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New Music Business Model
By Marcus Treufont
StreetLevel.Biz Staff Writer

It used to cost a lot of money to record and promote new music. Artists struggled like hell to find a patron to support them (i.e. a label).  Everything was controlled and only a few artists became stars.  That was the major label system.  Most artists learned quickly when the recording advance money ran out that they needed other sources of income like performing, songwriting and the sales of merchandise to survive.

The new artist model says anybody can make and distribute a recording. It is much less expensive to make a record today and recorded music is only going to become less valuable to everyone over time.  The real hard part is promotion.  The true nemesis of the artist is obscurity. There is a glut of music out there and the situation is only going to get worse.   This is the reality of the future of music, abundance and saturation.

Personal connection with a fan base is the hallmark of the masterful entertainer. Truly great artists engage their audience while playing shows by working the room.  Today artists can establish meaningful virtual relationships directly with their audience by building an online fan base and answering online posts and comments and taking the time to interact with their fans. The reach of a live show can be magnified with the orbit and power of a networked online community.  To be sure, it is a lot of work to monitor the boards and keep up with the postings, but it is a lot easier than touring 250 nights a year, and the payoff can be massive.

This is just like employing street teams to build buzz and selling CDs out of the back of the tour van, both of which are proven tactics to build audience and create direct relationships between artists and fans.  Only now the street teams are virtual and the van is open for business in every city across the globe all the time. The name of the game for bands is to know who your audience is and what they like and where they are coming from.  You cater to that and you might just have a chance at a career in the new music economy.

Artists, songwriters and producers of the future need to find ways to break through the noise and stand out without significant recording revenue.  That model is no longer going to work.  Artists of the future are going to need musician businesses built around them that attract audience without relying on recordings to finance the machine.  We have already seen how this is possible today, and it is going to become more commonplace over time.

Today lots of small companies are planting the seeds of the future music industry by focusing on artist promotion and creating do-it-yourself tools for bands and their managers.  Bandwagon is a clever UK company connecting indie artists and labels with fans through a mix of music and video, ring tones, recommendations and online social networks.  This platform is an example of a new way of thinking about the relationships between artists and fans, direct relationships. Another example is Liverpool’s Safesell, a company that helps bands sell digital music directly from their web sites.   With the Safesell software, bands can deliver their music online to their fans and keep 70% of the money charged for downloads.  This is in contrast to the iTunes model where bands get to keep 6-8% of the download fee.

The recording has lost much of its perceived value and musicians are going to have to struggle with that new reality. Sales of records and CDs will never again be the cash cow the major labels got fat and happy on.  But recorded music can play a major part in the promotional strategy of new musician businesses and even make some money. 

The future of music distribution is going to be mobile and oriented toward mobile devices.  The culture of payment that exists in the mobile space will support transactional and subscription models for music that will capture people’s attention.  It is going to become more about having access to music than actually owning it.

Sales of CDs are going to fall off a cliff in the next few years as people find it easier and easier to get music digitally.  The value of recorded music is plummeting and not even Apple can make money off of it.  About iTunes, Steve Jobs says "Most of the money goes to the music companies, we would like to break even/make a little bit of money but it's not a money maker." 

The packaging and sales of recorded music is being ripped apart with full albums and CDs being cannibalized by the new digital single track downloads.  New bands are going to have to try new formats for recorded music to extract any real recording related profits in the future.

The broadband Internet, 3G mobile phones and MP3 players have fundamentally shifted the balance of power in the music industry forever, especially for the young.  Owning CDs is so last century. 

The big money for artists is going to come from live performance, sales of merchandise, DVDs, personal appearances, publishing and alternative revenue streams – all promoted and supported by the free and nearly free distribution of recorded music. Live performances and t-shirts cannot be digitized at least at the moment, and the experience of being at a live event is going to have to get more appealing, for many bands to survive in the coming years.

In reality, this is the way is has been for most artists for the past 50 years.  Only now the tide has turned, and the shifting sands of the music business will form around an entirely new promotional model that puts we, the music fans, at the very center of the circle.   It’s going to be entertaining to be sure.
StreetLevel.Biz Writers Staff
Perspectives
Allen Thompson

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HIP HOP

MYTH vs. REALITY
By Marcus Treufont


The successes of Nas and LL Cool J are not very common within the hip hop game. Videos tend to flood our minds with visions of tinted Benzes, Versace, Hilfiger and sparkling jewelry. Stacks of money are thrown all over marble top tables like plates of red beans and rice (supporting ill-usions).

To be frank, most artists don't own any of the clothes, cars or houses that appear in their videos. If you are Snoop or Dre, of course you do, but the majority of hip hoppers on TV are just giving us what we want to see--the glamour of hip hop. I'm always cautious when an MC states: "I wanna get signed to a phat major label." Although I can't blame the MC, this statement has been the root of evil over and over again, from the downfall of MC Hammer to the not-sosuccessful debut of The Fugees. Major labels have always been puppeteers on the stage at musical stardom--snipping the strings of vibrant rap acts only to introduce new trendier puppets. At one time everyone wanted a major label deal. However it takes more than a record deal to make money in the rap game--especially the rap game. The popularity of sampling and the non-popularity of hip hop concerts has dramatically decreased the amount of income rappers earn. A $500,000 advance may seem like a lot to your 2-man rap group, but by the time your album drops, you'll be down to nothing and unless you sell mad records or write original material (music included), you can expect nothing more.

MYTH #1
MAJOR LABELS DON’T NEED RAP ARTISTS

First, let's dispel this myth. Most major labels do not care about MC NoName. I've worked underneath major label radio promotion guys who couldn't tell you a thing about the urban releases they were supposed to be promoting. This might not be common practice in all major labels, but when most of the music business rotates toward alternative, pop, and country you have to realize which genres come up short. Frequently rap is one of the ignored genres. If you need proof, check out Billboard. Of the 20 albums certified multi-platinum in September 1996, only 4 were rap albums. Why is this, you wonder? Here's why: The big money labels are colossal because of artists who consistently sell albums. Pop, country and rock represent genres that will always be embraced during their entire lifetime simply because millions of albums means millions of dollars. 99% of the industry's rap artists are not this fortunate. Violence and the nonexistent East vs. West war have scarred the rap business. No one at the higher levels wants to deal with it--ask anyone on the top floor at Warner Bros. If you are a rhymer who is cutting edge, you may try finding an indie label or releasing your own material before approaching a major label. Beware though. Although indies may be responsible for the survival of rap, acquisitions and buy outs by the majors are resulting in "neo major" labels. Anyone can list a number of big money labels but only a handful of multi-platinum rap acts exists. That ought to tell you something. If you've got a pulse and half a brain, you know that most labels can weasel the rhyme out at any artist--rap or otherwise.

MYTH #2
AN ADVANCE MEANS YOU LIVE PHAT LIKE SNOOP OR DRE

So what's the deal behind the deal? Try reading through a 25 page recording agreement. From the setting of the term and options, to the calculated royalty rate. record labels generally get away with robbery. What does it take to get paid? Not an advance, that's for sure. Take the tale of 2Stupid, a successful hip hop duo. They hire a manager and an elite attorney to negotiate and secure a record deal. (Hint: If you think you don't need an attorney you're wrong. If you think you can get close to staying in major label negotiations without a manager or attorney, you're even more wrong. Due to the precedence set by countless lawsuits, it is essential to have these players when approaching a major label.) So 2Stupid does just that and within six months the deal is set. This is what 2Stupid gets: $500,000 in advance money and $350.000 to cover recording costs. Of the $350,000 for recording, $100,000 is to secure the production skill of three phenomenal rap producers for this first project. But wait, the drama gets worse! 2Stupid wants to "keep it real" and refuses to record clean radio edits. The label acknowledges this refusal by eliminating funds for indie promotions, marketing and publicity. The label's argument is this: Profanity and excessive lyrical bloodshed mean no airplay so why waste money on independent promotions? In other words, all promoting must be done by in-house staff (BIG MISTAKE!) So let's assess the bill. $850,000. 2Stupid doesn't mind because five hundred g's means Jeeps and Karl Kani... or does it? If you know music industry practices, you know it's not that simple.