Berklee College of Music
Music Business Journal
Volume 6, Issue 2
5th Anniversary Mechanical Dues & RightsFlow
By Trish Hosein
November 2010
Mission Statement
The Music Business Journal, published
at the Berklee College of Music, is a student publication that serves as a forum for
intellectual discussion and research into the
various aspects of the music business. The
goal is to inform and educate aspiring music
professionals, connect them with the industry, and raise the academic level and interest
inside and outside the Berklee Community.
Inside This Issue
The digital age of music has introduced new legal forms of music consumption
that do not correlate clearly with the previous
licensing laws. These old laws were created
at a time when the recorded music industry
revolved around physical sales and traditional
radio play. They do not address, however, services like Rhapsody, where streaming audio is
not public performance, nor is it a transaction
of ownership. In some cases, these gray areas have allowed royalties to slip through the
cracks, never reaching the hands of the rightful
copyright owner.
Music Collections Redefined
Over the last five years, the Copyright
Royalty Board has attempted to set rates and
regulations to clarify the dispute over how new
media royalties and licensing should be handled. In 2006, after a lengthy debate between
webcasters and copyright owners, the board
ruled that non-interactive webcasts would pay
royalties on a per listener basis, while ringtones
would have a hefty statutory rate of 24 cents.
A decision on royalty compensation regarding
interactive streaming was issued in 2008, which
paid royalties on a per-play percentage of a
blanket royalty rate. These steps were integral
in the birth of the independent, non-profit performance rights organization, SoundExchange.
The organization is responsible for collecting
digital royalties from non-interactive streaming,
internet radio, cable TV and music channels and
distributing these royalties to artists and master
recording owners. In addition, the digital age
has created changes in the ways that artists go
about obtaining mechanical licenses. Organiza-
tions like the Harry Fox Agency have begun
to enter the online forum with services like
Songfile, which radically eases the process of
obtaining mechanical licenses. With Songfile, an artist can shop through HFA’s entire
database of publishers, select a song, and obtain the license in minutes from the comfort
of their own home.
Enter RightsFlow
On the other hand, since Songfile
is a Harry Fox service, its possible mechanical licenses are limited to HFA catalogues.
Fortunately, a company called RightsFlow is
rapidly gaining momentum, offering a similar
service that boasts a much larger catalogue.
Founded in October of 2007 by intellectual
property and copyright specialist Patrick Sullivan and partner Ben Cockerham, the company acts as a middleman between those seeking licenses and those that do the licensing.
In addition to mechanical licenses
for physical and digital distribution, RightsFlow also does the licensing for ringtones,
online subscription services, and limited
download services. The company clears the
licenses and assures that the royalties accrued
from copyright use are accurately accounted
for and paid to the proper recipients. The
RightsFlow service is segmented into four
separate branches: Limelight, Limelight Professional, RightsFlow Enterprise, and RightsFlow Music Service. Each one provides the
same basic licensing service, but tailors the
approach to fit the needs of its varying clientele.
(Continued on Page 3)
Archiving Sound
Page 8
The Promise of India
Page 12
Microfunding Music
Page 6
Carbon Footprints
Page 10
An Affordable Pro Tools
Page 14
Volume 6, Issue 2
Music Business Journal
Editor’s Note
With vibrant colors of the fall season enhancing the beauty of the Boston skyline, this latest release of the Music Business Journal arrives just in time to beat the winter cold. A new season is here,
along with a fresh batch of hot-off-the press industry news.
Technology continues to reshape the changing landscape of the business. Trish Hosein kicks
things off with an informative piece on RightsFlow and its innovative approach to online mechanical
licensing. Luiz Silva also shares a well-researched look at US Copyright Law as it relates to digital
music. The diminished use of physical distribution mediums is causing lawmakers to reassess laws
originally written to protect tangible product. Recording technology also continues to bud with the
recent release of the highly anticipated, Pro Tools Native. Hunt Hearin provides us with a timely
report on the new software and its significance to the home studio market.
As technology moves forward, the window of possibility for independent labels and artists is
steadily opening. Dean Miller reports on the growing number of indie labels that are distributing their
product on formats thought to be extinct; cassettes, vinyl, etc. Nick Susi has also provided us with a
thoughtful analysis of new indie label, Polyphonic. No advances and no copyright ownership- this
label is striving to reinvent the wheel.
Artist Branding is quickly becoming an essential factor to surviving in the digital world. Kerry
Fee discusses the ways in which artists are beginning to harness this concept’s power. In addition,
Mike King –marketing director at the Berklee College of Music- has provided a very revealing piece
about the fan-funding site, Kickstarter.com. Studying the details of successful funding campaigns,
King has compiled a set of information that is guaranteed to change the way you think about fanfunding.
Reporting abroad, Sahil Mehrotra offers a detailed piece on the developing music industry in India and the ways in which international factors aid its expansion. Mia Verdoorn also shares a detailed
account of her summer internship at Sony South Africa during the FIFA World Cup.
As environmental awareness spreads, an increasing number of companies and organizations are
“going green.” This month, Minden Jones brings a telling article on the numerous advantages of a
green music industry. Lastly, I’ve provided a detailed report on the court case that will decide the fate
of the EMI record label. Equity investor, Terra Firma challenges its lender, Citibank, in federal court
on alleged claims of fraud.
Table of Contents
Business Articles
RightsFlow & Limelight........................1
Old Formats Die Hard...........................4
Polyphonic.............................................5
Finding Funding....................................6
EMI........................................................9
Green Music.........................................10
Sony & FIFA........................................11
India’s Evolving Music Market...........12
Branding & Blogs................................13
Pro Tools Goes Native.........................14
Law Section
Saving Sounds.......................................8
MBJ Editorial
Mission Statement...................................1
Editor’s Note...........................................2
Upcoming Topics...................................16
Sponsorship
Berklee Media....................................... 15
It gives me great pleasure to introduce this latest issue of the Music Business Journal. My hope
is that you will find it both timely and informative. Be sure to check us out on thembj.org and our
Facebook group page.
Thanks so much for reading,
Evan Kramer
Management
Editor-in-Chief............................................................................................................................................................... ...Evan Kramer
Content Editor.........................................................................................................................................................................Nick Susi
Webmaster..................................................................................................................................................................Itay Shahar Rahat
Faculty Advisor and Finance.....................................................................................................................................Dr. Peter Alhadeff
Layout Editor..................................................................................................................................................................Lau Meng Wai
Marketing Manager.......................................................................................................................................................... Minden Jones
Contributors
Editor’s Note.....................................................................................................................................................................Evan Kramer
Business Articles...................................................................................................Kerry Fee, Hunt Hearin, Minden Jones, Mike King
Business Articles (cont)............................................................Evan Kramer, Sahil Mehrotra, Dean Miller, Nick Susi, Mia Verdoorn
Law Section...............................................................................................................................................................Luiz Augusto Buff
Staff.............................................................................................................Witt Godden, Ben Hong, Trish Hosein, Gabriella Howard
Staff (cont)........................................................................................Dean Millser, Silvina Moreno, Dahyun Ed Jeong, Mia Verdoorn
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November 2010
Volume 6, Issue 2
Music Business Journal
Business Articles
RightsFlow & Limelight (cont.)
RightsFlow’s Limelight
Limelight is currently RightsFlow’s
fastest growing brand, providing independent musicians with unlimited accessibility
to affordable mechanical licenses on a userfriendly platform. The service is available
to anyone who can cough up the meager $15
service fee plus the statutory reproduction
costs. It also provides complete assurance
that 100% of the behind-the-scenes paper
work regarding legalities and royalties will
be handled.
In years past, independent artists
had to endure a far less accommodating process in order to obtain a mechanical license.
Until Limelight, an artist’s only option started
with acquiring a compulsory mechanical license directly through the US Copyright
Office. However, the regulations and requirements involved with obtaining (not to
mention maintaining) this license were excruciatingly time consuming and, at times, rather
expensive. Monthly audits by an accountant
and royalty due dates on or before the 20th
of every month were required or the license
would be revoked. The only other option was
to negotiate a license with the publisher directly, yet this was a complex legal process
that many small artists would not have been
privy to.
The barricades that prevented an
unknown artist from receiving the proper license not only discouraged them from further
pursuing the issue, but in many cases also
meant that covers were recorded and distributed without mechanical licenses at all.
More often than not, this was not a question
of whether or not an artist wanted to pay; it
came as a result of not knowing how.
With Limelight, the process of
clearing a license through the online website
-songclearance.com- is simple. The service
takes the information on the song intended for
use, such as the title, songwriter and publisher, as well as information on how the client
intends to use it. Then, the number of intended copies (or digital downloads/ringtones) as
well as the length of the song is used to calculate the statutory rate applicable and total the
sum of royalties owed to the publisher. Once
the projected royalties are computed, a $15
dollar fee is tacked on for service. For frequent users, the fee is incrementally reduced
with each purchase.
November 2010
As of right now, Limelight claims to
be able to clear licenses for any previously
recorded song. RightsFlow works with the
Harry Fox Agency and an assortment of
smaller independent agencies and publishers
to obtain mechanical licenses for the majority of songs requested. With some of these
companies, a blanket license is negotiated for
Limelight users, while others have agreed to
a rolling schedule license, where additional
compositions can be added to the license
with publisher’s approval. If the publisher
cannot be reached, compulsory mechanical
licensing is utilized and RightsFlow takes on
the arduous accounting and legal tasks that
go along with that.
It is important to note that while
copyright law only requires mechanical
royalties to be paid once a physical album
is printed (or a digital/ringtone download is
purchased), Limelight demands all royalties
to be paid upfront. What is interesting about
this upfront payment process is that it is
completely up to the user to honestly report
the number of intended copies, as Limelight
has no real way of tracking how many copies are actually printed and sold. Traditionally, when obtaining a mechanical license,
whether negotiated or compulsory, detailed
royalty statements had to be presented to the
publisher. With Limelight, it is assumed on
good faith that the artist will notify Limelight
if they wish to sell any more copies of the
covered song than originally expected.
This may seem to be a rather open
ended policy, leaving many concerned that
adequate mechanical royalties will not get
paid to the writer. It is reasonable to conclude, however, that the average Limelight
customer utilizes the service because they
actually want to pay the right mechanical
royalties to the respective artist. It is also
worth noting that services like Limelight are
actually bringing in royalties on copyright
use that would have otherwise been pirated
by making the process so much more accessible. As recording technology becomes
less expensive and more available, an unprecedented number of independent artists
are recording and distributing music – thus,
expanding the market for services like Limelight.
More Limelight Services
RightsFlow aims to ease the mechanical licensing process on all levels of
the music industry. Limelight Professional,
which caters to independent record labels,
and RightsFlow Enterprise, intended for major labels and distributer’s, both operate on
the same basic concept as Limelight, but on a
larger scale. Contrary to Limelight however,
Professional and Enterprise both provide
accurate and detailed royalty reports and
earnings statements for their clients to accurately track the use of licensed copyrights.
RightsFlow’s fourth branch, RightsFlow
Music Service, delves even further into data
tracking by supplying licensing reports for
major online music services like Rhapsody.
This program determines to whom, and how
much the employing company owes royalties
whilst supplying monthly, quarterly and annual royalty statements. So far, after only 5
years in business, RightsFlow has accumulated a sizable list of well-known partners
including companies like EMI, CdBaby and
Muzak.
Market Potential and Risks
With the largest catalogue of mechanical licenses available, and a well-tailored service for users of all kinds, RightsFlow has certainly created a very lucrative
market for itself. Having handled over 1 million licensing transactions in its short history,
the company is well on its way to establishing itself as an industry standard. Yet, when
one is in the business of dealing with such
complex legalities, there is enormous opportunity for problems to arise. For instance,
an issue could stem from copyright law’s requirement that a song covered by a compulsory mechanical license cannot change the
“fundamental character of the work”. With a
bulk licensing system, there is no way to ensure a writer that their music’s “fundamental
character” will remain in tact, perhaps leading a string convoluted legal complications.
These are just a few of the countless potential “honorary slipups” that could arise in a
licensee’s copy report. Nonetheless, RightsFlow’s innovations in mechanical licensing
are still moving the industry in a very positive forward direction.
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Volume 6, Issue 2
Music Business Journal
Business Articles
Indie Labels Tap Old Formats
By Dean Miller
An increasing number of small independent record labels are surviving based
on a new alternative Do-It-Yourself culture,
which has a genuine love for old analog formats. Traditionally, these labels are underdogs, thriving in areas that the over-manned
and over-funded major labels ignore. They
tend to specialize in locally played musical genres, even though self-produced
bedroom-pop seems to be the flavor of
choice.
analog format. They also feel as though they
are doing their part in supporting the artist.
A Special Listening Experience
Given their attachment to the product they trade, sellers of this niche market
view piracy with mixed emotions. For some,
The Trend
In fact, for many young listeners, vintage synths, fuzzy guitars, and
large amounts of reverb are becoming
synonymous with the word ‘indie’. In
this context, names like Bridgetown Records, Bathetic Records, and Lefse Records mean a lot.
Bridgetown Records, for instance, was created in 2008. This small
DIY label out of La Puenta, California
has since had forty releases. Surprisingly, most of these were done on High
Bias Type II chrome cassette tapes. This
vintage sound and format is exactly
what attracts fans of bands like Cloud
Nothings. Their Turning On album sold
out three editions since its December
2009 release.
By April 2010, Cloud Nothings’ album had inspired a beautiful
blue cloud-themed vinyl re-press from
another such indie, Spearkertree Records. Each song’s twisting guitar lines
and undeniably catchy melodies are washed
in reverb but are not something that DIY fans
want to hear on hi-fi studio monitors; rather,
they would prefer tape and vinyl played on
cheap old speakers from a past era.
Amy Spencer’s book, DIY: The
Rise of Lo-Fi Culture, points out that “the
DIY movement is about using anything you
can get your hands on to shape your own cultural entity, i.e. your own version of whatever
you think is missing in mainstream culture.
You can produce your own zine, record an
album, or publish your own book. The enduring appeal of this movement is that anyone
can be an artist or creator. The point is to get
involved.” Customers, it seems, feel connected with that particular culture when buying in
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leg; it’s just that Jon and I do have to put
a lot of work into each and every release,
so it’s nice to see a reward…Once a release is sold out, though, we usually have
no problem with supplying the mp3s for
the people that missed out or just want it
on their iPod. [Sometimes], we’ve even
given away entire releases in digital format on which we had our won physical stocks. Why? Because, the most
important thing, ultimately, is that the
music gets heard. That’s why we’re
doing this in the first place.”
Greenspon of Bridgetown Records maintains that customers that
download do not experience the full
effect of the music. “The problem
with downloads is [that] in the long
run, most of the people that like the
music don’t end up picking up a
physical copy--and bedroom labels
are very dependent on people that
support physical releases in order to
continue putting them out.”
Baby Steps
Revenues for these labels are
still very small. In October, analog
sales of cassettes at Bathetic totaled
about $1,000, for a net profit of $400.
This earning was reinvested, and
the company seems to do more than
break even; its owners believe that
profits will continue to be healthy.
like Matt Halverson of Lefse Records, a fourperson business that releases music on vinyl
and CD (while managing bands and doing
PR for other labels), piracy still gets people
to a show, and the promotion can be good for
sales.
However, Cody Watson of Bathetic
Records’ Cody disagrees:
“[When] people feel that they can
get the mp3 version on the net, there is no
reason to buy the cassette or vinyl. It is understandable to a point, especially when you’re
doing runs of only 100 copies of a tape. At the
same time, we put out physical releases for a
reason. There’s something special about holding that little chunk of plastic with that insert.
We’re not [completely] against the mp3 boot-
It is important to note as well
that retail outlets are aware of a
growing interest in vinyl and cassettes.
Urban Outfitters, for example, cater to
a demographic of young adults aged 18
to 30 who follow this DIY culture, and
now sell vinyl music alongside clothing
and other merchandise. The growing appeal of lo-fi rock bands has helped. Grizzly Bear’s 2009 album Veckatimest sold
33,000 units in 2009, and apparently
helped make vinyl DIY releases popular.
Labels like, Bridgetown, Bathetic, and Lefse are in the meantime
keeping these analog formats alive. In so
doing, they are tapping a market that is
becoming far less standardized, not just
by genre but by recording medium.
November 2010
Volume 6, Issue 2
Music Business Journal
Business Articles
Polyphonic : An Artist-Friendly Label in the Making
By Nick Susi
It would seem that artists, both established and aspiring, are searching for more
flexibility and freedom in their careers. There
is a surging demand for alternative options to
traditional label deals, and therefore, industry
executives are being forced to reexamine and
adapt their business models to meet this demand. The question is, are these alternative
business models sustainable?
The major labels – Sony, EMI,
Warner, and Universal – have made a clear
attempt at adapting to the ever-changing industry through the use of 360 deals. Controlling every facet of an artist’s revenue streams,
however, does not seem to fit this demand for
flexibility and freedom. Granted, 360 deals
do appeal to some artists who are entirely capable of becoming extremely wealthy writing
hit singles under this type of deal. Yet is also
fair to say that the business model for 360
deals does not attract all artists.
Thus, bold and new business models have begun to surface that show significant promise. A good example here is the
alternative label Polyphonic, whose pedigree
is impeccable. The company was founded by
Brian Message, the manager of Radiohead
and one of the minds behind the name-yourown-price release of the band’s latest album,
“In Rainbows” (from that album release, Radiohead kept all of its profits and utilized the
Internet for cheap distribution and instant access to fans). But behind Polyphonic there
is also Adam Driscoll, the chief executive of
the British media company MAMA group,
and Terry McBride, the creator of the Canadian management firm, Nettwerk Music, who
manages Sarah McLaughlin and the pop/rock
group Barenaked Ladies (the latter run their
own label in order to keep a greater cut of
their revenues).
The Promise
Polyphonic will be based in London
with offices in New York and Los Angeles.
Unlike a traditional record label, Polyphonic
does not grant a new artist an advance. Instead, they treat an unsigned artist like a
small business start-up, investing $300,000
in each new signee. In turn, Polyphonic splits
the artist’s revenue, from touring, recordings,
merchandise, and other, 50/50. As the artist’s
success grows, her percentage of the revenue
November 2010
increases. The immediate opportunity to earn
money is appealing to artists, since under a
traditional label deal, an artist is instantly indebted to the label through the requirement of
recouping their advance.
Polyphonic uses its connections to
help artists build a team for publicity, merchandise, and touring by contracting from
outside sources. Taking a transparent approach, Polyphonic encourages direct-to-fan
relationships without a visible buffer of a
go-between label. Finally, Polyphonic leaves
all recording and publishing copyrights, and
master recording ownership in the hands of
the artist. This is an incredible new opportunity for artists, since before Polyphonic labels
controlled the rights to the master recordings,
leaving artists with only a fraction of earned
royalties. With Polyphonic, artists are given
total control over every aspect of their creative compositions and are allowed to share a
more reasonable percentage of the profits.
This new service certainly seems to
fit artists’ demand for flexibility and freedom.
The abolishment of recouping advances and
the right to full royalties are the most enticing
factors by far. Even from the fan’s perspective, this may be a preferred transaction model. The money paid for albums makes its way
to the artist in a less roundabout way. “We are
all witnessing major labels starting to shed
artists that are hitting only 80,000 or 100,000
unit sales,” says Driscoll. “Do a quick calculation on those sales, with an artist who can
tour in multiple cities, and that is a good business. You can take that as a foundation and
build on it.”
The Questions
Others, however, are much more
skeptical. Polyphonic has high promises for
the artist, but does create a sustainable business model? If Polyphonic does not require
its initial investment in the artist to be repaid,
where does that leave the business if the artist
fails? If Polyphonic grants full royalty ownership to the artist, how will Polyphonic continue to make money once that artist severs
its connection with them? Even in the major
labels’ current financial state, they still continue to make money on the their exclusive
recording and publishing catalogues, which
Polyphonic does not have.
Despite numerous attempts,
Polyphonic has been unsuccessful in obtaining venture capital investments. Yet
the company remains undeterred, still
working to prove to investors that their
new model has potential. But since the
company’s creation in the summer of
2009, Polyphonic has received little publicity and there are no artists signed yet to
their roster.
With able management backing
the company, and a business model that
meets the needs of artists, Polyphonic
is still not getting the support it needs at
a time when its major rivals are failing.
From April 2010 to August 2010, Warner’s stocks fell nearly 40%, from $8 to
$4.64 per share. In August 2010, EMI’s
annual financial report stated a 512 million pound loss. Even now, EMI is tangled in a massive legal battle between
Terra Firma and Citibank, which is certain to be draining the label’s coffers.
Polyphonic could still prove to
be an answer to the industry’s problems.
If so, it would keep company with other
like-minded businesses that allow artists
more freedom and flexibility in the marketing, distribution, and financing of music. Topspin, TuneCore, and Artist Share
are in that category.
BIBLIOGRAPHY
“Polyphonic: Music Label That Promises Fairness to Artists.”
P2p File-sharing &
Torrent News, Top P2p Sites, Facts, Guides and Reviews. Web.
26 Oct. 2010. <http://www.p2pon.com/2009/07/12/polyphonicmusic-label-that-promises-fairness-to-artists/>.
“Resnikoff’s Parting Shot: Less Ownership, Less Long-Term
Value... - Digital Music
News.” Home - Digital Music News. Web. 25 Oct. 2010. <http://
www.digitalmusicnews.com/stories/072609polyphonic>.
Stone, Brad. “Artists Find Backers as Labels Wane.” The New
York Times - Internet.
Web. 26 Oct. 2010. <http://www.nytimes.com/2009/07/22/technology/internet/22music.html>.
“Terra Firma and Citi to Begin EMI Talks - NYTimes.com.”
Mergers, Acquisitions,
Venture Capital, Hedge Funds - DealBook Blog - NYTimes.
com. Web. 26 Oct. 2010. <http://dealbook.blogs.nytimes.
com/2010/08/19/terra-firma-and-citi-to-begin-emi-settlementtalks/>.
www.thembj.org
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Volume 6, Issue 2 Music Business Journal
Business Articles
Using Kickstarter To Raise Money
By Mike King
(Edited by Evan Kramer; see http://mikeking.berkleemusicblogs.com)
Lately, it seems that phrases like
“direct-to-fan” and “fan funding” have been
echoing off the walls. In the last few years,
artists like Trent Reznor and Radiohead have
pioneered a new kind of marketing using the
Internet’s vast power of communication to
make more personal connections with their
fans. In many cases, this has yielded some
overwhelmingly positive results --Reznor
scored an in-pocket $750,000 in just a few
days selling a limited-edition box set to fans
in 2008.
However, at this point, most independent artists would complain that the
luxury of these types of revenues is only
available to those that have a pre-established
fan base. On the other hand, authors Craig
Mod and Ashley Rawlings, would beg to differ. In funding their latest book, Art Space
Tokyo, the duo meticulously researched
kickstarter.com’s greatest success stories and
formulated a plan that generated an impressive $24,000 in just 30 days. Their findings
provide some very enlightening information
that could apply to creators in all mediums.
Musicians and Variable Pricing
Kickstarter is the definition of
fan funding. Independent musicians, writers, entrepreneurs, etc. can use the service
to present their idea to a world wide web of
potential investors. The site allows anyone
who feels so inclined to contribute money to
a given project by selecting one of the many
price tiers available --ranging from $1 up
into the thousands. Contributors’ pledges
are only used when the project has reached
its funding goal, thus reassuring investors
that their money is constructively going to a
go-project. These various price tiers are very
important (especially for musicians) because
the amount a fan contributes is directly related to their level of commitment to the artist, and the goods or services being offered in
return.
In selecting price tiers for the funding of their book, Mod and Rawlings looked
at the top 30 grossing Kickstarter campaigns
to determine which tiers would be the most
effective. This provided Craig with data that
he could use --in his words-- to “look for
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a balance between number of pledges and
overall percentage contribution of funds.”
TABLE I illustrates his findings.
In a blog post from his Official
Website, craigmod.com, Mod shares his insights on the data:
“This data is, of course, hardly perfect (for example, not every project I looked
at used the same tiers). But it’s good enough
to give us a sense of what price ranges people
are comfortable with. The $50 tier dominates, bringing in almost 25% of all earning.
Surprisingly, $100 is a not too distant second
at 16%. $25 brings in a healthy chunk too,
but the overwhelming conclusion from this
data is that people don’t mind paying $50 or
more for a project they love. It’s also worth
contemplating going well beyond $100 into
the $250 and $500 tiers: they scored relatively high pledging rates compared to other
expensive tiers. The lower tiers — less than
$25 — are so statistically insignificant (barely bringing in a combined 5% of all pledges)
that I recommend avoiding them. Of course
this depends on your project — perhaps
there’s a very good reason for a $5 tier. More
importantly, this data shows that people like
paying $25. Having too many tiers is very
likely to put off supporters. I’ve seen projects with dozens of tiers. Please don’t do this.
People want to give you money. Don’t place
them in a paradox of choice scenario! Keep
it simple. I’d say that anything more than five
realistic tiers is too many.”
In the case of musicians, Mod’s
findings seem to correspond well with the
multi-tiered product offerings that are gaining popularity on most artists’ websites. $1
downloads, $25 CD/ Poster sets, all the way
up to the $250 box sets; these price tiers cater
to the varying level of a fan’s commitment
to an artist. It is worth noting that, for musicians, the $25 tier might be a bit more useful than Mod and Rawlings found it to be in
their book campaign. Nonetheless, Mod’s
data illustrates the fact that lower price tiers
are far less effective (accounting for only 5%
of total earnings). In addition, giving investors too many options to contribute small
sums of money, in a way, encourages them to
give less instead of more –which to a degree,
defeats the overall purpose of the campaign.
By limiting a contributor’s options to a handful of specifically defined ranges with corresponding rewards attached, supporters are
forced to think bigger in terms of their donations.
Based on the data collected, Mod
and Rawlings put together the price tiers
found in TABLE II, with corresponding rewards for each. TABLE II shows that the
lowest price tier offered ($25) only generated
3% of the total earnings. A paltry 28 people
(11% of total contributors) opted for this tier
while 155 (59%) went for the $65 tier. Also,
the $100 tier got more than double the donations than the $25 tier (64 compared with 28).
Lastly, as the amount of each tier climbed, the
number of contributions proportionally dwindled, yet the $850 tier still pulled in a higher
percentage of total earnings than the $250 tier
with only 4 supporters.
Promotional Considerations
To spread word of the campaign,
Mod and Rawlings engaged in an online promotional plan that focused on their permission-based social medial touch points, as well
as key design blogs and magazine sites that
were completely in target with their psychographics and demographics. They focused
their messaging campaign using Twitter and
Facebook (their messaging was relevant and
minimal, too), as well as their own mailing
list. Mod and Rawlings had built up an extensive mailing list of design and art world
contacts over the past 6 years, which they leveraged nicely. Examples of the spreadsheet
with the timing and results of their targeted
email campaign, are found in TABLES III.
Perhaps the most impressive part
of the whole campaign was Mod’s outreach
strategy to the blogs that he felt were in line
with what he was doing with his project, and
his method of communication to them. He
was not focused on the quantity of external
outreach; rather, he was more interested in the
quality of the blogs he gave focus to. This is
a marketing strategy that creators of all kinds
would do well to consider. As Mod describes
it:
(Continued on Page 7)
November 2010
Volume 6, Issue 2
Music Business Journal
Business Articles
“I’m writing to blogs that I’ve
been reading for years, so for me, referencing older posts of theirs and personalizing
these emails is trivial, and fun. Whatever you
do, don’t send scattershot emails to media
outlets. Be thoughtful. The goal is to appeal
to editors and public voices of communities
that may have an interest in your work, not
spam every big-name blog. A single post
from the right blog is 1000% more useful
than ten posts from high-traffic but off-topic
blogs. You want engaged users, not just eyeballs!”
TABLE I
Points To Keep In Mind
Rawlings and Mod’s book may be
only a starting point to think about fan funding strategies for musicians. But there is a lot
to learn from them. First of all, Rawlings and
Mod had a clearly defined plan. While they
did not have anywhere near the clout that a
Trent Reznor-type would have, they knew
exactly how much money they needed and
who they were going to target to generate the
funds. They were also very strategic in how
they approached their campaign. They knew
their demographic, and they knew what sort
of incentives would be appealing at the various price points that they presented. If musicians approached fan funding with this level
of organization and preparation, the result
could be just as effective.
TABLE II
TABLE III
November 2010
www.thembj.org 7
Volume 6, Issue 2
Music Business Journal
Law Section
Copyright Law Compromises The
Preservation of Recorded Sound
By Luiz Augusto Buff
With the advent of
sound recording at the end of the nineteenth
century, many different kinds of sounds –
from musical performances and important
government speeches to animal sounds and
baby laughs – were captured and registered
for future listening. In order to commercialize those recordings, early entrepreneurs
established an industry around these recordings that grew vertiginously, becoming a fundamental part of our contemporary
cultural history. For years, it had been a
solid, profitable structure. Lately, however,
it is undergoing drastic transformations.
The transition to a digital age is causing
a huge impact on the way sound recordings – especially music – are commercialized, consumed and distributed. The
creation and consumption of recordings
are now occurring at a much faster rate
than the efforts involved in preserving
this cultural heritage for posterity.
In that regard, the US Congress assigned the responsibility to
“maintain and preserve sound recordings that are culturally, historically, or
aesthetically significant” to the National
Recording Preservation Board of the
Library of Congress (NRPB). This was
done through the National Recording
Preservation Act of 2000 (Public Law
106-474), that also required them to “...
undertake studies and investigations of
sound recording preservation activities
as needed, including the efficacy of new
technologies, and recommend solutions
to improve these practices.” As a result,
NRPB published ”The State of Recorded
Sound Preservation in the United States:
A National Legacy at Risk in the Digital
Age.” – a comprehensive study that delineates the web of issues that endanger the
sound recording history.
There are several organizations,
both in private and public spheres, which
are committed to preserve the audio legacy
for future generations. More and more they
are benefitting from the digital technology
to store files and manage their collections.
Digital storage helps overcome problems
such as physical space – since long halls
with countless shelves are being substituted
for hard-drives – and provides enhanced
8 www.thembj.org
search engines. On the other hand, the protection and maintenance of digital audio recordings is not at all simple. Problems like
server crashes and incompatibility of file formats due to the successive releases of new
software are an everyday struggle. There
are many more positive and negative issues
to consider, but it is clear that digital storing
must be the preferred format to achieve the
objectives of recorded sound preservation.
Hence, the archives require the development
of totally new preservation techniques.
To overcome this transitional
phase, NRPB envisions that a collective effort must be made. Different archives and
collectors should work together to avoid unnecessary costs caused by redundant efforts
of reformatting, cataloguing, and archiving.
That would help develop a new system in
which both old and new works are available
and preserved for posterity in a single digital
format. According to the report, this would
only be possible with a change in copyright
law, allowing the creation of a file-sharing
network of credentialed institutions. They
would acquire licenses to share digital files
of preserved commercial recordings for archival purposes. The whole idea of preserving audio content is very positive and important to our cultural heritage; however, it is
crucial that any changes made in the existing
system do not harm the copyright owners in
any way.
The study further emphasizes that
digital development does not ensure preservation for present and future creations. As
time progresses, newborn digital recordings
are in similar danger of being lost, like old
78-rpm recordings. The dissemination
of sound recordings is happening exclusively in digital format, via downloading
and streaming. Inexpensive tools for production and recording, matched with efficient marketing tools, allow new artists
to offer their productions directly to their
costumers. Therefore, the institutions responsible for sound recording preservation will have to face challenges like the
diversity of file formats, possible viruscontaminated files, digital rights management and legal issues related to the capture and maintenance of these files.
Another arduous task will be the
discovery and selection of the recordings to be preserved, due to the immense
quantity of potentially important material, extensively spread on the Internet.
Meanwhile, much information is being
lost. For instance, a podcast that could
have great content for scholars may not
be available the following month. It could
be due to the closure of the web site, or
an inability or refusal to pay royalties. As
a possible solution, the Library of Congress considered capturing the entire audio material produced online. Although the
modern industry has all of the technology required to complete such a task, under the current law and license agreements, it is illegal
to copy this born-digital content to public access servers and to provide access to it in an
institutional setting. Dark archives – where
data has restricted access until the content
falls into public domain – are suggested instead, but funding for an archive that has
such limited use may be very difficult.
It could be said, as a student did
at an NRPB public hearing in 2006, that
(Continued on Page 9)
November 2010
Volume 6, Issue 2
Music Business Journal
Business Articles
The Fate of EMI Lies in Court
By Evan Kramer
(From Page 8)
“the preservation of music is meaningless if
this music is not accessible”. Indeed, from a
business perspective, access is fundamental
to the viability of investment in the area. The
costs of preservation are tied to the possibility of exploring and exploiting the audio
material. An increase in funding for sound
recording preservation will only occur with
enhanced models of licensing agreements
that grant access to a vast variety of works,
including unpublished and out-of-print recordings. Sony Music Entertainment took
one step in this direction. They licensed their
repertoire of recordings from the acoustical era (before the advent of microphones
and electrical recording) to the Library of
Congress Jukebox, a tool that soon will be
streaming approximately 10,000 recordings
to the public.
NRPB gave special attention for
old materials in their study. They observed
that the works made before 1972 are protected by a confusing set of different state, civil,
criminal and common laws. It was only that
date that federal laws started to look after the
copyright of sound recordings. The actual
law keeps these works under state regulation
until 2067. According to NRPB’s analysis,
this provision should be repealed and all recordings produced should be placed under
a single, understandable and more coherent national law. As for the material that no
owner could be located – orphan works – the
proposal is to legalize their usage by means
of preservation. The report also suggests a
compulsory license for abandoned or out-ofprint recordings, so third parties can reissue
those works with an appropriate compensation to the rights owners.
It is clear that the interests of copyright owners and of those responsible for preserving the nation’s recorded sound heritage
are in conflict. The recorded sound preservation is critically affected by restrictions and
limitations fixed in the US copyright law. It
is important to find a perfect balance so that
copyright owners can be compensated and
organizations can achieve their fair goals of
preservation. The complete study from the
Library of Congress is available for purchase and as a free download at http://www.
clir.org/pubs/abstract/pub146abst.html.
November 2010
Since its inception in 1931, EMI’s
illustrious history has made it an industry legend. However, even with a controlling market
share in publishing, an artist roster that formidably holds its own on the charts, and a steady
increase in revenue streams over the past few
years, its future is anything but stable. Guy
Hands is the Chairman of EMI’s parent company, the British equity firm Terra Firma. After acquiring the label in 2007 on loan from
Citibank, Hands is now pursuing his lender in
US federal court on alleged claims of fraudulence concerning the EMI purchase. Scheduled to last three to four weeks, the trial’s outcome could be the sole determinant of EMI’s
future.
Monday, October 18th saw the beginning of the Terra Firma vs. Citibank court
case in which Guy Hands sought a total of
$11.1 billion in damages from Citibank. His
demands began with a $2.77 billion compensation for losses, plus a sum three times that
amount for punitive damages.
The controversy was ignited from
a series of phone conversations that occurred
between Guy Hands, and Citigroup Banker/
Advisor, David Wormsely regarding the EMI
acquisition in 2007. Hands, who had long
coveted ownership of the label, claims that he
was told three times by Wormsley (who acted
as an advisor on the deal) that Terra Firma
could lose EMI to US private equity group,
Cerberus, if it did not top their alleged bid
of $4.11 per share. After submitting a bid of
$4.16 per share ($6.7 billion), Hands discovered that Cerberus had never submitted their
bid, leading Hands to believe that Wormsley
–a long trusted friend- was milking the deal.
Citigroup and Wormsley denounce
all of these accusations saying that, “the evidence in this case is overwhelming that Citi
has done nothing wrong and we firmly believe
that Citi will prevail in this case.” In actuality,
the case lacks substantial evidence from both
sides, relying heavily on the recollections of
Hands and Wormsley’s phone conversations.
The acquisition couldn’t have come
at a worse time for Terra Firma. On the eve
of the 2007 credit crunch, collapsing markets
and plummeting physical CD sales added to
reduce EMI’s value to an estimated $2.8 billion. This is a far stretch from the $3 billion
that the company currently owes Citigroup,
not to mention the $6.7 billion that was initially paid out in the first place. This suggests
that over 60% of Hands’ original investment,
along with most of the equity of Terra Firma
has already been lost, leaving a crippled and
indebted EMI dangling helplessly above the
ravenous jaws of lawyers and jurors.
The case, currently called the trial
of the century in Britain, will impact the reputation of both Hands and Wormsley, two of
Wall Street’s best know investors. While rumors have surfaced that Citigroup could opt
for a debt-for-equity swap that could grant
it a stake in the EMI label, Hands has made
it clear that he has no intention of letting the
lender get a say in the company’s operations.
Still, an unfavorable outcome for Hands could
result in full EMI ownership by Citibank.
Despite numerous attempts to settle
outside of court, Hands is convinced that Citibank provided fraudulent financial advice.
He is clearly willing to take the accusation
as far as it needs to go. “If you accuse someone of fraud, it’s really game over in terms
of [refinancing] conversations,” he said in a
recent interview. “It’s like putting a stick into
a dragon.”
The court’s decision –scheduled for
early November- will almost certainly have
serious financial repercussions. An unfavorable decision for Citigroup could lead to losses, estimated upwards of $11 billion. For
Terra Firma, losing would be catastrophic; it
will likely declare bankruptcy after defaulting
on its loans and EMI would then be at the
mercy of Citigroup.
www.thembj.org 9
Volume 6, Issue 2
Music Business Journal
Business Articles
CO2 Emissions in the Music Industry
By Minden Jones
Currently, environmental issues
concerning greenhouse gases and CO2 emissions have become increasingly significant.
In the summer of 2009, the Major Economic
Forum addressed these matters proposing
that, by 2050, CO2 emissions should be reduced by at least 50% from what they were
in 1990. Regardless of whether or not that
bold idea is feasible, it is important to become aware of one’s own carbon footprint,
and the music industry is certainly no exception. Distribution, live music, and transportation in the business contribute to energy
consumption and the production of greenhouse gases.
be ordered and delivered directly to the buyer’s home. Transportation accounts for 50%
of the greenhouse gases emitted. By cutting
out customer transportation to the retail outlet, CO2 emissions are greatly decreased. In
this scenario, removing the retailer from the
physical distribution equation produces 1/3
less greenhouse gases.
For example, a study entitled The
Energy and Climate Change Impacts of Different Music Delivery Methods prepared in
August 2009 by professors Christopher L.
Weber, Jonathan G. Koomey, and H. Scott
Matthews for Microsoft Corp. and Intel
Corp. to evaluate energy and CO2 output in
the distribution of music in physical versus
digital form. Its executive summary says:
“We find that despite the increased
energy and emissions associated with Internet data flows, purchasing music digitally reduces the energy and carbon dioxide (CO2)
emissions associated with delivering music
to customers by between 40 and 80% from
the best-case physical CD delivery, depending on whether a customer then burns the
files to CD or not. This reduction is due to
the elimination of CDs, CD packaging, and
the physical delivery of CDs to the household. Based on our assumptions, online delivery is clearly superior from an energy and
CO2 perspective when compared to traditional CD distribution”; p.3
Prior to the digital distribution
model, a long, complicated process of physical delivery was used to bring music to the
hands of consumers. The CD itself, the recording process, and the packaging (leaflet,
jewel case, shrink-wrap), all produced energy consumption and waste. Furthermore,
shipping the product from the warehouses, to
the retailer, and finally to the consumer also
contributed to an estimated per album CO2
emission of 3200g of CO2.
For the consumers that absolutely
must get their hands on a physical copy of
their favorite band’s latest album, CDs can
10 www.thembj.org
Clearly, digital media offers the
simplest, most direct means of distribution,
thereby conserving the most energy in the
process. The music is still produced in studios, but afterwards, it is transferred to digital
format and stored in an electronic data hub
until being purchased and downloaded by the
consumer. In this scenario, only 400g of CO2
per album are produced, compared with the
latter example’s 3200g. Carbon emissions are
aggravated, however, if the consumer decides
to burn their digital downloads to CDs, and
even further, if that CD is stored in a purchased jewel case. Overall, digital music
delivery can make a significant difference in
reducing greenhouse gases.
Environmental activist group, Julie’s Bicycle, commissioned the Environmental Change Institute at Oxford University
to conduct a study that would evaluate the
greenhouse gases emitted by the UK music
industry. In their findings, they report:
“We estimate the greenhouse gas
emissions of the sale of music products and
live music performances to UK consumers at
least 540 000 t CO2e per annum. Approximately three-quarters of the industry’s GHG
emissions are attributable to the live music
performance sector and approximately onequarter to the music recording and publishing
sector. The major GHG producing activities
are audience travel (43%), live venue music events (23%), and music recording and
publishing (26%), with smaller contributions
from music festivals (5% excluding audience
travel) and music organizations (1%).”
The UK operates over 2000 live
music venues and over 500 annual festivals.
Considering the 540,000 tons of CO2 emitted by the entire UK music industry per year,
live performance venues and festivals alone
cause at least 400,000 tons of annual CO2
emissions, not to mention the amount of energy consumed. 175,000 of the 400,000 tons
of annual CO2 emissions are derived from
audience transportation to the shows. Moreover, the use of diesel generators, trucking,
and tour busses all increase these CO2 emissions. Keep in mind, these statistics only
reference the UK, and do not factor the additional emissions of all other countries.
These findings led to the creation of
a comprehensive guide on building a sustainable and responsible music industry, called
the Green Music Guide. Julie’s Bicycle carries the mission of reducing the UK music
industry’s carbon emissions by 60% from
2008 to 2025. They enforce recommendations regarding how offices, venues, studios,
festivals, touring, transportation, distribution, and merchandise can reduce their carbon footprint. Their four major guidelines
are: 1) assess how much greenhouse gas your
business produces each year, 2) reduce energy consumption in buildings, 3) influence
your business’s supply chain to decrease
their emissions, and 4) support electric suppliers who output low carbon emissions.
From the touring side, these recommendations include keeping the lighting
turned off when the rig or performing hall is
not being used. Also, turning off the exterior
lights can help save CO2 emissions while
saving money for the venue. Creating different heating and cooling zones is free and it is
estimated to see savings within six months.
If every venue implemented these recom(Continued on Page 11)
November 2010
Volume 6, Issue 2
Music Business Journal
Business Articles
(From Page 10)
mendations, it would prevent nearly 10,000
tons of CO2 emissions annually. At festivals,
generators can be powered by vegetable oil
or a sustainably sourced bio-diesel. Staff and
audience can get involved in being “green.”
Lastly, offering incentives for carpoolers – easy in and easy out parking – would
encourage and educate the audience. Also,
discounted ticket prices can be offered to audience members who ride their bikes or use
public transportation. Artists can create links
on their website to help plan the trip and carpooling options. The options for musicians to
help the environment are limitless.
Upon examining these studies, the
facts on distribution, live music, and transportation further suggest that the current way
of doing business in the music industry is not
sustainable. There is definitely a Green movement occurring, but it does not seem to be
happening swiftly enough, especially in the
US as compared to the UK. Musicians have
the ability to touch their fans deeply with their
music, as well as influence the behavior of the
fans. It is crucial that we act with the visions
and actions of sustainability and responsibility.
Sources:
[1] Christopher L. Weber†, Jonathan G. Koomey*, and
H. Scott Matthews; “The Energy And Climate Change
Impacts Of Different Music Delivery Methods”, Final
report to Microsoft Corporation and Intel Corporation,
available online at <download.intel.com/pressroom/pdf/
cdsvsdownlo>adsrelease.pdf
[2] “About JB.” Julie’s Bicycle. Web. 14 Aug. 2010. <http://
www.juliesbicycle.com/about-jb>.
[3] “Carbon Soundings: Greenhouse Gas Emissions of the
UK Music Industry.” IOPscience::.. Welcome! Web. 14 Aug.
2010.
<http://iopscience.iop.org/1748-9326/5/1/014019/
fulltext>.
[4] Http://www.dynamicdrive.com/style/, Dynamic Drive:.
“CDs vs. Music Downloads: Carbon Footprint Compared ·
Environmental Leader · Green Business, Sustainable Business, and Green Strategy News for Corporate Sustainability
Executives.” Environmental Leader · Green Business, Sustainable Business, and Green Strategy News for Corporate
Sustainability Executives. Web. 14 Aug. 2010. <http://
www.environmentalleader.com/2009/08/19/cds-vs-musicdownloads-carbon-footprint-compared/>.
[5] “Green Music Guide.” Julie’s Bicycle. Web. 14 Aug.
2010. <http://www.juliesbicycle.com/green-music-guide>.
November 2010
Our Correspondent in South
Africa Takes FIFA to Task
By Mia Verdoorn
This past summer, I had the privilege of doing an internship at Sony Music in
my home country, South Africa. It was during the 2010 FIFA World Cup, and Sony was
one of FIFA’s main partners for the World
Cup. My experience in the office was therefore colored with all of the organization and
preparation that was required for the event.
During the World Cup, there was an
assortment of products deemed “official” for
the tournament. For music, there was an official song, an official mascot song, the official
team song and the list goes on and on. Each
track, however, was produced and marketed
by a different record company, which created
confusion in the marketplace. Technically,
Sony Music was the only company permitted to have any connection with World Cup
merchandise due to their licensing contract
with FIFA. In other words, the phrases and
acronyms “FIFA”, “World Cup”, “South Africa”, “2010” and even “Soccer” could not
be used on a product unless it was released
from Sony. With the persistent competition
from other record companies like Universal and Warner (despite their absent license
agreements), customers experienced great
bewilderment about what product to buy as a
memento of the special occasion.
Interestingly, these FIFA World
Cup compilation records were not available
in downloadable format from a computer;
South Africa’s digital market was simply
not yet developed enough to support it. Conversely, the “hits” from Sony’s album , i.e.
Waka Waka sung by Shakira and the local
band Freshlyground and Sign of Victory
by R. Kelly, were readily available as mobile downloads, which is remarkably a very
developed technology in South Africa. Yet,
with the market so diluted with “official”
releases from each major label, it was tough
for Sony’s album (for which the rights were
acquired) to stand out. Unless a consumer
really did their homework, there would have
been no way to distinguish unofficial albums
from official ones. With every major label
competing for the FIFA market, the oversupply created an influx of World Cup-themed
disks.
Unfortunately for Sony, the entire
effort of promoting “Listen Up! The Official
2010 FIFA World Cup Album” wound up
losing the company a substantial amount of
money. All proceeds were initially donated
to FIFA’s “20 Centers for 2010” initiative⎯
an organization that instills positive social
change through soccer. The overwhelming
disparity in sales, caused by an unforeseen
competition, virtually eliminated what was
thought to cover promotional costs. But on
the bright side, “20 Centers for 2010” did
accomplished its mission of building twenty
“Football for Hope” centers for public health,
education, and soccer in South Africa and
other African charities.
The question that comes to mind is
whether or not it is practical to grant exclusive
rights for the World Cup to just one company.
It’s not to say that Sony Corporation should
no longer be a FIFA partner, but rather, Sony
Music should share FIFA’s responsibility in
the matter. Had FIFA given the rights of the
“official” album to other record companies
as well, probably less confusion would have
been created for consumers. Had this been
the case, a more positive atmosphere among
South African record companies could have
existed for the betterment of the event as a
whole. The official album and featured artists
could have been marketed globally, since different record companies have different niche
markets for their products. If FIFA had given
the responsibility of handling the recording
and the release of the official album to the big
five companies of that country (Sony Music,
Warner Music Gallo Africa (WMGA), Universal, Select and EMI), soccer music fever
would have been better exploited. Everyone,
including the soccer hooligans, would have
likely spent more on music.
www.thembj.org
11
Volume 6, Issue 2
Music Business Journal
Business Articles
India’s Music Market: Open For Business
By Sahil Mehrotra
Bringing a new style of music
into a market of over a billion people, and
finding the right distribution channels for
such a style, is anything but a simple task.
Atul Churamani, a music producer considered to be one of the principal innovators of popular music in India, managed to
achieve such a feat when he brought western popular music into the market. In 1988,
Churamani joined Magnasound India, a
production company that had just acquired
the exclusive license for Warner Music in
India.
A History
At the time, the music marketplace was suffering from two major problems, according to Churamani. The first
was that music was only distributed on
poor quality cassette tapes. The other problem was that India only received international albums months after they’d been released in their respective countries (mainly
the United States and Britain). By the time
the albums reached India, the market was
already flooded with pirated copies, making it very difficult for international releases to sell successfully.
In order to fix these problems,
Churamani took advantage of being the exclusive Indian licensee for Warner Music
and began releasing international albums
in attractive packaging, on higher quality
cassettes, and at highly competitive prices.
This in turn resulted in a substantial rise in
the legitimate international music market.
The demand for legitimate international
music was quickly growing and in 1991,
Star Network facilitated the launch of MTV
into the marketplace. At the time though,
MTV was only playing music videos from
artists within the United States and Britain.
However, according to Churamani, approximately 70% of the local music within
India was coming from Bollywood, so he
jumped at the opportunity to incorporate
the local Bollywood music into MTV.
In 1992, Magnasound India produced two music videos by local artists,
an English-singing female vocalist by the
name of Jasmine Bharucha, and a Hindi
rapper by the name of Baba Sehgal. Baba’s
music videos became so popular that his album reached sales numbers unprecedented
by any local pop artist before him. In es-
12 www.thembj.org
sence, the Indian pop music market had been
created thanks to Churamani’s way of distributing international music and the introduction
of MTV into the marketplace. Star Network
even went on to create their own version of
MTV called Channel V.
The Future
Distribution for music in India has
drastically changed since the turn of the 21st
century. CD’s, and even more so MP3s, have
replaced the cassette tape, and offer higher
audio quality amongst other benefits. In
particular, the format has proven extremely
popular because of its ease of distribution via
cell phones. There are 670 million wireless
subscribers in India, out of which ringtones,
and music already pre-loaded onto phones,
account for 30% of the Indian music industry’s 7.5 billion rupees—or a revenue of $168
million. Only 7% of the population (81 million) uses the Internet on personal computers.
It is clear that the emerging cellular market
has a huge potential to bring all sorts of content, particularly music, to people all across
the nation, including rural areas that would
otherwise have no access to digital media.
Although some people do use internet café’s
for their internet browsing, rural folk, which
account for around 73% of the population, do
not access them. However, cell phones have
become increasingly popular in the countryside. An additional benefit to the distribution
of digital music via mobile phone networks
is the fact that mobile phones are less vulnerable to digital piracy because wireless carriers
have much more control over what content is
available.
music in direct correlation with faster download speeds.
It is unclear how much the music
industry is benefiting from the distribution of
music via wireless mobile networks because
telecom carriers don’t provide any information on what percentage of music sales they
keep for themselves. However, professionals
in the music industry have noted it is upwards
of four-fifths. Regardless of the low cut given
to labels, the distribution of music through
telecom companies has definitely boosted the
market for the music industry in India. Again,
it definitely benefits the music industry that
almost all the musical content provided
through cell phone networks is legitimate and
not pirated.
With a population of over a billion
people--of which not even half have access
to the Internet or mobile phones—there is a
lot of optimism that the Indian music industry
will grow. With the right distribution channel bringing an end to pirated music, one can
hope that the record labels within India will
begin receiving larger percentages of music
sales from the cellular network providers, and
continue providing music for the nation as
digital content continues to spread.
Sources:
[1] The Wall Street Journal Online - http://blogs.wsj.com/
indiarealtime/2010/10/22/mobile-not-net-drives-indianmusic-sales/ (Oct 2010)
[2]http://www.wipo.int/wipo_magazine/en/2010/05/article_0003.html (Sept 2010)
Mobile Music Is It
[3] Physorg.com – Mobile music a cell-out in India (2006)
Bharti Airtel, the largest wireless
carrier in India, reported in 2009 that their users completed over 200 million downloads of
music content. Although the pricing for music is much lower in India than in the United States, approximately 33 cents for a ring
tone, the market is still growing. Analysys
Mason, a telecom and media-consulting firm,
believes that the true potential of the music
market, measured by mobile music penetration, has yet to be tapped. India is currently
at around 30% penetration for mobile music
services where China is currently over 80%.
Once a faster 3G wireless network becomes
available it can be speculated that the new
network will also boost downloads of digital
[4] India Technology Investments – “Magnasound India
Ltd.” (2000)
[5] Mobile internet in emerging markets – “How the mobile
internet will transform the BRICI countries” (Sept 2010)
[6]http://en.wikipedia.org/wiki/Demographics_of_
India#CIA_World_Factbook_demographic_statistics
November 2010
Volume 6, Issue 2
Music Business Journal
Business Articles
Branding, Sponsorships, & Artist Imaging
By Kerry Fee
In the current music market, personal
branding, sponsorships, innovative distribution,
and public image have all become key aspects
for an artist’s success. These concepts are valuable tools that artists are using to their advantage
to differentiate themselves in a market of clear
over saturation. In each case, an artist’s utilization of branding needs to be considered, and
most importantly, its effectiveness on consumer
behavior must be examined as well. There are
recent developments within the industry that are
creating trends and testing new angles of promotional branding and image establishment.
Essentially, every artist is a product,
and the current industry demands that an artist
to be able to market themselves on a variety of
levels. Artists also owe it to themselves to look
at their art as a commodity, following a similar
progression as a company would with releasing
a product. Market research, target demographic,
and consumer demand for what you are trying
to do must be carefully examined in order to
hurdle over the clutter. Branding has become a
new way to connect with fans, reaching out and
pulling two communities together.
Recently, non-music related businesses have been seeking brand equity relationships, i.e. using an artist to deliver
themselves to a specific audience they want
to connect with. Music is a part of the consumer’s daily life and conversation. The key
is to portray an honest image and to be aware
of credibility and consistency issues.
Many major campaigns have arisen
within the past few months, including Natasha Bedingfield’s partnership with boutique
hotel chains, Keith Urban with Target, John
Legend & The Roots with American Express,
Zak Brown Band with Dodge, and Drake, Pitbull and Trey Songz with Kodak. Finally, a
promising partnership is Converse’s yearlong
campaign centered on British talent, such as
Hot Chip, Bitman & Roban, Hot City, and
New Order.
Converse has identified its market,
and created an agreement that is beneficial for
them and their clients. Bands are promoted to
clients and fans through Converse’s website
and other means, and the company narrows its
marketing by learning from each band’s loyal
fan base. Over the summer, the company also
paired up with Kid Cudi, Vampire Weekend,
and Bethany Cosentino of Best Coast for the
single “All Summer,” as part of their “Three
Artists, One Song” collaboration campaign.
The ultimate decision is how to craft
the brand to compliment your art. In order for
any personal brand or partnership to be successful, an artist or company must determine what
they do well. Everything starts with authenticity. Artists should not attempt to sell themselves
to everyone, but should take time to evaluate Although many wide reaching
their demographic, and be sure the brand is the mass media deals are only seen with artists
right match before moving forward.
of a superstar level, the model is beginning to
change. To many companies, a debut group
November 2010
that has a strong image is a prime target for
such deals. Companies are getting comfortable connecting with these new artists because fans adore them, and blogs passionately cover them. “Indie artists have audiences
that believe what they say, and partnering
with that kind of credibility means more to a
consumer than connecting with an artist who
just has mass popularity,” says Jeff Tammes,
senior VP of strategic marketing at Cornerstone. “Some brands are willing to grow with
an artist, and use these lanes to connect with
a demographic honestly and thoughtfully, because all in all, it is about building a community with an artist, protecting it, and finding
a new audience. This in turn, will generate a
large amount of revenue for the indie artists.”
Brands and sponsorships are becoming the new labels for many artists --able
to generate substantial revenue and combine
marketing, advertising and PR all in one. The
Economist magazine recently placed the value of sponsorships in the USA at about $1.8
billion dollars , a figure that is equivalent to
roughly a half of annual concert ticket sales.
Clearly, this part of the business, which used
to be unaccounted for, is expanding. Questlove, percussionist for The Roots, summarized the current sentiment at a recent press
conference. “There is no more selling out”,
he said, “just selling.
Sources
[1] The Economist, “What’s Working In Music”, Oct. 9,
2010; 101-103; 102.
www.thembj.org
13
Volume 6, Issue 2
Music Business Journal
Business Articles
A Home Studio Milestone:
Pro Tools Cost Is Almost Halved
By Hunt Hearin In October of 2010, Avid (formerly
Digidesign) announced Pro Tools HD Native.
The latest in a recent string of product rollouts, Pro Tools HD Native bridges the gap
between consumer grade and professional
grade Pro Tools workstations. Pro Tools HD
Native allows access to the full capabilities
and power of the Pro Tools HD platform, but
at a fraction of the cost. Once accessible only
by professional studios, the entry-level price
point for a Pro Tools HD system was set at
$10,000 dollars. Pro Tools HD Native allows
access to comparable power for as little as
$6,000, appealing largely to the semi-professional production market.
To fully understand the benefits of
Pro Tools HD, both Native and DSP, one must
gain insight on how these products function.
Traditionally, Pro Tools HD has made use
of DSP (Digital Signal Processing) through
the use of Core PCI (Peripheral Component
Interconnect) cards. Essentially, these cards
act as a secondary motherboard, entirely
dedicated to processing audio. The Core PCI
cards can work alone as an HD 1 system, or
in various combinations, branded HD 2 and
HD 3, provide additional amounts of input/
output (I/O) and track count. The dedicated
processing power that these systems provide
makes it possible for audio engineers to record and edit large sessions on an extremely
reliable platform. Native processing, on the
other hand, relies on the use of your computer’s internal processing power to handle these
tasks.
An HD Native Core Card, essential for every Pro Tools HD Native system,
brings the user 64 channels of I/O, 192 available tracks, as well as 128 mix busses. This
is a tremendous improvement over the previous step down, Pro Tools LE system, which
only offered 18 channels of I/O, 48 available
tracks, and 32 mix busses. Pro Tools HD
Native also brings powerful features like
Automatic Delay Compensation and Input
Monitoring to the semi-professional production arena. By allowing the user’s computer
to power plug-ins and mixing functions, the
Pro Tools HD Native Core Card handles I/O.
Paired with the Avid HD Omni,
Avid’s newest entry-level HD interface,
semi-professional and professional studios
can have complete access to Pro Tools HD
at an affordable price of just over $5,000
The core card can also be interfaced with
converters from Apogee Electronics or Lynx
Studio Technology, allowing for easy integration with systems that users may already
own. Additionally, Native processing power
allows the engineer to employ third-party
DAW software such as Apple Logic or Cubase for use with the Avid hardware. This
provides a tremendous opportunity for engineers who have outgrown and are looking to
upgrade their limited Pro Tools LE systems,
allowing them to unlock the capabilities and
sheer power of the Pro Tools HD platform.
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The advantages of a traditional Pro
Tools HD system do not come without a price
tag. In addition to requiring a Pro Tools HD
Core Card, a studio would need to purchase
a Mac Pro (or Windows equivalent,) and a
compatible Analog to Digital/Digital to Analog converter. Without factoring the cost of
the recording console or outboard gear, this
system closely reaches a $15,000 price tag,
which is not typically accessible to the home
studio user. Newly released Pro Tools HD
Native, paired with the new interfaces from
Avid, brings a turnkey system to the consumer for slightly over a third of the previous
cost.
14 www.thembj.org
November 2010
Volume 6, Issue 2
Music Business Journal
Berklee College of Music
Music Business Journal
Volume 6, Issue 2
November 2010
www.thembj.org
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Some of the topics we will tackle in
next month’s issue of the Music Business
Journal:
Ten Years of Hip Hop
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