[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.

[FMC] Guiding Artists Through Tremendous Change

After finally getting to GW, only a few minutes late, there’s wireless here, and we’re on live from the Future of Music conference.
Guiiding Artists through tremendous change
Eric Brace Last Train Home and The Washington Post (moderator)
Charles Bissell The Wrens
Bertis Downs Advisor, R.E.M.
Michael Hausman President, Michael Hausman Artist Management
Peter Jenner Manager, Sincere Management/Secretary General, IMMF
Clyde Valentin Director, Hip Hop Theater Festival
Shoshana Zisk Management, George Clinton Enterprises
Bissell: Connections with audience (via ‘net, podcasting, email) makes it possible to go outside the traditional model

Valentin: From a theater, rather than music, background, but still, it’s all about connecting with audiences.

Zisk: “Let’s put George Clinton on myspace, get an independent distributor, go with the hwole DIY approach.”
[Aside– Major artists, like Clinton, can take advantage of the increased revenue from selling directly, owning the master, owning the publishing, but have already taken advantage of getting name recognition on major label marketing budgets.]
SZ: George has distribution, owns the master and owns the publishing for the first time.

Hausman: Artists need to go out and build a fanbase.
College and AAA radio isn’t so much of an expense as getting on top 40. The indie promoters at this level are more like tastemakers than the gatekeepers who control access to stations.
After the crackdown on indie promotors, some stations won’t talk to any independent radio promoter.
A project only works if it’s going to ship enough records to make it worth my time.

The internet and mobile phones are out there, and there will be money knocking around out there.
We’re in the era– we’re in the railroad business and the first 707s are just rolling off the production lines, and it’s very hard to work out how the train companies get into the airplane business.
The creative community wants to figure out how to get on the airplane and get fuel for the plane.
For the new media to work as an entertainment medium, it needs to have good music to make it worthwhile– the music that appeals to them, while the record companies (who still control must of that music) don’t want to give up what has worked.
How to get paid is the challenge, which is the problem that no single manager/artist/record company can resolve.
Suspect there has to be legislation, change in copyright laws.
It’s a new model– not a new way of selling records, a new way of getting music to the public.
Quite a lot of legislators will be very grateful if the creative community and consumers can get together on their own to figure out what work.

SZ: Going direct makes a lot more work for the artists– entering info into iTunes, then Napster, then Rhapsody, etc. Of course, IODA helps. The distributors are trying to get into the digital distribution space, too.

CV: Content flows from space to space, genre to genre
MH: The job of managers and support people is to find talent, nurture talent and support talent, but the angles have changed. Selling records is no longer the benchmark.
EB: You can make a lot of money selling 10,000 records.
CB: The “sympathetic, like-minded” scene is more important than the NJ local scene (except at Maxwells).
CB: There’s a lot less free time. The role of music is becoming relegated to a background for people’s lives. Listening to music as a goal isn’t so big anymore.
PJ: The legal services are very restrictive and limited. The challenge over the next few years is to get a sensitive, sensible collective licensing system, which means that the electronic distributors can provide the public with what they want. The unit cost is going to go down.
PJ: Music is becoming more of the soundtrack of your life, rather than something you sit down to have the maxell experience. Access, not ownership is what matters. Today’s legal models make access very complex legally and that needs to get sorted out. The plethora of media means that mass marketing has become ridiculously expensive. The majar labels are hooked on mass marketing. George Clinton (or Billy Bragg or Aimee Mann) can afford to put out records today b/c they already have a following, so they can afford to put out records. Breaking new artists will require communities working together (ala, indie rock, hip-hop, etc.) Capitalism is killing music.
PJ: Home taping illegal usage is not killing music. We just need to find ways of getting the revenue streams going. Live music is like that– it’s much more intense than just listening at home. The need to get together as human beings.
BD: There are problems with the current model, but what revenue when there is none from Kaaza or Grokster?
MH: compulsory fee on ISP subscriptions, mobile phones, which permits access to non-commercial services. In America, the problem is we don’t have a proper, sensible performance right.
BD: It seems like music has become less and less valluable.
MH: People are still happy to buy music– after all, there’s bottled water.
CV: What about the idea of selling music with concert tickets– didn’t Prince do that?
SZ: Yes, Prince included a copy of the CD with concert tickets and scanned those to count for Soundscan, Soundscan canged the rule because of Prince to exclude albums bundled with tickets.
Audience member (whose name I didn’t catch): WeedShare solves all these problems. We may not have critical mass yet.
MH: I can’t just throw my clients music out, because the internet isn’t geography limited because they have foreign distribution deals that take advantage of having people working for us ‘over there’
Weedshare would be great if we were building the industry from the ground up– we’re stuck in a model designed by Kafka with Rube Goldberg as his architect, and it’s very difficult to change the status quo.
PJ: We may be shifting to a bifurcated model– one copyright law for physical goods and then a new set of laws for the digital world.
MH: Be careful with what rights you give away.
PJ: Artists, never assign a copyright. License it, but never assign it. It’s always a bad idea, but now it’s suicidal.
[Audience member Tori Sparks]: How do indie artists take advantage of this when they are not yet at the level of a George Clinton, so that they can take advantage of the new environment.
PJ: think about genre sites and building with a community and build a crowd, a following. Do something which gets people talking about you and being your friends.
CB: There’s a trickling down of buzz to revenue. Pitchfork -> download -> go to show -> buy stuff -> money. Community is very important. you end up working with the people that you already know and get along with and have similar things with.
[Brian Calhoun, Label Managing Systems]: What percentage of artists’ revenue comes from the various streams?
SZ: George makes most money from touring than from anything else.
MH: A lot of artists have spikes from big licensing deals, but grossing from touring is high, though net isn’t high, because touring is expensive. Licensing is the best value. We’re trying to do as much in-house as possible.
SZ: A lot of P/funk members are int he band now, because they just kinda came up backstage or started hamming, thhen ended up in the band.
PJ: Artists should be much more open with their websites and getting fans to explore other music that the artists like.