Two themes and a reprise, part 2

Here’s a short coda.

I wrote previously about independent labels as a growing source of successful new music and the Majors as a declining developer of in-house talent, possibly leading to a stronger licensing role for the latter, Adele being just one example.

Although this seems advantageous for all parties there are legacy problems to deal with. I mentioned the eye-watering pay cheques of Major label managers and their yearning for big margin in-house successes.

There is also the changing role of online retail. While the Majors still have a strong territorial role distributing physical recordings they will be much less important in future as sales move onto the web.

Then there’s online entertainment. Today, the Majors are significant gatekeepers to traditional broadcasting and offer a useful service for licensed material (such as Adele) but that role will be diluted by the growth of new channels.

So, as time goes by independent labels won’t need to license their big successes to Major labels quite as much.

Finally there’s the whole question of the master license. Major labels own the master licenses for all their artists but they aren’t necessarily the best agent to work every aspect of a master these days. And there is a real question about value-for-money when they take half or more of the master income for transactions in which their ownership seems incidental. For example, say Rihanna has an album with Mercury who provide access to distribution and broadcasting, should they also take a big chunk if one of the tracks is used over the credits on a film? Your attitude probably depends on how you see the artist—as someone working for a label or someone with a label working for them.

Today, when anyone can make a sound or video recording, ownership of the master is a very blunt tool for simply getting the product to market or the media. I would argue this is another reason why closer partnerships between artists and independent labels are better all round.

The Majors would probably argue it’s only by owning all their artists’ masters that they can negotiate strongly with new licensees such as Spotify. But who benefits when such deals are struck? Do the Majors look after their artists’ interests or their own?

There are similar questions hanging over 360° recording contracts. The Majors certainly offer a number of very strong services to their artists but they are by no means the strongest in every sector.

From my perspective this makes the licensing solution sound even more attractive. An independent label seems far better able to tailor a number of licenses with different service suppliers rather than lumping the whole thing with a Major. But obviously not everyone will see it the same way.

Two themes and a reprise

Is this were the Major labels need to go next?

money bagI’m going talk about two long term record industry trends and how they might be heading back to where it all started. It isn’t about the Internet, although that does come into it briefly.

Things don’t happen quickly in society or industry. It took technologists most of the 19th century to get from the principles of recorded sound to a record player in 1895 and another decade to knock out a million seller (Caruso, 1907), then twenty more years before amplified sound in 1925. I’m not going back that far but it’s a good illustration of how progress progresses slowly. A lot of that time—about 90 years—was spent on distractions that went nowhere but that is only obvious with hindsight. Engineers at Edison, working on new phonograph cylinder resins for decades, probably thought they were the cutting edge.

It’s fashionable to say our technological society is moving faster than ever but it isn’t really the case. Someone born in 1905 would have had the passive record player and telephone but by the time they were 20 years old, international air travel, radio broadcasting, amplified music and cinema had arrived, and a world war had taken place. A mere 10 years after that we had TV. Progress only seems slow when we look back, at the time it appears overwhelming but day-to-day changes amount to very little.

So I’m highlighting two trends that are long enough to be real, with early signs they could amount to a new milestone.

Our first trend is independent recorded music, which has a 60 year history of growth. After World War Two a number of things came together: new vinyl formats and multi-track recording became available, and a large number of trained engineers left the armed services. These new resources fed a post-war boom in American recording (Sun, Elektra, etc.) and radio—although BBC radio wouldn’t be challenged until the mid-Sixties. In the following decades independent labels became more common and although they were often bought up by bigger labels, numbers increased. The Sixties pop boom in the UK (Immediate, Charisma, Virgin, etc.), punk in the late Seventies and home recording in the Eighties were all good times for independent labels and by the Nineties (Creation, and others) the independents were firmly established. Now, whether they are one-man DIY operations or multi-national independent groups they are a substantial source of new recorded music.

It’s hard to imagine now that there was a time when a handful of companies owned all the technology and resources for making records and that before 1950 independents were almost non-existent. What’s important about independents is they’re not the same as Major labels. They have a strong connection with artists and audiences the Majors don’t, ever since the post-1970 corporate mergers made investors money rather than making music.

So, our second trend is corporate recorded music, which has a 40 year history peaking around 2000 and declining thereafter. I’m not talking about the original Warner Brother records—which was another kind of corporate—I’m talking about the motley corporations founded around 1970 when Steve Ross’ Kinney cleaning and parking empire bought Warner’s and Elektra. That marked the start of an era when outside investors and shareholders drove Major labels to grow by buying up competitors. They adopted the inevitable trappings of big business: de-risking, repetitive processes, micro-management, limited individual freedom, layers of authorisation, corporate strategy and a mass market mind-set. Their focus was never the artist or the fan.

Whatever age you are and whatever music you’re into you probably know the charts around 1970 were very different from what we have today. There were fewer genres then but a wider range of styles. One week’s top ten albums might include teen pop, soul, heavy rock or blues, prog rock, a stage musical soundtrack, classical, folk and jazz. Fans knew what to expect from the record labels and artists re-invented themselves from album to album. That variety has gone, replaced by safer more predictable output. And whereas 1970’s pop, folk, jazz, musicals and classics sold to all age groups very little of today’s corporate music is marketed to anyone over 35.

The charts matter because that’s where the volume is, and diversity matters because that’s where the audience is.

The reason chart music narrowed is that a smaller number of Major labels now control content. They spend a vast amount marketing their own ideas rather than licensing music, even though innovation is something they don’t do very well. Successful new music is frequently from independent labels and management companies. Narrowing output isn’t just a weakness in the record industry. We see it in cinema, book publishing, radio and TV. Every corporate entertainment giant has the same problem. As Kick Ass says in the independent masterpiece of the same name:

Jesus, doesn’t it bug you? Why do thousands of people want to be Paris Hilton, and nobody wants to be Spiderman?

The corporate record industry has come a long way in the past couple of decades but they still don’t have a strategy for growth—at least not one that shows any sign it’s going to work. As revenues fall year after year UMG’s big idea is that streaming will get thousands of times bigger. In some ways that is wanting to be Spiderman but it’s the wrong fantasy.

So where is the new milestone coming from? Let’s rewind to 1895 for moment. When Berlinner launched his genius spiral track flat disc start-up he didn’t have time to dream up the content as well. His record producers pulled in musicians from music halls, concert halls and dance halls. The art of selling recorded music was making and distributing it, not designing the content. He didn’t have to make his artists popular he just signed artists that were already popular. You might think that approach would be impossible today—if a record company only distributed music how could it make money? Well, the Columbia imprint is 125 years old and now part of Major label Sony—one of its best selling artists is Adele. Adele is not a Columbia act, she’s signed to independent XL. The biggest selling artist of the past few years isn’t a Major label act, so it’s not really far fetched to imagine the Majors could return to their roots.

The upside for Sony would be considerable. Adele came through the door with content and all the other stuff taken care of, all Sony had to do was distribute a licensed package.  Licensing from independents would eliminate a lot of risk—something corporate music doesn’t like—and a lot of overheads. They could jettison large numbers of costly A&R and artist management staff, and cut 100% of the losses on their homegrown flops. Most of the acts launched by Major labels flop apart from the TV show celebrities, and I can’t see the indies fighting to sign them.

The downside is that Adele’s contract is with XL, so Sony couldn’t take 80% of the profits but let’s be clear, the golden age of the record industry is never coming back, this is about survival. Another significant drawback for the Majors is they would no longer own any of the masters for licensing, but most of their licensing is not this year’s model so that wouldn’t be an immediate problem. Of course, demystifying the business would make it hard for the multi-million dollar superstar CEOs and their million dollar minions to justify their pay but you can’t make an omelette without breaking some eggs.

Imagine there’s no copyright

I’ve been a musician and composer for nearly 50 years and always been aware of, and in favour of, copyright. It means I can decide how my music and lyrics are used. Since 1995, given the ease of copying material online, there has been a new debate about the nature, purpose and flaws of the copyright system. I follow this debate closely and study a lot of UK and USA legislation.

In the past couple of weeks (when I got involved in this particular conversation) I’ve been thinking about a world without copyright. Those involved in the discussion range from artists wondering how best to use the Internet, to free-culture fundamentalists who demand you agree with them before they even talk about their reasoning.

Fundamentalists are confused between copyrights and licenses. Copyright is set down in national law and different in each country. Licenses—such as Creative Commons, soundtrack sync, a blanket performance license, or a record label territorial sales deal—are individual permissions based on the national law.

Abolitionists protest, often quite rightly, about the behaviour of Big Content interests (movie studios, Major record labels and publishers) and blame copyright. If a Major label rips off their artists or customers that isn’t the fault of copyright. If you’re unhappy about Apple’s commission on iTunes sales that isn’t the fault of copyright either. Copyright simply gives the artist the choice, it has no control over what happens after the choice is made; after the record deal is signed or the tracks are submitted to an aggregator.

We covered most of the points in comments on the previous post but here’s one angle that’s worth bringing together.

Copyright abolitionists imagine that without copyright, artists would still be able to earn a living from their art while wider society enjoyed their work for free. That alone is quite a tricky argument to sustain but it doesn’t end there, they also imagine middlemen would be abolished. Let’s examine those 3 ideas:

Without copyright, artists would be able to earn from their art

If everything was public domain, everything an artist made could be copied. A great T shirt design could be sold in supermarkets. A box set of their music with special artwork and booklets could be re-manufactured in Asia. It is sometimes thought this would just be great publicity for the artist, but it’s hard to see how unrestricted copying doesn’t take food off her table. And would the middlemen pay her a cent? Why would they? Culture is free!

(Incidentally, I’m in favour of unrestricted music file-sharing but I draw the line at commercial third parties copying unique art without compensating the artist, unless that’s what the artist wants.)

Society should have free access to all artists’ work

Copyright doesn’t stop that happening—enlightened artists do share and it does help them.

Without copyright there can be no middlemen

Unfortunately you can’t abolish middlemen by abolishing copyright, unless you also ban the sale of goods and aggregation of content. There will always be shops and superstores. They will always need goods. A free supply of art and design ideas would be welcomed by big retailers. Many Internet sites make their living by aggregation (Google, YouTube, Grooveshark, and many others including the lyric sites Drew Stephenson mentions). Just consider all the places that copy your stuff now, then add the other commercial locations prevented by current law.

Abolitionists seem to think a level playing field would allow buyers to seek out the original artist rather than using a middleman but they wouldn’t. People pay a big mark-up for aggregation in a superstore and inevitably choose Internet aggregators over individual artist sites. That’s what they do now—the absence of copyright wouldn’t change that, it would just make art cheaper for the middlemen.

If you have a solution to these problems I’d be pleased to hear it, but copyright is designed to protect the artist in a world of commerce and unless you can change the world it seems we are stuck with it.

Copyright is not really complex for individual artists. If you want to do business in your own way it should be easy to describe it to customers. “Pay what you like.” “Buy one share one.” “Pay what you like, or nothing.” “Virtual tip jar.” “Free music, buy a T shirt.” The possibilities are as broad as your imagination, just browse some artist sites or Bandcamp. Lawyers will go purple, and they do have a point but only a small one. You need to make sure your licenses (“Pay what you like” is a license) are coherent and don’t conflict with other licenses but that’s just common sense. Don’t make two exclusive deals in one territory for example.

You can’t transfer your ownership without transferring your ownership, so don’t think you are endangering your copyright by offering your stuff for free. Don’t feel compelled to add legal mumbo-jumbo: “Pay what you like to enjoy unlimited personal use for yourself and your immediate family, limited to the tracks you have chosen, in the territory where you are resident subject to copyright law.” I don’t need to explain why that’s bad, do I?

(Some artists also fret about their best track being stolen by Sony and making millions for an X-Factor runner-up. That isn’t really a problem of copyright either. If you make your stuff widely shareable and it does get stolen by a Big Content user you have the problem of suing them. Your best bet might be to shame them on social media.)

You may prefer to use Creative Commons licenses but they are limited to certain specific uses and although many people think otherwise they too are based on national copyright law. Creative Commons is a set of copyright licenses.

Are record labels evil?

Aimee MannI saw this question on Twitter the other day. Given that Amanda Palmer’s $1.2 million Kickstarter album is roughly what a big record label would spend—what’s wrong with the record label anyway?

Well, just three things: control, recoupment and accounting.

(That’s Aimee Mann by the way not Amanda Palmer… all will become clear.)

Control

With a record label you couldn’t choose the studio or the producer. Your album would be vetted for radio-friendly sounds and safe lyrics. You might get some input but the last word on content, design and marketing would come from the label. Media interviews would be set up by the label and under a 360° deal even merchandising and gigs would be decided for you.

Maybe you came to the label with 50,000 fans but the record label isn’t thinking about them, they’re thinking about how many other fans buy records like the ones in the charts. As Aimee Mann said of her time with big labels: they say they really love what you’re doing but they’d like you to do something else. And of course, you pay the bills.

Recoupment

A record label might give you an advance (a small one these days) and pay expenses but everything they shell out simply adds to the recoupable amount they recover from sales. That studio and producer they chose? Recoupable. The artwork you didn’t really like? You’re paying for that too.

Accounting

Recoupment wouldn’t be quite such a scam if record label books didn’t come from the banana republic school of accounting. Every artist who has audited their accounts has come up with some “overlooked” money in their favour. Even The Beatles had to take EMI to court to get their label accounts paid in full.

Of course record labels aren’t evil in the same way as Stalin, Hitler or Satan himself but there are valid reasons to avoid them. It goes without saying—so I’d better just say it—not every record label is the same. XL hasn’t handled Adele the way UMG would. And there are artists like Justin Bieber who don’t (yet?) have the creative breadth of Amanda Palmer or Aimee Mann. For artists like Justin a major label deal really is the best thing.

A bunch of music biz links

 9 music biz stories from the past week…

The Recording: It's Been Losing Its Value Since 1962...

Big Four Music Labels Hire Students To Chase File-Sharers

Why are The Sex Pistols still the voice of anarchy in the UK?

A Record Label With A Midas Touch

When iTunes Becomes Obsolete

Map of the World’s Most Dominant Websites: Who Rules Asia?

Can Artists Get Rich In A Streaming Music Industry?

Recap: “The Future of Audio” Congressional Subcommittee Hearing

Did an Indie Band Inspire a Volkswagen Ad?

There is no new boss

Google sucks, but stay calm

A couple of months ago David Lowery posted Meet The New Boss, Worse Than The Old Boss? on The Trichordist. A lot of what he says is undoubtedly true but it doesn’t add up to a persuasive argument. As a general proposition it lacks focus (was Atlantic better than Spotify? quite possibly) and who is the “new boss” anyway? This is my take on the angles that don’t quite hang together.

Lowery’s premise is he was promised the Internet would liberate, empower and enrich him. I’m surprised anyone would think that—I didn’t hear that promise and it’s hardly likely to happen. And he is disappointed…

…the music business never transformed into the vibrant marketplace where small stakeholders could compete with multinational conglomerates on an even playing field.

Again, that Internet Santa Claus idea isn’t serious, surely? I know a lot of musicians, some signed to big labels and publishers, some independent, others semi-pro and many amateurs (like me). To my knowledge none of them expected that.

His next argument is the music business, once dominated by broadcasters and others,  is now dominated by tech conglomerates. He calls Apple, Amazon, Facebook and Google “the new boss” and he’s disturbed how dependent he is on them. If that’s true for him fair enough, but it’s not generally true. I don’t know a single artist whose craft or business is dependent on them, or who thinks that way.

We’re addressing the music business here. Apple and Amazon are big music retailers but nobody has to use them. Facebook and Google give access to two large audiences but frankly only YouTube is a unique music business asset. Otherwise I don’t use Google, or Facebook (although I have a zombie page there). Lowery’s concern seems to be more about their lobby against copyright but that doesn’t make anyone dependent on them. It’s just what big business does, especially in the USA and increasingly here too. The Google lobby has undermined WIPO but copyright is still enshrined in human rights law, their lobbying may well come to nothing.

Last, he argues disintermediation promised artists a bigger cut and that hasn’t happened. This is tied to the Santa Claus delusion: he liked big label advances but expected more when the labels were swept away. Not very likely. In fact the big labels are now half the size they were and the Internet has significantly increased competition in the independent sector. Disintermediation was never going to give everyone a windfall but it does mean some small acts can make a living where they previously couldn’t. If they don’t sell 100k singles or 500k albums they won’t be signed by a Major today. Would they be better off signed, with a multi-million advance? Stupid question.

So I don’t buy his general argument. The Internet was never going to be the promised land, that’s simply a straw man (his article is full of them). Under the old boss, for every 100 acts signed only 10 released a record and only one made money. Sure, the 99 still had their advances if they were lucky (today advances are rare) but the successful one had to pay the 99. And the new boss? Apple, Amazon, Facebook and Google aren’t anyone’s boss, least of all Facebook.

Along the way Lowery makes many points I agree with. I won’t list them—there are far too many. But wherever he leans his main argument there is invariably a crumbling factoid failing to support it.

Just say no

He talks down the power of the old labels: if you don’t want to do something you just say no—that is the most unbelievable piffle. Just read a book about Motown for God’s sake. But we needn’t to go back that far because yesterday Alison Moyet revealed her new record deal just collapsed, why? She refused to appear on a reality TV show. Just say no my arse.

Artists losing money

He quotes a lot of today’s acts losing money on records and losing money on the road but a lot of artists always lost a lot of money. That doesn’t mean it never happened under the old boss or that the Internet has failed. Is this what he means about the Internet enriching people? That artists should always make money?

The FMC are Google’s poodle

I have no idea where this one comes from. I’ve followed the FMC for years and they have done nothing but campaign tirelessly for musicians. Maybe Kristin Thomson (co-author of the seminal guide to running your own label, before the web happened) trod on Lowery’s toe once or something. Or perhaps he’s just phobic about anyone who suggests his beloved old Major labels might be left behind by technology.

Apple, Amazon and risk

He spends some time on the economic theory of risk and reward although it’s way off his path from the pipedream he was promised to the harsh reality of, well, reality. His analysis of income from online sales shows Apple and Amazon take a cut (and aggregators take a cut). They are distributors and retailers like Pinnacle and HMV, or Our Price, in old money. But he wants them to reward the artist because they don’t take enough risk. Well, distributors and retailers never did anything for the artist apart from a bit of advertising and of course getting money from customers. Pete Townsend came out with the same daft idea in the BBC 6Music lecture. Apple is not a record label, they are a shop.

Record labels and risk

But when he looks at the old boss he finds evidence for investment and risk. He puts a lot of expenses in the label column that labels never paid (recording, promotion, breakages, advertising, publicity). Everything the label used to shell out was recoupable, so they added it to the sum they could take direct from sales before the artist saw any royalties. For 9 out 10 artists that was a risk that didn’t pay off but the label got it all back from the one hit. When you control TV and radio I wouldn’t say that’s much of a risk. No record label audit has ever found the artist was overpaid but they have frequently found the opposite, to the tune of millions.

So to sum up, what he really liked about the old boss was the advances and how nice they were, and what he doesn’t like about the Internet is Apple, Amazon, Google and Facebook being the new boss. Well they aren’t.

There is a lot to dislike about Google: they facilitate copyright infringement; they commit copyright infringement and drag their feet over DMCAs; they lobby against copyright; they facilitate access to infringing material and earn money on advertising for it; their search results are cooked; etc; etc. But that doesn’t make them the new boss and it doesn’t make the old boss suddenly look attractive. Lowery seems to hate Google so much it triggered latent Stockholm Syndrome.

With a different sense of perspective I think it’s possible to repudiate both Google and the Majors. Who needs a boss anyway?