Originally posted in: TUNECORE | Written by: Jeff Price

 

There have been six fundamental changes to the music industry that have revolutionized and transformed the business. It is vital that artists are fully aware of these changes in order to make the most money and pursue their passion on their own terms.

 

With these changes, gone are the days of needing to be able to negotiate a label and/or distributor deal agreement (provided you were lucky enough to get one).

 

Instead, with self-distribution and access to marketing, the artist is now: The Label, The Performer, The Publisher and The Songwriter. While wearing all of these "four hats" at once, artists are now uniquely positioned to profit from the best possible contractual distribution terms and highest revenue generation via the sale, use, or streaming of their music. The challenge is that many artists don't know what these rights are, or how to collect the money they've earned from these revenue streams. A comprehensive, streamlined, and completely inclusive infrastructure does not yet exist that enables every artist who is owed money to easily collect it. However, there are solutions out there for artists, and it's imperative that you understand these.

 

THE SIX COPYRIGHTS YOU MUST GET TO KNOW AND UNDERSTAND
The entire music industry is built on six legal copyrights.

 

For a more detailed explanation of each one, please download or read the free TuneCore Music Industry Survival Manual: How Not To Get Screwed: The Six Legal Rights That Drive The Music Business

 

Money is made from music by either selling, licensing or using it -the sale of the music is the one that gets talked about the most.

 

The others also generate a LOT of money for artists, performers and songwriters. This money is made based on the USE of music as opposed to just the SALE of the music - in other words, music does not necessarily have to be sold to make the artist, songwriter, performer and label money. Much of the money from these six copyrights is collected by entities located on every continent around the world called Performing Rights Organizations (PROs). PROs tend to be not-for-profit or government controlled and/or mandated. Their function is to collect and distribute money owed to songwriters, labels and performers. The amount of money the writers are paid comes from federal laws in those countries that mandate entities MUST pay them for the USE of music.

 

This has become increasingly important now that the music industry is global - with one click your music can be distributed, sold, shared, tracked and marketed around the world.

 

As one example, unless the songwriter agrees not to be paid, every single time a song is streamed legally for free on the Internet, money is owed to the songwriter. This money is paid to the PROs and sits there waiting to be claimed.

 

As another, every single time a song is played on the radio (either via the Internet or broadcast from an AM/FM transmitter tower) the songwriter, label and performer must get paid. As an interesting twist, and to make a point, there is an exception to this rule - everywhere in the world the songwriter, performer and label get paid when a song is played on AM/FM radio EXCEPT for the United States. In the U.S., only the songwriter gets paid. This means from radio play, there is money sitting in other parts of the world with a PRO for the label and performer. If the label and performer are based in the U.S., they are not able to collect this money UNLESS there is someone in another country working on behalf of them to collect it.

 

As yet another example, if you are a U.S.-based band and you write your own songs and use TuneCore to distribute your music into another country like iTunes Japan, each time your music sells in Japan, iTunes pays the Japanese PRO money for the "reproduction" of your song. This money is in addition to the money iTunes pays for the sale of the song. This money sits with the PRO until it is collected by the songwriter/publisher. After a certain period of time, if it is not collected, it is given to other members of the PRO.

 

It is vital for you to know about all of these potential revenue streams and how to collect on them around the world.

I view it as TuneCore's job to go into the world on behalf of its artists and help them plug into and collect all the money that exists for them. This is a major initiative for us in 2011. Over the next 90 days, we will be providing significant news and updates on how we intend on doing this for this new industry.

 

Also, in the next 45 days or so, we are rolling out a new accounting system that allows for even more transparency down to the one trillionth of a penny as well as even more advanced custom sales reports and free access to iTunes trending data.

 

A major education initiative is also being undertaken to provide the knowledge and information every artist should know. To that end, we will continue to post a large amount of specific information on the blog as well as create more PDF booklets for free download. George Howard (former President of Rykodisc, current professor at Loyola) and I are embarking on a series of free to attend multi-hour seminars discussing in-depth the nuances and information around the six legal copyrights.

 

 

The Six Legal Copyrights:
Friday March 18
2:00 - 4:30 PM
Room 8 (Third Floor)
Austin Convention Center

 

The power of TuneCore Artists is now unquestionable - they have sold over 300 million songs via paid download or stream over the past 2 ½ years and have transformed the industry. Artists today not only can take the power and control into their own hands, but they must do so. This does not mean that you must go it alone; there are resources that you can avail yourself of in order to create and succeed on your own terms. It is our mission to continue to work with you to further transform the industry and provides these resources. Only by setting it free can the industry grow to its full potential.

 

Stay tuned for the next transformation...

 

Jeff

 

Originally posted at: http://blog.tunecore.com/2011/02/arrested-artist-development-1.html
Written by Jeff Price

 

Sometime in the 90's, "artist development" for rock and alternative bands, got turned on its head. Gone were the days of a major label aspiring to propel an artist over many years to "rock legend" with multiple releases, tour dates, interviews and in-store appearances (Led Zep, Rolling Stones, Springsteen, The Byrds etc). Instead, new artists were given six weeks from the street date of their debut album to have a radio/MTV hit. If the first single from the album failed, the artist would typically get dropped; their career effectively over before it even began.

 

This change occurred with the consolidation of the music industry under multi-national billion dollar companies (many publicly traded). Gone were the days of patience for a "return on investment". Instead, the world boiled down to revenues earned over the last 90 days. Shareholders demanded quick growth, the value of a company lived and died by what was reported and booked every quarter of the year. If the company invested $1 million dollars into a band in January, it cared only about how quickly it could see its money back and how much profit would be made.

 

 

Before the record label consolidation, an artist would get signed, an album would get recorded, the release would get set up and distributed. The artist would tour as the label promoted the artist/album building up the fan base and credibility. The band would gain experience playing live, learn things in the studio and grow as musicians. About a year later, the next album would be released, this time to some anticipation by the existing fans, and the same cycle as with the first album would repeat - building, playing, learning, touring, gaining new fans - until the next album came out. It was the artist's later album, built on years of learning and credibility, that would go multi-platinum providing the final piece of the puzzle in defining them as a "legend". Once at that status, an abundance of opportunities and wealth would arrive for many years to come via gigs, merchandise sales, advances and band and publishing royalties. The label would experience a huge spike in back catalog sales from new fans discovering and buying old albums selling as many copies of a catalog album in a single week as they did over the previous year. There were no label marketing costs directly tied to these catalog sales thereby generating huge amounts of high margin money for their bottom line.

 

Or said another way, the value of a major label like EMI (or make that Citigroup due to its recent acquisition) is not from one new Beatles' album, it's from the entire Beatles' catalog. These older albums sell and sell and sell yielding huge financial returns that dwarf income made off of just one hit album.

 

In the old music industry, the true monetary value for the record label and artist was in the catalog of created and released works - each song, album, EP selling a little (or a lot) each day, week and year creating a large and steady recurring and predictable stream of income ("recurring and predictable income" is the holy grail for financial institutions). The shift to a new strategy of just six weeks to "have a hit or you're dead" flew not only in the face of artist development but also in the face of long term financial gain while radically changing the way the game was played.

 

A quick financial return strategy in the music industry could only be accomplished in one way, a mass-consumable commercial radio/video hit single. Bands began to be signed not for their current and future value, but for just the one hit they may have written. All label bets were placed on the one single as it was sent to radio and MTV with hopes of airplay, reaction and consumer sales. Radio and MTV gained massive power being the only outlets to allow this quick explosive growth, and the labels were willing to pay them whatever it took to gain the media exposure.

 

The music world went topsy turvy - debut albums became an artist's best selling album with subsequent releases selling far less (Spin Doctors, BloodHound Gang, Alanis Morissette, Hootie & The Blowfish, Third Eye Blind, Better Than Ezra, Marcy Playground etc etc etc). Gone were the days of development, catalog and box sets; in their place came the world of "one hit wonders" whose value dissipated as quickly as it arrived.

 

This is not to suggest that these bands or songs were good or bad, nor is this to suggest that the phenomenon of "one hit wonders" was not happening through the entire history of the music industry. What was different was the lack of bands being nurtured, supported and given time to grow and develop at the world's largest labels. Lawyers, calculators and quarterly profit and loss statements replaced the ears and creative passion of music executives like Seymour Stein, Ahmet Ertegun, Lenny Waronker and Mo Ostin.

 

Bloated artist contracts were an additional side effect of this new get rich quick strategy - understandably, artists, lawyers and managers were demanding larger and larger advances on future albums as a major label would only exercise the option due to the previous album being a financial hit. Percentages of these large advances went into the pockets of the managers and, in some cases, the lawyer's, incentivizing them to take the money and run. Marketing spends went through the roof as the labels tried to hit grand slam home runs. Albums selling a few hundred thousand copies that were previously seen as a success were now redefined as failures.

 

As more than 98% of the bands signed were not hits, the labels could not justify nor afford the huge advances previously negotiated and the bands were dropped, their careers stunted and ended before they even really began.

 

As this new shortsighted strategy progressed for over a decade, the labels woke one day and realized what they had done - for the past fifteen years they neglected to build up a valuable catalog of work that people would continue to buy over a long period of time. The older "legacy" catalog of Pink Floyd still sold, but there was nothing taking its place, nothing being incrementally added - even rock legends die, taking their chest of musical riches with them to grave. This left only one option, buy even more into the new vicious cycle, do even less artist development, spend more money on marketing, invest more in videos, up advances, swing like mighty Casey at bat for that elusive home run and hope to god something hit.

 

Had there been more patience, less greed, less focus on next month's bottom line the magnificence of the industry could have been perpetuated through its creativity. Not only would these media companies have been reaping far greater financial rewards, but the artists and the music fans most likely would have had a different view of the entire industry.

 

The good news is the cycle has been broken, artists no longer singularly need a label to have a career; there is now a choice. The lessons of the past combined with the technology and opportunity of today can quite possibly create a return to the true cultural and long-term financial value of music. Through new media outlets and social networking, bands and fans can connect in more personal and meaningful ways. Fans are now able to more directly and meaningfully support their favorite musicians over the long term enabling the artist to create a significant body of work through their lifetime. The control of a band's career has shifted from the label to the artist - be it the path of Vanilla Ice or Radiohead, the choice, success (or failure) is the artists to make.

 

 

Distributors are responsible for selling, positioning and marketing a record label's or artist's music with any outlet where music fans buy music including traditional retailers, online download services, online subscription based services, ringtone providers and mobile downloads. Most major music outlets, traditional and online, won't deal directly with record labels or artists and order exclusively through distributors. Distributors range in size from those owned by the big 4 record labels to independents to those that only distribute to online outlets. They typically charge the labels they distribute a percentage of price the retailers pay, 20% for example.

 

Inventory and billing management are keys to a distributor's success since retailers can return unsold inventory they purchase at any time. It is not uncommon for a retailer to return an order to the distributor prior to their invoice coming due then turnaround and place the same order they just returned. Since the distributor must accept any and all returns from retailers they typically require exclusive distribution agreements with the record labels they distribute. Retailers also typically want to deal with only one distributor on a CD release so they know who to order from and where send returns to as needed. Distributors must manage their inventory levels to make sure they can fulfill orders from retailers but not have too much inventory in stock that's not selling. They must coordinate shipments to and from both record labels and retailers. Many times distributors will also coordinate the manufacturing of the CD's for their labels since they can often times get better pricing due to the volume of CD's they can produce.

Distributors have sales people who call buyers at the retailers and get them to order inventory of their labels CD's and stock them in their stores. Retailers will often tie the amount of inventory they order to the amount of money the distributor is willing to pay in marketing programs and advertising with them. These marketing programs include special product placement within the retailer's stores, listening posts, giveaways and promotions, and often include print and online advertising. Distributors have a staff to coordinate the retail marketing programs with their labels, agree to marketing budgets, get ad artwork and send retailers the artist one sheet summaries of the release and promotional CD's to the buyers at the retailers. The costs of these marketing programs are charged back to the record labels and usually become a recoupable expense against the artist's royalties from sales .

Distributors must keep up with the constantly growing options for digital music and make sure their content is appropriately licensed and distributed by the wide array of digital music outlets available to music fans. Distributors who sell music through digital retailers and mobile providers must build and maintain an accurate database of each track and its related metadata (artist, album, track name, art, publisher and related information.) and create an ISRC code for each track in their catalog. The tracks and metadata must then be formatted to meet the format standards for each digital retailer and mobile provider before transmitting a file to them since there is not an industry standard that has been developed. Many distributors have developed web-based tools that allow each record label they distribute to upload their catalog and new releases directly to the distributor's database.

 

Today there are a growing number of companies who have bypassed the traditional retailers and focus all their efforts on digital distribution like the IODA Alliance.