Texas? What about the crowd at The Townhouse? last year on the 4th of July. It was a 106 degree you make of the weather – is it comparable Cheack Shmu out at: http://www.shmusix.com http://www.facebook.com/shmusix

I slept in the van after the show, the sun woke me at 9am cuz it was so ridiculously hot. I came out the van with my pillow, a sweaty, tired mess. I attempted to find another place to sleep such as the backyard that Zac was sleeping in. A girl 028


DAVID BYRNE’S SURVIVAL STRATEGIES FOR EMERGING ARTISTS — AND MEGASTARS Full disclosure: I used to own a record label. That label, Luaka Bop, still exists, though I’m no longer involved in running it. My last record came out through Nonesuch, a subsidiary of the Warner Music Group empire. I have also released music through indie labels like Thrill Jockey, and I have pressed up CDs and sold them on tour. I tour every few years, and I don’t see it as simply a loss leader for CD sales. So I have seen this business from both sides. I’ve made money, and I’ve been ripped off. I’ve had creative freedom, and I’ve been pressured to make hits. I have dealt with diva behavior from crazy musicians, and I have seen genius records by wonderful artists get completely ignored. I love music. I always will. It can say that. What is called the music business today, however, is not the business of producing music. At some point it became the business of selling CDs in plastic cases, and that business will soon be over. But that’s not bad news for music, and it’s certainly not bad news for musicians. Indeed, with all the ways to reach an audience, there have never been more opportunities for artists. Where are things going? Some see this picture as a dire trend. The fact 029

saved my life, and I bet I’m not the only one who


that Radiohead debuted its latest album online and Madonna defected from Warner Bros. to Live Nation, a concert promoter, is held to signal the end of the music business as we know it. Actually, these are just two examples of how musicians are increasingly able to work outside of the traditional label relationship. There is no one single way of doing business these days. There are, in fact, six viable models by my count. That variety is good for artists; it gives them more ways to get paid and make a living. And it’s good for audiences, too, who will have more — and more interesting — music to listen to. Let’s step back and get some perspective. Advise and guide artists on their careers and recordings FUND RECORDING SESSIONS MANUFACTURE PRODUCT

pub sing-alongs, ceremonial music, military music, dance music — it was pretty much all tied to specific social functions. It was communal and often utilitarian. You couldn’t take it home, copy it, sell it as a commodity (except as sheet music, but that’s not music), or even hear it again. Music was an experience, intimately married to your life. You could pay to hear music, but after you did, it was over, gone — a memory. DISTRIBUTE PRODUCT

(Or, more precisely, what did they do?)

WHAT DO RECORD COMPANIES DO?

Technology changed all that in the 20th century. Music — or MARKET PRODUCT

its recorded artifact, at least — became a product, a thing that could be bought, sold, traded, and replayed endlessly in any context. This upended the economics of music, but our human instincts remained

HANDLE THE ACCOUNTING

intact. I spend plenty of time with buds in my ears listening to recorded music, but

What is music? First, a definition of terms. What

LOAN AND ADVANCE MONEY FOR EXPENSES (TOURS, VIDEOS, HAIR AND MAKEUP)

is it we’re talking about here? What exactly is being bought and sold? In the past, music was something you heard and experienced — it was as much a social event as a purely musical one. Before recording technology existed, you could not separate music from its social context. Epic songs and ballads, troubadours, courtly entertainments, church music, shamanic chants, 030

I still get out to stand in a crowd with an audience. I sing to myself, and, yes, I play an instrument (not always well). We’ll always want to use music as part of our social fabric: to congregate at concerts and in bars, even if the sound sucks; to pass music from hand to hand (or via the Internet) as a form of social currency; to build temples where only “our


kind of people” can hear music (opera houses and symphony halls); to want to know more about our favorite bards — their love lives, their clothes, their political beliefs. This betrays an eternal urge to have a larger context beyond a piece of plastic. One might say this urge is part of our genetic makeup. All this is what we talk about when we talk about music. All of it. This was the system that evolved over the past century to market the product, which is to say the container — vinyl, tape, or disc — that carried the music. (Calling the product music is like selling a shopping cart and calling it groceries.) But many things have changed in the past decade that reduce the value of these services to artists. Recording costs have declined to almost zero. Artists used to need the labels to bankroll their recordings. Most simply didn’t have the $15,000 (minimum) necessary to rent a professional studio and pay an engineer and a producer. For many artists — maybe even most — this is no longer the case. Now an album can be made on the same laptop you use to check email. Manufacturing and distribution costs are approaching zero. There used to be a break-even point below which it was impractical to distribute a recording. With LPs and CDs, there were base manufacturing costs, printing costs, shipping, and so on. It paid — in fact, it was essential — to sell in volume, because that’s how many of those costs got amortized. No more: Digital distribution is pretty much free. It’s no cheaper per unit to distribute a million copies than a hundred. Touring is not just promotion. Live performances used to be seen as essentially a way to publicize a new release — a means to an end, not an end in itself. Bands would go into debt in order to tour, anticipating that they’d recover their losses later through increased record sales. This, to be blunt, is all wrong. It’s backward. Performing is a thing in itself, a distinct skill, different from making recordings. And for those who can do it, it’s a way to make a living. So with all these changes, what happens to the labels? Some will survive. Nonesuch, where I’ve done several albums, has thrived under Warner Music Group ownership by operating with a lean staff of 12 and staying focused on talent. “Artists like Wilco, Philip Glass, k.d. lang, and others have sold more here than when they were at so-called major labels,” Bob Hurwitz, president of Nonesuch, told me, “even during a time of decline.” But some labels will disappear, as the roles they used to play get chopped up and delivered by more thrifty services. In a recent conversation I had with Brian Eno (who is producing the next Coldplay album and writing with U2), he was enthusiastic about I Think Music — an online network of indie bands, fans, and stores — and pessimistic about the future of traditional labels. “Structurally, they’re much too large,” Eno said. “And they’re entirely on the defensive now. The 031


only idea they have is that they can give you a big advance — which is still attractive to a lot of young bands just starting out. But that’s all they represent now: capital.” So where do artists fit into this changing landscape? We find new options, new models. The six possibilities Where there was one, now there are six: Six possible music distribution models, ranging from one in which the artist is pretty much hands-off to one where the artist does nearly everything. Not surprisingly, the more involved the artist is, the more he or she can often make per unit sold. The totally DIY model is certainly not for everyone — but that’s the point. Now there’s choice.

Live Nation. For a reported $120 million, the company — which until now has mainly produced and promoted concerts — will get a piece of both her concert revenue and her music sales. I, for one, would not want to be beholden to Live Nation — a spinoff of Clear Channel, the radio conglomerate that turned the US airwaves into pabulum. But Madge is a smart cookie; she’s always been adept at controlling her own stuff, so we’ll see.

2. Next is what I’ll call the standard distribution deal. This is more or less what I lived with for many years as a member of the Talking Heads. The record company bankrolls the recording and handles the manufacturing, distribution, press, and promotion. The artist gets a royalty percentage after all those other costs are repaid. The label, in this scenario, owns the copyright to the recording. Forever. There’s another catch with this kind of arrangement: The typical pop star often lives in debt to their record company and a host of other entities, and if they hit a dry spell they can go broke. Michael Jackson, MC Hammer, TLC — the danger of debt and overextension is an old story. Obviously, the cost of these services, along with the record company’s overhead, accounts for a big part of CD prices. You, the buyer, are paying for all those trucks, those CD plants, those warehouses, and all that plastic. Theoretically, as many of these costs go away, they should no longer be charged to the consumer — or the artist. Sure, many of the services traditionally provided by record labels under the standard deal are now being farmed out. Press and publicity, digital marketing, graphic design — all are often handled

1. At one end of the scale is the 360, or equity, deal, where every aspect of the artist’s career is handled by producers, promoters, marketing people, and managers. The idea is that you can achieve wide saturation and sales, boosted by a hardworking machine that stands to benefit from everything you do. The artist becomes a brand, owned and operated by the label, and in theory this gives the company a long-term perspective and interest in nurturing that artist’s career. Pussycat Dolls, Korn, and Robbie Williams have made arrangements like this, selling equity in everything they touch. The T-shirts, the records, the concerts, the videos, the BBQ sauce. The artist often gets a lot of money up front. But I doubt that creative decisions will be left in the artist’s hands. As a general rule, as the cash comes in, creative control goes out. The equity partner simply has too much at stake. This is the kind of deal Madonna just made with 032


by smaller, independent firms. But he who pays the piper calls the tune. If the record company pays the subcontractors, then the record company ultimately decides who or what has priority. If they “don’t hear a single,” they can tell you your record isn’t coming out. So what happens when online sales eliminate many of these expenses? Look at iTunes: $10 for a “CD” download reflects the cost savings of digital distribution, which seems fair — at first. It’s certainly better for consumers. But after Apple takes its 30 percent, the royalty percentage is applied and the artist — surprise! — is no better off. Not coincidentally, the issues here are similar to those in the recent Hollywood writers’ strike. Will recording artists band together and go on strike?

flip side is that because the label doesn’t own the master, it may invest less in making the release a success. But with the right label, the license deal can be a great way to go. This is the relationship Arcade Fire has with Merge Records, an indie label that’s done great for its band by avoiding the big-spending, big-label approach. “Part of it is just being realistic and not putting yourself in the hole,” Merge cofounder Mac McCaughan says. “The bands we work with, we never recommend that they make videos. I like videos, but they don’t sell a lot of records. What really sells records is touring — and artists can actually make money on the tour itself if they keep their budgets down.”

4. Then there’s the profit-sharing deal. I did something like this with my album Lead Us Not Into Temptation in 2003. I got a minimal advance from the label, Thrill Jockey, since the recording costs were covered by a movie soundtrack budget, and we shared the profits from day one. I retained ownership of the master. Thrill Jockey does some marketing and press. I may or may not have sold as many records as I would have with

3. The license deal is similar to the standard deal, except in this case the artist retains the copyrights and ownership of the master recording. The right to exploit that property is granted to a label for a limited period of time — usually seven years. After that, the rights to license to TV shows, commercials, and the like revert to the artist. If the members of the Talking Heads held the master rights to our catalog today, we’d earn twice as much in licensing as we do now — and that’s where artists like me derive much of our income. If a band has made a record itself and doesn’t need creative or financial help, this model is worth looking at. It allows for a little more creative freedom, since you get less interference from the guys in the big suits. The

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a larger company, but in the end I took home a greater share of each unit sold. 5. In the manufacturing and distribution deal, the artist does everything except, well, manufacture and distribute the product. Often the companies that do these kinds of deals also offer other services, like marketing. But given the numbers, they don’t stand to make as much, so their incentive here is limited. Big record labels traditionally don’t make M&D deals. In this scenario, the artist gets absolute creative control, but it’s a bigger gamble. Aimee Mann does this, and it works really well for her. “A lot of artists don’t realize how much more money they could make by retaining ownership and licensing directly,” Mann’s manager, Michael Hausman, told me. “If it’s done properly, you get paid quickly, and you get paid again and again. That’s a great source of income.”

download. They weren’t the first to do this — Issa (formerly known as Jane Siberry) pioneered the pay-what-you-will model a few years ago — but Radiohead’s move was much higher profile. It may be less risky for them, but it’s a clear sign of real changes afoot. As one of Radiohead’s managers, Bryce Edge, told me, “The industry reacted like the end was nigh. They’ve devalued music, giving it away for nothing.’ Which wasn’t true: We asked people to value it, which is very different semantics to me.” At this end of the spectrum, the artist stands to receive the largest percentage of income from sales per unit — sales of anything. A larger percentage of fewer sales, most likely, but not always. Artists doing it for themselves can actually make more money than the massive pop star, even though the sales numbers may seem minuscule by comparison. Of course, not everyone is as smart as those nerdy Radiohead boys. Pete Doherty probably should not be handed the steering wheel.

6. Finally, at the far end of the scale, is the self-distribution model, where the music is self-produced, self-written, self-played, and self-marketed. CDs are sold at gigs and through a Web site. Promotion is a MySpace page. The band buys or leases a server to handle download sales. Within the limits of what they can afford, the artists have complete creative control. In practice, especially for emerging artists, that can mean freedom without resources — a pretty abstract sort of independence. For those who plan to take their material on the road and play it live, the financial constraints cut even deeper. Backup orchestras, massive video screens and sets, and weird high tech lights don’t come cheap. Radiohead adopted this DIY model to sell In Rainbows online — and then went a step further by letting fans name their own price for the 034

Freedom versus pragmatism These models are not absolute. They can morph and evolve. Hausman and Mann took the total DIY route at first, getting money orders and sending out CDs in Express Mail envelopes; later on they licensed the records to distributors. And things change over time. In the future, we will see more artists take up these various models or mix and match versions of them. For existing and emerging artists — who read about the music business going down the drain — this is actually a great time, full of options and possibilities. The future of music as a career is wide open. Many who take the cash up front will never know that long-range thinking might have been wiser.


A Look at the Theoretical Deal Spectrum for Upcoming Artists With more control comes more responsibility but also more opportunities License Deals ProďŹ t Sharing Deals

Just Distribution Deals

Standard Deal

More Corporate Investment

...But for most bands the

Less Corporate Investment

sweet spot

is somewhere in the middle

Equity Deals / 360 Deals DIY All The Way

Less Control

More Control

The Dream: DIY your way into a decent funding situation: with enough fans, respect and leverage to develop a mutually beneficial  relationship with a corporation, label or sponsor.

What Successful Musicians and Managers Know in 2012 Revenue producers greatest to least: Touring 035 Social networking has made promotion in new cities cheaper and Merch For artists struggling to make a living in the digital age, a strong Licensing Artists who fit the sound requirements and have a certain buzz amongst Recorded Music The "album" has quickly become relegated to a promotional item Publishing 0035 Publishing a song is administering the rights to, and commercially


Mega pop artists will still need that mighty push and marketing effort for a new release that only traditional record companies can provide. For others, what we now call a record label could be replaced by a small company that funnels income and invoices from the various entities and keeps the accounts in order. A consortium of midlevel artists could make this model work. United Musicians, the company that Hausman founded, is one such example. I would personally advise artists to hold on to their publishing rights (well, as much of them as they can). Publishing royalties are how you get paid if someone covers, samples, or licenses your song for a movie or commercial. This, for a songwriter, is your pension plan. Increasingly, it’s possible for artists to hold on to the copyrights for their recordings as well. This guarantees them another lucrative piece of the licensing pie and also gives them the right to exploit their work in mediums to be invented in the future — musical brain implants and the like. No single model will work for everyone. There’s room for all of us. Some artists are the Coke and Pepsi of music, while others are the fine wine — or the funky home-brewed moonshine. And that’s fine. I like Rihanna’s “Umbrella” and Christina Aguilera’s “Ain’t No Other Man.” Sometimes a corporate soft drink is what you want — just not at the expense of the other thing. In the recent past, it often seemed like all or nothing, but maybe now we won’t be forced to choose. Ultimately, all these scenarios have to satisfy the same human urges: What do we need music to do? How do we visit the land in our head and the place in our heart that music takes us to? Can I get a round-trip ticket? Really, isn’t that what we want to buy, sell, trade, or download? David Byrne is currently collaborating with Fatboy Slim and Brian Eno. Separately. Chart Szzzzources: Jupiter Research, Recording Industry Association of America, Almighty Institute of Music Retail, Wired Research

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What Successful Musicians and Managers Know in 2012 Revenue producers greatest to least: Touring Social networking has made promotion in new cities cheaper and easier. As tough as touring can be, artists focused on this are clearly leveraging it into a career. Merch For artists struggling to make a living in the digital age, a strong merch strategy can be the difference between living life as a starving artist and making a comfortable living. Licensing Artists who fit the sound requirements and have a certain buzz amongst music supervisors are often rewarded with multiple placement opportunities for their music. Recorded Music The "album" has quickly become relegated to a promotional item although there is still immense value in recorded music, especially live and alternate versions/takes/b-sides, for the fan base. Publishing Publishing a song is administering the rights to, and commercially exploiting it. Traditionally artists sign to publishing companies which perf collect income from usage, but now it is possible to self publish.

1 Touring

2 Merchandise 3 Licensing 4 Recorded 5 Publishing music royalties

The Majority of DIY Artists Juggle Multiple Roles 1594 1600 1400 1200 1000 800 600 400 130 200 0 1 role 41 18 388 983 817 1400

“Musicians are musicians because they play music, not because they love accounting or managing Facebook pages. But in the current climate, artists are now forced to play more roles than ever.� - Paul Resnikoff

2 roles

3 roles

4 roles

5 roles

6 roles

7roles

8 roles

- Future of Music Coalition 2012 037


IF ‘DIY’ IS KILLING YOU, THEN PLEASE READ THIS... by Paul Resnikoff

Childish Gambino AKA Donald McKinley Glover is an American rapper, actor, writer, comedian, and producer.

I think it’s very difficult to do things without a team. I would hate to have an artist or a manager leave this room thinking, ‘oh that’s easy, I can do this myself, I can just do the site, do the work, get my records loaded in and everything goes well,’ or ‘I can just sign the artist and go to a distributor and it ends there.’   I think ‘DIY’ means the autonomy of the decisionmaking on the taste within your operation.  I think that’s the do-ityourself feeling where you don’t have to

The industry debunked ‘DIY’ years ago, yet the concept remains a romanticized, religious idea for many artists and companies. More and more, that’s proving to be an expensive belief, especially when it overloads, distracts, and demoralizes artists who need to be focused on their art firstand-foremost.           Here’s what Daniel Glass of independent Glassnote Records told an audience at Musexpo on the topic on Monday.  Glassnote is home to artists like Phoenix, Childish Gambino, Mumford & Sons, and the Temper Trap, among others.     0038


depend on someone to tell you what to do with your music. But I still think that either you’re putting together a loosely or tightly knit team of professionals to perform functions and rent them out or use consultants.  I think it’s been done quite well by certain people.   The Civil Wars, for example, went to the Grammys and had a profound effect and won two Grammys.  They did things on their own but had an amazing team, and spent a lot of money getting there. I praise them, they got there and sold several hundred thousand albums.    But a pure DIY is really smart if you put together the right professional teams - song pluggers, publicists, distribution people, people who will do those things well for you.  My advice to people is not to be too DIY, because you should focus on the essence of why you got there.  And most of us feel that it’s the music, and repertoire, so if you get bogged down in distribution issues, and payment issues, and sub-contracting issues, I think that’s when you kill your business, and kill your spirit.   Because people do those things really well, obviously there are people on this panel who do

really well in distribution. So I’d go to those professionals.  And go to like-minded people, if they distribute labels in the culture that you like, and they pay their bills and if you can get some recommendations, then take that out of the way.   The same thing with campaigns.  If you’re looking at Radio 1 or Triple J, or if you’re looking at K-Rock or KCRW type of records, who’s working on those records?  So look at those teams, look at the pedigree. Just like we look at who masters records, who mixes records.  If you have a child, and your child God forbid needed surgery - a serious thing - you’d go to one of the twenty best surgeons in your country. You’d fly anywhere for your child.   So why would you make a record for three months, put every bit of your life savings and not have it mixed or mastered properly by one of the great people who do it?  So the same thing should be for every part of your DIY team. So you may not check into that big hospital, but you would research it for your child.  Same with your band and your music.  Pearl Jam has a team they’re doing it themselves. Radiohead has a team - they

do it themselves. Odd Future put together a team, but it feels DIY.  I just think that they are making creative decisions on their own, and not encumbered by some filter at a major corporation or label that will say, ‘oh this should be the first single.’ They’re over that, they don’t want to hear that anymore.  These are successful touring bands. So that’s where it comes from.  I think the DIY will tell you more about a band that’s pretty self-sustaining in the touring area and then can do things on their own.”

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Forget Conventional Cleaning.

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Wired DIY  

Wired DIY check it out

Wired DIY  

Wired DIY check it out

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