The New Music Business

by | Jul 23, 2014 | Blog | 0 comments

It’s arguable that now is perhaps the most tumultuous time in all of history for musicians. Artist payouts from major media vehicles like Spotify are in the imaginary numbers (Hypebot), indie labels being blocked by Youtube unless they agree to the terms of the new music service (The Guardian), and an endless parade of press talking about the state of the music industry being skewered by runaway business practices, coupled with the incompetence of our legal system to defend fairness and dispense justice, due in part to outdated legal definitions such as the consent decree which is currently being revisited (Digital Music News).

All of this talk about how the landscape of the music business has changed, at the core of that shift has been technology. From iTunes to streaming a la Spotify, Youtube, and so forth – clearly, technology businesses are at the forefront of shifting how we experience music. Couple that with the fact that a good majority of society doesn’t understand how the business actually works (let alone many professionals in the industry; it gives us headaches too) which leaves a lot of room for businesses to set up models that abuse or take advantage of others.

The long, confusing monetary pipeline

We need to acknowledge the complexity of the current systems in which the industry operates. Firstly, there are labels – which may or may not fund artists to produce their recordings by way of an advance which must be repaid. For all intents and purposes, think of Labels as private banks making loans. Next, there are the lateral: logistics companies which are there to offer services like royalty collections or Performance Rights Organizations which “manage” the exchange of those businesses in need of music content and are capable of paying for it – essentially, “business to business”. Then there are the outlets for which consumers can find, purchase or stream said content.

All of those companies have multiple mouths to feed under their banner. They all get to take a cut of the payout for music created by an artist who publishes, even if they were to publish themselves the DIY route would still have to rely on a P.R.O. (performance rights organization) like A.S.C.A.P. to which said artist would have to register (for a small fee) to be a part of in order to receive residual payments for the consumption of the content they published. To compound the matter further, the constant devaluation of musical content is worsened even for those courageous enough to try to do it themselves. There is a multitude of lateral services like TuneCore and CDBaby all set up to make profits off the artist in exchange for the platforms (placement on iTunes, Rhapsody, etc.) or materials (like cd’s and jewel cases) the artist needs from these companies to get their content to market. We don’t even have to discuss the myriad of professional audio hardware, software, and services professionals can provide that have to be paid for to get the content sounding “commercial”.

Now, in the literary publishing world, I’ve heard a saying before and that is “all money flows towards the writer”. So far, the current business practices being employed in the music industry are so vast and wide, they continually work toward the opposite. If you want to publish yourself you’re going to have to invest in registrations to organizations like TuneCore or CDBaby, A.S.C.A.P. and I.S.R.C. (if you want your own sound recording code to allow organizations to track digital sales) and Harry Fox Agency in attempt to get your content onto most of the major platforms – all which have their own payout structures and take cuts for their own overhead.

I propose that the future of the music industry stop looking “up” to big business as the end goal. While the path we’re heading down already seems to portray the departure of “big business” as less and less space is available at the top for world-class studios and music firms, we seem to have stabilized on that departure. However, if the medical industry has taught anything, stabilized only means the condition has stopped deteriorating, it doesn’t mean the problems are over. The stability of the value of music itself has continued to fall while technology companies have come up from under and created a huge disruption in the experience and thus the value. If we want to bring back any stability in the music market with regards to the subjective worth of the music we make, we have to learn the business end and be ready to invest just as heavily in protecting our business as we do creating our music.

An exemplary measure

Klayton of Celldweller has carved out quite a storied career in the last decade and a half. In his brand new Youtube channel trailer, his list of accomplishments is impressive not just for the credits he can claim his music has been placed in and his touring career; but also for his business entrepreneurship: from label, to publishing and publicity firm, merchandise, and a myriad of other content avenues he endeavors on top of regular uploads to Youtube. This is clearly a model of how – if not what – it takes to survive in the current music industry climate. It’s not completely unheard of, just exceedingly rare to find an Artist in control of so much of his own business.

To elaborate, since his business model isn’t extremely public beyond the expose mentioned above – this is clearly speculative. However, one thing that is certain is that when you look at current business practices, all of the 3rd party companies from the labels to the P.R.O.s and so on exchange information on as little a basis as possible: they only divulge the information on a need to know basis. A long-standing and prominent technology company by the name of Avid is a prime example of just what I’m talking about. Avid forced off the public stock exchange due to its egregiously over-ambitious business moves of acquisitions and mergers in markets it wasn’t fully prepared to understand and support (SonicScoop). It’s only as the public became more interested in the controversy that more information surfaced about the specifics which led to Avid’s delisting (Forbes). To see the connection between this instance and find the relationship with the music industry, is to see the music industry in its entirety, you have to include the technology companies too.

That means the consumer applications like Spotify, the .com web platforms like Youtube and Soundcloud all should be considered. When they first crop up, whatever starts trending gets praise for doing so well, but a finer look at the disruptive pattern in retrospect causes ripples that can negatively impact the lives of many later on. The content on Spotify is only worth a fraction of a cent, yet it’s founders – Daniel Ek, and Sean Parker holds a collective net worth in excess of $2.5 Billion. Spotify is currently one of the top new media streaming services in the world, but I’m fairly positive that Spotify’s creators aren’t working to protect fair payment for the artists’ content, they’re ultimately in business for themselves and not the artists. Now Spotify must face backlash for the financial commotion it helped fuel. The same can be argued for the technology giant Avid.

It’s a big old music industry pie.

Now, it’s obvious that Klayton himself is not responsible for all of the logistics behind all of these things, but nonetheless, he’s managed to create it all in the name of his business and secured his legacy. His efforts definitely deserve respect for no less than the amount of what he’s achieved in the time he’s achieved it; especially when the market continues to be over competitive with existing indie and big labels. It’s clear that path won’t work for everyone, but if you look at the successful music businesses based around artists who either have a hand in a label or manage their own, they all use a business model similar to Klayton’s whether in diversity or scale. Not every artist has to go and start their own version of everything under the sun like Klayton has, we just have to better comprehend how to utilize and deal with the 3rd party companies in existence now. Don’t just assume that a P.R.O. is going to treat your content fairly simply for being a member of it.

If a writer and publisher of music are to be successful, let alone sustainable off their content, then clearly they have quite a job of staying in-the-know with the myriad of everything that’s strung together to create this music industry. When there are too many external hands that take a cut from the money that is due to the artist, there is little control over the fluctuation of how much that artist’s content will be valued at. What we need is transparency, and as artists, we will only get that if we take control of our publishing, our distribution, and our delivery and payment methods.

What do you think about this topic? Do you agree that artists should have more control over their content’s value in some way? How, as artists can we fight for it? Please share your thoughts!