[FMC[ New Label/No Label Models

Kristin Thomson Organizer, Future of Music Coalition (moderator)
John Buckman Founder/CEO, Magnatune
Brian Camelio Owner, ArtistShare
Melissa Ferrick Artist/CEO, Right On Records
Jerry Harrison Multi-platinum producer, Chairman & co-founder, GarageBand.com, member of Talking Heads
Joe Henry ASCAP artist and songwriter/producer
Sam Jennings Director, NPG Music Group Club (Prince)
Buckman: Magnatune is an attempt to create a record label that doesn’t make CD’s. What other digital distribution or ideas will pop-up. Don’t be evil. Can license music online. Artists participate in revenue in a 50-50 split. Sign artists directly and sign second-tier genres (classical, electronica, metal, jazz,
Average listener spends 2hr 40 min on magnatune– auditiioning music while doing other things manes it easier to sell music.
Can specify how much to pay for an album, between $5-$18. The average price people pay is $8.20.
Sells full-quality WAV files as well as MP3 files. No DRM. Creative Commons license. Trying to capture the Linux spirit. Allow non-commercial uses and remixes. Podcasters can use Magnatune music.
Licensing is a major focus. Trying to make it easy for creative people to license music– all music is pre-cleared. Major revenue boost for artists.

Camelio: AristShare isn’t as much a label as it is an arts community. Find something to market that you cannot pirate, digitize or steal. There is nothing you can do to appropriate the creative process of a project.
Maria Schneider had a budget of $85,000 for her first ArtistShare album– fully funded by fans, first album to win a grammy without a release in stores.
[This is a model that I’ve thought that artists could exploit– fans would pay in advance for the album to fund the capital costs of the record.]
ArtistShare takes 15%. “Artists are making the money. I’m struggling.”
Ferrick: Opened Right On Records by default in 2000. Wasn’t seeing royalties from her indie label. Went to MyCorporation.com and incorporated. Owns all of her publishing.
Has distribution through Red Eye. Online through CD Baby.

Garage Band developed an algorithm to deliver music, based on listener ratings.
Spent a lot of money on marketing during the dotcom hype
Is developing podcasting/audioblogging tools for artists.

Starbucks is selling more and more records while the traditional music industry is selling fewer records each year.
Starbucks allowed him to go to these artists he was collaborating with and say on the date of release, it will sell 250,000 copies. Starbucks is taking that risk. S’bucks is exploiting a demographic and seeing things that the industry was not seeing. This is a finite period of success– as this is successful, S’bucks will take on more and more records and might dilute its success. Deal with WB/Rhino to sell in traditional ways.
It should be alright to sell 20,000 records– not every record has to sell 5 million copies.
If you’re in the business of music, you shouldn’t be there by accident.

Started NPG music club ~4 years ago, to empower the connection btw Prince and his biggest supporters. Eliminate the middle man.
Club members get access to download store and seats in the front at concerts. Prince was #1 tour in 2004. Last year, everyone who went to a show got a copy of Musicology. The price of the CD was built into the ticket and all CDs were manufactured by NPG, bypassing completely the label model. Had a deal with Sony for release in traditional channels.
When the tour started, Soundscan counted bundled sales for the chart, but later decided that bundled sales won’t count for the charts. “If a million and a half people have your CD’s, you don’t really care if you chart.”
Harrison: charting does help with radio airplay and MTV.
SJ: But then, Prince doesn’t really need to get Top 40 airplay, and probably won’t get MTV these days.
JB: Don’t most people who go to the shows already have the CD? Or go to multiple shows, get multiple CDs?
SJ: That’s another way to get distribution– goes from fans to friends. It’s a great way for an established artist to get his new music out to casual fans.
Henry: There are many ways the music can be successful.
Harrison: There have been other models. iTunes is like going back to the 50’s for a singles-based, rather than album-based sales. going back to the 40’s, records were really only promotion for the tour. Make sure that the live show is the one thing that’s unique, and every night it’s a little bit different, and the show is really good.
Henry: Playing live music is a different pursuit from making a record. Don’t want the show to be a commercial for the album.
Harrison: Would you sell recorded copies of that show right after the show?
Henry: Sure.
JC: What the labels had for perceived value, the perceived value of that went way down (which is why labels want to control all rights now.) Always build you model around the live show.
Ferrick: Thinking of making live shows more interactive, tap into the community/local scene. Engage the audience, don’t forget that they are intelligent, want to be entertained, want an experience.
JB: Command and control marketing is too expensive; the audience is too savvy (or cynical) to be sold to. It’s the engagement of the audience– a social movent– the audience proselytized– like Linux or the Talking Heads. You can’t buy major market share anymore.
KT: Looking at the stats, the best-selling genres on Magnatune are Classical, electronic and baroque.
JB: Classical is the 3rd best selling genre on iTunes.
JB: When napster (classic) could snoop on people’s hard drives, most people had at least 3 different radically different genres in their libraries. People are not music automatons. People get involved and then start to proselytize the music. It’s all about connecting and creating something that people like enough to rave about.
Audience: Does putting out music under a CC license require foregoing performance royalties from a PRO?
JB: In the UK, yes. In the US that hasn’t been a problem yet. Most of the music licensed on Magnatune isn’t getting commercial airplay anyway. allowing non-commercial uses makes more exposure for the artists. The money is in the licensing, not in CD sales.
MF: Do artists have control over how their music can be used?
JB: Not through Magnatune. All music is pre-cleared, so we’re providing a competitive advantage to our artists so that licensors can buy music for their uses without having to worry about obtaining clearances. That said, Magnatune does not blindly license to porn or other unsavory uses.
Harrison: The business is shrinking because the CD replacement is ending. Most of the major labels were bought with leveraged money, so they have to do a LOT of debt service. There may be a purging of this debt, either by bankruptcy or getting bought by deep pockets, and there will still be a place for the major label marketing budget and mega-success.
Camelio: The people to ask are the kids in junior high and high school now and figure out how they want to get music.
Henry: How do you survive long enough as a working musician to get good? A&R people have about 3 months for the album to do something. Artists have to find a way to keep doing what they’re doing.
Harrison: It worries me that kids are growing up today hearing music only in an impoverished sonic version [as lossy, compressed MP3 files.]
Audience: Why is Magnatune’s 50% take a good deal, while Ferrick was in a deal with a label that took 50% that was a bad deal?
Buckman: Magnatune is non-exclusive. Artists can still make money from other angles (licensing, CD Baby sales, sales at a show.)
Ferrick: 50% was after the label recouped, and the label was recouping for rent, and paper. Why are we the last people in line? Why don’t the other people in the industry work as hard as the touring musicians? Yes, I’d like a royalty check
On Warner, 42,000, with $2 a record on budgets of $5k and $7k and saw nothing.
Sell 45,000 records on own label at $8/record, means real money.
Buckman: Anyone who’s sharing in a percentage, you want them to get filthy rich, which means that you get filthy rich, too.

One Comment

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