Better Late Than Never? Music Industry Starts Adapting to Digital Age

When Shawn Fanning created Napster in 1999 it set off an explosion of file sharing across college campuses nationwide.

While the act of file sharing created careers for previously unheard of independent bands like Dispatch, more established acts like Metallica and Dr. Dre, along with the Recording Industry Association of America, insisted people were stealing music and actually sued individual file sharers.

Undeterred, millions of Americans continued trading mp3’s and burning CD’s for their family, friends, and co-workers. For ten years the music industry has been left dumbfounded by this brutal attack on their business model and album sales continue to plummet.

When news came last August that a private equity financier named Guy Hands paid $6.3 billion for EMI Records eyebrows were raised. Some of his previous investments included gas stations throughout Germany and hotels and pubs in Britain. By no means a lightweight, Hands Private Equity Firm Terra Firma had earned his bosses over £1.5 billion profit since 2002.

At EMI Hands immediately set to work trimming costs and in the process stepped on many toes. He discovered some employees were disguising write off’s for “drugs and prostitutes” as “fruit and flowers” so he started making employees provide receipts for every expense.

In January of this year Hands announced EMI would be trimming 2,000 jobs and critics responded saying Hands’ restructuring of the company appears out of touch and ruthless at best.

Despite his lack of empathy for artists’ sensitive egos, and his blatant disregard for industry veteran’s extra-curricular activities, Hands displays a keen awareness in his embrace of online digital strategy.

In addition to slicing the EMI workforce by one-third, Hands’ response to the erratic climate of the music industry and the rising tide of digital sales has been to cut costs by reducing artist advances and to pay less for marketing music.

Popular acts like Paul McCartney have left the label over disputes related to copyrights and this past week rumors have been swirling over the departure of the Rolling Stones. However, since EMI owns the publishing and licensing rights to the Rolling Stones catalogue (a major source of their income) it would be pointless for the group to leave.

A dispute last fall over an advance worth £10 million caused British rock band Radiohead to leave EMI and the band followed suit with a strategy unheard of in the music world. Radiohead released their new album In Rainbows online allowing fans to pay “whatever they wanted.”

While Radiohead kept the official tally a secret, industry analysts suspect they sold close to 1.2 million digital downloads of the album before physical copies were later released. Radiohead front man Thom Yorke said the band made more in digital sales for In Rainbows than in all previous digital album sales combined. After In Rainbows was released in physical form it shot to number one on the music charts in both the US and the UK, debunking popular criticism over their strategy that undoubtedly led to file sharing or so called ‘piracy’ of their album.

It is clear that Hands isn’t relying on his personal popularity at EMI to sell music, and he certainly isn’t relying on the traditional music industry model of selling physical copies of albums either.

At a gathering of band managers last autumn Hands said Rupert Murdoch had scoffed at his acquisition of EMI by saying, “Myspace is going to be the future of music, not record labels.”

As if adhering to Murdoch’s assessment, a confidential business plan from Mr. Hands’ investment firm reports an additional way to reduce costs is to use social networking sites to ”source new acts and as a means to test public reaction to individual acts.”

Despite their differences, both Radiohead and Hands are examples of how industry leaders are adapting to the digital revolution affecting the music industry.

Other artists have adjusted to file sharing by simply giving their albums away for free, effectively using their music as a promotional tool towards other means of generating income. Prince placed three million copies of his new album in London’s Sunday Times last year then proceeded to sell-out 21 straight concerts. Through his actions Prince discredited album sales as a source of income, and instead put his faith in concert ticket sales and other monies he earned from publishing and licensing royalties associated with merchandise.

Another example comes from EMI artist Coldplay. In April they released their new single Violet Hill for free as a digital download. When they released their new album last week they went to number one on the charts and reported over 302,000 sales (more than the next five albums on the charts combined). However, the number is still down from the 464,000 album sales for their last release over the same period.

How does this information relate to less established artists?

In May of this year the PEW Internet and American Life Project released a study showing 64% of music buyers discover music from family, friends, or co-workers. Social networking Web sites have made family, friends, and co-workers more connected and the advent of newer technologies like the mp3 has made it much easier to share music.

Digital sales are improving and according to the latest figures by the Recording Industry Association of America online digital sales have increased from 0% to 23% of the market share over the past five years. Keep in mind a Nielson study from December 2007 shows only 71.7% of American’s regularly use the Internet and only 21% of the world regularly logs on. Those numbers will continue to increase at a dramatic rate.

These examples from Radiohead, Prince, and EMI illustrate it is very important for artists to maintain their publishing and licensing rights because in the new digital age artists can’t expect to generate as much of an income through album sales. It may be time for artists to consider their album as more of a promotional tool and to focus their efforts on securing licensing deals through movies, advertisements, TV shows, video games, and related means. While these options were once called “selling out” they may be your only shot at a comfortable music career.

Social networking Web sites, an effective communication strategy, and word-of-mouth marketing are just several specialties a PR Firm like CFM could offer in promoting an artist’s musical reach to greater audiences while simultaneously trimming a bloated advertising budget.

Thoughts on Social Networking Web sites ...

I recently completed some social networking sites for my favorite author, Bill Carter. I invite you to add the books to your friends list - and above all else I invite you to read them.

Red Summer

Fools Rush In

I have been thinking a lot about social networking lately. Many people who are friends with Fenbi now were originally friends because of the work we did with The Young Immortals.

Firstly, we performed at Shaken Not Stirred once a week where we just goofed off and had fun and became friends with one another. Next, we kept in touch not only through work and friendship, but also through myspace. I think I have had conversations with nearly every person I met through Shaken Not Stirred via myspace, and that is pretty crazy if you think about it.

There is a huge rage going about the PR world right now as professionals try to figure out how to fully utilize social networking Web sites. But I think I have come to believe that social networking sites are only one piece of the pie. You still need to have community outreach on a personal level, and you can't expect anything on the net to replace something as simple as putting posters up around town.

Any promotional effort needs to have many moving parts and just like we have realized so many times in the past in science, or marketing or whatever - there is never a silver bullet to any problem in life. People are complicated and so is society.

Anyway - I don't know if any one will get anything from this blog ... but let me know what you think.

Portland Music Scene

Every once in awhile I like to write a blog about the Portland Music Scene. Every time I do I can't help but feeling pretentious and a little misguided at best. After all, I don't really go out to shows that much and I no longer enjoy spending my weekends (and weekdays) drinking Pabst at shitty smokey bars.

Performing with a band 2-4 times per week will cure you of wanting to see other bands perform and will likely cure you of hanging out in bars too. Although it is likely to encourage you to be an alcoholic. Now, the only bands I want to see are ones that I have heard of and bands that have been a part of my life. I want to see Stone Temple Pilots, Radiohead, Pearl Jam, Ryan Adams, the Pogues ... you know ... established artists. I don't want to see your shitty friends shitty band.

And that attitude is precisely why it's going to be hard to get people to see our band. It's funny but true - because we're your shitty friends shitty band. If only by default.

It's hard to get people out to shows these days. I know 10 years ago it was hard too ... we have to compete with so many things. We have to compete with the "shitty friends band complex" but we also have to compete with whatever popular TV shows are keeping people at home. We have to compete with movies, books - so many forms of entertainment that are FREE. The internet for crying out loud ... youtube ... It seems like the only thing we don't have to compete with these days is someone whose only option is to watch paint dry - and even that is debatable.

I dunno. This is a shitty blog that doesn't make any sense and I don't really even believe any of the things I said. I have to admit I just wasted your time. I only wrote it because I am bored and waiting to receive an important email. Maybe a part of me is hoping that if someone google's "Portland Music Scene" our blog might come up ... and someone might be inclined to check out just another shitty friends' shitty band. Or whatever.

Modern American Musical Slavery

The other week I had an interesting conversation with an acquaintance who plays in a soon-to-be famous rock and roll band signed to Epic Records. It was a conversation about licensing and publishing rights - a topic that was part of a reason I quit my last band - and something my friend admitted to spending several months talking over with his band and lawyers.

He brought up an analogy about car accidents. He said that as a drummer, if he were killed in a car accident the other guys in the band could reluctantly replace him if they wanted. On the other hand, if the singer was killed in a car accident, the band would be over and they would have to go their own ways.

What he said had a lot of truth to it. There was no 'Experience' after Jimmy Hendrix died. There was no continuation of Nirvana - there are tons of examples of bands that did not continue after the singer died.

I think this is a really lame way to look at band agreements. I am of the thought that everyone who contributes to a band to be able to split everything equally. Here is my argument.

Often times for years, the members of a band will struggle together to reach a goal of signing a deal with a label or at least garnering some form of success. They often work as a team ... each person lending a hand in making sure the songs reach an audience ... everyone practices ... everyone plays their part ... and like any entrepreneurs each one of them puts the rest of their life on hold for a common dream. So why is it fair that one member gets more benefits when their effort finally pays off? It's not fair. Everyone should be recouped for the years they spent laboring for free ... not knowing if the sacrifices they were making would actually pay off.

My final thought is that the concept of giving the singer and/or songwriters any more of the publishing or licensing or any other monies is just like good ol' fashioned slavery. It doesn't matter if we're talking about musicians ... or pirates on a ship - the people in power (record label or pirate captain) always want to give one of the slaves a little extra power so that the other slaves have someone who controls their fate (either beating them or controlling them with their financial power).

The singer/songwriter will always exist ... there are billions of them ... and the songs are NEVER what carries them to fame and notoriety. It's the people forming the mosaic of support that make it happen - whether it's girlfriends or family or friends of band members. That is why I think the British band the Ting Tings are a couple of twats. If you read one of their blog entries they call to attention a friend who is selling copies of their vinyl album for 60 pounds. They berate their friend and say "they would never ever make their fans pay an outrageous price." Get over it! That is what I say. I don't know the friends ... I don't know the situation ... but those friends trying to make an extra buck were probably the same friends letting you crash on their couch, buying you coffee, holding your hair out of your face as you vomit.

People, get over yourselves. Be a team. Call me a communist if you must. This blog is not complete and I will probably revise it when I have time ....