TuneCorner

All About Income Streams, Part II

When TuneCore first began, we called George: few people understand the music business as deeply. George Howard is a professor of management at Loyola University, New Orleans. He is the former president of Rykodisc, and founder of Slow River Records. He is the senior editor for Artists House Music, and a board member and advisor for a number of companies including Wolfgang's Vault and Daytrotter. He has written two books on the music business for Berklee Media. Check out his personal blog at www.9giantsteps.com.

Click here for Part I.

Recoupment of royalties

Now, let’s move it a bit closer to reality in order to show you how important mechanical royalties are. Let me say this clearly, most records never recoup. The money that the label spends recording and marketing the record is almost never made up in sales, and therefore the artist receives no ($0) “artist royalty.” To make this completely clear, suppose in our example above that Sinatra’s label had really decided to “go for it,” and had taken a year to make the record, and had gone all out trying to market it (made numerous videos, paid for visibility in all the major stores, tried to make a song a #1 hit on top-40 radio, etc.). This marketing effort ended up costing the label $3.5 million dollars. Sadly, even with all the additional marketing efforts, the record still sold the same million copies and generated the same $3 million dollars in royalties for Sinatra. But, because the label spent $3.5 million, Sinatra actually owes the label a half-million dollars. In industry parlance, Sinatra is unrecouped (or upside down) to the tune of a half-million dollars

For writer “A” and writer “B,” however, nothing changes. Each writer still receives their $455,000, even while Sinatra receives nothing! The label has to pay these mechanical royalties for the right to use the songs, whether they make a dime in profit or not—it’s the law.

All About Income Streams, Part I

When TuneCore first began, we called George: few people understand the music business as deeply. George Howard is a professor of management at Loyola University, New Orleans. He is the former president of Rykodisc, and founder of Slow River Records. He is the senior editor for Artists House Music, and a board member and advisor for a number of companies including Wolfgang's Vault and Daytrotter. He has written two books on the music business for Berklee Media. Check out his personal blog at www.9giantsteps.com.

All about Income Streams, Part I
--By George Howard

One thing that’s very important to get a handle is the multiple royalty (income) streams available to artists. As an artist in today’s landscape you must think in terms of varied sources of revenue. What many artists don’t understand is that there is a HUGE difference in potential income streams for the person who writes the song versus the person who performs the song. This article will explain these differences and illustrate the first two multiple streams of income. Future articles will explain further streams.

Concept of the song as a separate entity from the performance of the song To begin to understand how this works, you must separate out the performance (or recorded version) of the song from the actual song itself. Think of it this way, Frank Sinatra never wrote any of his songs. He performed songs written by lots of different people on his albums, on his TV appearances, via radio broadcast, and in venues, but he didn’t write any of the songs. Why is this important? It’s important because, every time Sinatra released a record, the person (or people) who wrote the songs got paid. It’s important because, every time Sinatra sang on TV, the person (or people) who wrote the songs got paid. It’s important because every time one of Sinatra’s records was played on the radio, the person (or people) who wrote the songs got paid. It’s important because when Sinatra was one of the top-grossing touring acts in the world, the person (or people) who wrote the songs the he performed on stage got paid.

Now in some of the examples above, of course, Sinatra also got paid. But what’s crucial to begin understanding is that Sinatra got paid for something completely different than the writer(s) of the songs did. Sinatra got paid for performing the song, not writing it. For performing the song, Sinatra received a royalty from the label called an “artist” or “record” royalty (both terms are used, they mean the same thing). This “artist” royalty is based on a percentage of the list price of the album, while the writer of the song(s) received what is called a “mechanical” royalty based on the number of songs the writer has on the album.

The Gigging iPod/Laptop Musician and the Phantom Menace

...or, Learn how to connect your iPod or Laptop to a to a PA mixer safely and noise-free.

by Barry Rivman

From our friends at Music123 comes this article vital to anyone who ever sets up a tour date. It's written by Barry Rivman, a 25-year survivor of the music industry, studio owner, independent producer, and multi-instrumentalist who attended the Juilliard School of Music for composition and The New School in New York for recording engineering and synthesis. He created number one-selling pop tracks for the Tennessee Production Company/Charbuster Karaoke and recently learned advanced recording and mixing techniques from multi-platinum producer/engineer/mixer, Michael Wagener. Learn more and be part of Music123 when you sign up for their weekly email here.

Performing live with prerecorded track on iPods or laptops running sequencing programs such as Ableton Live etc. is getting increasingly popular. Whether you’re running through your own PA or need to plug into a venue’s house system, there exists the possibility of doing irreparable damage to your expensive iPod or laptop due to phantom power or improper cable connection from a stereo source to a mono channel. Noise can also be a problem. Here are the solutions:

Answer these questions three, or be cast into the pit of eternal peril

If you have dedicated CD/Tape inputs, or line-level stereo input channels, a simple Y cable from your iPod (usually 1 x 1/8" to 2 x RCA or 1/4" depending on available input jacks) will do the trick. If your laptop has RCA audio outputs from the sound card, male-to-male RCA or RCA to 1/4" cable is all you need. Hopefully, the tape-in section will have its own level control so that you can make it louder if necessary. As long as the mixer (powered or otherwise) is near you, there shouldn’t be a problem. Things can get dicey, however, if one of three conditions exists; your mixer is more than ten feet away from you; you want to plug into two mic/line channels for more control over the sound, or you’re playing in a venue where you must use the house system and plug into a stage snake.

Trending Is Live, Plus New Store: ShockHound.com!

We're LIVE with Trending data! If you had sales from iTunes in the last week (Monday through Sunday, May 26 through June 1, 2008), and iTunes reported it, log in and click "My Account" and you can download the week's report for only $2.98 and see what sold, how many, by song and/or album, by artist, and also see the COUNTRY, STATE and CITY and ZIP CODE of where it sold!!

We're going to be adding back weeks (and of course forward weeks) over time.

Enjoy this new data, it's revolutionary!

Also, new store! TuneCore now delivers to ShockHound.com, the soon-to-be-launched Hot Topic store and community service and sharing site.

Thanks everyone! Major announcement by email coming soon.

--Peter and the whole TuneCore Team

Apple changes the rules again.....

Very soon we are due to launch a new feature for TuneCore customers. If you sold music in iTunes you will be able to log in and see weekly trending sales data showing how many songs and/or albums sold the previous Monday – Sunday, the zip code/postal code, country and city of the buyer. In addition you also see the date of the sale and the projected money you have earned.

Apple has released this data to TuneCore and we built the system to ingest it and split it up between everyone’s account.

I wrote a press release about this and sent it to our publicist. They wanted to see if we could get some big press out of it by offering it as an exclusive to a news source. Good idea. The news source gets the exclusive (meaning they get to write about it before anyone else does) and in return they commit to running a feature story. After the first two outlets passed on picking up the story, a third one showed interest and asked this simple follow up question.

“So itunes doesnt offer this type of report to artists directly?”

My answer (kept very bullet point and staccato as it was a factual press inquiry) was:

“To have access to this info you have to be in a direct deal with iTunes

iTunes does do not do direct deals with most artists. The artists need to go via middlemen (the aggregator)

Most aggregators do not do deals with most artists, they filter whom they choose to work with by varying degrees. Most aggregators try to do deals with labels.

The aggregator has access to the Apple data, but in addition to access, it needs to build the technology to ingest the reports and then the tech to splinter it out to the different labels in a deal with the aggregator.

The labels would then need to build the same system - ingest these daily files, splinter them out by artist, title, song etc and then create the technology to deliver these files to the artists outside of the royalty accounting periods.

Labels account to bands either quarterly or bi-annually - usually 30 to 90 days after the end of each quarter or bi-annual period. Labels do not provide this level of detail to a band (take it from a guy that ran one for 20 years)

So the short answer is no, artists have NEVER had access to this information before - Apple is the FIRST retailer on the planet (as far as I know) to release the zip codes/postal codes of its buyers to the supplier.

And TuneCore is the first "supplier" to hand this information to the artist”

I clicked send and about two minutes later realized the magnitude and importance of this.

For the first time a “retailer” (Apple) is allowing people to know extremely detailed information about its customers, down to the zip codes of its buyers.

This would be the same thing as Tower Records supplying the Zip Code of each buyer of CDs at Tower to the record labels.

It just did not (and does not) happen. This information is usually very highly guarded by the retailer (not to mention very hard to collect). And Apple released it. Kudos to them!

Because the release of this data is so new and no one has ever released this it before, there really weren’t pre-existing systems set up to ingest it all. And even with these systems built, there was still a barrier between the company that received the information and handing it out to the musicians.

In other words, record labels just do not send daily or weekly information at this level of detail to the actual artist. Sure, there is something called Soundscan, a third party company which trys to provide this data, but it is not 100% accurate nor does it have this level of detail. And although anyone can buy this information from Soundscan, the price is quite high (thousands of dollars for access to it). However, Soundscan does compile all the sales information from all the stores into one report. The reports in TuneCore are only from Apple.

That being said Apple is the number one seller of music in the US (if not the world).

Now, for the very first time, musicians can have very detailed information about who their fans are, where they live, what songs are being bought, how often, what country, how much money they have coming to them when the accounting statement shows up the following month and more from the largest seller of music on the planet.

With this information, musicians have the ability to plan a tour to where their buying fan are as well as promote themselves to local radio, TV, newspapers with hard proof that they should be covered. In addition, for TuneCore users, artist have a pretty good idea of how much money is coming down the pipeline and when.

Planning out cash flow, buying things, tour support issues all become a lot easier.

The most interesting thing to me is, the entities that control this data do not release it as many are concerned it could hurt them if they let it out, seems to me, it just makes things more robust and healthier. With more information, there is more reason to pursue your passion which can only be better for us all.

The TuneCore Huffington Post Article

This posting went live at the Huffington Post some time ago - I thought it made sense to make it available here as well.

The Democratization of the Music Industry

(The original posting can be found here.)

Due to the advent and adoption of the Internet, digital media and hardware by the masses, control of the global music industry has being broken. For the first time, all music creators can choose to be their own record label – there are no longer subjective gatekeepers controlling who gets let “in”, promoted, exposed and made available to the masses, the choice now becomes ours.

For the past century, artists could record, manufacture, market, and, to some degree, promote their own music, but no matter if they were The Beatles, Elvis or Led Zepplin, they could not distribute it and get in placed on the shelves of the stores across the country, the required costs and infrastructure of the physical world were just too massive – a 500,00 square foot warehouse staffed with 30 people,  trucks and inventory systems, insurance, a field staff of 30 people walking to music stores leveraging, begging, pleading and paying to get the CD, album, 8-track, wax spool etc on the precious shelves of the retail stores.

Musical Freedom = Musical Responsibility

"Liberty means responsibility. That is why most men dread it." ~George Bernard Shaw

As a musician, entrepreneur, and consultant, I've spent a lot of time thinking about how to create a new "path" for musicians to succeed.

Unlike the olden days, success doesn't have to equate with record sales, or even concert attendance.

Why? The emerging music industry is flexible. There aren't any make-or-break "gatekeepers." It's wide open and the costs are pretty much zero. There are no barriers to expression. Make a song for your mom and email it to her. Or take over the British singles charts. Whatever. Make what you want of it.

The key word, however, is "you". Even more than usual, musicians are the ones who will be ultimately responsible for music's progress.

TuneCore Tech Corner

Hi there! Thanks to all the artists and musicians who are making TC such a great place to work. We spend a lot of time down here in the engine room making sure things run smoothly. Here's a few hints about how you can make sure your album goes up as fast as possible.

Upload WAV or FLAC files of your music whenever you can: it's easier for us to process the files. Since every store demands different audio formats (some need MP3s, some need M4As, others need Windows Media, still others take WAV files), we translate your music to all those formats and want to start with the highest possible quality input to ensure quality output. This is even more important when the store sells lower-bitrate audio files--the higher the quality going in, the better it sounds under compression. We'll still take a compressed audio file (such as an MP3), but it won't sound quite as good on the other end. We do everything we can to ensure your music files meet all audio quality standard, so help us out by sending the best you have.

At TuneCore, the back-end servers (about 100 virtual servers running on Amazon's EC2 service) do all the audio "heavy lifting." We spent the last year or so building a system powerful enough to process hundreds of times as many albums as we could before. You may notice your new albums are getting through the system faster and getting onto iTunes even more quickly. We've improved our error rates and processing times radically since last year, and we're constantly striving for perfection. There's a lot more cool features in the pipeline for the next few months, starting with those band pages. On behalf of Marcus, Mike, Alex and the rest of the TC dev team, thanks for using TuneCore!

Food for Thought: I'll Have the Apple Pie

Steve Jobs just posted this essay in his Apple blog:

http://www.apple.com/hotnews/thoughtsonmusic/

It makes for interesting reading. In essence, Jobs says, "If you big music companies stop making us use DRM, we'll stop requiring it." The numbers Jobs uses does make the whole DRM-for-iPods thing sound academic, against the massive exchange of music that bypasses DRM altogether. That makes we consumers hope there'll be a mass throwings-in of towels and the end of DRM altogether.

What Jobs doesn't mention is how this might affect iPod sales. By not mentioning it, he implies he doesn't really consider it a problem--which further implies his confidence that iPod sales won't be affected because people buy them not to comply with DRM on already-purchased (or to-be-purchased-through-iTunes) music, but rather on the sheer merits of the iPod, and presumably future iPods and iPhones.

That's refreshing! I like the idea that Jobs values competition and, staring it in the teeth, has no fear of losing market share even in the face of losing a few shreds of market protection. This is the crux of the argument, of course: DRM even now is just a shred of armor, barely matters to even 3% of what's out there digitally. So in a sense, Jobs can look at the iPod market domination and say, "Hey, we already won, it's practically a free market anyway, and the iPod rules!"

In that way, Jobs is stating he has nothing to lose: he can side with the NO DRM crowd (related to the "all music should be free" crowd, they're cousins), thereby making Apple look neutral in the debate. And in this debate there is no neutrality, so it shifts the burden of DRM squarely onto the big record companies.

I suspect a stance like that will sell more iPods.

--Peter

Form and Analysis

In high school, I studied piano and music theory. I remember building four-part harmonies and counterpoint, learning the rules of chord progression, the scales, even a bit of twelve-tone theory for spice.

When  I look at a site like Pandora, I'm a little awed. The Music Genome Project has created this site and is populating it with music profiles, "DNA"s of music. Their people sit around categorizing music not by traditional "form and analysis," but other, less academic methods. These are invisible, transparent to the end user, but you get a "profile" and they match music to your tastes.

I think the old traditional way of analyzing music formed a method, a vocabulary whereby those educated in it could find the music they liked, or, in the language they used a hundred years ago, the music that was "eternal" or "great" or "timeless." These new systems democratize, reach not for common denominators of greatness, but for an infinitely versatile sliding scale that codifies and uses your own tastes in the service of exposing...and marketing, of course.

I'm of mixed minds about it. After all, they don't teach you how to use or apply the scale themselves, they don't educate. You click a button and they provide "music you might like" based on their algorithms, their black-box analysis of the music in your own iTunes library or on your hard drive. They'll only suggest music in their own catalogs, of course, which is a marketeer's delight, and that also worries me. This tool can be used for evil--coopting the Internet's astounding heterodoxy with normalizing traits: it doesn't matter what you like, SOMETHING mainstream in our catalog will match your "profile" close enough, you should listen to this, then buy it from us. This is already happening on Pandora--you can only skip (read "browse") a few titles, then you're stuck listening to what they gave you. Hmm.

But the Internet routes around even these sorts of things, because you can't put a lid on the idea. Other sites with other algorithms will pop up, ones which match in different ways. I expect there'll eventually be "meta-recommendation" sites that rate and explore the idiosyncrasies of the profiling sites, or that places like Digg.com will serve as watchdogs.

In all, though, it's part of how market forces collide with Internet possibilities to generate low-level AIs, and that fascinates me to no end. What does it mean that a computer, through non-aesthetic analysis (after all, a computer can't LIKE a piece of music) nevertheless uses trend-analyzing algorithms to refine what I like, whether I know I'll like it or not?

If it doesn't work, of course, I can always fall back on the old-fashioned method. Because, see, I love choral music in minor keys that ends with plagel cadences.

--Peter