ch.ch.ch.ch.Changes

Kristin Thomson, Future of Music Coalition @kristinthomson

How technology-driven changes have impacted musicians

3 obvious and 7 not-so-obvious things that have changed recently for working musicians.

1. Vast increase in number of platforms to share, distribute, license or sell music.

Physical retail Radio

Record shopsBig box retailers

Indie shops

Commercial radioNPR

College radio

Direct sales

MailorderRecord clubs

Sales at shows

Prior to 1998

Physical retail Radio

Record shopsBig box retailers

Indie shops

Commercial radioNPR

College radio

Direct sales

MailorderRecord clubs

Sales at shows

Digital retail Webcasters/satellite

++ +

Direct sales

Interactive streamingOnline audio

++ +

Online video

Positive !

More options for consumers/music listeners More efficient delivery Music is way more accessible

1. Vast increase in number of platforms

+

Negative !

For listeners, “the paradox of choice” Dispersion of fans/consumers Have to be present on multiple platformsThe “unbundling” of music (more about that later)

1. Vast increase in number of platforms

_

2. Musicians’ greatly improved access to the music marketplace.

Retail RadioLimited by shelf spaceControlled by big distributors and retailersMajor labels a priority

Prior to 1998

Tightly controlled playlistsPayolaMajor label dominated

CD Baby: $49 per album TuneCore: $30 year 1/$50 each following year

91% of revenues back to artist 100% of revenues back to artist

2. Greatly improved access to marketplace.

2. Greatly improved access to marketplace.

Other “free” or low cost platforms and tools !

YouTubeSoundcloud!

PandoraSirius XM!

!

!

!

Websites/blogsBandcamp!

FacebookTwitterInstagram

Positive !

No barriers to entry! Easy, affordable access to digital stores and platforms Drastically reduced overhead costs No need for distribution deal Direct access to fans

!

2. Greatly improved access to marketplace.

+

“It’s not a novel observation on my part, but technology has leveled the field of distribution to a great degree.” !

– jazz manager interviewee !

!

2. Greatly improved access to marketplace.

Negative !

No barriers to entry! Way more “noisy” More competition for consumers’ attention/wallet share Competing with the entire history of recorded music For composers, significant drop in what they can charge

2. Greatly improved access to marketplace.

_

3. Increased number of music- related revenue streams.

Composition income Sound recording income

Mechanical royaltiesPublic performance royalties

Synch licensesJingle writing/composing for hire/

commissions

Prior to 1998

Physical retail salesPhysical mailorder

Selling music at showsMaster use synchs

Composition income Sound recording incomeMechanical royalties

Public performance royaltiesSynch licenses

Jingle writing/composing for hire/commissions

Physical retail salesPhysical mailorder

Selling music at showsMaster use synchs

Digital retail salesDigital performance royaltiesInteractive stream payments

YouTube partner programCloud storage payments

AARC royalties

++

Streaming mechanical royaltiesMechanicals for cloud storage

Lyric display royaltiesYouTube partner program

42 Revenue Streams money.futureofmusic.org

Revenue Streams: Existing, Expanded and New money.futureofmusic.org

Positive !

More opportunities to make money from your compositions, recordings, brand. Shift from one-time purchases to license-based payments for each listen. Development of entirely new revenue streams. !

3. More revenue streams

+

Negative !

Atomization of former income streams. Many new streams are fractions of pennies. Lengthening of payback period. Discovery and payment increasingly dependent on proper metadata and attribution. !

3. More revenue streams

_

4. Disruption of conventional music business models, and 7 related results.

(Re)creation of the singles market. Great for consumers, and a key factor in success of iTunes store model but... > Significant drop in revenue from retail sales > Significant drop in mechanical royalties to composers > Reported drop in label support for artists !

4. The unbundling of music

“The thing that’s decreased—this won’t surprise you—is the income from recording. By that I mean the royalties, the advances, all of the income streams that go along with the recordings. It’s all decreased significantly over the last 10 years.” !

– Contemporary Chamber Ensemble interviewee

4. The unbundling of music: decreased retail sales

“Mechanical royalties have just been decimated; the statement that was 20 pages long and involved six figures has turned into this statement that’s 100 pages long and doesn’t even make five figures. It’s probably, I’d say, at least a 75% decline in mechanical royalties…” !

– Nashville Songwriter interviewee

4. The unbundling of music: decreased retail sales

4. The unbundling of music

50%

22%

23%

4%Self-identified songwriters/composers:

Over the past five years, have the mechanical royalties for the reproduction of your songs/compositions increased, stayed the same or decreased? !

Money from Music survey. N=1062

Half of songwriters/composers say mechanical royalties have decreased.

No label support, lower revenues overall means artists are asking their fans to: > pre-purchase albums > support tours > buy premium offerings Great for many musicians, but does add to workload. !

5. Direct support from fans possible...and necessary

6. Increased corporate presence

42%

35%

9%

14%Self-identified recording artists with a relationship to an indie or major label:Thinking back over the past five years, has your financial support from your label(s) increased, stayed the same or decreased?!

Money from Music survey. N=381

42% of signed artists say that label support has decreased.

Reported drop in label support for artists means musicians looking to other sources for support. > tour sponsorships > product endorsements > sync license deals !

6. Increased corporate presence

“[...] it definitely seems that people in general are bummed that record sales are so shitty and while I would love to get paid more for records I, long ago, gave up chasing that particular ghost and have looked for money elsewhere.” !

– Damian Kulash, rock band guitarist and singer !

6. Increased corporate presence

Drop in “traditional” revenue streams and tour support means that bands are more dependent that ever on income from live performance. > more shows > more attention (and money) paid to stagecraft !

!

7. More shows, and higher expectations

“Do I think that touring has become significantly more expensive? Yes. I think the bar has been raised for production…I think it’s required now and because of that it costs more to do that.” !

– hip hop business manager !

7. More shows, and higher expectations

Digital sales are very well documented. No more dealing with distributors, hassling phone calls, getting stiffed on payments. !

!

8. It’s way easier to get paid

+

Platforms like Bandcamp make it possible to: > use variable pricing > bundle physical and digital goods together > sell directly to fans !

!

!

9. Market segmentation for the win

+

“We have our own download card system in place. I, for one, definitely use that when I’m playing out, particularly with the vinyl. There’s a download card taped to the back of each record, and I try to do the same with t-shirts as well.” !

– Tom, indie label owner and performer

9. Market segmentation for the win

Prior to 1998: if you aspired to be on commercial radio, in big retail chains, playing big shows, you needed to sign with a major label and relinquish your copyrights. !

Now: artists can more easily retain control of copyrights and doing licensing deals, hire consultants for expertise. !

10. Musicians can control more of their career

+

36.8

53.5

55.7

63.9

66.3

24.1

21.8

23.7

18.9

11.6

18.4

2.7

8.0

4.6

1.2

20.7

22.1

12.6

12.7

20.9

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

My day-to-day work is more about promotion than creation

I can collaborate with other creators

I can manage my career myself

It's more competitive than ever

I can communicate with my fans directly

Strongly agree/Agree Neutral Disagree/Strongly disagree Not applicable

I can communicate with my fans directly

It’s more competitive!than ever

I can manage my !career myself

I can collaborate!with other creators

My day-to-day work!is more about promotion!

Thinking back over the past five years, how have emerging technologies and the internet affected your musical career?

{N = 4617 Data from Artist Revenue Streams

February 2012. money.futureofmusic.org

5 w

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“There’s enormous structural differences from the day-to-day blue-collar existence of the musician in terms of how you organize a tour.”   – indie rock composer, performer, sideman!

10. Musicians can control more of their career

Empowered music creators. Created efficiencies. Greater access to the music marketplace. Direct connection to fans. Possible to retain control of rights, and self-manage career. !

Recent changes are a double-edged sword

++

Atomized income streams. Support structures are changing. More competitive than ever. Created new work and additional responsibilities for musicians, whether it’s managing an online presence or self-releasing your music digitally. !

Recent changes are a double-edged sword

_

The  answer

Jenny

The  answer

Jenny

There  is  no  single  solution  to  the  challenges  facing  musicians  and  songwriters.

Be everywhere.

Leverage the internet tooffer different prices and bundles.

Play favorites.

Re-assert exclusivity.

Super-serve your fans.

Maintain control.

Measuring the impact of these changes.

FMC resources

Artist Revenue Streams Research

money.futureofmusic.org

42 Revenue StreamsRevenue Streams:

Existing, Expanded New

money.futureofmusic.org/40-revenue-streams/ money.futureofmusic.org/revenue-streams-existing-expanded-new/

FMC resources

HOW THE MONEY FLOWS BACK TO

songwriters, artists,publishers & labels

songwriter

broadcast radio terrestrial broadcast of any AM or FM station

PROs ASCAP, BMI, SESACCsongwriter

publisherperformance of composition

performance of sound recording

How are musicians and songwriters compensated when their music is played on the radio, sold on digital platforms,

webcast, or streamed on interactive services?

For digital stores and on-demand streams, how the money flows depends on what entity negotiated the license.

For record labels that are represented by a digital aggregator/distributor:

For artists who own their sound recording copyrights and use services like CD Baby or TuneCore:

In the US, terrestrial broadcasters do not pay performers or sound recording copyright owners

For record labels that have a direct deal with services:

digital saleiTunes • Amazon

Google Play • eMusic

SR record label artist/band*

mechanical reproduction of composition

sale of sound recording

publisher songwriter

10-50%

9.1¢/track

* Rate of payment from label to artist/band depends on terms of contract, and whether digital sale is classified as a sale or a license.

0.5% Sound Recording Special Payments Fund #

# Labels contribute a small percent of sound recording sales income. If recording was made under the AFM’s recording agreement, payments are disbursed to musicians who were paid scale wages during the recording session.

musicians

SR aggregator

artist/band*

mechanical reproduction of composition

sale of sound recording

publisher songwriter

IODA/The Orchardrecord label

9.1¢/track

@50%

85%

SR only relevant if performer recorded + released songs written by others

sale of sound recording

publisher songwriteraggregator artist/bandCD Baby or TuneCore

91-100%

AFM & SAG-AFTRA Fund

webcast or digital performance

Pandora • Sirius XM • NPR streamingany webcast stations

PROs ASCAP, BMI, SESAC*C

SR SoundExchange

songwriter

publisher

record label

performer(s)

50%

45%

5%

performance of composition

digital performance of sound recording background singers and musicians

* At the end of 2012, Universal Music Publishing Group and Sony/ATV-EMI pulled their digital rights from ASCAP and BMI, seeking to get a higher rate by negotiating directly with webcasters.

UMPG and Sony ATV-EMI* UMPG and Sony ATV-EMIsongwritersC

songwriter

songwriteron-demand

streamSpotify • Rdio • Rhapsody

SR record label artist/band*

streaming mechanical royalty

licensed use of sound recording 10-50%

10.5%

minus payment to PROs

PROs ASCAP, BMI, SESACCpublisher

performance of composition

publishers

UMPG and Sony ATV-EMI*C * At the end of 2012, Universal Music Publishing Group and Sony/ATV-EMI pulled their digital rights from ASCAP and BMI, seeking to get a higher rate by negotiating directly with services.

UMPG and Sony ATV-EMIsongwriters

licensed use of sound recording

PROs ASCAP, BMI, SESACsongwriter

publisherperformance of composition

SR aggregator

artist/bandIODA/The Orchard

record label 50%+

85%

on-demandstream

Spotify • Rdio • Rhapsody streaming mechanical royalty

songwriterpublisher*

C

streaming mechanical royalty

licensed use of sound recording

PROs ASCAP, BMI, SESACC

songwriter

publisherperformance of composition

SR aggregator artist/bandCD Baby or TuneCore

on-demandstream

Spotify • Rdio • Rhapsody

* Services pay streaming mechanical royalties to big publishers directly, or to a mechanical licensing agent like Harry Fox, Songtrust or Music Reports, which then pay their publisher members/clients. Because it is very burdensome for self-published songwriters to collect these royalties, both CD Baby and TuneCore have set up services to help self-published songwriter clients to collect them.

* Rate of payment from label to artist/band depends on terms of contract, and whether digital sale is classified as a sale or a license.

* Services pay streaming mechanical royalties to big publishers directly, or to a mechanical licensing agent like Harry Fox, Songtrust or Music Reports, which then pay their publisher members/clients. Songwriters need to be proactive in seeking out this revenue.

mechanical licensing agent or publisher*

publisher*

Information compiled by the nonprofit Future of Music Coalition, with gracious assistance from many experts and friends.

Poster edition: September 2013www.futureofmusic.org | money.futureofmusic.org

© Future of Music Coalition 2013

Artist Revenue Streamsmoney.futureofmusic.org

* Rate of payment from label to artist/band depends on terms of contract, and whether digital sale is classified as a sale or a license.

mechanical licensing agent or publisher*

performance of composition

performance of composition

big labels

indie labels

self-released

10.5%

minus payment to PROs

9.1¢/track

10.5%

minus payment to PROs

91-100%

For radio and radio-like services, blanket licenses determine who gets paid, and how much.

digital saleiTunes • Amazon

Google Play • eMusic

digital saleiTunes • Amazon

Google Play • eMusic

Music and How the Money Flows infographic

futureofmusic.org/moneyflow

New Business ModelsDigital Distribution and

how to participate

futureofmusic.org/nbm futureofmusic.org/dd

Kristin Thomson | Future of Music Coalition @future_of_music@kristinthomsonslides posted at money.futureofmusic.org/contentcamp