How to Succeed in Today’s
Music Business
By Steve Gordon
• Opportunities and Challenges Facing New Artists
• Whether An Artist Should Sign with a Label: What Record
Companies Give To and Take from Artists
• What to Avoid in Signing with a Label
• Advantages of DIY & How New Technologies Have Made it
Possible for New Artists to Succeed
• Strategies for DIY Success
• How Artists Should Use Online Tools
I.
Opportunities and Challenges
Facing New Artists
The Current State of the Music Business
1999: 14.6 B
2009: 7 B
Major Labels
• The five major labels are now only four
• Each has suffered significant decrease
in revenue of 50% or more from sales of
prerecorded music
• EMI Music is teetering on bankruptcy
• Each label has dropped artists and is
signing fewer artists
• But, the majors still control more than
80% of distribution, and own more than
80% of popular music
Top Ten Selling Albums 4/24/10:
1
AKB 48 - Kamikyoku Tachi
King Records Japan - 295.000 - 1 week at No.1 - Hot Shot Debut
2
Justin Bieber - My Worlds (My World+My World 2.0)
Island - 207.000
3
Lady GaGa - The Fame (Monster)
Interscope - 128.000
4
Slash - Slash
Dik Hayd / Roadrunner - 109.000
5
Usher - Raymond V Raymond
Laface / Arista - 109.000
6
Madonna - Sticky & Sweet Tour
Maverick - 83.000
7
Black Eyed Peas - The E.N.D.
Interscope - 71.000
8
Lady Antebellum - Need You Now
Capitol Nashville - 62.000
9
Sadé - Soldier Of Love
RCA / Epic - 58.000
10
Gorillaz - Plastic Beach
Parlophone / Virgin - 55.000
Challenges Facing New Artists
•
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Less likely to be signed to a major
Even if signed to a major, less likely to sell
as many units as ten years ago
Additional Challenges: More
Competition than Ever
•
8 MILLION bands on MySpace
•
Over 100,000 albums released in US alone:
 Only 10,000 sold more than 1,000 copies
 Only 1,000 sold more than 10,000 copies
 Only 250 sold more than 250,000 copies
Opportunities!
•
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New technologies have reduced price
of recording
Distribution is almost free
Affordable Recording
•
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For $1000 you can have a home
studio with speakers, headphones, a
laptop, and music software
With today’s inexpensive equipment
and software you can write, arrange,
produce, mix and master your own
music at home, without the need for
an expensive producer, mix engineer
or mastering engineer
Free or Nearly Free Distribution
•
•
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TuneCore: $2 per side per store
CDBaby: 9% of receipts
DIY/Paypal: 1-2 cents per side
Flip Side of Opportunity
•
Anyone can be on the Internet
•
Anyone IS on the Internet
II. Whether An Artist Should Sign
with a Label: What Record
Companies Give To and Take from
Artists
“Rising Above the Din”
A label will:
•
Produce & record
• Market & promote
•
Distribute
Major vs. Indie Label Deal
Major Label Deal:
• $500,000 advance
• $1M marketing budget
Indie Label Deal:
• $0-15,000 advance
• $15,000-$30,000 marketing budget
Marketing and Promotion
Both majors and indies do the following:
• Radio play
• Tour support
• Radio & TV interviews and
performance
• Advertising for product (print ads,
posters)
• Press coverage
Online Marketing and
Promotion
•
•
•
•
•
•
Blogs
Internet Radio
Website Development and
Maintenance
Online promotions
Features on major websites: AOL,
Yahoo, MSN
Positioning on music stores: iTunes,
Amazon, Rhapsody, Napster
What the Artist Has to Give
Up
•
Both majors and indies take more than
90% of record income
Deal may say 15-20%
Deductions:
•
•
–
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Packaging: 25%
Net sales:10-15%
Foreign reductions and royalty
“New technology” deduction
III. What To Avoid In Signing
With a Label
360 Deals
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20-50% Performance
20-50% Publishing
20-50% Merch
20-50% Endorsements
20-50% Everything else
– Appearance in movies, TV, etc
– Private parties
– Paid interview
– Etc.
What To Avoid In Signing
Cont.
Make them Pay or Perform
• Advances for each income source
• Performance-based deals
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–
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Percentage of revenue IF they secure a
synch
Percentage of revenue IF they secure
endorsement
Percentage of revenue IF they secure a
live engagement
IV. Whether it is Better to Do
It Yourself: Advantages of DIY
LABEL
DIY
Keeps 90% of
record sales
Artist keeps the $
20-50% of
everything else
Artist keeps the $
Is DIY Better? Yes!
BUT HOW?
V. Strategies for DIY
Success…
Production, Marketing and
Promotion Budget
• Investors
• Marketing Companies
• New Business Model: Polyphonic
Investors
• $5,000-$1M : Return on Investment
– 25-50%
– Cap of 100% of investment
– Payable after recoupment of artists’
expenses
– Family, angels, and businessmen
Marketing Companies
• Create marketing plan
• Implement strategies to secure goals
– Create buzz online through major websites
– Acquire coverage in press
– Secure play on radio and internet radio
– Branding – improve image of artist with
proper photos, interesting graphic design,
consistency across social networks and
website
Polyphonic
• Joint venture between Nettwerk Music
Group and Radiohead management
• $20M investment behind it
• Artists to keep copyrights of their own
music
• Polyphonic provides funds: Promotion,
marketing, tour support, distribution
• Profit-sharing model: 50/50 split
between Polyphonic and artist for all
sources of income
VI. How Artists Can Use
Online Tools
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YouTube
Websites
Online Distribution: Third Party or DIY
Blogs
Social Networks
OKGO’s Viral Success on
YouTube
•
Their first DIY video, “A Million Ways”, cost $20
and was downloaded 9 million times from
YouTube
Their second DIY video, the Treadmill Video,
cost a few thousands dollars (for eight used
treadmills) and debuted in July 2006. Two years
later:
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It had been viewed 42 million times on YouTube
Parodied on The Simpsons
Led to the band’s appearances at the MTV Music
Awards, The Tonight Show with Jay Leno, and The
Colbert Report
It won a Grammy for Best Short-Form Video (2007)
Websites
Do’s:
•
Web 2.0 aesthetics: clean, streamlined website make site easy to navigate
•
Make contact information easy to find: email of
artist, manager, PR agent, booking agent, and
links to social networking sites (include widgets
to make links easy to find) :
•
Make sure the site looks cool for the genre of
music you are working with (branding/aesthetics
can vary greatly from rap to pop to folk, etc.)
Websites
Do’s (cont.):
•
Include music and video players in addition to
links to YouTube/Vimeo (but, DO NOT have
music/video automatically play - can be
distracting and even deterring for new visitors to
your site)
•
Also include: photos (both from live shows and
for press), link to a mailing list, link to where you
can buy music (iTunes/Amazon/label website),
and past favorable reviews or other press
•
Giveaway download in exchange for email
address on mailing list
Example of a Good Website:
Terry Poison
Websites
Dont’s:
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•
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Don’t make the site difficult to navigate
Don’t let your site have a ‘corporate’ vibe
•
A) Don’t have banner or sidebar ads unrelated to your
music
•
B) Don’t make it difficult to sell your album
Don’t let the site ‘age’: make sure that you are constantly
updating the site
Example of a Bad Website:
Mr. Cota Cota
Example of a Bad Website:
Chrisette Michele
Third Party Distribution:
TuneCore
• Storage Fee: $20/year
• Distribution Options:
– $9.99/song in all 19 stores
– $47/album with unlimited number of songs
– $2/song per store
• Digital distribution only
Third Party Distribution:
CDBaby
• Storage Fee: None
• Distribution:
– $35/album: goes to 21 online retailers and
physical copies sold by CDBaby (physical
copies must be mailed to CDBaby)
• CDBaby keeps 9% of revenue from
digital sales, and $4 off each physical
album sold
Self Distribution: PayPal
• Create seller account on PayPal and
mail your own albums/merch
• PayPal keeps just a few cents on each
transaction
• Can easily add a PayPal widget to your
website, blog, MySpace, and other
online profiles
Social Networks
Is MySpace Dead?
•
YES:
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Inundated with advertising
Clunky interface
Only bands and artists use MySpace for social
networking
NO:
•
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Important people still look at and play music from
MySpace pages
Still one of the easiest ways to quickly preview an
artist’s sound and image
Social Networks
Facebook
•
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Quickly becoming an essential tool for
social networking
Artists can easily self-promote with the
creation of Facebook Pages and Groups
Over 200 million people on Facebook
Social Networks
Twitter
•
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Another easy method to connect with
fans and potential listeners
Can instantly and easily update
Blogs
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Huge number of music blogs on the
Internet, all featuring different styles of
music
Bloggers are both writers and music fans –
they are interested in listening to new
music and writing about what they like
Blogs are viral tastemakers
Blog Stats
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Approximately 133 million blogs
77% of internet users read blogs
2/3 of bloggers are male
60% of bloggers are age 18-44
75% of bloggers have college degrees
75% of bloggers are employed full time
Source for all above statistics:
http://thefuturebuzz.com/2009/12/10/blogging-stats-facts-data/
Blog Benefits
2008 NYU Stern Business School Study
Researched whether there was a correlation of
album sales and blog posts.The research found:
• If 40 or more blog posts were made before an album’s release,
sales ended up being three to four times the average for both
independent and major label releases
• If blog posts crossed 250, album sales rose to six times the
average, regardless of label
Top Music Blogs on the ‘Net
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Stereogum, Spinner, Brooklyn Vegan,
Gorilla vs. Bear (pop, electronic, indie, folk,
rock, hiphop, soul)
Nah Right, Grandgood (electronic, rap,
R&B, hiphop)
Blog aggregators: giant RSS feed of
thousands of various music blogs
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Hype Machine
Elbows
We Are Hunted
Hype Machine
Blogs: Viral Tastemakers
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Why “tastemakers”?:
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Bloggers are active consumers of new music
and each features from several to more than a
dozen artists every week
Why “viral”?
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Blogs are often aggregated on sites like
Elbo.ws or Hypemachine – if you are featured
on an aggregated blog your visibility will soar
Bloggers are active on social networks (to
promote their own visibility) – if your music
gets a post it will be mentioned on
Twitter/Facebook/elsewhere
Bloggers read other blogs – will likely repost
something if they like it as well
How to get your music
featured by bloggers
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DO YOUR HOMEWORK: Find blogs that
feature similar styles of music. (E.G. Do not
send your latest R&B song to an indie folk
blog!)
Bloggers gets hundreds of emails a week from
artists who want to be featured. To make your
email stand out:
Make it short: Include a one-sentence
description of what your music sounds like,
a 1-3 sentence bio, two download links and
a link to your MySpace
NEVER send mp3s in attachments – only
send download links (attachments clutter inboxes)
Getting Posts: Is it better to
DIY or get an Agent?
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•
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If you DIY, your emails might go unread –
bloggers get hundreds of emails a week, and
larger blogs like Stereogum won’t read unsolicited
emails
If you pay for a PR agent, they might be able to
get you the kind of coverage that DIY can’t – on
larger blogs and online magazines – IF they have
existing relationships.
Never pay a PR agent if you haven’t seen his/her
artists on blogs you want to be featured on –
bloggers often overloaded by mass mailings from
ill-established PR agents!
Example: DIY
Example: Agent – LCD
Soundsystem on Perez Hilton
Another Model for Success:
Be Successful First
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OkGO broke away from EMI to start its own management, Paracadute
Moby established successful career with aid of EMI. He is now with
“indie” Mute
Aretha Franklin announced that she will leave long time home Arista to
start her own label
Prince “Lotusflow3r/MPLSound/Elixer” triple album set exclusively
released by Target (Warner)
Paul McCartney “Memory Almost Full” – Starbucks (formerly Capitol)
Radiohead “In Rainbows” – Internet/pay-what-you-want/discbox for $82
released independently – “In Rainbows” later released by XL (formerly
EMI)
Madonna left Warner and signed with Live Nation for $120 million deal
Mariah Carey - Chanel and Elizabeth Arden endorsements
Eagles “Long Road Out of Eden” - Walmart represented by Irving Azoff
(Frontline/Ticketmaster) – success at Walmart
50 Cent gave his name to “Formula 50” in exchange for stock. Coke
bought the brand and his share is worth from $100 to $400 million