Category: Music Business

The Grey of Youtube Covers

One of the things I find both fascinating, but also troublesome about Youtube covers is the licensing aspect. Ie, a mechanical license, ie Harry Fox doesn’t really work, as you arent selling, and its not like you can go out and buy 1000 count license for 1000 browser hits. In addition, if you tweak the arrangement, a mechanical license alone is not enough, you need publishers permission. Furthermore, being video is involved, you really should have a sync license… and then figure on selling a good chunk of equity in your house to pull that off.

In other words… the optimum solution is to contact the copyright owner(s) and get permission, and work out a deal. Of course… more than likely, if you are able to track them down, you will likely find someone even more confused than you are. Even if they think such would be cool, more than likely no one will have much of a clue as to how to proceed without some attorney. In a lot of cases, it would seem a no might be a better answer.

That being said, there are covers of nearly everything on Youtube, and it doesn’t seem that very many get pulled, so what gives…

I came across the following post entitled Music, Copyright, and Youtube from @slainson and while she acknowledges the above grey, it seems there is a much much larger window than the above gloom and doom would suggest. Whats incredible cool, is that she keeps updated the entry as more info becomes know.

The following explanation seems very apt.

I think Youtube has developed a new licensing mechanism. It has created a database of content, then matches the content to the user, and lets the rights holder decide if the video needs to be taken down, if the sound gets shut off, or if the video stays. And as Youtube gets bigger, makes more money, and finds more ways to make it financially worthwhile to rights holders to be flexible about content usage, it creates a viable experiment to see if and how copyright and user creativity can work together. While pro-copyright and anti-copyright groups are debating, YouTube has actually created a system, though flawed, which is working and pushing the envelope without going so far as to get shut down..

The article is long, but if you are going to upload Youtube covers, it is a must read. To start building a fan base on Youtube, only to hit 3 strikes and get blown off the map is not cool at all. Some prework may well save a ton of aggravation…. plus you might connect with some really cool folks along the way.

7 Ways to go after Recurrent Revenue without Record Royalties

Massive scaling was the big carrot of record deals. The proverbial work once, and sit back to reap all the rewards based upon the initial investment is something venture capitalists dream of all the time. Being practical though, almost always there is some level of incremental investment in each successive sale. A more realistic model would be to put in a lot of effort once, followed by a nominal amount of effort for each additional sale.

After reading Derek Sivers blog entry Valuable to Others or Just to you, I got thinking… can I make a list of seven or so tangible items which can serve to expand the canvas. More so, can I do this such that most of the value returned is a function of initial investment, sort of like the record royalties of old?

1. Instructional videos showing how to perform your music. It may be individual instruments, it could be technology, it could be special effects… there are many possibilities here. For sure, one riff could be covered in a freebie video on youtube, and then one could charge for a video teaching an entire song/album.

2. Guitar tabs and/or sheet music (which aligns with the recorded performance) I’ve seen numerous requests for this on youtube… Sure, someone else could do this, and make it available for free. However, if direct from the artist, such could provide significant value to a dedicated fan. It wouldn’t scale as well, but signing and numbering each tab/sheet would likely add even more value.

3. Backup tracks in a number of different keys… such would be really easy to do, even if each needed to be individually mastered. Many who bought the album, and then wanted to sing along with it, would gladly pay for such an offering.

4. Online master classes (they scale much more so than do private or even group lessons in person).

5. Custom sheet music arrangements made to order (for choirs and mixed instrumentation) Finale and Sibelius can make short work of such an offering. Granted, this doesnt scale as well, as its a made to order thing… otoh, 80% of this could be done once, the rest is custom orchestration.

6. Ringtones… easy to make too, again a very nominal upfront investment in time to make this happen.

7 Fan generated merch and contests. This is just creative marketing of what one already has… some fan might well come up with the next great thing merch wise, if you give her the tools to make it happen. Rather than a tshirt bundle, include an image file on your cd, include some heat transfers of your logo, and a fan page to submit photos of their creative endeavors. If one adds in the potential to even cross sell such merch between the creators, and to the public, a whole other market opens up. One could even set up some type of revenue sharing arrangement.

The biggest issue for almost any of the above is going to be the marketing of such. Creation wise, most any musician can do so, or they could hire someone to walk then through it, or even outsource it completely. The marketing is the tough part… but since one is already marketing their CD or downloads, any incremental revenue brought in by co-marketing is just icing on the cake… or in some cases, it might well be the whole cake if one uses free downloads for the music itself.

The End of an Era

Records were huge, but significant money was made on merch too. In some case, merch might even come with the record. Indie labels spring up everwhere, and they’d take chances that the large entities wouldnt. As the decade ended, technology changed, and the ability to get music for free, namely through electronic distribution, caused record sales to crash and burn. Sadly, along with the records, so went the merch bundles. Before too long, indie labels either went bankrupt, or merged with larger firms.

The year, 1930…

If one looks at wax cylinder records, and the transition to gramophone records, to radio, is it not that different than that from albums to CD’s to mp3’s on the internet?

Merch was different though, in fact sheet music and piano roll sales were for many years greater money makers than the actual record.

Years back, I used to take my horn to this really old sax guru. He had been with Tommy Dorsey back way back when… and the tour stories of that era make many of todays starving artists appear to live like kings. The economic factors of a big band made such a real feast or famine deal, and famine for the side men, even with a big name artist from time to time was a whole lot more common than one might expect.

There was a glory period for big name acts and record royalties back in the day, and of course more recently. Between such time slots, other revenue streams had to predominate.

Have things really changed all that much?

Coffee houses and PRO’s

Mike King wrote a post entitled “Are the PROs hindering the development of new artists?” and I think the opposite is the case in many situations. Far too many new artists are being taken advantage of ranging from pay to play, to perform for free, to perform for a pittance. If ones music AND ones presentation of it brings in revenue to a venue, then that revenue should be shared with those associated with its production… and even the smallest entities if managed well can and do make more revenue with live music.

The concern is that when the PRO’s (performing rights organizations such as BMI, ASCAP, and SESAC) come in to collect their yearly fees, the venues will quit having live music, and thus kill off opportunities for new artists. The example cited in the article was a coffee shop who had monthly open mike nights, and would need to pay a $332 fee per year. Or in other words, about $30 per open mike night, or about half the cost of an employee, and likely a fraction of the interest they pay for their operating line of credit, or any number of other expenses… In this case I am 100% on the side of the PRO’s. Its not that they can’t pay, its that they dont want to… and if they are that cheap concerning performance rights, I’d hate to think what the musicians get paid. I think most small entities fall into this domain.

The other side of the coin, is that many new artists only play their own originals, where in the song writer would not be compensated by the PRO anyhow. In that case, I would be on the opposite side.

There is also the issue of non-commercial entities with very low revenue such as small libraries, and other community venues. For sure the song writers should be comped in their material is being used… otoh, there needs to be enough volume of scale to make such worthwhile. Ie, it an entity has a gross revenue of $5000/year, all the “employees” are really volunteers, and the musicians play for free has about zero scale. It is likely such a venue will never be large enough to earn enough revenue to even cover their overhead. Otoh, such a venue might well be a stepping stone for a new artist, and thats where things are tricky, and exemptions should be written to encourage rather than discourage live music.

There is also an issue of cultural diversity… I made good money with well known cover tunes (which did get old at times). Otoh jazz fusion and ethnic music which was a blast to play was never received very well by those with the purse strings. Such was more art for the sake of art, rather than for $, and it showed. In a lot of ways, the new artist is in the same boat, irrespective of genre. The songs need to be known, and how do they get them out there, if there are no venues for them? Putting the venues out of the live performance arena is not the answer, but neither is pay to play.

Another challenge is how to sift the non/low revenue outfits, from the small places that are making money left and right. When I think back to my younger days, and small bars (under 25 seats) paying us hundreds of bucks a night, they did so, as they made tons more money with live music. Otoh, I think of the mid size library who brings in folk singers and hammered dulcimers as more of a community service than anything else, and I’m sure even $332 would be a stretch for them. When one looks at the wide scope of music, venues, and situations, its near impossible to come up with a one size fits all solution thats fair to everyone.

Health Insurance interesting article from ASCAP

I found the following pretty useful, albeit its from 2005.

Health insurance for an independent contractor is impossible. This country is in a terrible health insurance situation. We have at least 400,000 songwriters affiliated with the three performing rights organizations who have no coverage at all. These are people that we know don’t have health insurance. It reflects what we’re seeing on a national level in the U.S. Health insurance has just become so expensive for independent contractors; more than half don’t have any health coverage.

Ideally, it would be nice for ASCAP to get group rates, but we would need 70-80 percent of our members to sign up for our health insurance to get group rates. If you don’t do that, you get something that is called “negative selection.” Negative selection means that if you go to any organization and say, “We don’t care if ten or 10,000 of your members sign up. We’ll take any ten or more. If they sign up, fine.” Who signs up? People who can’t get insurance anywhere else. It just blows the whole thing apart. You can’t do that. You need a broad base of people to sign up. We can’t get 70 percent of our members to sign up. Those who really need insurance may have a spouse that has insurance and they’re not going to sign up with us. Or, they can’t afford it, even with a group rate. People who are just starting out of college can’t afford it, for example.


Songwriters and the Zero Revenue Music Media Model

Previously, I wrote about the Zero Revenue Music Media Model. For the individual band or musician, they can get by, and likely ever prosper with alternative revenue sources. A few might even strike it rich. The big problem is providing revenue in the chain for the parts who create huge value. The predicted lower value parts of the chain, ie promotors, labels, and media companies, will find a way to work with alternative revenue sources. Even Apple is looking at alternate sources, in light of the itunes market starting to contract. Such parts of the chain will scream and holler for sure, but if there is a buck to be made, you can be sure they will find a way to do so, and to leverage it to death, and as usual probably to the chagrin of the artist. The huge unknown, and one of the biggest and most critical value contributors is the songwriter.

A few in the recent past made it in alternative arenas, ie film, gaming, contract, or even publication… but significant income was due to media in one way or another. As the revenue model based upon media continues to shrink, radio/tv converge to narrower and narrower conservative focuses… huge barriers are coming up as concerns the song writer. Then, throw in the explosion in the indie artist realm, where the long tail grows even further, and the song writer could well end up left out in the cold.

Yet, the songwriter cannot be left in the cold… they will not willingly go galt. Songwriting is their passion… and unlike many fields is not fungible. A lame songwriter creates lame music no one wants to hear. A good songwriter creates great material…. if their revenue is cut, they will still produce, but the volume of production will drop, as they need to backfill revenue to eat. If that happens, listeners will have a bird, and there will be a demand that songwriters produce, the problem being, how to compensate them, when the music media revenue model has crashed.

The Revenue Zero Music Media Model

@kevinkclee talked about the rise of digital music, and that owning, storing, and listening costs are heading towards zero, thus killing such as a revenue stream. Obviously, those with a vested interest are not going to want to see that happen, but I think its inevitable.

In part, being I just read the full transcript of the Colgan 3407 airplane crash, and its something Captain Renslow brought up during their taxi time. He stated,  “US Domestic laws are dictated by social acceptance.” Specifically he was referring to smoking legislation, ie its become socially unacceptable, and as such laws now prohibit it a great deal. I think something similar is entirely possible in the music domain. Ie, many people see nothing wrong with piracy, and thats either going to drop margins to nill, or to zero.

One possibility is the Iphone software model, where in market driven prices are reduced so much, they reach the sub impulse domain. In such a model, prices become so low, that its easier to buy then pirate. At such a point, a revenue stream would remain, albeit a tiny one, in contrast with today, much less the past. Another possibility is a change in law, as to allow the practice of piracy as currently defined. Either way, revenue based upon media unit sales is going to continue to shrink. Thus, either a totally new method of generating revenue off media will come to be, or alternative  revenue streams will dominate.

Being so much of this is already rolling, I dont see it stopping anytime soon. There is just too much social pressure for things not to return to the way they were, no matter the amount of lobbyist pressure.

Changes in the Business Side of Music

Music was a revenue source of mine for many years, but then chasing semiconductor process issues took more and more time, and something had to give… and the days of being a hired gun were it. During the time I was out of the music scene, many things changed. The whole pay to play thing of today would have freaked folks out in the 70’s and 80’s. Same with the low pay scales, and massively shrunk margins of today…. It is a different world out there for sure.

As a result, I’m trying to catch up on the changes, and from what I’ve been able to gather so far, the changes are happening ever faster with each passing moment. Sure, many of the basics remain the same, but the implementation of such is a different matter entirely. I came across this way cool article, via a tweet from Lunajade which was written  by @kevinkclee, entitled The Music Industry: 7 Dying Sectors & 8 Growth Sectors. Its fascinating for sure. Here are some bullet points.

He presents the following issues…

  1. Digital Music is here to stay
  2. Free and Instantaneous music is here to stay
  3. Due to 1 & 2, the costs of owning, storing, listening is heading towards $0.00
  4. Prior revenue models are heading towards $0.00 becuase of #3
  5. Music may hyper-fragment, mainstream is may shrink
  6. Due to #5, album art, big labels, superstar producers, big budget music videos, ultra-wealthy artists, and recording studios are likely to shrink. In addition, such will likely also cause a major change in the business models of  performances rights organization business models, ie ASCAP, BMI, SESAC.

He suggests the following as oppurtunities.

  1. Tour Coordinators, Mangers
  2. Media consultants
  3. Music discovery
  4. Individual artist management
  5. Sponsorships/Endorsements
  6. Recording/Editing Equipment / Services
  7. Open source producers/artist collaboration
  8. Exposure Tours/Festivals

These are interesting things to consider. I’m not 100% on board with the entire set, but there seems significant logic to back them up. By the same token… this is almost like history repeating itself.  In my younger days, I met a ton of old school musicians. I remember a guy talking about touring with Tommy Dorsey, and the economic disaster they run into after WWII. Another guy at Ampex remembered Bing Crosby’s involvment, and how things went crazy growth wise for them for a number of years. Change has always been with us.

In some ways, memories of years past seem like glory days… things didnt change quite so fast, and one could put a game plan together and roll with it pretty much. Today, thats not an option. Yet, in light of the old school fellows, there really wasn’t that much glory for most. Folks still about starved on tour, equipment failed, promoters ripped folks off, and record deals were never the deal they seemed to be. We tend to only look at the big successes… and forget there were tens of thousands of musicians who never achieved fame, but yet still earned a modest living doing something they loved. And of course, the untold numbers of folks who crashed and burned so badly they left the business entirely.

One encouraging thing that seems pretty consistant with the changes of today, is the small underfunded outfit has a much better chance than ever before. By the same token… unless that small underfunded outfit has their ducks in a row, the probability of crashing and burning is incredibly high, likely more so than ever before. The margins are just not there to withstand major failures.

Over the next few posts, I intend to take a look at these different avenues individually, and see what shakes out. It should be interesting.