Entertainment For Lively Minds
Making money from music in the 21st century explained
Posted by David Hepworth on 18 August 2009 - 6:42am.
If you want to know how the music business works nowadays go to page 42 of the August 10th issue of the New Yorker. In the course of a piece about Ticketmaster and Live Nation, the former's boss, Irving Azoff, delivers this concise summary of what's going on:
"The way the industry is monetized has completely changed. The order used to be: first, records; second, live; third, merchandise. Now it's: first, live; second, third-party sponsorship; third, merchandise; fourth, publishing; fifth, records."
Now think of all the implications of that.
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We don't have to think about
We don't have to think about the implications, we can see (and hear) them.
Is there anyone who takes chart placings seriously anymore?
No, he may have died but we live in Michael Jackson's world now.
Personally, I preferred Johnny Burnette & His Rock 'n' Roll Trio's world, and I'm going there right now!
Rocket 88
is playing right now. I found out the other week that Jackie Brenston & his Delta Cats didn't actually exist. It was Ike Turner after all. At least we can all travel in time via our music.
Jackie Brenston did exist
He was Ike's chauffeur.
Well I Never.
His chaffuer got to have is name on one of the coolest band names ever, and put out the first rock and roll song ever as well. Although some argue about the latter.
So what
happens when the recession bites and people stop going to the gigs? Or at least only keep going to the reasonably priced ones, rather than paying £200 to see Van Morrison play Astral Weeks? That pretty much wipes out merchandising and sponsorship too.
Publishing
Silly question I know, but can someone explain exactly what publishing is, and how an artist or record company earn money from it.
Publishing
A publisher will try and place the music they own the copyright to in films, on TV shows, in TV ads, in video games, on compilation CDs etc, and will receive a royalty each time a game is made, or a CD manufactured, or an ad shown. The revenue is split between the publisher and the author of the music in question - it's nothing to do with the record company. In reality it's more complicated than that, but them's the basics.
More questions
Thanks Fraser.
How does an artist find a publisher? Is every song copywrited with a publisher? With internet releases perhaps becoming more prevelant (Radiohead as an example), will these releases be tied up with a publisher?
More answers
Artists are signed by publishers in the same way they're signed by record companies - by A&R people, whose job is to locate artists whose catalogue is worth exploiting (isn't industry jargon just lovely?). Web distribution is all part of it - if you download or stream a track, a royalty is owed to the publisher, just as it would if the track was featured in a TV ad.
Wikipedia's section on mechanical royalties explains all this better than I can.
Chrysalis
Doing well out of Michael Jackson publishing
http://news.bbc.co.uk/1/hi/business/8200938.stm
Point of order.
Chrysalis is doing well out of Rod Temperton's publishing (Michael Jackson's publishing is controlled by Warner Chappell). This story's interesting inasmuch as Chrysalis were recently on the verge of selling up to EMI until the economic apocaplypse loomed. I'd expect they find themselves in a much more secure position now.
When someone writes a song, they own the copyright in it until such point as they choose to assign that copyright to a music publisher. The term of assignment generally used to be Life of Copyright (70 years after the death of the author) which meant the publisher effectively owned the songs outright, but this was more common practice in the old Tin Pan Alley days. Nowadays a publishing contract's more likely to be for a fixed term; say, two to five years with options and a retention period of perhaps ten years, after which time the rights will revert back to the author.
With publishing, the writers, not the recording artists, gets a royalty for every use of their song, assuming it's successful. This is why yer Burt Bacharachs and Jimmy Webbs and Randy Newmans and Paul McCartneys have the wealth of Croesus; because their songs have been recorded by hundreds upon hundreds of artists, continue to be hits, and continue to get radio play and suchlike. There are all sorts of opportunities for 'secondary' exploitation - films, TV ads, games, ringtones, etc - and some of these can be very lucrative. But the essential difference is that Dionne Warwick only gets recording royalties for her version of Walk On By, whereas Backache & David get publishing royalties for every version of Walk On By.
So, recording royalties = payable to the recording artist. Publishing royalties = payable to the songwriter, irrespective of who the recording artist is.
so...
...if you can't sell a concert ticket, there's no point in making a CD (at the risk of stating the obvious).
...if you want to make a CD, you should get third party funding - and the only way to do that is if you have a name for yourself playing live.
Therefore: the record companies are all redundant.
Pretty much what we knew all along. Yet, the old-style model still keeps rumbling on.
Not only music....
The business model in sport has changed in a similar fashion.
Gate revenue having been knocked off the top by TV money and commercial sponsorship.
Merchandise
Surely that's what records have become now. Most gigs I go to there is a CD stall selling current releases and back catalogue for about a tenner each. Most artists are happy to turn up and sign them. Adds to the glamour of the evening and to the coffers.
How soon before Live Nation and their stable of stars get in on the act? Like current memorabilia shows, queue for ages in a Live Nation venue to get Bono to sign your CD/photograph, only available for sale at the event and also pay £20+ for signature. For an extra £30 queue to have your picture taken with him. Kerching.
Now there's an idea...how about getting a cover artist to sign the subscription-only copies of The Word. How much on eBay?
Not so prevalent in the UK yet...
... but very common already in the US from what I read - from memory, Bon Jovi, Alice Cooper and Robin Williams all offer "meet and greet" tickets, including a photo of you with the artist, on their current/recent/upcoming tours. Way more than £30 extra though...
All is changed
Changed utterly. A terrible beauty is born.
Big will survive. Small and niche will survive. Things in the middle will disappear.
Old will survive. New may surface but not survive.
We can listen to old things forever now. How we will discover new things is more questionable.
I think new can survive
I listen to more new artists now than I ever did thanks to the Internet. Some of my current favourites don't have the might of a big label behind them. You only have to look at the rise of Ingrid Michaelson to see that you can sell a lot of CDs and downloads and a lot of concert tickets without a record company being involved if you're good enough or maybe you just need to appeal to the right part of the market. Whatever, new artists will continue to come through but they may a. Take a bit longer to "make it"
b. Need to get their initial funding from another source than a record company (just like any other small business would) and c. Accept that they may never be as big as Bono (although most people starting out should already know that!)
What about the songwriters?
The people that I feel most sorry for in all this is the non-performing songwriters. Their take, despite often being the most important and most talented part of the chain is destined to get smaller and smaller.
As Sheev points out, I can't help but notice that
that's a description of how the industry makes money from its existing resources; there's no mention of how the industry finds new resources.
The use of none of those revenue streams: live, third-party sponsorship, merchandise, publishing, or recordings will bring new material onto the marketplace, as they all rely upon industrial scale marketing exposure that will never apply to an up-and-coming band or songwriter. About the only exception I can think of to the need for prior mass exposure is the merchandising use of "Just Another Diamond Day" and similarly quaint forgotten gems over the last couple of years.
Without a copy of the New Yorker to hand, I'm at a loss to know how Mr. Azoff thinks his business can do more than milk the assets they already have until we're all sick to death of them.