Meet the new boss. Worse than the old boss?
david lowery
Friday, February 17, 2012 Music Business Qualifications
Singer/Songwriter- Cracker & Camper Van Beethoven 1 gold 1 platinum album 8 top ten modern rock/rock/AAA tracks Founded one of first artist owned indie labels-pitch-a-tent Sound of Music Studios-Archers of Loaf to Lamb of God Platinum selling producer- Counting Crows to Sparklehorse Shockoe Noise/ 804 Music- Licensed 100’s songs TV commercials University of Georgia/Terry College Business- “Rock Economist”/ Lecturer
Friday, February 17, 2012 Geek Qualifications
Mathematics UCSC MPM/CPM system operator DBASE Scripts RPG punch card hobbyist Cobol 40 years of amateur radio (de kf4krf) operated amateur APRS packet radio nodes currently enjoy exotic low baud rate digital modes on shortwave (mostly PSK phase shift keying) “Quant” derivatives trader* (Excel/VBA/REDI high frequency) Board of advisors Groupon*
Friday, February 17, 2012 New Digital Distribution Model Qualifications “Freemium-nista”
Taping policy since 1985 Free concert audio and Video distribution Early concert tape tree and cd tree proponent organized through website 1994 Free songs and album downloads upon joining email list leak songs on website other services stream all songs from our website many videos for youtube not just singles etc etc
I “get” the digital distribution model gotten my hands dirty working model for nearly 20 years
Friday, February 17, 2012 Started as a little bit of hyperbole
The new model is better if artists receive a greater share of recorded music revenue than under the old record label model
What we were thinking: “sure overall revenues are down but with disintermediation and digital delivery more revenue will go to the artists”
Friday, February 17, 2012 This is a good objective way to compare the two models.
As you might imagine from my title it appears that artists fare worse.
We were all thinking “sure overall revenues are down but with disintermediation and digital delivery more revenue would go to the artists” We are no longer searching for a “new” digital model it’s here. It’s been stable for at least 6 years. It sucks. Too little revenue goes to the content creators. And that share appears to be shrinking
The fact that people keep saying “artists/record labels need to find a new model” suggests that everyone knows that labels and artists aren’t getting a fair deal.
Friday, February 17, 2012 file sharing + free streaming youtube. the “exposure” myth + iTunes , Amazon etc new digital distribution model is...
File sharing + Free streaming/YouTube etc + iTunes/Amazon etc
Friday, February 17, 2012 The old record label system also sucked but... It appears it shared more revenue with artists.
How the did we manage to create a system worse than the old one?
Friday, February 17, 2012 here’s the outrageous argument i’m going to make that should shame everyone. Everywhere across the board the real data is negative
64% Decline in recorded music revenue since Napster. hard data.
polling of my peers, managers and others. (largely legacy artists)
Early anecdotal evidence from touring bands at 40 watt club athens GA. (“did you sell enough albums to pay for recording and production costs of your album”) no 100%.
Spotify and other streaming fees abysmally low. Anecdotal evidence from many record labels cannibalizing sales. (seems like every week new label drops out of spotify deal). especially Spotify. Shame on Spotify!
Record labels/artists that fight file sharing DO see increased sales, (see projekt records and others)- FILE SHARING REDUCES REVENUE
Fairly scientific examination of records of two established recording studios.
30-39% “parasitic” levy by digital distributors Apple, Amazon, etc (to be fair includes “parasitic”charges by banking network)
“parasitic” in economic sense. low or no added value.
Friday, February 17, 2012 spotify. i haven’t done the math but i saw a couple people post that you’d have to be spun in the millions per week to earn minimum wage. classic example of “meet the new boss/ same as the old boss” spotify was started by a tech billionaire with a history of shortchanging artists. Smoking Gun? In both systems the recording budget comes out of the artists revenue.
Sound of music studios and Chase Park Transduction are multi-room studio complexes long integrated into the home recording paradigm:
Basic tracks in commercial studio Overdubs in home studio Mix in commercial studio
hobbyists to platinum artists 100’s of projects
If artist were getting more revenue we’d expect to see demand for recording time going up. we’d expect to see the artists increased share of revenue expressed in the length/cost of tracking and mixing.
1996-2012 overall decline studio revenues overall decline in studio rates dramatic decline in length of recording project/budget. records made completely at home suggest smaller budgets
Occam’s Razor most other explanations add assumptions
Friday, February 17, 2012
Its important to compare the common thing between both systems. recording budgets
I don’t want to give a number yet. but if forced to right now i’d say it’s 2/3rds or more Zero
most artists aren’t even making enough to pay for recording.
Friday, February 17, 2012 this means most artists net revenue from recorded music sales is $0 The other side’s argument ?
There is no data
only individual examples
Friday, February 17, 2012 The subtle lies we tell ourselves. “see the new model works”
The new model works !
They may have been successful because they are talented not because they gave it away. we will never know. why cause they gave it away.
Friday, February 17, 2012 Popularity doesn’t equal revenue. if i was on the other side i wouldn’t even use this argument.
1. I would argue that Pretty lights was already popular before this. 2. I would argue that bit torrent gained more than pretty lights. Unless I received real cash from BitTorrent i’d fire “fame house”. 3. This is popularity but it does not go to the heart of the argument REVENUE. what was their revenue from this? 4. Is anyone willing to admit that the reason pretty lights did this was cause they are using uncleared samples and couldn’t sell this album anyway. note: this is popular is this success? (This is what you get when you don’t pay content creators. This is a vision of our dystopic future)
Friday, February 17, 2012 this is what you get when you don’t pay content creators. “See the new model works!”
Friday, February 17, 2012 this is success. this is a legitimate counter example. Louis CK probably did make more money under the new digital distribution model than he would have doing a video or album deal.
Radio head is also legitimate example.
I agree there are other examples of this kind of success. at least louis ck knew to get cash up front!!! along with the popularity!! he didn’t give away anything to bittorrent!! I won a million dollars in vegas!
The casino model works!
Friday, February 17, 2012 But you can’t judge the system by only looking at the winners.
If you could you could argue that gambling in vegas was a legitimate business model.
Actually this is a great example. cause this is really what the new digital distribution ecosystem is. a casino model. the vast majority lose, while the house wins. in this case the house is the “tech” industry. but having a few extraordinary winners allows the house to point out these winners and justify the system. “The new model works” is based on scattered anecdotes rare individual cases the survivors
What happens when you include the losers and middle income? It appears that the majority of recording artists are not making any money recording albums. Zero
Under the new model the casino is the winner.
Friday, February 17, 2012 How could this be?
1. File sharing enriches file sharing companies and ISPs that generate real “artist enabled” revenue but share 0% with artists. 2. Streaming services including Spotify and Youtube replace some sales but don’t compensate artists adequately. Also the “exposure” myth. 3. Digital Distribution costs the artist 30-39% of gross! 4. New model burdens artist with ALL expenses and all risk!!
5. The music business is moving farther into “Extremistan” Disintermediation/Black Swan/ N. Nassim Taleb/ Non-Gaussian Distributions.*
Friday, February 17, 2012 A note on the exposure myth. could be a whole lecture in itself.
It is often assumed that having your song on itunes, spotify or youtube gives the artist “exposure” these services provide value to the artist. bring benefits to the artist. not really true having your song on itune spotify youtube actually works the other way. the artist is bring a benefit to these web services. Independent artist share of gross digital revenue. Legitimate album sales only.
Digital “distributor” takes 30%
70% best case scenario
61% for independents more likely
Round it to 65%
Friday, February 17, 2012 Okay. let’s look at just legitimate digital downloads. Typical old school record deal Artist gets 18% (i always got 20+) Plus publishing royalties 25%
The “whiner” bias. You only hear about bad deals Plus all record deals end with artist getting dropped They end badly no matter how profitable or good they were the previous 5 years.
Friday, February 17, 2012 All the calculations you see never include the artists royalties. 5017 shares! wildly non-factual “whiner bias” created by bass player
Friday, February 17, 2012 This is why we think that artists were so bad of under the old system. New model 65% artist pays all expenses publicity promotion advertising, recording, touring. raises all capital. assumes all risk. in practice net <65%
Old model 25% artists pays for recording artist assumes no risk artist raises no capital
Friday, February 17, 2012 New model This means the artists pay 100% of the costs so that 65% shrinks to zero
The digital distributor is paying for no expenses and assuming little or zero risk for 30% (it’s now obvious that itunes/amazon etc work )
Never before in the history of the music business has some entity taken such a big share without assuming risk or contributing capital to content creation.
Friday, February 17, 2012 Old Model
in practice artist share >25%
Being un-recouped is good! Most artists un-recouped. This means they got more than the 25% share of revenue. Over the course of my career I have received more than 50% of revenue generated by my recordings.
Friday, February 17, 2012 I find no evidence he said this. but it’s often attributed to him. regardless reverse engineering you can see that the music business ran on the concept that only 1 in ten artists are successful. if you consider most artists were unrecouped they received more than Old Model
in practice artist share >25%
“throw ten records against the wall and see what sticks” Being un-recouped is good! Most artists un-recouped. This means they got more than the 25% share of revenue. Over the course of my career I have received more than 50% of revenue generated by my recordings.
Friday, February 17, 2012 I find no evidence he said this. but it’s often attributed to him. regardless reverse engineering you can see that the music business ran on the concept that only 1 in ten artists are successful. if you consider most artists were unrecouped they received more than Old Model
in practice artist share >25%
Ahmet Ertegun “throw ten records against the wall and see what sticks” Being un-recouped is good! Most artists un-recouped. This means they got more than the 25% share of revenue. Over the course of my career I have received more than 50% of revenue generated by my recordings.
Friday, February 17, 2012 I find no evidence he said this. but it’s often attributed to him. regardless reverse engineering you can see that the music business ran on the concept that only 1 in ten artists are successful. if you consider most artists were unrecouped they received more than Digital distribution Old model model
65% 0% 25% 50%?100%?
in Theory in Theory Practice Practice
Friday, February 17, 2012 13 years after the advent of file sharing and digital distribution There is no hard data to support the contention that artists are better off under the new model. There are only anecdotes and fairytales. Data seems to suggest artists are worse off. (I’d love to be proven wrong)
Friday, February 17, 2012 Friday, February 17, 2012 meet the new boss Friday, February 17, 2012 same as the old boss. Solutions? Some sort of content creator’s union to lobby big web/tech companies.
A fair trade type designation for web companies that fairly share revenue.
A content registry that file sharing sites have to reference. Take burden off artists tracking down links and files.
File sharing sites that didn’t voluntarily comply could then be targeted for civil action.
Friday, February 17, 2012 google already “snifs” for copyright protected material. Live revenues can not replace recorded music revenues
Touring is only profitable for the very top tier of artists.
Not enough venues or days in year for all bands to tour all the time.
You can not replace a scalable business model with a non scalable business model
Friday, February 17, 2012 The internet is making us stupid
After posting my musings on facebook/twitter I was surprised at the virulent comments and threats I received. But what surprised me most was how many “expert’s” arguments were built on easily disprovable “facts”. Hence I have coined the terms digeridiots and freehadists.
Please don’t try to debate me through twitter. 140 characters? really? Lies are simple truth is complex. If you disagree let’s debate through my blog www. 300songs.com
Friday, February 17, 2012 Digeridiot
A consumer of web content who has never actually, written code, run or built a website, or tried to make money by generating content and giving it away on the web.
Must have blog or newsletter.
Must be able to insist with straight face that anyone that does not agree with them “just doesn’t get it”.
Friday, February 17, 2012 If this seems a bit snarky read what people said about me on the facebook, twitter etc when i first started these musings. If this seems a bit snarky read what people said about me on the facebook, twitter etc when i first started these musings. Example Forbes magazine
“It’s not a physical product that’s being taken. There’s nothing going missing, which is generally the hallmark of any good theft.”- Paul Tassi in forbes magazine arguing piracy is not actually theft. That movie studios and musicians don’t “get it”.
Friday, February 17, 2012 this guys is an idiot. i can’t believe forbes printed this. Definition of a Freehadist
Individuals who blindly equate file-sharing with internet freedom. Won’t listen to any arguments to contrary. Threaten those who disagree with them. The most virulent of these are young aspiring musicians. I call them Freehadists.
Recruit young aspiring musicians (or bitter older musicians) “Evil big record labels”= Oppressor Other more successful musicians may also serve as a proxy evil. freedom/salvation = giving away your music and other peoples music for free on internet Internet based stardom = 72 black eyed virgins Anyone who turns against file-sharing is an apostate.
Propaganda: File sharing sites, YouTube other free riders “help” musicians: exposure, advertising, distribution. not true. other way around. musicians help these sites.
Result shock troops that are sent in to soften up positions in favor of copyright protection weakened copyright protection enriches giant tech behemoths at expense of content creators in the process the freehadists “blow up” their own future music revenues
Friday, February 17, 2012 Macro Trends
Long Tail effects Artists/content creators are bearing entire burden of populating the long tail.
Black Swan Conversion of music from physical products to information. Mediocristan to Extremistan - “A few giants and lots of dwarves”
Strange statistical consequences of global markets see expected utility, decision theory and St Petersburg paradox for a deeper explanation. one should be willing to pay a virtually unlimited amount to play a game that the reward is virtually unlimited. because artists are still recording albums does not mean they are being compensated fairly.
Friday, February 17, 2012 The internet is making us stupider.
5017 shares.
Friday, February 17, 2012 The first thing that’s wrong with this it looks like it was made by a bass player. the most disgruntled of all bandmembers. this chart has many mistakes. first managers only commission applies after all expenses not gross. but mainly it is a special case. the artist does not recoup and they decide to spend all the advance on the recording. (only stupid artists spend all their advance). Then this is applied across the board to all artists to justify stealing. Friday, February 17, 2012 “All theft is a tax on the virtuous”
File “sharing” puts the burden of creating content on the virtuous. That price must slowly increase until the virtuous can no longer afford it
Or the content creator must absorb the costs.
It is possible to model all of this
Friday, February 17, 2012 Our future
Friday, February 17, 2012 Secretly everyone knows I’m right.
why do angry freehadists always threaten to pirate my songs like crazy? won’t that make me more popular? more famous? more people come to my shows?
Friday, February 17, 2012 “Meet the new boss same as the old boss” The profits promised artists by disintermediation have mostly gone to large corporations and pirates.
The 30% digital distributor fee is too high
or if 30% is what it costs to digitally distribute albums then the old physical product system was just as efficient.
Friday, February 17, 2012 Most touring is unprofitable.
The old music ecosystem social contract was you tour lose a little money but people buys your albums and recorded music revenues increase
Now Touring increases illegal file sharing File “sharing” sites sell more ads Touring increases Megauploads Revenue.
Friday, February 17, 2012 spotify
Friday, February 17, 2012 prediction a content creators union movement occupy google/apple/amazon movement
Friday, February 17, 2012 Henry ford knew he had to pay his workers enough to buy his cars. and he had fascist sympathies
Why won’t the music tech world stand up for the content creators? who is supposed to buy your technologies?
Friday, February 17, 2012 The world is irreducibly complex. Only lies can be told in 140 characters Please don’t debate me through twitter. It’s not fair to any of us. I love snappy comebacks more than anyone but i prefer to debate in a long format setting. Your can visit my blog at www.300songs.com or contact me at The University of Georgia.
I sure hope i’m wrong
Friday, February 17, 2012 so maybe their is no way to go back to something like the old model as many claim. all I ask is that we stop pretending the new model is more fair and benefits the artist.
Friday, February 17, 2012