The Democratization of the Music Industry

John Macy · From: Rockport TX/Denver CO

The Democratization of the Music Industry

Jeff Price - HuffingtonPost.com

As I write this, iTunes ranks as the 2nd largest seller of music in the U.S. -- only Wal-Mart's physical stores sell more. Digital revenue is real, and there is a lot of it being earned. Sales from iTunes alone can provide a band enough revenue to achieve true financial success. Don't take my word for it, just look at some of the sales by the following unsigned artists utilizing the Net for both digital distribution and marketing: Kelly sold over 500,000 songs in five months, Eric Hutchinson sold 120,000 songs in three weeks, The Medic Droid sold over 25,000 copies of a single in 45 days, Crank Squad sold over 20,000 songs in 30 days, Secondhand Serenade sold over 225,500 songs in three months, Jason Reeves sold over 20,000 songs in December 2007 and the list goes on and on. Unlike a physical store, digital stores like iTunes have unlimited shelf space allowing everything to be in stock. If the virtual shelves fill up, another hard drive is popped in to make more shelf space. In addition, inventory never runs out; the music simply replicates itself on demand each time it is bought.

After 17 years of running my record label spinART Records, I shut it down. The advent and general adoption of the Internet, digital media and hardware took control of the global music industry away from the record labels and media outlets and handed it to the masses. For the first time in history, through sites like TuneCore, all music creators can choose to be their own record label. There are no longer subjective gatekeepers controlling who gets let "in," promoted and exposed. The choice is ours. Now, anyone can be famous.

In 1991, I asked my high school friend if I could help him release an indie rock band compilation CD called "One Last Kiss," he said "yes" and spinART Records was born. For the next 17 years I co-ran the label and had the privilege of releasing many of the bands on my high school and college mix tapes (The Pixies, Camper Van Beethoven, Roddy Frame (Aztec Camera), Echo & The Bunnymen, The Church, Richard Thompson, and more) as well as a large number of other bands discovered post college (Lilys, Lotion, Clem Snide, Apples In Stereo, The Dears, Poole, etc.).

In 1996, I cold-called Ken Goes, then manager for the Pixies and Frank Black, in an attempt to convince him that our band Lotion should open for Frank Black on his upcoming national tour. While on the phone, Ken put me on hold for about two minutes. When he returned he told me the deal he had been working on with another record label to release the new Frank Black & The Catholics album had just fallen through -- Frank Black would not grant them the digital rights as they had already been assigned to another company called GoodNoise (now called eMusic). I told Ken this would not be a problem for me. spinART went on to release the next seven Frank Black & The Catholic albums, a Pixies album and a double disc called Frank Black Francis.

Soon thereafter I met the founders of eMusic and went on to work with them for the next 3 ½ years. spinART Records became the first label in the history of the music industry to put its available catalog up for paid download as MP3s and the education I received helped set the stage to adapt to the inevitable changes about to impact the music industry. I took to the emerging digital sector the way Bush took to weapons of mass destruction.

Over the ensuing years, spinART had its peaks and valleys. By 2004, there were a lot more valleys than peaks. The label still did what it did very well, identifying bands that it believed people would like and making them famous. But there was one big change, in the "old days" the more famous an artist got, the more money the bands and spinART made by selling the music. Almost suddenly, this correlation seemed to be breaking. Necessity being the mother of invention, it got me thinking, what could I do to remain in the music industry under a model that would not rely on selling music (the exploitation model). And thus the idea for a new model was born, turn distribution into a service for a simple up front, one time flat fee.

For the past century, artists could record, manufacture, market, and, to some degree, promote their own music, but no matter if they were The Beatles, Elvis or Led Zepplin, they could not distribute it and get in placed on the shelves of the stores across the country; the required costs and infrastructure of the physical world were just too massive -- a 500,00 square foot warehouse staffed with 30 people, trucks and inventory systems, insurance, a field staff of 30 people walking to music stores leveraging, begging, pleading and paying to get the CD, album, 8-track, wax spool, etc., on the precious shelves of the retail stores -- and checking up afterwards. Distribution was out of the hands of any one person, no matter how dedicated or wealthy. Without the music available to buy, there was no way for it to sell.

Record labels made artists famous and made money off that fame by selling the music -- without the music available to buy, there was no way for it to sell. The record labels exclusively had the relationships with the distributors (and in the case of the "four major record labels" the same company owns both). Therefore, with only one means to the desired end, the goal for many artists was to get "signed" to a label.

Record labels were in a very unique position of power due to their exclusive access to distribution, they were not only the singular gatekeepers to a career for an artist by "signing" them to an exclusive contract, but they were also the subjective "deciders" as to what music was pushed out and promoted to the media outlets. With a "signing," the labels acquired exclusive rights to and from the artist. In return, the label advanced money while providing the relationships, expertise and infrastructure to record, manufacture, market, promote, distribute and sell the music. Of all the artists and music creators in the world, far less than 1% got chosen by the labels due to the risks and economics of the "brick and mortar" world. Of all the music created around the globe, even less has had the opportunity to be discovered and heard by the masses.

And then the world changed thanks to the Internet and digital media.......

For administrative reasons, most of the digital stores like iTunes don't deal directly with the artists -- frankly, customer support for millions of bands (or Uncle Larry, who insists he can do the best version of "How Much Is That Doggy In The Window") are not what the digital stores are about. The stores prefer to get the music from music industry middlemen that aggregate music and deal with the administrative headaches (a record label as one example). The way to meaningful distribution has been reduced from "access plus infrastructure" to merely "access."

With the launch of TuneCore (full disclosure here, I am the CEO and founder), for the cost of a six pack and a pizza (around $30), anyone can now literally be their own record label and have the same distribution as any "signed" artist. However, unlike a "signed" artist, this new model allows artists to keep all their rights and receive all the money from the sale of their music via a non-exclusive agreement that can be cancelled at any time, all while having infinite inventory with no up front cost or risk.

This is analogous to telling a band 15 years ago that if they paid $30, every Tower Record store (god bless its now departed soul) around the world would have their album on its shelf and never run out of stock.

Music marketing and promotion is simply giving music to media outlets in hopes that they play it, talk about it or write about it. In the old days, there were three main media outlets that provided the general population a way to discover music en masse: commercial radio, TV (i.e., MTV, VH1, BET) and print magazines like Rolling Stone.

These three media outlets created a second subjective filter as they decided which music videos to show, albums to write about or singles to play on the radio from a limited pool of artists promoted to them via the labels. If an artist was not on a label, the possibility of getting exposure from any of these three outlets was virtually impossible -- MTV in particular.

Just getting pitched to any three of these media outlets also required a label due to the costs (i.e., making a video, greasing the palms of the programming directors at commercial radio stations, hiring a publicist, etc.) and connections.

Once again, enter the digital age. The Internet has created new media outlets and given everyone global access. Commercial radio is being replaced by Internet based recommendation streaming radio stations like LastFM that let all music in for programming, not just music pushed from the labels. MTV (when they actually played music videos and nothing was being pimped out, dated or real world-ed) has been replaced by sites like YouTube. All anyone needs now is a cell phone to make their own video and broadcast to a potential Internet viewing audience of hundreds of millions. Print magazines have been replaced by MP3 blogs like Stereogum, Gorilla Vs. Bear, PitchforkMedia, My Old Kentucky Blog and many others. These, combined with social networking sites like iLike, MySpace and more, have limitless circulation and the ability to allow readers and users to form a community that listens to, shares, rates, comments on and in some cases, even buys music. Everyone can become their own commercial radio station, magazine and/or TV network, reaching tens of millions of people.

With the restrictions of the physical world removed sites like iTunes have new vehicles allowing people to discover and share free music (make sure to snag a copy of 34 Stars, a 34-artist compilation album available for free download on iTunes

Subjectivity and filters have been removed. All music can be discovered, downloaded, shared, promoted, heard and bought directly by the audience itself. It is truly the democratization of an industry.

As far as the other label functions, these are now affordable and accessible for everyone. For the cost of one day at a studio, you can go to a place like Guitar Center (disclosure again -- Guitar Center have an equity position in TuneCore) and get inexpensive high quality gear to record at home along with lots of knowledgeable experts working the floors to educate and advise. With the removal of a physical medium to deliver the music (i.e., a CD), the barriers and expenses created by physical manufacturing have been removed.

Allowing all music creators "in" is both exciting and frightening. Some argue that we need subjective gatekeepers as filters. No matter which way you feel about it, there are a few indisputable facts -- control has been taken away from the "four major labels" and the traditional media outlets. We, the "masses," now have access to create, distribute, discover, promote, share and listen to any music. Hopefully access to all of this new music will inspire us, make us think and open doors and minds to new experiences we choose, not what a corporation or media outlet decides we should want. It is then the public, not a corporation that gets to decide what is bad and good. The revolution (pun intended) has truly begun.

View source article at: www.huffingtonpost.com
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John Macy
Rockport, TX
Engineer/Producer/Steel Guitar

Leslie Ehrlich · From: Saskatoon, Saskatchewan, Canada

All I can say is 'it's about time'.

Drew Howard · From: 48854

John,

Thanks for that.

Could you comment on the democratization of the recording process?

Drew
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Jon Light (deceased) · From: Saugerties, NY

Interesting read. These guys (spinart/tonecore) are our next door neighbors at work--in fact they occupy what used to be the other half of our space. Sadly, democratization of real estate has yet to come about and they (and we) are being forced out by a huge rent increase. (Not out of business, just out of quarters.)

Donny Hinson · From: Glen Burnie, Md. U.S.A.

Gordy Hall · From: Fairfax, CA.

John,

Good post.

I must, however, disagree about Tower Records. Their policies insured that artists would get ripped off.

Tower insisted that to deal with them, they had to receive 120 day EOM billing with 100% return privileges.

That means when a new album came out, they'd order, say, 40,000 copies, and not have to pay for them for over 4 months, then Tower would return all unsold records.

No other store nor chain got those terms, and they were badly abused by Tower. The mom and pops were lucky to get 10% return on unsold product.

So the artist would not get any payment for those records for over 6 months while Tower got free records and stock and used their advertising clout (with co-op ads from the labels) to drive independent stores out of business.

I spent years in the retail record business, and neither the big stores nor the record companies were honest with the artists.

But your plan sounds good, and I will probably be sending a couple people your way.

Gordy Hall

Bill Hatcher · From: Atlanta Ga. USA

[quote="Donny HinsonBut at 99 cents a song, I'm STILL paying 12 bucks for an "album" of 12 songs.

"Lucy! 'Splain this to me!!!"

After some feedback, I'll explain how I think the system should work! Wink

(And how it could work, if some people weren't so damn greedy.)[/quote]

The public was paying more than that for most new issue CDs at Tower Records. The 99 cent price is still attractive to the public, specially since they don't have to buy the other 11 songs on the CD if they don't want them.

It is a better deal if you look at it like that, but I still want the hard burned CD with all the paperwork inside. There is coming a day when you will have no plastic CDs anymore. It will all just be 0s and 1s in machines.

Randy Phelps · From: California, USA

Consider this. How much money should a good songwriter make? A good singer? A good sideman? Arranger? Producer? etc.

Should folks who write 'hit songs' or record them or sing on them be millionaires? To do that we have to have a model that has a narrow focus on a few artists and a few songs by a majority of consumers.

An album in my youth (1970's) was about 4.50. Using the inflation calculator that same album should cost 22.07 today. So, 9.90 (the average cost of an album on iTunes) is a dang good value.

The model that evolved in the 1970's was highly extractive and not sustainable. The payola models in the 50's and 60's was also not sustainable... but in both eras we got some great music.

The new model is evolving.... and new models are evolving in just about every media.. the newspaper business has collapsed and will continue to shrink, the networks are half the size they once were...

This will shake out.. I hope that it is a true democratization of the business and that artistic merit wins the day... I wish that musicians and songwriters could earn a good and decent living so that their lives would be sustainable and there could be more of them in a larger community and that music would return to small towns and towns could develop their own sounds again...

Long way to go.. but a start.

btw, a plastic cd is just a vessel holding 0 & 1... and records were just magnetic hairs holding a charge... the music is more than the 0 or 1 and yet that is all it is.

chas smith R.I.P. · From: Encino, CA, USA

A few months ago, I was doing some work for a film composer who's brother was in a famous rock band. They were talking about the record business, as we knew it, and the conclusion was, it's over. This was just after talking to another friend, who I used to work with, playing on film scores, and the way that used to happen, at least for us, is no longer. Studio M, the scoring stage at Paramount, is now an executive lunch room.

The job I did for Jeff, he called in what he wanted, over the phone. I recorded what he described and uploaded it to a server somewhere. He mailed a check.

Last Friday, I was at a funeral for a friend, that I used to work with when I worked in the motion-controlled camera world. There were a lot of grips as well as effects supervisors and camera people and of course we were all talking. The conclusion was, the film business, as we knew it, is over.

Now what?

David Mason · From: Cambridge, MD, USA

chas smith R.I.P. · From: Encino, CA, USA

David Doggett · Posted 2 Apr 2008 9:07 am

Yeah, I think the MP3/compressed vs. CD/wave quality is as big a problem as the distribution revolution.

Eventually the distribution situation will sort itself out. It may end up more democratized. But the public can hold only so many stars in attention at any one time. So the promotion part of the game will still be there. It will take investment in promotion to get to the big bucks in distribution.

The MP3 vs. CD-quality problem may eventually be resolved by technology, just as HD TV will improve image quality. But compression is a one-way street. All the stuff mixed for MP3/compression will still sound inferior when technology upgrades for CD-quality downloads. Sad

Randy Phelps · From: California, USA

I think the model about downloads versus cd's is two fold: 1) When mp3 was derived (and now mp4) bandwidth availability was significantly different, so to make downloads viable much had to be sacrificed to reduce file size. 2) downloads, cds, 5.1 mixes, vinyl releases are sales tactics to get folks to buy multiple copies of the same artistic endeavour. Similar to box sets or remixes etc... What companies have discovered is that folks are willing and happy to buy multiple copies of the same thing in different media form and quality for different types of experiences.

I was watching the garbage man come up the block a few minutes ago... his truck is automated and he does not have a crew with him anymore and a machine does all the lifting of trash cans that are identical. The trash cans have wheels now which makes them easy to move to the curb versus how I remember carrying our various barrels to the curb as a kid. Pretty remarkable how it has all changed... how come it wasn't common to have wheels on garbage cans in the 60's and 70's? Weird. My point is just that some parts of the experience is better now, some parts worse.. trade offs I suppose.

Donny Hinson · From: Glen Burnie, Md. U.S.A.

Randy Phelps · From: California, USA

donny,

I don't think the facts support your statement about WalMart.

As for comparing computer costs to media costs... again, Moore's law is the critical factor there and Moore's law doesn't apply to media..

you'll note that I said that I hoped the new model would give merit a chance to win the day... did you intentionally misread that or just miss the point? Of course, payola is the old term, of course we can assume the cynical and call it realism... there is a possibility that as file sharing increases and so many opt to have music at no cost, it will force the issue.

I would maintain that 9.90 for a complete album of songs is a reasonable price. The success of the iTunes store is testament to it being the right price. The next step, in my estimation, is to return more money to the artists and creatives.

We can buy a pay per view movie for 4.00, go to the movies for 7.00, a baseball game costs 15-45.00 plus 20.00 to park. All of these entertainment experiences are one time only. A DVD movie costs 14-30.00.

What would be the right price for an album?

b0b · From: Cloverdale, CA, USA

I'm selling my CD for $10. That's a dime more than iTunes, I know, but you actually get to hold it in your hands, and you can keep it forever.
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Leslie Ehrlich · From: Saskatoon, Saskatchewan, Canada

Steve Hinson · From: Hendersonville Tn USA

...should ANYBODY be a millionaire,then?Some people make their living from recording,touring etc...
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Theresa Galbraith · From: Goodlettsville,Tn. USA

I just bought George Strait's Troubadour CD for $9.99 at Target. Not a bad price for 12 songs, lyrics, credits and additional information!

George has done it again! Smile

Ron Page · From: Penn Yan, NY USA

It is a remarkable transformation. When the author uses the term “democratization” he seems to be referring to removing the control over supply and distribution that the record labels once held. So artists and listeners are now completely free to participate in voluntary exchange. That’s capitalism.

Now, price is working to organize that market. Price is--to paraphrase Milton Friedman-- telling us the supply is abundant, providing incentive to reduce costs, and determining who gets how much of the product—distribution of income.

David Doggett · Posted 4 Apr 2008 9:41 am

There was an announcement in the paper today. Three of the four remaining big labels are combining with MySpace to create MySpace Music. Fans will be able to pay for single track downloads as well as access free streaming audio/video paid for with advertising. And there will be merchandizing and ticket sales. Supposedly it will be a one-stop site for everything to do with a performer or group.

But so you have a million musicians with sites on there. Fans can't check them all out. Promotion will still be the name of the game. Companies providing promotion will still have to gamble on who to spend money on up front, and they will take their cut to get paid back. Independents will have to pay for promotion, if they want any. And what about those advertisers? They will have to choose who to advertise with, so if you want them, you will have to cater to them and keep them happy.

b0b · From: Cloverdale, CA, USA

It used to be really hard to find steel guitar music. Now, that music is so abundant on the internet that sales of "hard" formats (CDs, tapes, LPs) have been negatively affected. Music downloads and free music on YouTube and MySpace have basically killed the steel CD market. Apparently, steel players don't "value" the music as much as they claim to. Sad

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Ron Page · From: Penn Yan, NY USA

I'm a little bit old school, I guess. I still like albums, not just a single or two, and I still like the liner notes. I recently considered downloading the latest Alan Jackson album, but before I could, my wife came home with a hard copy from Wal-Mart, for under $10. There are 17 songs on it.

Tell me something. Are the liner notes available with the downloads of an album? And do you get a discount for buying full album vs. single tracks?

My MP3 is not an iPod. You probably gathered that I don't go for those monopolies. Very Happy

I have to get my steel albums loaded up on the box here. I mostly play them at work.

PS: b0b, maybe you can get setup to do online downloads. It's adapt or perish. You were a pioneer in the online forum biz, I'm sure you could go online with music and maybe even team up with Michael Scott's SteelRadio to promote the albums. Gotta have liner notes, though. Laughing

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Theresa Galbraith · From: Goodlettsville,Tn. USA

Ron,
That was my point about buying the cd. I want to read the lyric, credits, etc.

You gotta go get George Strait's Troubadour cd! Smile

Steinar Gregertsen · From: Arendal, Norway, R.I.P.

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