New Rules For The Music Industry

FOR THE MUSIC INDUSTRY:

1) BE TRANSPARENT – No more hiding behind complex royalty calculations. Man up. Be honest. Provide clear and accurate accounting. The digital world makes it easier than ever to do this.

This applies to labels, distributors, ASCAP, BMI, SESAC and anyone else you can think of. They can all be transparent if they choose to be. Right now they choose not to be.

2) PAY ON TIME! – No more artificial royalty accounting periods. Returns and co-ops are a thing of the past. Pay out and account on one way no return sales that you have been paid in the same month you get them.

The only reason to hold on to the money is to make bank interest on it. If this is what you are going to do, see #1, BE TRANSPARENT and tell artists you are doing this.

3) NO MORE SUGARCOATING AND HIDING REALITY – Seriously. Stop promising things you know you can’t deliver. Not everyone is going to be a star. Be honest, tell the truth,. Let the musician and artist know the realities of the market so they can have a better understand of what needs to be done to succeed or why things are not going the way they want them to.

4) ACKNOWLEDGE YOU WORK FOR THE ARTIST, NOT THE OTHER WAY AROUND – Without the artist none of us will have jobs. They are the ones with the talent. They create culture and write songs that have an impact on the world. They are allowing us to serve them, not the other way around. This philosophy and culture must permeate everything you do. Turn this industry from one that “exploits” the artist to one that serves the artist.

5) ONLY OFFER SERVICES YOU CAN ACTUALLY DO – No more asking for rights or income from things you can’t contribute towards. If you are a label and want more money from other areas (i.e. merchandise, songwriter income, gig income etc) you actually have to provide a service that does something to earn that right. There are others out there that are specialists in these areas, can you do what they can?

6) UNDERSTAND THE ARTIST NOW HAS CHOICE – Unlike the old days, artists can now succeed without you. Labels have gone from a “must have” to a “might need”. Be clear in what you have to offer and create a fair and equitable deal in exchange for the services you are offering.

7) COMMERCIAL RADIO AND MTV NO LONGER SINGULARLY BREAK BANDS – It used to be that print, commercial radio and MTV were the three ways to break a band, no longer. Fans themselves have this power via social networking. Find ways to speak to fans directly and don’t use a middleman. Empower and excite them and they will follow.

FOR THE ARTIST

1) STOP ASKING FOR BIG ADVANCES – Understand that the economics of the business have changed for both the artists and the labels. The goal for artists and labels must be the same: create sustainable working relationships for both parties. Disproportionate advances only add tension (economic and otherwise) to an already tense dynamic. Create financial working relationships based on realistic expectations of ROI.

2) EDUCATE YOURSELF – It’s no longer acceptable (or charming) to be the un-informed artist who doesn’t know the difference between a mechanical royalty and a mechanic. You can’t claim that you’ve been taken advantage of by anyone at this point; the information you need is out there, and it’s not that hard to find. Learn it, once you have this knowledge you can then make informed decisions and decide if the other entity is doing its job. Not to mention, the labels etc already know this info and so should you.

3) TAKE RESPONSIBILITY – Stating that there is any person or thing standing in the way of you and success is a cop out. No longer can you say, “If only my records were in stores, people would buy them,” or, “If only people could hear my music they would love it.” The gatekeepers have vanished; the gates are open…go through them.

4) TAKE ACTION – Waiting for a booking agent before you tour? Waiting for a producer before you make a recording? Waiting for a label before you distribute or promote your music? Guess what, someone else isn’t waiting for anyone, and he or she is leaving you in the dust. The worst thing you can do is nothing.

5) SELL – Get over the fact that you’re the artist, and asking people for money in exchange for your art is awkward. The reality is that if your work is good, people will want to compensate you for it. You must not only give them the opportunity to do so, but make it easy for them. Be clear and transparent, and tell your customers that your music is valuable, and that if they want to ensure that you are able to keep creating the music that they enjoy, that they must pay for it. Then give them a wide variety of things to buy at different prices.

6) GIVE WITHOUT ASKING FOR ANYTHING IN RETURN – It’s not all selling, of course, and we are all in this together. Look for ways to help other artists. Share information, share resources. This is not a zero-sum game; the overall pie can expand, and we will all benefit proportionately when it does.

7) DEMAND ANSWERS – if you don’t understand something, ask. If the person you ask can’t give you a clear, understandable answer then he or she is either clueless or trying to hide something. Demand a clear, understandable answer or walk away from the deal.

8) MARKETING DOES NOT ALWAYS EQUAL SUCCESS – The major labels spent hundreds of millions of dollars marketing and promoting bands. Only 2% of them succeeded, the other 98% were deemed failures. If marketing = success, they would have had a 100% hit ratio. The reason an artist succeeds is because the music caused reaction.

9) LEAD TIME FOR STREET DATES MATTER LESS – It’s not like the old days where you only had a limited time for prime real estate in a retail store and if the CDs did not sell they would be returned. In the new model you can release music today, and market later, with little detrimental impact.

10) IT’S ABOUT A CONSTANT STREAM OF MUSIC AND MEDIA, NOT A ONCE A YEAR ALBUM RELEASE ­ – The new world moves fast. The best strategy is to roll out songs, videos, pictures, blog postings, tweets and anything else you can think of on a constant basis. This keeps your fans engaged and stops you from losing momentum and going stale.

11) IT’S GLOBAL – The new music industry is a global one. At the click of a button your music is available to buy, share, stream and download around the world. Keep this in mind when you think about where your money is being held, generated and how to get it.

12) YOU ARE NOT POWERLESS – Music is not food, shelter or clothing, but everyone likes it and needs it. The music industry currently generates around $30 billion dollars a year. The entities and people getting this money is shifting from the legacy companies to you. Within another five years the collective power of you will be bigger than any of them. You have the power to change things, and you already are.

As just one example, in the past two years, TuneCore Artists have earned over $170 million in gross music sales and have sold over 400 million songs by paid download or stream. TuneCore Songwriters have earned over another $120 million dollars.

As you sell more, they sell less.

13) DEFINE YOUR GOALS – Know what it is you are tying to accomplish. Are you looking to be the next Vanilla Ice or just sell some music without touring? Is your goal corporate sponsorships or having others cover your songs? Whatever it may be, have a goal in mind and then work towards accomplishing that objective. With that one conquered, you can move on to the next.

DON’T EXPECT SOMETHING FOR NOTHING

It’s going to take work to make things happen. Either you need to do the work or you must hire someone else to do part, or all of it, for you. If you understand your rights, how money is made, and how much you should make, you can make educated decisions.

Inside Record Labels

There is a lot of work involved with signing, recording, promoting, publicizing, and selling music. The following introduction to the way major labels and independent labels setup the business of music marketing is broken down by departments. As you will see, the larger record labels have the luxury of having many different departments and dozens of employees to carry out the many responsibilities involved in running a label. And, the smaller companies, that have the same work to do, have to be quite creative and energetic to get all that work done.


Major Label Departments
What are the key departments at a record label, and what are those departments responsible for? Let's take a look.

For starters, the CEO of a major label will generally oversee the business affairs of all the affiliated labels under their corporate umbrella. Each major label will have its own President who is responsible for all the label activities. For example, at Warner Brothers, there is a president for Warner Brothers Records, a president for Reprise Records, a president of Atlantic Records, etc.

Every department at a major label is usually run by a Senior Vice President, in charge of one of the following:
The Business Affairs Department takes care of label finances; bookkeeping, payroll, et al.
The Legal Department handles all contractual issues and other legal responsibilities.
The A&R (Artists and Repertoire) Department locates and signs new talent. They work with the artist in song selection, choice of producers, recording studio selection and they communicate with the label's Business Affairs Department to make sure all the paperwork and accounting issues involved with the actual recording of an act's record are setup properly. In short, The A&R Department can serve as a liaison between an artist and all the other departments at the label.
The Art Department supervises all product design jobs, (CD, Tape, Vinyl cover art etc), trade and consumer press advertising, retail sales posters and flats, and other needs of the print media.
The Marketing Department is responsible for creating the overall marketing plan for every record the label is releasing. They are also involved in coordinating all the promotion, publicity, and sales campaigns that the label is committed to.
The Publicity Department arranges for any feature stories, interviews, or record reviews in local and national newspapers, magazines, web-zines, as well as the broadcast opportunities for such coverage on radio stations and television. They may also co-ordinate any of these publicity opportunities with an artist's own Publicist.
The New Media Department produces and promotes the music videos for the label's artists that are shown on MTV, VHl, etc. This department also oversees some promotions and marketing opportunities on the Internet that use the audio and video technologies available from online hardware and software sites that support music..
The Artist Development Department usually oversees the career planning of artists signed to the label. This department coordinates a consistent marketing and promotion presence for an artist throughout their career with the record label. The Artist Development Department has changed over the last decade. Many labels no longer have such a department. Others have changed the name to Product Development and concentrate more on "breaking," or promoting artists quickly in order to try to speed up the return on their financial investment. The pressure to return a profit to shareholders has changed the face of the music business dramatically in recent years, so the emphasis has been more on Product Development, and securing a hit as fast as possible.
The Sales Department oversees all the retail activities of the label, and concentrates on building relationships with the key record store chains and other mass-market retailers. The Sales staff coordinate their efforts with the major label's distribution company, as well as communicating regularly with the Promotion and Publicity departments at the label.
The Label Liaison is the person who coordinates the business of the major label's distribution company with the needs of their parent record labels. Street dates, (the date that a new release goes on sale at music retailers), must be approved by the label's distribution company
The Promotion Department's primary goal is secure radio airplay for their company's new releases. These days that means not only traditional FM radio stations, but select Internet stations and satellite radio as well. Their ability to get songs played on the radio is central to the success of the whole company. The Promotion department is closely connected to and constantly communicating with other departments within the label to make sure that all strategies being used to market and sell an artist's record are working together properly. Soliciting videos to MTV, VH1 and other music oriented television networks and programs may also be the responsibility of this department. At some labels this job is a separate department, or part of the New Media department.
Every department at a record label plays an essential role in the success or failure of the company. They are team members, working together toward the goal of selling their records and CDs as one lean, mean machine.


Inside an Independent Record Label
Independent record labels come in all sizes and shapes. The large, well-funded indie labels are organized by departments much like the major label operations described above. The more money a label has the more they people they can hire to handle the various responsibilities of a label. Smaller, grass roots or garage labels organize the work of promoting, selling and publicizing their releases by wearing as many different hats as they can. These smaller labels have an awesome task marketing their records because there may be only two or three employees, including the label owner, doing the A&R scouting, calling radio stations about airplay, working with a distributor (if they even have one), checking with the music retailers, and coordinating the publicity and new new media efforts, as well as dealing directly with their artists and bands helping them find gigs and put tours together.

Running a record label is a very expensive and time-consuming job. One of reasons so few independent labels succeed is related to the issues I have just outlined. It takes a lot of money, and a lot of time to operate a legitimate record label. The more research and planning a young label does before jumping into the world of music marketing, the higher the likelihood that they will survive, and perhaps even prosper in a very competitive business.

Media executives see digital revenues on the rise

About 94 percent of media executives polled say they expect an increase in digital revenues this year, according to a survey of media and communications executives by KPMG.

More than a third of those media executives believe that their digital revenues will increase more than 10 percent. About three-quarters believe overall revenues — both digital and traditional combined — will be higher a year from now. That’s more optimism than in the past from executives who have seen their traditional media businesses eroded by the internet. In the past, media executives have seen an unrelenting decline of their businesses because the digital side of the business was so small.

The 94 percent expecting an increase in digital revenue compares to just 83 percent in 2010. About 37 percent expect their companies to grow digital revenues by over 10 percent, compared to 31 percent in the 2010 survey.

The survey results come from the annual Communications and Media Industry Business Climate Survey by KPMG, the audit, tax, and advisory firm. Companies interviewed include newspapers, magazines, internet publications, cable TV companies, and other media and communications firms.

The respondents this year said that the important drivers for their revenue growth over the next three years are increasing broadband access speeds, new distribution methods, social media platforms and online advertising. The toughest challenges are maximizing digital media revenue growth, managing subscriber growth, and managing customer churn.

“It’s clear from our survey that communications and media executives are more optimistic and their companies are placing bets that now is the time to position and invest for growth, despite an uneven economic recovery,” said Paul Wissmann, KPMG’s National Sector Leader for Communications and Media.

In an interview, Wissmann said the survey did not focus on the erosion of traditional revenues for the media. But digital media such as tablet apps offer hope that traditional media can be competitive in the new era of competition.

The executives are investing in technology and products through both organic growth and deal making. About 21 percent of those surveyed see a 7 percent to 10 percent increase, compared to 15 percent in 2010. About 20 percent see a 4 percent to 6 percent gain.

Mobile commerce and other new convergences of business opportunities are expected to have the greatest positive impact on the business. About 47 percent expected a 1 percent to 5 percent growth rate for the industry in the next year, while 32 percent expect growth of 6 percent to 20 percent.

“Communications and media companies are sensing industry momentum that is the result of leaner organizations coming out of the recession, combined with the opportunity offered by the development of — and users’ rapid adoption of — innovation such as tablets, high-speed wireless access and social networking platforms,“ said Carl Geppert, KPMG’s national account leader for communications and media.

Social media is scoring high in strategy for media companies. In the survey, 43 percent ranked new distribution methods as the top business driver. About 37 percent said that online ads were in the top three drivers. And 75 percent said that cloud computing would have a slight to moderate transformational impact on their businesses in the next few years.

Seven of 10 executives believe their companies will be involved in a merger or acquisition during the next two years. About 58 percent will likely be a buyer and 10 percent will be a seller. The reasons include access to new tech and products, product synergies, and access to new geographic markets. Wissmann says that media companies feel a need to grab market share through deals or get left behind in the shift to digital services.

Some 47 percent of media companies expect their headcount to rise over the next year, lower than the 57 percent in the previous year. In fact, looking back, only 34 percent said they actually increased headcount in the past year. About 41 percent said they reduced headcount in the past year, while 23 percent said they expect to cut headcount in the next year. About 22 percent said their headcount has reached pre-recession levels, while 35 percent said their headcount would return to pre-recession levels over the next 30 months. And 34 percent said headcount would never return to those levels.

Some two-thirds expect the U.S. economy to improve within the next year, but they believe a full national economic recovery has been pushed out until 2013. Last year, respondents said the recovery would take hold by 2012. The survey was conducted from May to June and it includes responses from 101 executives at communications and media companies. About 66 percent are from companies with revenues exceeding $1 billion, and 34 percent are from companies with revenues in the $100 million to $1 billion range.