How to Succeed in Today’s Music Business

By Steve Gordon

• Opportunities and Challenges Facing New Artists

• Whether An Artist Should Sign with a Label: What Record

Companies Give To and Take from Artists

• What to Avoid in Signing with a Label

• Advantages of DIY & How New Technologies Have Made it Possible for New Artists to Succeed

• Strategies for DIY Success

• How Artists Should Use Online Tools

I. Opportunities and Challenges Facing New Artists

The Current State of the Music Business

1999: 14.6 B

2009: 7 B

Major Labels• The five major labels are now only four• Each has suffered significant decrease in revenue

of 50% or more from sales of prerecorded music• EMI Music is teetering on bankruptcy• Each label has dropped artists and is signing fewer

artists• But, the majors still control more than 80% of

distribution, and own more than 80% of popular music

Top Ten Selling Albums 4/24/10:1

AKB 48 - Kamikyoku TachiKing Records Japan - 295.000 - 1 week at No.1 - Hot Shot Debut

2Justin Bieber - My Worlds (My World+My World 2.0)  Island - 207.000

3Lady GaGa - The Fame (Monster)  Interscope - 128.000

4Slash - SlashDik Hayd / Roadrunner - 109.000

5Usher - Raymond V RaymondLaface / Arista - 109.000

6Madonna - Sticky & Sweet TourMaverick - 83.000

7Black Eyed Peas - The E.N.D.  Interscope - 71.000

8Lady Antebellum - Need You NowCapitol Nashville - 62.000

9Sadé - Soldier Of LoveRCA / Epic - 58.000

10Gorillaz - Plastic BeachParlophone / Virgin - 55.000

Challenges Facing New Artists

• Less likely to be signed to a major• Even if signed to a major, less likely to sell

as many units as ten years ago

Additional Challenges: More Competition than Ever

• 8 MILLION bands on MySpace

• Over 100,000 albums released in US alone:

Only 10,000 sold more than 1,000 copies Only 1,000 sold more than 10,000 copies Only 250 sold more than 250,000 copies

Opportunities!

• New technologies have reduced price of recording

• Distribution is almost free

Affordable Recording

• For $1000 you can have a home studio with speakers, headphones, a laptop, and music software

• With today’s inexpensive equipment and software you can write, arrange, produce, mix and master your own music at home, without the need for an expensive producer, mix engineer or mastering engineer

Free or Nearly Free Distribution

• TuneCore: $2 per side per store• CDBaby: 9% of receipts• DIY/Paypal: 1-2 cents per side

Flip Side of Opportunity

• Anyone can be on the Internet

• Anyone IS on the Internet

II. Whether An Artist Should Sign with a Label: What Record Companies Give To and Take from Artists

“Rising Above the Din”

A label will:• Produce & record

• Market & promote• Distribute

Major vs. Indie Label Deal

Major Label Deal:• $500,000 advance• $1M marketing budget

Indie Label Deal:• $0-15,000 advance• $15,000-$30,000 marketing budget

Marketing and Promotion

Both majors and indies do the following:• Radio play• Tour support• Radio & TV interviews and

performance• Advertising for product (print ads,

posters)• Press coverage

Online Marketing and Promotion

• Blogs• Internet Radio• Website Development and Maintenance• Online promotions• Features on major websites: AOL,

Yahoo, MSN• Positioning on music stores: iTunes,

Amazon, Rhapsody, Napster

What the Artist Has to Give Up

• Both majors and indies take more than 90% of record income

• Deal may say 15-20%• Deductions:

– Packaging: 25%– Net sales:10-15%– Foreign reductions and royalty– “New technology” deduction

III. What To Avoid In Signing With a Label

360 Deals• 20-50% Performance• 20-50% Publishing• 20-50% Merch• 20-50% Endorsements• 20-50% Everything else

– Appearance in movies, TV, etc– Private parties– Paid interview– Etc.

What To Avoid In Signing Cont.

Make them Pay or Perform• Advances for each income source• Performance-based deals

– Percentage of revenue IF they secure a synch

– Percentage of revenue IF they secure endorsement

– Percentage of revenue IF they secure a live engagement

IV. Whether it is Better to Do It Yourself: Advantages of DIY

LABEL DIY

Keeps 90% of record sales

Artist keeps the $

20-50% of everything else

Artist keeps the $

Is DIY Better? Yes!

BUT HOW?

V. Strategies for DIY Success…

Production, Marketing and Promotion Budget

• Investors

• Marketing Companies

• New Business Model: Polyphonic

Investors

• $5,000-$1M : Return on Investment– 25-50%– Cap of 100% of investment– Payable after recoupment of artists’

expenses– Family, angels, and businessmen

Marketing Companies

• Create marketing plan• Implement strategies to secure goals

– Create buzz online through major websites– Acquire coverage in press– Secure play on radio and internet radio– Branding – improve image of artist with proper

photos, interesting graphic design, consistency across social networks and website

Polyphonic• Joint venture between Nettwerk Music Group

and Radiohead management

• $20M investment behind it

• Artists to keep copyrights of their own music

• Polyphonic provides funds: Promotion, marketing, tour support, distribution

• Profit-sharing model: 50/50 split between Polyphonic and artist for all sources of income

VI. How Artists Can Use Online Tools

• YouTube

• Websites

• Online Distribution: Third Party or DIY

• Blogs

• Social Networks

OKGO’s Viral Success on YouTube

• Their first DIY video, “A Million Ways”, cost $20 and was downloaded 9 million times from YouTube

• Their second DIY video, the Treadmill Video, cost a few thousands dollars (for eight used treadmills) and debuted in July 2006. Two years later:

– It had been viewed 42 million times on YouTube– Parodied on The Simpsons– Led to the band’s appearances at the MTV Music

Awards, The Tonight Show with Jay Leno, and The Colbert Report

– It won a Grammy for Best Short-Form Video (2007)

WebsitesDo’s:• Web 2.0 aesthetics: clean, streamlined website -

make site easy to navigate

• Make contact information easy to find: email of artist, manager, PR agent, booking agent, and links to social networking sites (include widgets to make links easy to find) :

• Make sure the site looks cool for the genre of music you are working with (branding/aesthetics can vary greatly from rap to pop to folk, etc.)

WebsitesDo’s (cont.):• Include music and video players in addition to

links to YouTube/Vimeo (but, DO NOT have music/video automatically play - can be distracting and even deterring for new visitors to your site)

• Also include: photos (both from live shows and for press), link to a mailing list, link to where you can buy music (iTunes/Amazon/label website), and past favorable reviews or other press

• Giveaway download in exchange for email address on mailing list

Example of a Good Website: Terry Poison

WebsitesDont’s:

• Don’t make the site difficult to navigate• Don’t let your site have a ‘corporate’ vibe

• A) Don’t have banner or sidebar ads unrelated to your music

• B) Don’t make it difficult to sell your album

• Don’t let the site ‘age’: make sure that you are constantly updating the site

Example of a Bad Website: Mr. Cota Cota

Example of a Bad Website: Chrisette Michele

Third Party Distribution: TuneCore

• Storage Fee: $20/year

• Distribution Options:– $9.99/song in all 19 stores– $47/album with unlimited number of songs– $2/song per store

• Digital distribution only

Third Party Distribution: CDBaby

• Storage Fee: None

• Distribution:– $35/album: goes to 21 online retailers and

physical copies sold by CDBaby (physical copies must be mailed to CDBaby)

• CDBaby keeps 9% of revenue from digital sales, and $4 off each physical album sold

Self Distribution: PayPal

• Create seller account on PayPal and mail your own albums/merch

• PayPal keeps just a few cents on each transaction

• Can easily add a PayPal widget to your website, blog, MySpace, and other online profiles

Social Networks

Is MySpace Dead?• YES:

• Inundated with advertising• Clunky interface• Only bands and artists use MySpace for social

networking

• NO:• Important people still look at and play music from

MySpace pages• Still one of the easiest ways to quickly preview an

artist’s sound and image

Social Networks

Facebook• Quickly becoming an essential tool for

social networking• Artists can easily self-promote with the

creation of Facebook Pages and Groups• Over 200 million people on Facebook

Social Networks

Twitter• Another easy method to connect with

fans and potential listeners• Can instantly and easily update

Blogs

• Huge number of music blogs on the Internet, all featuring different styles of music

• Bloggers are both writers and music fans – they are interested in listening to new music and writing about what they like

• Blogs are viral tastemakers

Blog Stats

• Approximately 133 million blogs• 77% of internet users read blogs

• 2/3 of bloggers are male• 60% of bloggers are age 18-44• 75% of bloggers have college degrees• 75% of bloggers are employed full time

Source for all above statistics:

http://thefuturebuzz.com/2009/12/10/blogging-stats-facts-data/

Blog Benefits

2008 NYU Stern Business School Study

Researched whether there was a correlation of

album sales and blog posts.The research found:

• If 40 or more blog posts were made before an album’s release, sales ended up being three to four times the average for both independent and major label releases

• If blog posts crossed 250, album sales rose to six times the average, regardless of label

Top Music Blogs on the ‘Net

• Stereogum, Spinner, Brooklyn Vegan, Gorilla vs. Bear (pop, electronic, indie, folk, rock, hiphop, soul)

• Nah Right, Grandgood (electronic, rap, R&B, hiphop)

• Blog aggregators: giant RSS feed of thousands of various music blogs

• Hype Machine• Elbows• We Are Hunted

Hype Machine

Blogs: Viral Tastemakers• Why “tastemakers”?:

– Bloggers are active consumers of new music and each features from several to more than a dozen artists every week

• Why “viral”?– Blogs are often aggregated on sites like Elbo.ws or

Hypemachine – if you are featured on an aggregated blog your visibility will soar

– Bloggers are active on social networks (to promote their own visibility) – if your music gets a post it will be mentioned on Twitter/Facebook/elsewhere

– Bloggers read other blogs – will likely repost something if they like it as well

How to get your music featured by bloggers

– DO YOUR HOMEWORK: Find blogs that feature similar styles of music. (E.G. Do not send your latest R&B song to an indie folk blog!)

– Bloggers gets hundreds of emails a week from artists who want to be featured. To make your email stand out:

• Make it short: Include a one-sentence description of what your music sounds like, a 1-3 sentence bio, two download links and a link to your MySpace

• NEVER send mp3s in attachments – only send download links (attachments clutter in-boxes)

Getting Posts: Is it better to DIY or get an Agent?

• If you DIY, your emails might go unread – bloggers get hundreds of emails a week, and larger blogs like Stereogum won’t read unsolicited emails

• If you pay for a PR agent, they might be able to get you the kind of coverage that DIY can’t – on larger blogs and online magazines – IF they have existing relationships.

• Never pay a PR agent if you haven’t seen his/her artists on blogs you want to be featured on – bloggers often overloaded by mass mailings from ill-established PR agents!

Example: DIY

Example: Agent – LCD Soundsystem on Perez Hilton

Another Model for Success: Be Successful First

• OkGO broke away from EMI to start its own management, Paracadute• Moby established successful career with aid of EMI. He is now with “indie” Mute • Aretha Franklin announced that she will leave long time home Arista to start her own label• Prince “Lotusflow3r/MPLSound/Elixer” triple album set exclusively released by Target (Warner) • Paul McCartney “Memory Almost Full” – Starbucks (formerly Capitol)• Radiohead “In Rainbows” – Internet/pay-what-you-want/discbox for $82 released independently –

“In Rainbows” later released by XL (formerly EMI)• Madonna left Warner and signed with Live Nation for $120 million deal• Mariah Carey - Chanel and Elizabeth Arden endorsements• Eagles “Long Road Out of Eden” - Walmart represented by Irving Azoff (Frontline/Ticketmaster) –

success at Walmart• 50 Cent gave his name to “Formula 50” in exchange for stock. Coke bought the brand and his

share is worth from $100 to $400 million