Peter Gabriel On The Future (Music Industry)

Colin wrote:
...
Now I would like to see Mike do another future movie
only to be about the Record Industry of the Future.

The CEO of WanerTimeStarbucksMusic
could be Titan - that great new Robot you can hire now.

Moses Supposes - January 2008
In This Issue:

-- Radiohead vs. the Monster: 360 Deals or “pay what you want”:

Will Both Mean The End Of The Majors? (Feature)

-- New Laws That Will Make You Laugh and Cheer

-- Find Out Who Is Lying About Still Having Their Label Job

-- Next Confessions Workshop Discounts and Specials

NEW YEAR – NEW LAW
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Happy New Year and welcome to the new, new music business, one that promises to keep you guessing as to how you’ll be making a living in the next 365 days.

While the rest of us were hanging frayed mistletoe and giving even more money to labels via their “new and improved 360 deals,” the California Legislature was busy figuring out better ways to regulate us. Since California tends to lead the way in new law, this affects everyone, really.

In the general scope, we have wired things that only those in the Granola State could dream up: in domestic violence cases, pets can now be included in protective orders and coming soon are criminal penalties for even accidentally running over squirrels and wild animals that happen to be in front of your vehicle. Conversely, products made from Kangaroo skin can now be sold in the Sunshine State. So, you can’t punish your dog for pooping on the rug, but you can slaughter as many marsupials as it takes to make a purse. Y’know, that ignorance of the law is no excuse thingy would be easier to apply if lawmakers could make up their mind.

To the music space we add a couple of vital items: Classic musical groups who market themselves as “the real deal” when touring, must contain at least one original member of the group. You’d think this was given, but wrinkle-rock impersonators have been skating away on the thin ice of misrepresentation for years using names like, Credence Clearwater Resurgence and The One and Only Platters. There are also about a dozen “Original Beach Boys” and several variants on “Bill Haley’s Comets.” Those without an “original member” under the new law can only bill themselves as “tribute” groups. An exception was carved out, however, for STYX and Steely Dan, since no one can seem to agree on who the original members were.

The big news is the introduction of a concept that is already in place just about everywhere else in the free world and it involves how broadcasters pay royalties; specifically that they will now ALSO have to pay record companies/artists when a song is played on the air, instead of just publishers/songwriters. ASCAP ad BMI are understandably a bit concerned that this will dip into their “non-profit” revenue stream. But…

The new bill proposes the following:

1) Requires terrestrial radio and HD radio to pay labels and artists.
2) Non-commercial broadcasters (like Public Radio) pay only $1,000 per year and small broadcasters pay a flat rate of $5,000 per year.
3) Creates a statutory rate for Sound Recordings (finally!) and the rates will be set by the CRB: the Copyright Royalty Board (formally the CARP-- the same ad hoc group that is about a year late in setting the regular statutory rates.)

And most importantly…

4) New law cannot diminish what songwriters are already paid by broadcasters. (So ASCAP and BMI can stop bitching.)

There’s something here for everyone to both like and complain about. John Simmons CEO of SoundExchange (SX) told me he believes that this will be a multi-year campaign, one that will not likely yield results until after 2009, but at least we’re on the right track for once.

SX is putting a lot of cash into pushing this puppy through—and this is to be expected, but the question that I wish some credible journalist would ask them is—how much of this money will be deducted as an “expense” from the artist/label royalties they are already collecting? Hmm.

RADIOHEAD vs. THE MONSTER

While labels want more from their artists and retailers, in 2007, Radiohead gave away their new record, “In Rainbows” for whatever a fan wanted to pay. It seems that of the 100,000 downloads (according to Big Champagne) the average fan--who wanted to pay anything--paid about $9 US. (How many opted to pay $0, only the band knows.) Regardless, the campaign translated into great physical sales as well. This is something few experts predicted.

The “In Rainbows” ranked as one of the top-selling albums this month, selling 122,000 copies in the US. While it’s far less compared to 2003’s “Hail to the Thief” and other major label releases, think of the gross revenue to the group; $1.50 per record on a major, compared to about $7.00 per unit sold “independently.” The figures also back up something I’ve been saying for a while now: music fans still like owning physical product, namely CDs.

On the other hand, if the public thinks an album is worth $9 US, what do they think stealing it is worth to the poor label victimized by illegally downloading? In 2007 a civil jury spoke loudly on that as well— $9,700 per song (about $100,000 per album.) Now that “the people” have put a price on using illegal P2P, you would think that everyone would flock to the “pay whatever you want” model. But no, studies show that P2P file-sharing is still alive and well.

CONFESSIONS WORKSHOP

Major labels have the power to sue (and often do) those who steal their catalog. What can an independent artist do? I’ll tell you at the next Confessions Workshop in Los Angeles which is on March 1-2, 2008 at Loyola Marymount College in Marina Del Ray and at two FREE events in Los Angeles (see bottom of this email for more or go to: http://www.mosesavalon.com/moses_appears.shtml )

Regular Registration for the Confessions Workshop is now open at $225. Rates will go up in February. Special group rates and “repeat” rates are available. If you’ve done it before and want to do it again-- $90. What a bargain. What will we be talking about?

· The new 360 Deals: will it be the end of the majors or the panacea they desperately need?

· The new Sound Recording Copyright act and Sound Exchange: what’s the agenda, the strategy and the effects.

· What, Amazon, Google and YouTube are doing that changes everything.

· How will new developments with Best Buy, MySpace and Apple both help and damage the business?

· How Lime Wire 2.3 and Bittorrent will ripple and affect your business.

· Are music sales really down or is it just BS to suit an RIAA agenda?

So… Pay-what-you-want, versus pay the label everything they want, which model will more likely attract the up-and-coming artist to majors and keep the $10 Billion music business from becoming a footnote in history?

More info and registration: www.MosesAvalon.com

See you there.

WHO IS HYPING THEIR JUICE?

Massive major label downsizing last year hasn’t stopped many a former Vee Pee from trying to impress eager artists (and the ladies) with the vestiges of their hip, label business cards. Meanwhile the odds are about 2:1 they are really collecting unemployment!!! Recently I was given someone’s card at a party and after reading it said, “Didn’t Universal downsize your entire label three months ago.”

The new Music Business Registry gives a complete list of everyone who still has a real job. Cost: only about $80 and it will pay itself back in the many hours of bullshit you’ll save. I highly recommend their publications. Go here for more details: www.musicregistry.com

Then there is The Indie Venue Bible. A revolutionary live music venue directory that was created with the needs of the touring/live performing artist in mind. It features 26,000 venues and 2000 booking agents in the US and Canada. I have not personally seen this publication, but it’s worth checking out. They did not respond to my request for a review copy, so tell me what you think. Check them out: http://www.indievenuebible.com

JOB OP WITH NAPSTER

Napster is looking for a Content Coordinator. This is an entry level, Los Angeles based, full-time position paid on an hourly basis. This person will be part of Napster’s Content Team and will assist in obtaining digital mechanical licenses for their music subscription services, along with other content-related tasks. If you know of anyone, please feel free to have them send their resume directly to Robin Schwartz: Robin.Schwartz@napster.com.

360 DEALS: THE FINAL NAIL IN THE MAJOR LABLE COFFIN?

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Will the “new model” bring record labels salvation or oblivion
By Moses Avalon

You know that theory about light and distant stars; the one that says that it takes so long for light to travel to Earth that some stars only appear to still be shining? That’s how artists should probably be thinking about major label record deals. Because the industry has burned so long on the fossil-fuel of major label cash, it can seem like they are still relevant. Are they?

New so-called “360 deals” on major labels want a piece of everything the artist makes. They get their name because a circle has 360 degrees and these deals take revenue from all directions, sales, touring, licensing, publishing, acting, modeling, merchandise—you name it.

They offer big bucks, higher percentages and look and feel like major label deals of yesteryear, with the press releases and executives shaking your hand in offices perched high in some big-city skyline. But are they? Could it be that these deals are merely a façade: one where the label may be committing fraud right at the onset of the deal, and, in all probability, even BEFORE the toner on the contract is dry?

And what’s the alternative: start your own label? Artists can and have tried in the past. (Failed attempts include The Rolling Stones, Grateful Dead, Bruce Springsteen and Pearl Jam.) But the Radiohead experiment of 2007 shows why it could be the only way to go if you’re an established concern. (See above)

If you’re just starting out, unfortunately and want to sell 100s of thousands of units—majors are still the way to go, even in the age of the internet. Why? Because the very qualities that make a great artist, often also make a lousy business person (Gene Simmons notwithstanding—wait, is he a great artist? Never mind. That’s another article.)

Case-in –point, many fans who were attracted to the Radiohead “pay-what-you-want” offer complained of time delays and the “shopping cart” utility jamming. Lack of bandwidth was the probable cause, which resulted in long wait time and abandoned attempts.

Why didn’t Radiohead hire the best IT people to account for the extra traffic and glitches? Probably because artists don’t think this way. They think about their fans and their product. Not about technical minutia. Majors are counting on this lack of business acumen as the commodity they peddle in the 360 deal.

Does this mean that once again artists are stuck with accepting the junk contracts labels have given artists for years? Is the 360 deal, where the label takes a piece of everything, the new junk deal they have to accept? Maybe. But, there are several Achilles heals in the 360 deal that majors will not realize until years from now, after they are already entrenched in them.

Now, I hear you saying out there, “But Moses, if you’re revealing these weaknesses, won’t the labels correct for this?” Hey! Did they change a thing after my first book, Confessions of a Record Producer began selling in the top 10% of all books on Amazon. Ah, no. And they won’t now, because they are:

1) Slow to respond to the obvious—despite advice from people who are really, really smart.

2) They do not care. They take the position of an insurance company when dealing with a claim: We don’t pay artists and artists probably won’t sue.

SECRET#1: THIS DEAL IS DUMB

Aside from CD and download sales, the 360 Deal dips into revenue from merchandise, licensing and touring; issues that were formerly handled by other vendors to the artist: mainly, the agent, manager and the producer (and publisher, if the artist was a songwriter). If the label takes this cash, where is the vig for these other professionals going to come from? Especially if producers and managers will want a similar structure-- you can't co-op 100% of your revenue streams with everyone. This would be like donating your vital organs to several hospitals. So, what will happen? Two conclusions leap to mind:

1) The artist will pay a second set of commissions, ON TOP of the split that they give the label. This of course means the artist makes less money. A lot less.

2) The artist will decide they don’t want to pay two parties for one job and not contract with outside vendors.

Since number two is the more likely scenario, let us look at its ramifications. It will mean the inevitable extinction of the manager, booking agent, and (some) producers and yes… their managers, and handlers. We are talking about roughly a third of the people listed in The Music Business Registry. (An excellent publication BTW, check it out: www.musicregistry.com.)

Labels gouging the income from about a third of the professionals in the business will not be met with any degree of acceptance, I can assure you. They will fight back, exploiting some very alarming weaknesses in the 360 deal that will leave labels wondering, once again, how they painted themselves into a corner.

How and with what weapons industry pros and artists use will be the subject for future columns. If you like a great catfight, stay tuned. If you can’t wait and want to do a face-to-face Q&A with me you will have three opportunities in the next month or so: two of them are free, all are in Los Angeles.

- SongsAlive – Feb 3rd. (Explained for artists – simple terms. Even your dog will get it.)
- Los Angeles Bar Association - February 6th (More legalese – not for the faint of heart.)
- Confessions Workshop - March 1-2 (The real deal: in-depth analysis and multi-expert input.)

For more info on these appearances go here: http://www.mosesavalon.com/moses_appears.shtml

I hope to see you there.

Moses Avalon

Announcements, Reminders and Other Cool Stuff
=====================================
Moses Appears
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In the next two weeks, I’m giving a series of FREE lecturers on Digital Distribution, 360 Deals and how recent events will effect the future of the business. Theses events are free. They will be at the Los Angeles Bar Association and SongsAlive. For more info go here: http://www.mosesavalon.com/moses_appears.shtml


Color Me Thankful
==============

Well it appears that after ten years of writing cutting edge information on the music business some one has finally noticed; I am now an “Award wining” journalist, according to NARIP, the National Association of Music Business Professionals. Their members selected me as one of the best writers on the business of 2007. My fellow winners where Bernard Baur (Music Connection) and Chris Anderson of Wired and I’m honored to be a winner among them. (Narip.com)

I don’t know who of you on the list I have to thank for their vote, but it feels nice to be recognized. Thanks to all of you.

Other News
=========

Oh, next week are the Grammy Awards.

Mo Out.

In this issue:

--360 Deals Part II: How artists can usurp them
--Politicians blame record companies for failing business at Grammy Town Hall
--The Beatles won’t win an Oscar again.


GRAMMY TOWN HALL
===========================
Our Government Thinks We’re a Bunch of Douchebags

While the general public sits home watching wrinkle rock on parade, to those actually in the music biz the Grammies is a week-long affair. It’s parties, yes, but it’s mostly important meetings. The crown jewel of which is the “Town Hall.” This is the place where NARAS (National Academy of Recording Arts and Sciences) members and journalists get to ask select politicians, who are supposedly guarding our interests on the Hill, the tough questions; the legislative questions; the questions behind the issues that are going to shape the next 20 years.

Question one was posed by NARAS Senior Executive Director, Daryl Friedman, and let me tell you, it had the senators squirming: “What song do you think best describes Washington?”

Ouch! What a sting. For a second it occurred to me that NARAS might take this gathering about as seriously as they seem to take their other so-called “advocacy efforts.” Which is to say, it’s a great way to gather a bunch of rich, music folk and make them feel outraged enough to bring a checkbook. But then I realized that while NARAS could focus a bit better on the education and advocacy part of their mission statement, few others are doing even half what they have done for the music biz.

After the levity of smug answers like, Fool on the Hill, and You’re so Vain got us all in the proper mood, the agenda quickly turned to something relevant: “What the hell are you clowns doing about stopping P2P (peer-to-peer file sharing) from destroying our industry and what are you doing about getting performance royalties for artists on terrestrial radio?”

Marsha Blackburn, lead with a hollow simile that completely misstated the legal issues at hand: “I liken piracy in radio to piracy on the high seas.”

Okay…

Darrell Issa, Micheal McCail and Linda Sanchez followed with comments that were far more on-point, but no more reassuring, and it was not long before the dialogue turned to the controversial solution to all the Music Biz’s problems: an IPS tax as a solution to infringers for using their services to rob music makers.

The basis for this already exists in the form of a tax on blank media collected every time consumers buy a CDR. Could this concept be legislated for the internet? Panelists steered away from responding directly. They know that ISPs butter their bread far more lucratively than record companies. Instead they suggested the music industry make the subscription model “work better.” “Remember,” one senator said, “legislation doesn’t make good business models. Business people make good business models.” (Sigh…)

At this point, one frustrated mega record exec (whose privacy I’ll respect in this piece) stood up and retorted that the numbers for subscription services “Just don’t add up,” that the industry is competing with free and no amount of clever models are going to replace a solid piece of law. He made a comparison to the porn industry; that even they have better protection under the law than record companies and added “Maybe it’s time we started licensing some good music to that industry.” Which received a thunder of applause and laughter.

All-in-all, I left the room thinking, my God, if we’re relying on these politicians to protect us, NARAS and the RIAA better start making some serious campaign contributions.

ACROSS THE UNIVERSE
=====================

I don’t go to the movies these days. I have a home entertainment system I’m quite proud of and I subscribe to just about every movie service there is. I figure, if the movie is any good at all, it will come to me. So, when Across the Universe came out in DVD this week, I leaped at the chance to consume it.

If you are a Beatles fan and you have not seen this movie, well… then your life is basically a pathetic, empty hole. Even if you’re not, this movie is one of those perfect pieces of production, blending superb and uniquely original renditions of songs we’ve heard a thousand times before (hats off to T Bone, Teese Gohl, and Elliot Goldenthal who produced the soundtrack) with a new treatment of the 1960’s peace movement. Despite the fact that it did not win an Oscar for best soundtrack, or anything really, it is probably the best movie in the past few years and a testament to how music will be sold in the next decade.

After only the first thirty minutes I went to my Amazon one-click account and bought everything to do with the flick: the soundtrack, the special collector’s DVD, and just for fun I also bought the DVD for Backbeat, the best bio-picture ever made about the Beatles or just about any rock band.

Between the movie rental and my three purchases, costing me a total of about $40, I generated around $25 in royalty revenue for the so-called beleaguered music business. It took me less than 5 minutes to do this from my home computer. I will own these forever, enjoy them, time and again, plus, labels, publishers and artists got paid. Best yet… no crime was committed.

So, for those searching for new business models in the music space, I have a fresh suggestion… stop whining and produce something truly great. See what happens.

360 DEALS: PART II
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How Will the Industry Fight Back Against The New Indentured Servitude?

Part I, if you missed it: http://www.mosesavalon.com/mosessupposes/jan08.html#pay

The word from on high is “360” or “all in” deals, as they are becoming known. In these deals record labels participate in not just revenue from record sales, but in every aspect of the artist’s career, from movie and TV appearances to branding opportunities. They claim to offer higher splits than traditional deals, but if you believe that labels are interested in giving more to artists because they feel generous—you are higher than the artists. Like many record company proposals, this one gives with one hand while reaching into the back-pocket with the other.

Mega music executive Jimmy Iovine has told his minions that EVERY new deal on Interscope must be an “all in” deal. Will this work? In the past major labels have ruled through the “no alternative” strategy. Will asking artists for more money be the magic elixir majors need to stay relevant, or will it be their final undoing?

Alternatives to this deal do exist—things like The Radiohead scenario, which suggest that one-to-one sales directly to a fan base are a viable substitute. Radiohead realized 100,000 downloads with the average fan paying about $9 US. Other examples like the Eagles/Wal-Mart deal and the Madonna/Live Nation deal show us that super stars do indeed have an alternative. But what about new artists, or even the mid-sized ones of the present?

I’ve run the numbers and I think what we have in a 360 Deal is a typical rich-get-richer scenario. For artists who have crossed that platinum threshold this deal is a sweetheart. Instead of making $1.50 a record they will now make $3-$4. Even if it means giving up some publishing rights this will net out to a better deal for anyone able to sell 1,000,000 units.

However, if you are just starting out and you haven’t hung that first plaque on your wall, this is bad news. Yes, you’ll be making $3-$4 bucks a record, but you’re not likely to sell enough to recoup, which means you’ll get zero from record sales. Meanwhile the label will get big chunks of publishing, merchandising, and other streams that were once considered untouchable by the labels. Artists who don’t meet the tipping point will be in recoupment hell. How will they get out of this trap?

To find out, I bounced a few legal theories off some lawyer friends and workshopped the topic when I spoke at the Los Angeles Bar Association this past month. The consensus was that artists may begin exploiting some very alarming weaknesses in the 360 deal that will leave labels wondering, once again, how they painted themselves into a corner.

Mainly, now that labels have total participation, they may also have a “fiduciary” responsibility to the artist. This means that they are legally responsible for helping them make decisions in the artist’s best financial interest; which might mean NOT signing a 360 deal. Ironic, bizarre, but very possible.

Being a fiduciary is something labels have been trying to avoid and have spent gobs of lobbying dollars persuading magistrates of their position. So far, they have won, but all that may change now.

Another area is “conflict of interest.” All of the revenue streams that the label participates in under a 360 deal would qualify them as a manager: but by law, you cannot be both a manager and a label to the same party. In many similar cases, judges have de-compartmentalized and sometimes completely dissolved the contracts.

Case three: if the label starts booking acts (and they will) they’ll bump up against California’s famous Talent Agencies Act; which prohibits anyone other than a registered agent from booking gigs. And if the label doesn’t book gigs or get them movie roles to sidestep this, the artist could then claim that the label has “abandoned” these rights, and get them back.

The labels’ defense is obvious—they will claim that they are not really managers or agents or fiduciaries; they are simply enjoying revenue from these sources without actually contributing to their value. If this happens artists can claim “unjust enrichment,” a complex but completely viable cliam.

Now, it’s possible that labels have thought this out and are ready for these claims, but I doubt it. If they are as unprepared as I’m guessing, there will be some very intriguing sparks in the years to come. What if an artist, say a wholesome girl-next-door pop singer decided that after three albums that she wants to pursue a career as a porn star. Can the label stop her? In the old days no. But under the 360 model they might be able to have say in every aspect of the artist’s decision making.

If an artist becomes unsatisfied, instead of threatening to audit their label, they will simply threaten one of the actions above. These have greater legal teeth than the old actions of simple “breach.” I predict that labels will do anything, even give back some of these new rights, rather than debate the integrity of their new 360 model in front of a court.

Imagine investing millions in an act only to have a judge say that the deal is off. Then imagine every artist using this ruling to get out of their record deals, years after they have taken large advances.

An old Chinese proverb goes, “May you live in interesting times.” Oh man, are we there.

Mo out
http://www.mosesavalon.com

Guy Hands, the owner of EMI, has hit out at the company's 260 artists and repertoire (A&R) experts, who find and nurture talent, saying he wants to take away their power and give it to "the suits" in the record company.

"The power and the decision has sat with the A&R man, who is someone who gets up late in the day, listens to lots of music, goes to clubs, spends his time with artists and has a knack of knowing what would sell," Hands said. "What we are doing is taking the power away from the A&R guys and putting it with the suits - the guys who have to work out how to sell music."

He added that some of EMI's labels had been spending more on marketing than they made in gross revenues and he told them "you might as well have put a £50 note on the CD - it probably would have done better."

"Those sorts of comments don't go down too well," he admitted. In fact, his outburst at the Super Return private equity and venture capital summit in Munich, was met with disbelief and derision by music industry experts.

Jazz Summers, chairman of the Music Managers Forum and manager of the Verve, Badly Drawn Boy and Richard Ashcroft described Hand's idea as "totally and utterly ludicrous".

"The real essence of a record company, the reason why a record company is successful is having good A&R," he said. "If he (Hands) wants to succeed at EMI he needs to have an army of great A&R people and get rid of the suits.

"Basically what went wrong at EMI is they were a little too narrow in their A&R policy. He's learnt nothing, in fact he's going backwards," he added.

Since his Terra Firma outfit picked up struggling EMI for £2.4bn last year, Hands has made few friends in the music business, raging against the excesses of the industry, the "hand out and hope" way that advances are paid and announcing plans to axe 2,000 jobs.

Robbie Williams, for instance, withheld his next album and his manager, Tim Clark, compared Hands to a plantation owner. Radiohead quit EMI amid arguments over the control of their digital rights, with frontman, Thom Yorke, accusing Hands of behaving like "a confused bull in a china shop".

Hands admitted Wednesday that while the transformation of EMI is proceeding according to his financial plans, "emotionally and physically it's a lot tougher to do than we expected".

He also admitted that the ongoing credit crunch has forced Terra Firma to look elsewhere for financing, "as banks refuse or are unable to underwrite megadeals, we will start having to raise our own debt directly from pension funds, sovereign wealth finds and even the global money markets," he said.