Business

What You Need to Succeed In Today’s Music Industry

Here is the keynote address from the 2007 Recording Academy Indie Impact Conference in New Orleans. Most of what was relevant then is also relevant today.

www.artistshousemusic.org

I am honored to be here. I’d like to start by saying thank you.


There is a lot of talk about the problems in the music industry. The record business model that has been place for the decades is failing. That is not anything you haven’t heard.

The problems may already be impacting you. At the conference today you will learn about solutions to help you not only survive, but thrive in the new digital landscape.


What are these problems that people are talking about? Let’s look at what’s happened over the last 5 years to music sales.

Statistics based on Nielsen SoundScan reports. You may be familiar with them as the company that provides information for the Billboard Top 200. In order to be counted, you would have to register with the system which all majors do.

In 2001, new releases accounted for 295 million copies sold, but last year only 220 million. That’s a 25% decrease. To give you some perspective, imagine you made $40,000 per year in 2001, but only made $30,000 last year.

Declining sales can be attributed to a number of factors; illegal file sharing and bootlegging are the most popular culprits in the press. But they are not the only factors:
· Many retail stores have closed, so there are fewer places to buy
· A big contributing factor is increasing competition for consumers’ entertainment dollars; like
o DVDs
o video games
o pay per view video.
o All of these products continue to improve the user experience, but music is still consumed from CDs the same now as it was 20 years ago. Compare video games from 1987 to the new version of Guitar Hero, Halo or Madden


Back to our comparison
· In 2001, there were 31,734 new albums released (25,279 by indies)
· Last year, there were 75,774 new albums released (64,544 by indies)
That is worth repeating:
It is an increase in almost 250%

For the consumer, that is great because there is more choice, if they can find what they want. But, for you, it’s tough because there is more competition.

The increase in releases can be attributed to 3 things, all technology based
1. Recording is cheap – Digital hard disk recording has significantly reduced the cost of creating an album. I talked with Phil Tan, a Grammy award winning engineer about it. He said, the quality of music you can create with Apple’s new version of Logic and Pro Tools LE approaches what can be done in a high end studio. So, for a couple of thousand dollars, which is the cost of working in one of these studios for a day, you own your own studio to record, mix and master your music.
2. Distribution is easy – after you record your music, you can sell it as a digital download directly from your website, social network page or on any digital music store like iTunes, Rhapsody, Napster. Now you can get your product in the hands of consumers with the same speed and efficiency as the biggest music companies in the world.
3. Marketing is inexpensive and highly targeted – The internet has leveled the playing field by giving artists a platform that didn’t exist before. Now you can directly reach fans without having to spend money on mass media outlets like radio, TV and consumer print.

Chris Andersen talks about this in detail in his book The Long Tail. If you haven’t read it, I suggest you do. Check out his web site at www.TheLongTail.com.


Going back to our 5 year comparison let’s look at the number of platinum albums sold:
· In 2001 61 of the new releases sold a million copies or more
· Last year only 33 platinum
So there were twice as many new releases, but half as many sold over a million copies.

Many indie musicians I talk with initially say, “I’m reasonable, I know I won’t sell a million copies, but I know I can sell at least 100,000.
· In 2001: 454 sold > 100K copies.
· Last year: 364 sold > 100K copies.

What may be more discouraging is the number of release that didn’t even sell 100 copies:
· In 2001: 12,077 sold <>
· Last year: 55,516 sold <>
The trend of more new releases with fewer sales per release is not changing. At the end of this year there will have been more new releases with fewer total sales than last year. I am not saying this to be discouraging, but to get you to manage your expectations.

So, yes the record business is in bad shape. That is, specifically, the record business. Anyone whose business model is contingent on making money from selling music CDs only is going to have problems. But, the music business overall is great.

Digital music sales doubled in 2006 and overall digital music sales are expected to reach 25% of earnings by 2010. People are using music in many new and exciting ways. In addition to sales, you should consider the value in your brand as an artist and how to make a career. As you can see by the trend in record sales, you should not base everything on selling music. From now on, let’s be sure to consider all of the areas where you can make money on your brand: · Merchandise · Touring · Licensing · Publishing · Mobile products · Endorsements · Advertising Since you are going to be looking at all of the potential revenue streams for exploiting your brand, the line between record label, manager, booking agent and publisher blur and all of the revenue derived from these various streams goes into one pot. All of the efforts feed off of each other. In order to do so, however, you need to retain all of your rights.


To be successful in the music business today, we must first redefine how we measure success. It should not be based on music sales alone and it will be different for each person in this room. It may be:
· headlining a tour of 10,000 seat venues and having millions of fans
· It could be making a living from recording and performing your music
· Or, maybe it is just making music to share with your friends. In any case, the tools now exist to help you achieve success


To get started, you should identify your goals.
· Who wants to be signed by a record label, major or good size indie?
· Who wants to remain completely independent?

Even if you want to get signed, the best way to do so, is to gain exposure, build a fan base and create enough hype for the labels to come calling you. Then you can evaluate whether or not you should sign. There are advantages and disadvantages of each to consider:

Pro of being signed:
· Label pays for everything and does most of the work (marketing, distribution, accounting, etc.)
· The label makes you famous which you can leverage to make money in other areas

Cons of being signed:
· Less control, likely no ownership of your music
· With new 360 deals, you are likely giving up revenue in most areas that used to be reserved for the artists such as merch, touring, endorsements, and publishing
· You operate on the label’s schedule
· Committed for years

Pros of being independent:
· You have complete control, artistic and otherwise
· Own your masters and publishing which frees you up to do all kinds of new deals
· You control your destiny
· Higher financial reward when you are successful

Cons of being independent
· But, there is a greater risk
· You must fund everything – recording, marketing, accounting everything
· You have to do the work of the label

The good news, as I’ve said is that the Do-it-yourself tools are available all found on the web. I think it was Bill Gates who said, “In the future, there will be two types of business, those on the web and those out of business.” The same applies to record labels.

One of the key problems is that many artists just want to be artists. But if you are going to be successful, whatever you consider success to be, you must get a minimum level of understanding of how the business works and do it. If you are not going to do it, you have to empower somebody who will. Tools exist, but someone has to use those tools, whether it’s you or your partner. Take a hammer. It is an effective tool to drive a nail into a plank of wood. But, it still takes a hand to grasp it and arm to swing it in order to drive the nail into the wood.

Don’t be the artist that says, “I don’t want to know about the business. I just want to create.” That’s a problem. That can keep you from achieving the success you want. Even if you are lucky enough to become successful, that’s how you get ripped off. I encourage you to become informed artists and use the knowledge you gain.


New tools on the internet allow you to accomplish 2 major things:
1. Easily extend your reach – you can better market and build your brand, develop your community, have direct contact with fans, disseminate your message
2. generate revenue from the exploitation of your brand

Here are some practical new media strategies that you can implement beginning today:
· Build your community – collect email addresses and mobile numbers
· Manage your email list effectively – keep it updated, but respect your fans. Don’t share the list with some discount online pharmaceutical company
· Leverage your fans, empower and encourage them to promote for you (widgets). Make them feel like they are a part of you. Don’t shun the rabid fan, put them to work!
· Give music away (maybe not albums, but at least to podcasters, internet radio DJs and music bloggers)
· Make regular, constant updates to your web site, social networking pages to keep people engaged. Write a blog. Email fans about what you are doing
· Tie all of your properties together. Have links to all of the pages, use social book marks like Delicious and Digg, RSS feeds. Bring together your web site, blog, social networking pages, message boards, calendar, video channel
· Broadcast yourself with internet video, not just YouTube. Make videos. Look at the success OK Go had from the inexpensive video they made and posted
· Use Social Networks, but all friends are not valuable. You don’t need the girls who are trying to get you to their porn site

Here are some general business practices
· Be professional
· Show up on time
· Treat people well
· Know your market
· Make people feel like they are getting a good deal
· Find and work with like minded people
· Become partners with people, not clients (web developers, booking agents), barter. Maybe your drummer is your web master, bassist manages the MySpace page and lead singer is the blogger.
· Network with other artists. Find out about what’s working for them.
· Attend conferences
· At conferences talk with panelists. Be respectful, but most people are very approachable, otherwise they likely wouldn’t be on panels
· Read. A lot of information is available online either very cheap or free if you look for it.


Examples
· Technobrega in Brazil. Artists create music and go straight to the bootleggers. They never intend to sell it. They make their money from performing
· Christian artist who had 500 people show up for album release party and to buy his new release. He made like $12,000 in one night, but makes enough money selling CDs and touring to support his family.
· Country band who worked out a deal with a truck company to sponsor their tour. Made official song for racing vehicles. Because they had a great email list. They got in front of the right person who made it happen

You have to develop a strategy that you are comfortable with. You will make mistakes, but learn from them. Do not be afraid to experiment.


In addition to some strategies, I want you to give you a list of some companies that can facilitate your efforts in some different areas. It’s about 40, so I hope you’ve got your pens ready!
· Radio – Airplay direct, Digiwaxx digital record pool
· Digital performance royalties, you are entitled to receive payment for performances on satellite and internet radio – SoundExchange
· Digital Music Sales, aggregators that will get your product on all download stores like iTunesCD Baby, The Orchard, INGrooves
o Make sure you don’t have spelling errors and tag, but look at terms
· Online video
o Non-revenue models – YouTube, Google Video, Yahoo Video, Daily Motion
o Revenue sharing
· Publicity – Sonic bids for EPK, CyberPR who specializes in internet music promotion campaigns
· Fan club/email list management – Fanbridge, Constant Contact
· Widgets (third party item that can be embedded in a web site, like a social network page to add content to the site which is updated by the widget creator) – Reverb Nation
· Social Networks –
o Existing – MySpace, Facebook
o Create your own – Ning, Kick Apps
· Licensing – pump audio, rumblefish
· Touring/Performances – Eventful, Online gigs
· Trade Organizations – Recording Academy who put on this event, A2IM (American Association of Independent Music), Future of Music Coalition
· P2P, leverage for marketing and revenue opportunities – Intent Media Works
· Merchandise – Zazzle and Café Press
· Mobile – Groupie Tunes (community building across the web and mobile),
· Multiple functions – Musicane, Nimbit, Groupie Tunes
Conclusion
Don’t worry if you missed a couple, just send me an email and I will send you a complete list of the companies I mentioned along with my notes, which I’m sure you will want to read over and over again. Go to my website, www.MusicBusinessToolbox.com and click on contact us. Send me an email with Grammy in the subject line and I will send you notes from today. While you are there take a look at the toolbox which is a set of tools and information for indie musicians to manage their business and releases. You can download the free pieces or buy the full version if you’d like. Again, the website is www.MusicBusinessToolbox.com.


I’d like to leave you with this: Make new business contacts today. Get as much information as you can. But education is not motivation. You have to get out there and do it. You should leave here with ideas and strategies that you put to work for yourself.

It is not just indie musicians and unknown bands who are taking the indie route. Major acts like Prince, Radiohead, Clap Your Hands Say Yeah, Madonna, Bare Naked Ladies are choosing to remain independent, or do interesting new deals with companies other than major record labels. They are using the tools available to them to:
· cut out the middle man
· directly reach their fans
· and keep more of the money for them! And, so can you!


I advise many artists and labels on business practices and on developing their new media strategies. One of them is Kanye West, who is arguably the biggest artist in the world. What’s interesting is that many of the same tools that we use with him, you can use: write a blog, deploy some widgets, create profiles on social networking sites.

There are more opportunities now than there have ever been for independent artists.

Thank you.