David Lowery
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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.