Archive for the ‘Financial’ Category

Stem Helps Split Royalties, and Takes Off as Music Distributor

February 7, 2017

By BEN SISARIO NY Times.com 2/5/17

When Frank Ocean’s album “Blonde” came out in August, it went straight to No. 1 and became the talk of the music business because it was released completely outside the usual channels of the recording industry. The mystery was how Mr. Ocean and his team did it.
One answer was revealed on Sunday in an online ad promoting “Blonde” as one of the most acclaimed releases of 2016 and noting that it was “powered by Stem.”
That service, which began only a year ago, has quickly become a player in a fast-growing corner of the music industry: online platforms that cater to independent artists by distributing their music to streaming services and organizing the many strands of royalties that accumulate from fans’ clicks.
Stem, founded by three 20-somethings in Los Angeles, has attracted a clientele of young artists who operate independently yet tend to collaborate frequently with other acts, some of them stars. For them, Stem’s attraction is its ability to easily manage the complex “splits” — the divvying up of royalties among multiple parties — that result from such collaborations. Stem Disintermedia, the company behind it, has raised $4.5 million from investors, including Upfront Ventures and Scooter Braun, who is the manager for Kanye West and Justin Bieber.
The indie music sector already has a well-established network of alternative distribution companies like TuneCore and CD Baby, which deliver unsigned artists’ work to online services for what is usually a small fee. But those services have no means to divide the royalties if a song has, say, two producers and five writers, an example of the kind of collaboration that is now common in pop. Instead, the main performer would be responsible for accounting.
Stem eliminates that burden by tracking every collaborator on a song, and requiring all parties to agree on percentage splits. Milana Rabkin, Stem’s chief executive and one of its founders, compared the service to online payment apps that let friends easily split a restaurant tab.
“In a world where Venmo exists,” Ms. Rabkin said in an interview, “why isn’t there a Venmo for Apple and Spotify?”
Stem’s consensus model, however, could also be its Achilles’ heel, since it will not allow any party to be paid until all agree on the splits, a process that gives holdouts bargaining power. Ms. Rabkin said that most projects reached consensus in a few days and that the longest had taken “a couple months.” The service takes a 5 percent cut on royalties.
Representatives of Mr. Ocean declined to comment on exactly how he had used Stem. But aside from the album’s initial appearance on Apple Music — when it was delivered directly to Apple — Stem appears to have been the vehicle used to release “Blonde” to most major services. Stem distributes music to Spotify, Apple, YouTube, Amazon, Tidal, SoundCloud and several other outlets.
While Stem’s model was novel when it first appeared, it now has competition. In December, CD Baby quietly introduced a new distribution service, Soundrop, which, like Stem, tracks royalty splits — although without the consensus requirement — and caters to a generation more likely to post songs on YouTube and think about making money later.
“It’s an opportunity to reach a demographic that wants to create differently,” said Kevin Breuner, the vice president of marketing at CD Baby. “Music distribution is a secondary thought to them.”
Stem, by contrast, is catching on among a class of young professionals who often operate independently but may be involved in the highest creative levels of the business. Its clients include Childish Gambino and the electronic producer Deadmau5. The company says it has distributed 6,000 pieces of content that have been streamed 500 million times.
Dina LaPolt, a lawyer representing Deadmau5, said her client was using Stem to track his music on YouTube, but explained that Stem’s royalty-tracking system was particularly important to artists in managing the otherwise daunting task of tracking royalty splits.
“Music is the only business in the world where the artist is responsible for doing all the paperwork,” Ms. LaPolt said.
Among Stem’s most vocal advocates is Anna Wise, 28, a singer and songwriter who won a Grammy Award for her work with Kendrick Lamar. She was working as a nanny before she began using the service, which she said had provided her with a steady income — “enough to pay Brooklyn rent,” she said — and devote herself fully to making music. Her latest album, “The Feminine: Act II,” released through Stem, comes out on Feb. 17.
The company’s system, she said, allows her and friends to quickly and transparently arrange deals among themselves, maintaining control and minimizing any disruption to creativity.
“It’s essentially like a smart contract,” Ms. Wise said. “It’s easier and simpler, and I love easy and simple.”

Why Superstar Artists Like Beyonce and Bruno Mars Are Replacing Powerful Managers With Salaried Staffers

July 18, 2016

Why Superstar Artists Like Beyonce and Bruno Mars Are Replacing Powerful Managers With Salaried Staffers

By Billboard.com 7/14/16
Why Superstar Artists Like Beyonce and Bruno Mars Are Replacing Powerful Managers With Salaried Staffers

Paul Tuller

The idea of the artist as mogul is no longer a novel concept. But where that has meant clothing lines, lifestyle brands or other endorsements, some acts are turning their attention to the traditional music management structure, trading commission-based representatives for salaried employees.

In February, Ariana Grande split with Scooter Braun and handed managerial duties to her mother, Joan, and Stephanie Simon at management company Untitled Entertainment, with whom she has worked for the past eight years (though sources say Braun stayed on as a consultant and is involved creatively). In May, Bruno Mars cut ties with manager Brandon Creed after nine years to start his own in-house company. That puts them in the same category as Taylor Swift and Beyoncé, superstars who make decisions with a tight-knit team and retain complete control over their careers.

Despite the recent spate of high-profile defections, insiders agree that commission deals, in which a manager typically makes 15 to 20 percent of an artist’s gross revenue, are still the industry standard for acts of all sizes. And for young and emerging artists seeking a foot in the door, the connections, influence and experience of a top-level manager are invaluable.

But for the superstar elite, employee managers seem to be an increasingly enticing prospect. “If you want somebody good and you have enough money to pay a generous salary and don’t need an upside, sure,” says one representative of major pop acts. “But most artists can’t do that. The Taylor Swifts of the world can write a check, but Taylor is very business-savvy — she’s like a female Jay Z — and she’s the rare exception.”

Still, there are those hands-on artists who are so heavily involved in making their career decisions, like Swift or Beyoncé, that they see no financial advantage to retaining a manager on a percentage basis, opting instead to pay anywhere from $200,000 to $500,000 annually for day-to-day services. (For Swift, who earned $73.5 million in 2015, topping Billboard’s annual Money Makers list, a 15 percent cut would be $11 million.) Others, such as Sean Combs and Jay Z, run multifaceted businesses like corporations and handle the responsibilities of a CEO. Some veteran musicians may assign trusted family members a salary. And for strong-willed acts such as Grande retaining a high-profile manager like Braun, whose roster includes Justin Bieber and Kanye West, makes little sense if his counsel isn’t heeded.

“I’ve spoken to artists before that aren’t looking for advice or management; they have their own vision,” says Myles Shear, who manages Kygo and Thomas Jack. “It all comes down to what the artists feel makes sense, and what they feel is fair.”

But those who can balance business decisions with artistic expression are a rarity. Several industry insiders tell Billboard that, with the advent of social media and the changing structure of the music industry, managers today handle more aspects of an artist’s career than ever. One former major label executive estimates there are only a half dozen artists on the planet who would be able to juggle being an artist without a traditional manager successfully — and that it only works for the top of the top.

“You can’t pitch and catch at the same time; the ball moves too fast,” says Charles Chavez, whose roster has included Pitbull and Magic! “I wish those artists and managers luck.”

“Every artist that I manage, the ultimate decision is theirs; I’m here to advise and guide,” says Maverick Management partner Clarence Spalding, who works with Jason Aldean, Rascal Flatts and more. “And I think that a lot of times — not all the time — a person who is an employee of the band is more reticent to push back.”

Prince may be the classic example of the pitfalls that come with total control. In 1988, he fired longtime managers Steve Fargnoli, Robert Cavallo and Joseph Ruffalo, installing a series of employees as de facto reps in their stead (one a former bodyguard). The move coincided with the commercial flops, critical failures and high-profile battle with Warner Bros. Records over ownership of his masters that lasted for a decade, a period that resulted in waning relevance and a decline in the quality of his releases. Queen and Billy Joel faced similar challenges after bringing their management in-house in the ’80s.

Prince may have been “unmanageable,” as one industry veteran put it, but his business dealings shine a light on the importance of having an outside advocate, even for a once-in-a-generation talent. One longtime manager relates a story of an act that left their manager and, after taking advice from others, promptly lowered ticket prices for their next tour believing they’d sell more tickets: “All that did was lower their gross, which lowered their guarantee,” the source says.

“There are shrewd, sharp managers that make decisions and add value,” says another source. “Bieber couldn’t manage himself without Scooter; he wouldn’t be the same. Mariah Carey? Forget it.”

“It’s just greed,” scoffs another veteran manager. “Acts go up and down, and talent is only half the game when it comes to having a successful career. When you’re paying someone a percentage, they’re there for the long haul.”

How Pop Stars Make Money Now

September 13, 2015

By Andrew Hampp Vulture.com  9/11/15

The week of July 2, 2015 marked a turning point for the music industry. Not only was it the first week that album releases moved to Friday from Tuesday, it was also the same week that Taylor Swift’s 1989 crossed the 5-million-copies-sold mark at a time when the rest of the industry was down a crushing 7.8 percent in overall sales year-to-date, according to Nielsen Music, making 1989 the fastest-selling album in over a decade.
Swift stands to make upwards of $5 million from 1989, but that’s far from her only source of revenue these days. After all, in a business increasingly reliant on revenue that’s fractions of pennies-per-stream from services like YouTube, Spotify, and now Apple Music, Swift has been placing her bets far and wide as have many of her emerging peers like Tori Kelly, Fifth Harmony, and Martin Garrix, each of whom had multiple major endorsement deals to their name before their debut albums had even been released.
To wit: Swift’s current 1989 Tour features sponsor support from American Express and xFinity, whose combined eight-figure spending stands to net Swift a cool $1 million in endorsement fees on top of a total tour take that will easily exceed the $30 million she personally grossed from 2013’s Red Tour.
How does that stack up next to, say, the hottest rapper du jour, Fetty Wap? The 25-year-old Paterson, New Jersey, native, signed to 300/Atlantic in a partnership with his own indie RGF Productions, has already charted four hits in the top 20 of Billboard’s Hot 100, led by his breakthrough “Trap Queen,” a viral sensation that’s already grossed more than $700,000 in revenue from views on YouTube alone, according to industry estimates. But could Fetty, who recently boasted about having five addresses while on tour with Chris Brown, be sitting even prettier with a few other alternative income sources to his name?
Vulture crunched the numbers, speaking with agents, managers, and industry vets on how today’s artists make their mint, if not record sales. The numbers we received were all ranges, but they do to capture the earning potential of an artist today, both well-established and emerging.
Type Superstar Emerging artist
Concerts $200K – $400K (Per Show) $15,000 max for opening acts (Per Show)
Festival Performances $600K – $4M (Per Show) $15K – $100K (Per Show)
Tour Sponsorship $1M – $10M (Per Tour) $100K – $10M (Per Tour)
Music-Video Sponsorship $50K – $1M (Per Video) $1K – $50K (Per Video)
Endorsement Deal $100K – $5M (Per 1- to 2-Year Deal) $5K – $100K (Per 1- to 2-Year Deal)
Paid Social-Media Posts $1K – $10K (Per Post) $500 – $2K (Per Post)
TV/Film Appearance $10K – $1M (Per Role) $1K – $50K (Per Role)
Singing Competition Coach/Adviser $1M – $17.5M (Per Season) $0
Equity Ownership of Consumer Product Line $100K – $100M $0

Revenge Of The Record Labels: How The Majors Renewed Their Grip On Music

May 26, 2015

Zack O’Malley Greenburg  4/15/15  Forbes.com
While Jay Z’s streaming service gets headlines, music’s majors have quietly coopted the multibillion-dollar digital revolution.

Last October SoundCloud–a free music-streaming service with a massive 175 million monthly users–appeared to be running out of cash. News broke that the Berlin-based company had lost $29.2 million in 2013, and when a rumored $2 billion buyout bid by Twitter fell through, it looked like music’s hottest startup might be in danger of going bust.

Then something strange happened: Warner Music Group became the first major record label to strike a licensing deal with SoundCloud, instantly legalizing scores of songs posted to the service. More surprisingly, Warner acquired up to 5% of the company, adding to funding that’s passed $120 million; the company is now valued at over $1.2 billion.

Yet despite the credibility they bestowed on each other, Warner and SoundCloud have largely eschewed talking about the partnership–neither side would comment to FORBES–and have zealously guarded the terms. Why? A source with knowledge of the agreement says the record company acquired its SoundCloud stake at a discount of about 50% from what other investors paid. And such details illustrate a quiet revolution in digitization of the music industry that all sides seem to prefer go unnoticed .

Left for dead by most investors and pundits, the surviving Big Three labels–Warner, Universal and Sony–have quietly muscled out stakes of the hottest digital entertainment startups, including 10% to 20%, collectively, of the established streaming services, such as Spotify and Rdio. Terms are similarly stark for younger startups: The labels take stakes for free or on the cheap, and then often give themselves the right to buy larger chunks at deep discounts to market later on. It’s not just streaming: The labels have gobbled up pieces of startups ranging from choose-your-own-adventure music video purveyor Interlude to song-recognition giant Shazam–valued at $1 billion in its latest round–which counts Carlos Slim, the second-richest man in the world, among its investors.

And what have the labels been giving the startups, aside from legitimacy, to secure these sweetheart deals? All-encompassing access to the artists and their songs–a neat little trick. Sure, the artists derive some minimal amount of royalties from these new channels, but they aren’t getting any of the ownership.

“That’s the story of the music business,” says John Oates, one-half of Rock and Roll Hall of Fame duo Hall & Oates, who went independent almost 20 years ago amid frustration over their financial arrangements with labels. “It goes back to the earliest days–take it back to, ‘Give him a bottle of wine and take all his publishing for the rest of his life.’ “

The artists are starting to fight back–and not just by opting out of the system. Earlier this year Jay Z purchased Swedish high-resolution-streaming services WiMP and Tidal for $56 million, merging them into a single service to compete directly with Spotify. At the official launch 16 of music’s biggest acts were introduced as the new “owners” of Tidal, including Beyoncé, Calvin Harris, Kanye West, Alicia Keys, Jason Aldean and Daft Punk. Each was reportedly offered a 3% stake.

Representatives from all three major labels–as well as Beats, Spotify and Rdio–declined or did not respond to requests for a comment on whether or not the majors demanded free or cheap equity in streaming companies as part of the price of doing business. But in industry circles, the practice is an open secret.

FORBES estimates that the three labels have amassed positions in digital music startups valued at almost $3 billion–or around 20% of the $15 billion or so the labels are collectively worth. The percentage will shoot even higher if and when Spotify goes public. And some bets have already paid off: Universal Music Group took an early position in Beats by Dr. Dre and owned 13% when Apple bought the company for $3 billion last year, resulting in a $404 million score. Artists + leverage = digital windfall. That’s the kind of math, applied across all their revenue models, that the labels hope puts them back atop the musical food chain.

To understand the urgency the labels feel, it’s helpful to walk through what they’ve endured. Total U.S. album sales peaked at 785 million in 2000–the year after a pair of teenagers named Shawn Fanning and Sean Parker created Napster, which allowed anyone with a computer and a reasonably fast Web connection to trade music.

By 2008 annual album sales had plummeted 45%. Between then and now, even as the labels reined in illegal downloading, sales dropped another 40% to 257 million. That means, at $15 per album, the industry is currently taking in $7.9 billion less in annual retail sales than it was a decade and a half ago. Initially, the labels’ response was to fight piracy in court and to fold into one another. There were six majors in 1999; now there are three.

Apple provided a respite. Selling billions of 99-cent songs on iTunes gave labels a few years to catch their breath as the streaming revolution approached. Now, as the MP3 heads the way of the eight-track tape, it seems the labels have learned from their mistakes. Led by Warner’s new billionaire owner, Len Blavatnik, Universal CEO Lucian Grainge and Sony’s music chief, industry veteran Doug Morris, the majors have figured out that it’s smarter to bully their way into companies seeking to eat their lunch rather than perpetually try to sue them, Whac-A-Mole-style, out of existence.

So far two dominant streaming models have emerged: Internet radio companies like Pandora that allow subscribers to passively listen to music that’s customized for their tastes and interactive ones like Spotify that allow users to pick songs.

The former can operate under a government-mandated license that dictates how much they have to pay. By contrast, Spotify and others must strike deals with labels and publishers in order to license music for legal use in the U.S.

One insider says YouTube alone paid the majors more than $1 billion in advances over the past two years. Spotify pays out about 70% of its revenue–at a rate of 0.7 cents a spin–to labels and publishers, who then pass along a small fraction to their artists and songwriters.

These arrangements offer labels another way to leverage their artists to make money from digital streaming: arbitrage. The formula for how much Pandora, YouTube and Spotify pay the labels isn’t related to the formula that the labels use to pay the artists whose songs are played. The latter is determined by a combination of individual contracts and a structure so byzantine that it goes by a moniker only a secretive hedge fund quant could love: the “black box.”

So how do the labels make money from the spread? Let’s understand the concept of “breakage.” The labels generally ask for digital partners to front an advance, not unlike how they worked with the record clubs of yesteryear. When a contract expires, there’s often a difference between the royalties earned and the initial advance. The labels generally keep that difference. When the labels re-negotiate, it’s with entities in which they hold significant stakes, ensuring the same rules apply all over again.

The black box has many other ways to squeeze money from the artist. For example, “Drunk in Love” is undoubtedly a hit single performed by Beyoncé and Jay Z–but it exists under many different names (“Drunk in Love” by Various Artists, by Beyoncé feat. Jay Z, etc.). In cases of mislabeling, royalties don’t typically go to music’s royal couple but rather a pool of unclaimed cash eventually doled out to the labels at a rate commensurate with their market share.

And while U.S. laws exempt broadcasters from paying out royalties on the recording side, foreign laws often do not. When an American act scores a hit in the U.K., it’s not clear how often the U.K. label pays through to the U.S. label and performer. FORBES estimates that labels are collecting $300 million worth of putatively “unattributable” money each year.

“By not having great data and not having a worldwide database,” says John Simson, who used to run SoundExchange, a nonprofit trade association responsible for collecting artist and label royalties on digital transmissions, “it just makes it easier for money to go to the black box.”

Labels have also increasingly used their leverage to get a piece of concert revenue. This is relatively new: Historically, touring was often a loss leader to boost album sales. Now that it’s reversed–most of the profit in the music industry comes from live shows–the majors take a piece of the profit in exchange for their promotion and marketing for the acts overall. These so-called 360 deals date back to the days of the Monkees and became prevalent when Live Nation started shelling out nine-figure advances to the likes of Jay Z and Madonna (both now stakeholders in Tidal) for such arrangements about a decade ago.

These days 360 deals are mostly reserved for young acts with little leverage; under such an agreement they typically give up 10% to 20% of what they net on shows to the label. Of course, these sorts of heavy-handed tactics have existed since the early days of the phonograph. Thomas Edison himself founded Edison Records–and refused to even print artists’ names on his products, let alone pay transparent rates.

The difference is that artists now have choices. Most of them rail about the system–and then buy in anyway. But some put their money where their mouth is and go their own way. Taylor Swift owns a piece of her label, Big Machine Records, and she pulled herself off Spotify after a reported dispute over her fees (months later she agreed to put her music on Jay Z’s Tidal). Hanson puts out its own albums, cuts it own deals and books its own shows. “We have a really good 360 deal,” says Isaac Hanson, one of the three famous brothers in the group, “with ourselves.”

Alternative rocker Amanda Palmer took to crowdfunding to finance her last studio album–she raised a record-setting $1.2 million on Kickstarter in 2012. “I’ll probably make enough money on Spotify to buy me a sandwich,” she says. “[But] I don’t think you can put this genie back in this particular bottle. I think you’re better off trying to cope with the reality instead of pretending that the reality doesn’t exist.”

Even by coming up with new takes on old tricks and accumulating pieces of popular streaming services, the majors still have a rough road ahead: Universal and Warner recently reported quarterly revenues that were flat or down on a year-over-year, constant-currency basis. Sony Music’s revenues were up 13% thanks to releases by Garth Brooks, One Direction and Pink Floyd–and the favorable depreciation of the yen against the dollar. In some cases their startup stakes are held by the label’s parent companies, so positive results wouldn’t necessarily show up on the same balance sheet–but for the most part streaming services aren’t yet in the black anyway.

That may change as usage scales up. According to MusicWatch’s Russ Crupnick, in 2013 only 45% of the 190 million Internet users in the U.S. bought music in any form, spending an average $55.45 per year. A full year of premium service on Spotify or Rdio (or Tidal) costs $120.

“It’s a mathematical case,” says Robb McDaniels, founder and former CEO of INgrooves, which handles digital distribution for Universal Music Group (and is now partly owned by it). “If everyone signed up, the pot would be many times as big. So that’s actually good for artists. The key is, we have to get the average music consumer to sign up instead of just the early adopters.”

Spotify is making steady progress–as of January 2015 it had 60 million active users, 15 million of whom were paying for the premium version; both these numbers are up about 150% from March 2013. And the company doesn’t need to be profitable to go public: In the event that it does, the labels will likely share a windfall in excess of $1 billion. The per-spin payouts may continue to grow, but there will be no pro rata share of an IPO jackpot going back to the artists and songwriters who made the music responsible for the company’s rise.

Though, tellingly, none of the majors was willing to comment for this story, their executives have been transparent enough about their intentions. In a memo laying out goals for his company in 2015, Universal Chief Grainge expressed a desire for the company to “be a formative player in shaping and developing the music platforms of tomorrow.” By looking forward, while squeezing the models of the past, the record label seems to be on its way to avoiding extinction

US takes first step towards paying artists for radio play

April 14, 2015

Tim Ingham musicbusinessworldwide.com 4/14/15

US Congressman Jerrold Nadler and Marsha Blackburn yesterday introduced the Fair Play, Fair Pay Act of 2015 – which seeks to impose a performance right that would see artists and labels paid when their tracks are played on AM/FM radio.

Songwriters are currently paid when their tracks are broadcast on traditional radio, but performers are not – setting the US apart from almost every developed nation in the world.

Confusingly, artists are paid in the country – via SoundExchange Collections – when their tracks are played on personalised digital radio such as Pandora, and satellite radio such as Sirius XM.

The Fair Play, Fair Pay Act of 2015 seeks to correct what its supporters consider three ‘significant injustices’: the establishment of a sound recording royalty for AM/FM radio, removing satellite radio’s below-market-rate exemption, and treating pre-1972 recordings with the same level of respect as those made after February of 1972.

However, the Act faces a lengthy fight if it’s to be enshrined in law. The next key legislative steps would be having the bill considered in the House Judiciary Committee either with a hearing on the issues or through a vote. The Senate will also need to consider the bill, but at this point it has not been introduced there yet.

The next step for the Fair Play Fair Pay lobby is grassroots mobilising and putting pressure on Congress.

However, it faces fierce opposition from the radio trade body the National Association of Broadcasters. The NAB is strongly lobbying against the FPFP act with its own ‘Local Radio Freedom Act’, while claiming that any measure to force radio to pay artists and labels would devastate local stations.

Music First, a collective of artist representatives who have been calling for Fair Play, Fair Pay said in a statement: “Thanks to Reps. Nadler and Blackburn, we stand at the doorway of an incredible opportunity – a once-in-a-generation chance to make radio work better for music creators, radio services, and, most importantly, music fans.

“It is time for Congress to update music licensing laws. AM/FM radio, satellite radio and Internet radio exist side by side in car dashboards and compete for the same listeners. But whether performers and copyright owners are paid, and how much, depends solely on what button you press or app you choose. On Internet radio, it is one rate. On satellite, it is a different, lower rate. And on AM/FM, there is no rate at all – music creators get paid nothing. I think that we can all agree that makes no sense.

“Now, some digital services are claiming they don’t have to pay for pre-72 recordings. Several court decisions have already dismissed this absurd claim.

“The solution: all radio services should pay under the same ‘fair market value’ royalty standard for all of the music they play. Like everyone else who works, creates, or innovates, music creators deserve fair pay for their work.

“It’s a question of basic economic fairness, but it is also a matter of fair competition between music services. No more special privileges for old technologies. No more giveaways. No more special interest exemptions and subsidies. No more picking winners and losers among radio platforms. Let the best services win – fair and square, on the depth of their playlists and the quality of their products.

“Fair market value for music will encourage creativity by music creators. It will promote innovation among music services. And – most importantly – it will give fans the best music they have ever heard – delivered in the most exciting ways they could ever imagine.”

And Michael Huppe, president and chief executive officer of SoundExchange said: “For decades, music services have gotten away with building their business on the backs of hard working musicians, paying unfair rates — and in the case of the $17.5 billion radio industry, paying nothing at all — for the music they use. The Fair Play Fair Pay Act introduced today will bring much needed reform to the music industry and addresses many of the issues that plague the recorded music industry.

“It is time that we properly pay the artists who put so much hard work into creating the music at the core of these services. If it weren’t for them, these stations would be broadcasting little more than static.

“At the nexus of music and technology, SoundExchange is at the very center of the industry, representing the entire record music industry. In June 2014, we testified before Congress and laid out SoundExchange’s guiding principle: all creators should receive fair pay, on all platforms and technologies, whenever their music is used. This past February, the Copyright Office put out a comprehensive report that laid out a similar principle and today we have a bipartisan coalition in Congress heeding the same call.”

Sales of Streaming Music Top CDs in Flat Year for Industry

March 20, 2015

BEN SISARIO NYTimes.com 3/18/15

The American market for recorded music was flat in 2014, but income from streaming services like Spotify and Pandora has quickly grown to become a major part of the business, eclipsing CD sales for the first time, according to a report released Wednesday by the Recording Industry Association of America.

The association, a trade group that represents the major record companies, said that recorded music generated $6.97 billion in 2014, down less than 0.5 percent from the year before, when revenue was slightly more than $7 billion.

Overall revenue from recorded music, after falling from a high of $14.6 billion in 1999 — when CDs were the dominant format — has remained relatively stable for the last several years, hovering around $7 billion, according to the recording industry association. But within that total, the sources of income have changed significantly as consumers have increasingly shifted their purchasing habits online

In 2010, for example, when 253 million CDs were sold, sales of physical formats, like CDs and vinyl LPs, made up about 52 percent of total music revenue; downloads represented 32 percent, and streaming about 6.6 percent. (Ringtones and other miscellaneous income made up the rest.) By last year, the number of CDs sold had fallen to 144 million, and the split between formats was evening out: Physical formats were 32 percent of revenue, digital downloads 37 percent and streaming 27 percent.

The finer details of the industry association’s report, which is compiled from data supplied by the record companies, show how quickly the shifts are happening. In 2014, downloads of singles and albums generated about $2.6 billion, down 8.5 percent from the year before. CD sales were down 12.6 percent to $1.85 billion. (Vinyl records, a growing niche, were worth $321 million, up 50 percent.)

In aggregate, the various kinds of streaming outlets generated $1.87 billion, up nearly 29 percent from the year before — and, for the first time, slightly more than the total for CDs. That figure includes not only paid subscription outlets like Spotify, Rdio and Rhapsody, but also Internet radio services like Pandora, which does not let users pick exactly what songs they will hear, and outlets like YouTube and Spotify’s free tier, which let users pick specific songs and are generally supported by advertising.

43 things that scare a major record company in 2015

February 13, 2015

Tim Ingham http://www.musicbusinessworldwide.com 2/12/15

It’s tough running a major music company today. For starters, you’re reliant on off-the-wall creative types to help you hit your ever-stricter targets.

Then there’s piracy, cost-cutting and that big question mark over whether streaming, in reality, can ever really take this industry back to the promised land.

In fact, you might not realise just how many fears play on the mind of a major label boss every single day.

So we’re here to tell you. It’s 43.

Earlier today, Warner Music Group announced its fiscal results for the last quarter of 2014, recording Q1 net losses of $41m against a 1.7% revenue jump to $829m.

Buried within the company’s investor information lay something rather revealing about its biggest fears for the future: a list of what it deems its ‘risks, uncertainties and other important factors’.

This is the stuff that Warner warns, at any moment, could derail its hopes of hitting its financial forecasts.

Non-fiscal types might find some chuckle-worthy language in there: “Our indebtedness levels, and the fact that we may be able to incur substantially more indebtedness which may increase the risks created by our substantial indebtedness.”

But that doesn’t mean that many of the points below aren’t salient for any big music company in this day and age.

Don’t have nightmares.
1.The continued decline in the global recorded music industry and the rate of overall decline in the music industry;
2.Downward pressure on our pricing and our profit margins and reductions in shelf space;
3.Our ability to identify, sign and retain artists and songwriters and the existence or absence of superstar releases;
4.Threats to our business associated with home copying and digital downloading;
5.The significant threat posed to our business and the music industry by organized industrial piracy;
6.The popular demand for particular recording artists and/or songwriters and albums and the timely completion of albums by major recording artists and/or songwriters;
7.The diversity and quality of our portfolio of songwriters;
8.The diversity and quality of our album releases;
9.The impact of legitimate channels for digital distribution of our creative content;
10.Our dependence on a limited number of digital music services, in particular Apple’s iTunes Music Store, for the online sale of our music recordings and their ability to significantly influence the pricing structure for online music stores;
11.Our involvement in intellectual property litigation;
12.Our ability to continue to enforce our intellectual property rights in digital environments;
13.The ability to develop a successful business model applicable to a digital environment and to enter into artist services and expanded-rights deals with recording artists in order to broaden our revenue streams in growing segments of the music business;
14.The impact of heightened and intensive competition in the recorded music and music publishing businesses and our inability to execute our business strategy;
15.Failure to realize expected cost savings and other synergies and benefits contemplated by the PLG Acquisition;
16.Risks associated with our non-U.S. operations, including limited legal protections of our intellectual property rights and restrictions on the repatriation of capital;
17.Significant fluctuations in our operations and cash flows from period to period;
18.Our inability to compete successfully in the highly competitive markets in which we operate;
19.Trends, developments or other events in some foreign countries in which we operate;
20.Local economic conditions in the countries in which we operate;
21.Our failure to attract and retain our executive officers and other key personnel;
22.The impact of rate regulations on our Recorded Music and Music Publishing businesses;
23.The impact of rates on other income streams that may be set by arbitration proceedings on our business;
24.An impairment in the carrying value of goodwill or other intangible and long-lived assets;
25.Unfavorable currency exchange rate fluctuations;
26.Our failure to have full control and ability to direct the operations we conduct through joint ventures;
27.Legislation limiting the terms by which an individual can be bound under a “personal services” contract;
28.A potential loss of catalog if it is determined that recording artists have a right to recapture rights in their recordings under the U.S. Copyright Act;
29.Trends that affect the end uses of our musical compositions (which include uses in broadcast radio and television, film and advertising businesses);
30.The growth of other products that compete for the disposable income of consumers;
31.The impact of, and risks inherent in, acquisitions or business combinations;
32.Risks inherent to our outsourcing of IT infrastructure and certain finance and accounting functions;
33.Our ability to maintain the security of information relating to our customers, employees and vendors and our music-based content;
34.The fact that we have engaged in substantial restructuring activities in the past, and may need to implement further restructurings in the future and our restructuring efforts may not be successful or generate expected cost-savings;
35.The impact of our substantial leverage on our ability to raise additional capital to fund our operations, on our ability to react to changes in the economy or our industry and on our ability to meet our obligations under our indebtedness;
36.The ability to generate sufficient cash to service all of our indebtedness, and the risk that we may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful;
37.The fact that our debt agreements contain restrictions that limit our flexibility in operating our business;
38.Our indebtedness levels, and the fact that we may be able to incur substantially more indebtedness which may increase the risks created by our substantial indebtedness;
39.The significant amount of cash required to service our indebtedness and the ability to generate cash or refinance indebtedness as it becomes due depends on many factors, some of which are beyond our control;
40.Risks of downgrade, suspension or withdrawal of the rating assigned by a rating agency to us could impact our cost of capital;
41.Risks relating to Access [Industries], which indirectly owns all of our outstanding capital stock, and controls our company and may have conflicts of interest with the holders of our debt or us in the future. Access may also enter into, or cause us to enter into, strategic transactions that could change the nature or structure of our business, capital structure or credit profile;
42.Our reliance on one company as the primary supplier for the manufacturing, packaging and physical distribution of our products in the United States and Canada and part of Europe;
43.Risks related to evolving regulations concerning data privacy which might result in increased regulation and different industry standards

Mexico is undergoing a streaming music revolution

September 2, 2014

Tim Ingham musicweek.com 8/29/14

Mexico is undergoing a streaming music revolution

Revenues generated by streaming music services in Mexico have exploded in the past 12 months – up a staggering 130% year-on-year in the first half of 2014.

According to new figures from the Mexican Association of Phonographic Producers (Amprofon), analysed by Music Week, income to the local record industry from streaming services more than doubled to around 175 million Pesos (£8.0 million) in the six months to June 30.

That was enough to claim a 41% share of total digital music sales, which were up 14% on H1 2013, pulling in 428 million Pesos (£19.7m) overall.

Streaming services legally available in the territory include Spotify, Deezer and Rdio.

In total, the Mexican record industry generated revenues of 724 million Pesos (£33.3 million) in the six months, of which 59% were digital.

In turn, 59% of those digital revenues were accrued from sales. Of these, single tracks claimed 29%, albums 15%, mobile content 8%, ringtones 5% and music videos 1%.

That means 41% of record music’s overall revenues were claimed by physical formats, showing the continued strong position of the sector in Mexico.

83% of these sales of physical music were on CD; 12% were on DVD audio; 4% on DVD video; 1% was claimed by a combination of vinyl, cassettes, mini discs and Blu Ray.

More than a third (34%) of physical sales were claimed by Mexican artists. Just 29% were made up of ‘international anglo’ – i.e. non-Mexican English speaking artists.

Previously notorious as a hotbed of piracy, according to IFPI figures the Mexican record market increased in value by 17% between 2008 and 2012.

However, the annual market in Mexico fell by 4.4% in 2013 to total $135 million (1.76bn Pesos; £81.28m).

Taking into account the territory’s worth in the first half of 2014 – 724 million Peso (£33.3m) – would suggest the country’s overall 12-month value is once again likely to slip slightly this year.

Britney Spears: Popstar Directs Clear Vision of Her Billion-Dollar Empire

September 2, 2014

Andrew Barker Variety.com 8/24/14

Unlike singer-songwriters, contemporary pop stars rarely have their songs viewed through an autobiographical prism, yet it’s hard to miss the changes in Britney Spears’ core messaging over the past years. Early in her career, when she was a teenage star selling albums in the eight-digits, “Oops! … I Did It Again” seemed to sum up her effortless rise. Later, as she became an ever-reliable hitmaker and touring workhorse, “I’m a Slave 4 U” took on extra-textual meanings.

And during her mid-2000s run as the tabloid successor to Michael Jackson, “Chaotic” and “Blackout” served as the operative terms. In that sense, the 2013 track she uses to open every night of her trendsetting Las Vegas residency says volumes about her current career motto — its repeated refrain echoing through Planet Hollywood’s Axis Theater:

“Now get to work, bitch.”

The roots of Spears’ current form of Calvinist professionalism can perhaps be traced back to several business decisions starting in the late 2000s. Spears rehired Larry Rudolph, the man who steered her career from age 15, and Adam Leber as her managers. Nashville-based Lou Taylor of Tri Star Sports and Entertainment Group came aboard as business manager and financial guru. CAA’s head of music Rob Light and Jeffrey Azoff took over from the agency side. Tangential, if lucrative, gigs such as her stint as a judge on “The X Factor” were jettisoned. By 2012, Spears was placed No. 1 on Forbes’ annual list of the highest-paid female entertainers in the country, a return to the top slot since her 2002 heyday.

And the consolidation has continued. Earlier this year she re-upped with RCA Records, which had inherited her contract from former affiliate Jive years ago. And even touring was scrapped, as Spears established her two-year residency in the Nevada desert.

For Light, the key to Spears’ present stability was her team’s ability to refocus on the bottom line. “Larry and Adam are two of the best managers in the business, and they were spot-on in trying to identify who her core audience was,” he says. “Because before you can go forward, you have to figure out where your audience lives and how you get to them. And Jeffrey and I realized that her core audience is in the sweet spot of Las Vegas: that 21- to 35-year-old who is living in the nightclubs.”

Look a little bit closer, however, and Spears has been building an impressive empire for years, even if head-shaving antics and a financial conservatorship once gave her the image of teetering on the brink. She has sold more than 70 million records worldwide. Her tours — not counting the Vegas residency, which has already grossed more than $20 million — have grossed hundreds of millions. And her personally branded fragrance line with Elizabeth Arden has sold over a billion dollars’ (yes, billion with a “b”) worth of merchandise since launching in 2004.

“Britney has built her team more like that of a corporate structure,” says Taylor. “I think Britney truly conceives of herself as a corporate executive officer, and the organic desire she has for any sort of brand ideas or sponsorship, show ideas, music ideas, all really start at the top with her. I think that’s probably the thing that most people don’t understand about how she operates.”

Spears herself isn’t sure she’d call herself a CEO — “but that’s very sweet of Lou to say,” she says — though she acknowledges that recent years have taught her the importance of clear-eyed career planning.

“I’ve been very hands-on with everything I’ve done since I had my children,” she says. “And it’s just really important for me to understand the big picture, where everybody’s coming from, what’s the real purpose of this shoot and this song, or whatever it is in that moment that I’m doing.

“It’s important to learn to say no. With tours and all of that stuff, there are so many aspects that go into it, it’s easy to have so many people around you saying, ‘oh yes, yes, you can afford this, you can afford this,’ and then all of the sudden you’ve spent $20 million on your stage and you’re like, ‘where’s my money?’ You have to make sure that you’re on top of things and know where the money’s going.”

Even with something like the Elizabeth Arden deal — sometimes the sort of affair for which artists simply affix their name to a perfume bottle — Spears maintained hands-on involvement.

“When I first met with her, I had a list of questions, with all of her likes and dislikes, colors, flavors, other fragrances she had liked and disliked, art she thought was beautiful,” recalls Ron Rolleston, Elizabeth Arden’s executive VP, creative and business development. “There was a calculated risk involved, but also an intelligent investment to be made here. Britney had this really loyal fanbase that already existed.”

Spears plans to launch a sleepwear line this fall, and her branding ventures have also seen her partner with Hasbro and Candie’s, yet as Rudolph notes, “she’s had such a huge career, but when you really think about it, she’s done very little in terms of over-exploiting that in the branding space.”

Rudolph recalls Spears’ early deal with Pepsi, and its flurry of branded Super Bowl spots in 2001, as a particularly canny venture.

“We got as much out of it as Pepsi did,” he says. “Britney’s brand became so elevated as a result of Pepsi’s commitment to her. I think they bought $17 million worth of media at the Super Bowl just to play Britney commercials. You can’t beat that in terms of general brand extension.

“In Britney’s career, we’ve often tried to do things first,” Rudolph continues. “She was the first music artist to have a celebrity fragrance, and now everybody and their grandmother has one. She was the first solo female pop artist to come out in that cycle she came out in, before Christina Aguilera and Jessica Simpson. And now she’s the first pop artist to go into Vegas that is current and still has hits on the radio, as opposed to the heritage artists like the Celines and the Rod Stewarts of the world, playing off their old catalog.”

Launching her Vegas residency, the Baz Halpin-directed “Britney: Piece of Me,” was yet another calculated risk, wagering that the city’s youthful demographic shift and the explosion of dance clubs would support a star born in the 1980s, without prematurely branding her as a nostalgia act. The risk paid off, with 34 sold-out shows already in the ledgers, and dates scheduled well into 2015.

With the success of the Vegas residency came a significant setback, however: Spears’ last record, December’s “Britney Jean,” was both the lowest-charting and the lowest-selling studio album of her career, peaking at No. 4 on the album chart and failing to go platinum. (All Spears’ previous albums have gone platinum or better, with “Oops! … I Did It Again” certified diamond, and “Baby … One More Time” certified 14x platinum.)

Yet for Light, the record’s performance is less a reflection of Spears’ stardom than the shifting market standards.

“Honestly, trying to compare record sales in 2014 to anything anyone had in the past is an impossible task, because it is such a broken business,” says Light. “The actual sales are never going to be the same, but if the social media numbers stay high, and her audience stays incredibly active, we’re feeling great.”

Tom Corson, president of RCA Records, concurs. “Britney is still near the top of the bell curve,” he says. “If you have an album that’s somewhat less successful than prior albums, it can be a reflection of a lot of things. But what you know is that the artist is still selling tickets, the artist is still viable in the marketplace, the artist brand still has resonance.”

If “Britney Jean’s” cultural success intermingling with commercial underperformance is perhaps a common story for the modern record industry, Spears’ stationary performance schedule is something entirely new.

“Artists getting out there and touring is the best way to touch their fans, and you need to maintain that relationship,” Corson says. “It takes a lot of work and a lot of desire and motivation, and I respect an artist’s right to take a year or two off and do it differently.”

But when asked if she’s eager to get back on the road, Spears is succinct:

“Actually, no. I’m really happy with the way I’m set up right now, going to Vegas and coming back and having my foundation here,” she says. “I’m a home girl. I really don’t see how I went all over the place and traveled the world and did everything. I feel like I was out of my frickin’ mind, and I did that for 15 years. But I was just so hungry and young and eager to pursue my dreams that it made sense then. It’s really easy to lose track of where you are and what you’re doing.”

And plus, working on the Vegas residency schedule — in which Spears plays three shows a week, with the rest of the week spent at her home in Los Angeles, coupled with scheduled multi-week breaks along the way — allows Spears more time to pursue projects from her home base.

“In my off-time I do record,” Spears says. “Once in a while I’ll just go into the studio if there’s a really good song that I have in my head and want to do. I think as artists you’re constantly in creative motion. If I stopped writing songs then that’s a part of me that would stop in my life, and I need constant motion… I’m definitely more in a creative space now. You have more time to go there spiritually in your home with a piano than you would being in a hotel room.”

Bedroom Rockstars: How Peter Hollens Got A Major Record Deal Without Ever Leaving Home

August 27, 2014

Ari Herstand Digitalnews.com 8/25/14

“My fan base knows I’m a geeky guy,” YouTube star Peter Hollens joked to me over Skype. With his quirky A cappella videos covering everything from Shenandoah to the musical Wicked, Hollens has amassed over 750,000 YouTube subscribers and just signed a deal with Sony Music Masterworks.

Hollens perfectly embodies what the new music industry is shaping up to look like. He did not get a lucky break. He was not “discovered” by a record company exec in night club or from a viral music video. He built a self-sustaining career on his own – making a fantastic living and supporting his family solely on his music.

Like Marcus Grant, a manager at The Collective, said:
“You’re not going to get a record deal by asking for a record deal.”

And Hollens never asked for one. He was offered it only when he didn’t need it. And still doesn’t.

Why did he take a record deal? He is following in the footsteps of another Sony Masterworks artist, The Piano Guys. “It worked really well for them,” Hollens proclaimed. Their “5 Guys, 1 Piano” viral video of their One Direction cover has over 34 million views to date. Most of their videos feature the two founders, Jon Schmidt on the piano and Steven Sharp Nelson on the cello, and have views in the millions. The Piano Guys YouTube channel currently has over 3 million subscribers. Signing with Sony Masterworks enabled all three of their Sony releases to peak at #1 on the Billboard Classical charts and break the top 50 on the Billboard 200. They have also charted in Germany and Austria.

Hollens hopes for similar, chart topping success.
Not all record deals are created equally

It’s common knowledge that signing to a record deal with very little clout can leave the artist open to lots of dirty label tactics, screwing the artist out of lots of money. Unfortunately, this is not news. But what most people don’t realize, if you actually have clout and don’t need the deal, they’ll bend the f over backwards for you.

He can’t share many details of his deal, but he told me “this is a partnership. Sony Masterworks thinks it’s a partnership. The execs at Sony Masterworks are very intelligent and very progressive.” His deal is far from normal.

“I would straight up tell people not to try to be signed to a label. Build it yourself and have them come to you. Because then you have more power in the negotiations and you can walk at any point. If you no longer need them, then what they bring to you has significant value.” – Peter Hollens

Peter Hollens started off singing in an A cappella group he founded at the University of Oregon. He later went on to sing with them on the TV show, The Sing Off. Hollens admitted though, “The Sing Off did very little for me in terms of online influence.”

For years, Hollens built up a mobile studio business where he traveled around the country recording, producing and mixing other A cappella groups. He never thought to track his own music until his father asked him to.

“I started recording my own music because my father was on his death bed and was dying of brain cancer and he asked me to record music for him. He never heard me do my own stuff,” Hollens remembers. So he started a YouTube channel and began recording his own A cappella videos, by himself in his home studio. His father passed away 9 months after he started his channel.

To pay tribute to his father, Hollens and his wife Evynne (who was a singer in another A cappella group at the University of Oregon – where they met), recorded the classic, “The Prayer,” his father’s favorite song.

Peter Hollens was slowing building his channel and was at about 15,000 subscribers when the violin sensation, Lindsey Stirling, got in touch with Hollens to collaborate. “I owe everything to Lindsey,” Hollens explained. “She helped me go from part time to full time.” Hollens mentioned that their recording of “Skyrim” released in April 2012, which currently has over 38.7 million views, still helps pay for a large portion of his mortgage. He said he went from about 15,000 subscribers to nearly 80,000 almost overnight. “I can’t say enough good things about her. She handled her rise to fame so gracefully. I am where I am because of her. I would like to get to a point where I can evoke that kind of change.”

Hollens was one of the earliest adopters of the on-going crowd funding service, Patreon and the stand-alone store (and digital distribution company) Loudr. Through Patreon, with 938 “patrons,” Hollens makes a maximum $4,820 per video he releases. He usually releases about 2 videos a month. With Patreon, along with his iTunes and Loudr download sales, Hollens has been making a very comfortable living for the past couple years.

Hollens is currently working on his debut album for Sony Masterworks. Most of the songs will be re-releases of his most popular songs.

Hollens attends the various YouTube fan conferences around the country, including the gargantuan VidCon each year, where he is greeted by hoards of screaming fans – something quite unfamiliar to someone who hasn’t performed live, outside of these conferences, in nearly 4 years.

Hollens has proven that a self-sustaining, middle-class music career is possible in the new industry. He is still without a manager and continues to record all of his music and shoot all of his videos from his home studio.

While Hollens’ baby was crying during our Skype call, he excused himself to help his wife out the door, while calming their child.

The life of a rock star is quite different today than it was in the era of sex, drugs and free love. If Hollens has proven one thing, it’s that the old rules of the industry don’t apply anymore. He found a way to make a comfortable living creating the kind of music he does best without the help of any gatekeepers.

Hollens is not an anomaly. There is thriving musical universe outside of the Biebers, Swifts and Beyonces of the mainstream. If you dig deep enough, you’ll find that the working musician class of Millennials is paving the way for the true future of the music industry. And it isn’t found on the radio.