Category Archives for "Commentary"
The annual IFPI revue of the music business confirms what all the other studies have shown – that music is truly on the comeback trail. After years of doom and gloom, the industry has seen its first double-digit rise in revenues in nearly 20 years, all thanks to streaming. The skeptics said it would never happen, but the numbers don’t lie, as a billion dollar increase in income shows that the format replacement cycle has finally has finally taken hold.
The IFPI found that there were 112 million paying streaming subscribers, which is a little higher than most other studies have found. The predictions were that once the industry got to 100 million subscribers then the pain from the death of the CD would be lifted, and the prediction proved to be true. The fact of the matter is that this 112 million figure should be just the tip of the iceberg, as there’s still plenty of room for improvement.
One of the things that industry analyst Mark Mulligan cited was the growth of streaming in South America. When the CD was king, most of the consumer’s money went into purchasing a player, then the user bought mostly inexpensive bootlegs CDs, which meant no money returning to the artist, label, songwriter and publisher. Streaming changes the whole equation though, since most people already own a smartphone, so subscribing to a free or paid tier is more affordable. The same is happening in other parts of the world as well. Chalk that up as a win for increased revenue and royalties. It also shows why that 112 million figure is just a drop in the bucket.
Just to put this all in perspective though, streaming numbers will have to increase in a big way, as the CD revenue is about to collapse in the both Germany and Japan. Of course, it’s still a big business in the U.S. at a little less than a billion dollars a year, but expect that number to fall off a cliff soon too, maybe even in 2017.
There are still a lot of inequities when it comes to streaming royalties, beginning with the way they’re currently calculated by the streaming services like Spotify and Apple Music to the minimal payments from YouTube, but strides are being made in both areas that can change the dynamic soon. Word is that 2017 has started off a little flat on the revenue side of things, but barring some unforeseen catastrophe, 2017 will end up being another good year for both streaming and the music industry.
Music is a big part of the nightlife of any city, but venues everywhere have been seriously threatened by rising real estate costs, noise control laws, and city taxes. Luckily, many cities are finally waking up to the fact that a city without music is a far less attractive destination or place to live, and the effort is being make to save local music venues.
London has a master plan in place to save its existing music venues, and is even creating a new position of Night Czar. Even so, local tax increases still threaten to close down many pubs and music venues.
Philadelphia has introduced a new Music Industry Task Force to try to reestablish the city as the music center that it once was, and the Pittsburgh Downtown Partnership has created a new initiative to bring more music to the city as well. Denver has a particularly thriving music scene these days that’s often overlooked by everyone but touring musicians in the know.
Yet venues everywhere struggle against against gentrification, which not only raises real estate prices beyond what a venue can reasonably pay, to local condo owners complaining about the loud music and patrons as well.
Clubs have a definite lifespan, and one that makes it beyond 5 years might be considered living on borrowed time, but the challenges facing club owners today are greater than ever. Increased liability for drunken customers, DUI laws that limit consumable beverages putting an artificial limit on revenue, and a limited number of acts that can actually draw a crowd put extreme pressure on anyone running a club.
But clubs and small music venues are the farm team of the music business. It’s where young artists and bands develop their musical and performance chops, build their followings, and hone their shows. They’re vital to survival of the industry as a whole, so everyone should shed a tear for any venue that closes. That said, at least there’s a newfound awareness regarding the fragile nature of the music culture by many cities that just wasn’t there before, and that could only be a good thing.
It looked like Spotify’s strategy was to go public this year, but recent announcements have pretty much put that aside. The IPO (Initial Public Offering) market has changed recently, and tech companies can no longer be assured of the big paydays of just a few years ago. As a result it looks like the company’s new plan is to look for a buyer instead.
Now to be sure, Spotify has over $3 billion in revenue, but it also has been losing money as well. It currently has a lot of investors that want to cash out, and if an IPO is risky, then those investors are going to push for another way to get their money, which is through an acquisition.
Industry consultant Mark Mulligan thinks that a buyer probably won’t be Western. All the deep pocket companies like Amazon, Apple and Google already have their own services. Facebook is a possibility, but still not a good fit. Mulligan thinks that the only reason why Apple might be interested is to use up some of its off-shore cash reserves before it gets repatriated by the Trump administration, but that’s still a long shot. European companies don’t seem to be interested either.
That leaves Eastern companies and there are a number of them that could be potential suitors. China’s Tencent is already the streaming leader in the Asian market and the company has the money and the will for an acquisition. It would give the company an entrance into the West and immediately make it the 800 pound gorilla of music streaming.
There are a number of other Chinese companies also on Spotify’s radar. Alibaba, Dalian Wanda, and Baidu all have pockets deep enough to pull off an acquisition. Mulligan also suggests that a couple of telecommunications giants could also be in the running with SoftBank and India’s Reliance Communications being the most likely, although 21st Century Fox and Liberty Global may also see some synergy with Spotify in the fold.
One way or the other, it looks like Spotify is going to be going through some changes soon. How will that change its service? Probably not much actually. Until the license agreements with the major labels are renegotiated so the company can offer lower prices, things should still remain the same for some time to come.
There have been some pretty crazy plagiarism lawsuits brought against some of the biggest stars in the last few years. These have had a chilling effect on artists, songwriters, labels and publishers everywhere.
This funny video from the stars of Portlandia kind of says it all on the subject, at least from an artistic perspective. Do you have an attorney that’s so good he should “get a Grammy for suing”?
The part I like the best is the fact that the attorney in the video “owns the key of G.”
Payola has always been part of the music business and many insiders feel that it’s the reason that some artists become stars, and some stars become superstars. Without money or favors changing hands between the record label and the radio station/streaming service, a song might never gain the visibility it needs to become a hit. While this was a dirty under-the-table business in the past, today it’s a lot cleaner and above board in that we call it “corporate sponsorship” instead of payola.
What is payola? When it first reared its head in the 1950s, a record label would drop a wad of cash on a DJ or program director in order to get its record played on the station. It was basically renting the air time, or sponsoring the song, but it was never identified as such (or probably even thought of in that way). Soon payola was made a crime, so the labels then turned to “independent promoters” who handled the same transactions with the stations so the labels could legally say they weren’t involved. In many cases, drugs, vacations, and luxury items like big screen TVs where substituted for cash, but it had the same effect – getting airplay for the song on the station.
Today that still might happen in radio, but much of the attention has now turned to playlists, where indie promotion men now do their thing trying to influence the influencers to include a song or album on their playlist. That said, a new form of legal payola now exists in corporate sponsorship, which is completely out in the open even though we might not recognize it as what it really is.
It’s much more difficult to get radio airplay these days since stations are now owned by large station groups, so brands, bands, artists and labels have turned to sponsorship to fill the gap. For instance, Pepsi launched “The Sound Drop”in a partnership with MTV, Shazam, and iHeartMedia to spotlight artists who are already on major labels and in rotation on iHeartRadio. Not to be left behind, Dr. Pepper’s “One of a Kind Sound” is a series of artist promo spots designed to look and sound like pre-release album teasers. And of course, a few years ago Warner Music famously partnered with iHeartRadio to actively promote its artists (there was even a big announcement). Radio stations and groups continue to offer festivals and that’s also become a huge business. In fact, there was over $1.5 billion in sponsorship money spent last year for live events.
The artists of past were very idealistic about anything related to sponsorship and stayed as far away from it as possible in an effort to keep their music as pure as possible. Today those ideals are pretty much dead, as sponsorship is the main focus of the artist, management, labels and brands. It’s a new world out there where we might call payola by a different name, but it’s still payola just the same. If you don’t have the money, you can’t play the game.
One of the downsides of live music is that only so many people can experience it at any one time. Whether it’s a club, concert or festival, attendance is limited to only the people that are able to make it to the venue, even though many more may desire to do so. Live video feeds and broadcasts changed this somewhat, but haven’t caught on to the level that was expected, mostly because the experience is fairly limited from a viewership point of view. It’s not all that realistic, after all. This could all change thanks to virtual reality though, as was recently pointed out in an NBC post.
VR, even if it’s cheaply created and delivered, is a much more enjoyable experience as it gives you the feeling that you’re actually in the venue. Turn you head to either side and you see the people in the crowd. Turn to the rear and you see the bar. Turn forward left to right and you either see the individual band members on stage, or the expanse of the DJ booth. Look up and you see the ceiling, lighting and sound system. Look down and you may see a lighted dance floor. For all intense and purposes, you are there and you have the best seat in the house.
The picture portion of VR is way ahead of the audio however, which is the missing link in the experience. There’s not enough attention being paid to the this aspect and it’s the final piece of the puzzle for a truly live experience. The tools are available, but the integration with those high quality tools isn’t seamless at the moment, and it adds a level of expense that many club owners don’t want to absorb, although the bigger the venue, the less this becomes an issue.
Make no mistake about it, virtual reality may become a significant revenue source for both artists and venues in the future as soon as the kinks are worked out. That said, there’s a fear among venue owners that the experience can potentially be so good that it’s actually better than being present live in the venue. We’re not close to that yet, as VR is still in it’s infancy, but look for it to make its mark on live music in a big way in the near future.
The major record labels are adamant about keeping the price of a music streaming subscription at $9.99 per month, regardless of the platform, so it was a great surprise last week when Amazon announced that its new Amazon Music Unlimited service was priced at $7.99 per month for Amazon Prime members. It turns out that the labels haven’t softened their pricing stance at all, as Music Business Worldwide reported that Amazon will actually end up subsidizing the other 2 bucks when all is said and done.
It turns out that Amazon is expected to be paying out from between $5.50 to $6 each month to record labels and artists for each $7.99 Prime subscriber, and an additional $1.50 a month to publishers and songwriters. When you figure in administration, marketing, staff and infrastructure costs, that means that most if not all of that monthly fee has pretty much been eaten up.
So what’s the company’s end game?Amazon might be pulling an Apple here, losing money on software in order to sell more hardware and make a much higher profit. While Echo and Dot seem to be hits and are the leading products in this new category, there very well may be more hardware devices from the company on the way . Using music streaming as a loss-leader to make it’s hardware more attractive has been tried by many companies though, particularly in the mobile space, and only Apple has been wildly successful with the strategy.
The price subsidy could also be another way to increase Prime memberships. While Amazon doesn’t publish the actual number of subscriptions, insiders have reported it to be around 60 million, and when you consider that each one is paying $99 a year for the privilege, you can see why anything that might increase that number could be valuable. Still, it seems like a stretch to think that the average music user will say to himself, “I really want to subscribe to this music service because of this great price. Let me pay just $99 more so I can buy in.” [Read more on Forbes]
Amazon has finally launched it’s long awaited stand-alone streaming music service and it’s called Amazon Music Unlimited. On the surface it has a number of interesting features that differentiate it from the other major streaming services, but one has to wonder whether potential users will find them compelling enough to subscribe.
Perhaps the service’s biggest feature is price. If you’re already an Amazon Prime customer, Amazon Music Unlimited is available for just $7.99 per month or $79 per year, undercutting the norm of $9.99 per month charged by most other services. If you’re not a Prime customer however, you’ll still be charged the customary $9.99 per month.
If you happen to own an Amazon Echo, Echo Dot or Amazon Tap device, the price is even lower at $3.99 per month, but music playback only works on that device. If you want to receive the full Amazon Music service on your phone, for instance, you’ll still need to pony up for the full Unlimited tier at either $7.99 monthly if you’re a Prime member, or $9.99 if you’re not.
On the surface this seems pretty interesting in that a lower price for streaming is what major industry consultants have been advising for years. Even back at the peak of the CD boom, the average music buyer never purchased $120 worth of music per year, as is the case now with a $9.99 per month streaming plan. Though there’s been a decent amount of streaming penetration at that price point, it’s still only 10% or less in some territories, according to industry pundit Mark Mulligan. Potential subscribers that might not ever buy at $9.99 are more likely to change their minds if that monthly threshold was lower.
That’s why Amazon Music Unlimited’s $7.99 per month price point looks so inviting. It’s a step in bringing that monthly fee more in line with the expectations of the greatest number of users.
The problem is that this price is really a mirage.
You have to be an Amazon Prime member in order to have access to the $7.99 price, and this is after you’ve already payed $99 for your Amazon Prime subscription for the year. And, as a Prime member, you already have Amazon’s Prime Music service available to you for free, so why would you want to pay the extra 8 bucks a month for something that you’ve already paid for?
To be fair, Amazon Music Unlimited is different from Prime Music in a number of ways. There are a lot more songs available (Amazon will only say its in the “tens of millions” as compared to Prime Music’s two million), there are curated playlists, behind-the-scenes artist commentaries, and a new app. Is that worth the extra money per month? It will be interesting to see just how many of the estimated 60 million Prime members say, “Yes it is!” [Read more on Forbes]
If you want to start a music label executive ranting and raving, just mention YouTube. It’s currently public enemy #1 to the music industry thanks to its relative intransigence over royalty payouts that execs and artists alike feel are way too low. That’s a good reason why Youtube may think its brand new hire of music business insider Lyor Cohen as head of global music will help smooth over its difficulties with the labels, but that line of thinking will probably turn out to be somewhat misplaced when the dust settles.
Cohen comes from his own indie label, 300 Entertainment, after years as a senior exec at Universal Music subsidiary Def Jam, then Warner Music. At Warners, he helped oversee that company’s transition to digital distribution, being instrumental in signing licensing agreements with both Spotify and YouTube, so on the surface this looks like a great hire. Get an insider who knows everyone in the business and how the game is played, and YouTube’s trouble may be soon over, or so the thinking probably went.
The problem is that Cohen isn’t exactly a beloved figure in the industry, so he’ll not be welcomed with open arms to any negotiation, especially if he’s there to play hardball and keep the status quo regarding the royalty rate. Right now YouTube pays only 55% of ad revenue for monetized views, while other music distribution services are in the 70% range and even higher. That’s where the music industry wants to be, but YouTube doesn’t feel compelled in the least to acquiesce, and why should they? If a major label withholds a license, its songs will still find their way onto the platform thanks to the many fans uploading their own videos with the songs attached. YouTube is immune from any copyright infringement prosecution thanks to the Safe Harbor provision of the Digital Copyright Millennium Act.
While it’s possible to identify videos with unlicensed music via YouTube’s Content ID system, most labels feel that it doesn’t identify enough of them, leaving millions of possible monetizable videos views unreported. An improvement to the algorithm is something that the industry is also demanding.
Reportedly, all three major label’s license agreements with YouTube are now out of contract and updated versions of these agreements are currently on the table. Presumably, that’s what YouTube wants Lyor Cohen to handle, but unless he brings a substantial royalty increase with him, you can be sure that the company will continue to remain in the cross-hairs of the music industry, even with an insider at the helm.[This article originally appeared on my Forbes blog]
In my experience there are two kinds of songwriters. One writes completely from the heart as an expression of art, while the second does it more as a business, writing whatever the situation calls for. Neither is more noble than the other, they’re just different, and both require a tremendous amount of skill and passion. That said, the balance between the “artist” versus the “professional” songwriter might have changed recently. Today there are more artists and bands that will do anything to have their songs exposed, even if it means making fundamental changes that might have been ignored a decade ago. That’s all thanks to the new role of the television and film music supervisor.
With more and more chances for exposure thanks to our new 500 channel universe, the music supervisor has in some ways become the new A&R man, discovering music that many record labels or publishers wouldn’t otherwise touch. If a song gets placed in a show or film, there may be a better chance of getting that label or publishing deal as a result, so many artists and songwriters are now going against their instincts in order to give the music supervisor a tailored version of their songs, which may be completely at odds with their own artistic integrity.
A great example of some of the comments given to an artist from a music supervisor can be seen in the following quotes from a great article by Patrick Duniven in the LA Weekly.
“Your song is really beautiful but it will never get placed because it’s too personal and limits where we can put it.”
“You shouldn’t use the word love in your songs because it will be difficult to place it.”
“Your songs stand out too much; try and write some stuff that blends into the background better.”
Now to be fair, music publishers who push songs to music sups, and the music supervisors themselves are just trying to do their jobs, but there was a time in the not too distant past where a comment like found above would more than likely draw a “F**k Off!” response rather than a mad dash to the studio to try to configure the song to notes, which is like trying to catch your tail while running in a circle anyway. Many artists play the same game with labels by following the latest trend, but they’re always behind as a result.
The sad part about all of this is that trying to catch a placement is so much less lucrative than it was even 5 years ago, with so many artists and bands now trying to get into the game for exactly the same reason. That’s driven the advances way down, as well as the placement’s worth, to a little better than nothing.
So artists, bands and songwriters, do your best to keep the integrity of your art. The next time a publisher or supervisor asks you to make a change, write another song instead. Keep the comments in mind, but don’t force yourself to go where it doesn’t feel right. You’re going to be a lot happier in the end, and your music will be better too.