Category: Digital Music Revenues

The Truth About Remixes

The Truth About Remixes

Innovation is a remix of the past. Time and time again, we find the most groundbreaking inventions are improvements upon past creations. Take the flash drive for example. The development of personal computers brought about the “need to store more and more information… with [the desire of] portability… from machine to machine (Londonip, 2014).” The flash drive was created in order to fill the void left behind by its predecessor, the floppy disc, in order to give consumers more freedom in terms of capacity and convenience. Similar stories are prevalent throughout history. The past serves as the foundational building blocks of the future.

The storyline in RIP: A Remix Manifesto that I found to be the most compelling illustration of copyright law was the idea that culture always builds on the past (SocialRedChannel, 2013). Advancement is nearly impossible without an application of previous knowledge. In the case of music, it’s almost unreasonable to think that new sounds can be created without incorporating or modifying old sounds. Artists will always look to the past in order to connect with their audience, illustrate an appreciation for past cultures, strengthen their musical compositions, and create imaginative recordings that challenge the status quo. If artists were not allowed to build upon the past, music would not be where it is today. Take Rock N Roll, for example. The Rock N Roll Hall of Fame Foundation identifies the genres of Rhythm & Blues, Country, Jazz, Gospel, and Folk as Rock N Roll’s “immediate roots (RockHall, 2013).” If that’s the case, then one of the greatest genres in music is a mashup. Hip-Hop can also be considered a mashup. It builds upon past genres like Rock does, but it is also heavily influenced by sampling. One of the most iconic figures in Hip Hop, Jay-Z, recently sampled Nina Simone’s Four Women on his daring single The Story of O.J. (Unterberger, 2017). He did so in order to pay homage to the previous creator, and expand on the ideas of the original record. Jay-Z wanted to give his take on the topic and put a modern twist on the song. 21 Savage also recently sampled Coleridge-Taylor Perkinson’s Flashbulbs on his single, Bank Account (Unterberger, 2017). Both songs reached the Billboard 100, with the Story of O.J. peaking at #23 and Bank Account reaching #12 (Billboard, n.d.). Is it merely coincidence that a genre so heavily influenced by sampling is now the most popular genre in the music industry (Nielsen, 2018)? I don’t think so. The fact that Hip Hop can take something old and make it into something new is one of the reasons why it is so popular today. It’s daring, imaginative, and creative. It’s a culture that consistently builds on the past, and it’s driving the music industry into the future.

I understand that authors should have protection when it comes to guarding their intellectual property, but progression should be the ultimate goal, not inertia. We are in an era where things move at a very rapid pace. Creators are extremely active and need the proper tools to produce the products of the future. However, copyright law puts a limit on what they can utilize. It prevents culture from moving forward.

The fact of the matter is, mashups are “the result of two or more sources of content or data” being blended together to create a new application (Gerber, 2006). We use “mashups” every day. For example, internet sites such as Expedia and Priceline are mashups that allow consumers to easily compare vacation plans. Another example of a mashup is Angie’s List, “a directory service of general contractors, with customer reviews and opinions (Gil, 2018).” Some may argue that internet mashups and music mashups are very different, but the concept is the same: combine two or more sources of data in order to create an innovative way of consumption. The only real difference is, internet mashups connect the consumer to the seller. Music mashups, on the other hand, are viewed as competition to the original creation. But that misconception can be corrected through collaboration, in my opinion.

What many mashup artists don’t realize is that the original authors often feel like they are being undercut and unappreciated. Coherently, resistance will always be felt when creating something revolutionary that defies the norm. The phonograph was resisted by composers that were accustomed to making money from sheet music. Digital downloads were resisted by labels and artists that grew comfortable generating profits from physical albums. And streaming applications were resisted by companies that believed consumers should pay for a copy of music, instead of a subscription. In the end, that resistance eventually became support. I believe the same will occur when it comes to mashups, sampling, and remixing, but collaboration among all parties would certainly make things much smoother. Collaboration will turn resistance into support, especially if that same support becomes compensation.

Mashups should be legal, as long as the original author is acknowledged and profits with the new artist. As I explained earlier, mashups push music forward and have the power to create new genres, which will turn create new customers, new products, and new markets. Making mashups legal will create revolutionary styles of music that define previous classifications, which will grow the industry as a whole. While it’s unknown how much money Jay-Z or 21 Savage paid to clear the samples from Four Women and Flashbulbs (respectively), it’s clear that mashups are embraced as long as the original copyright owner is compensated. But money should not limit creativity. Everyone should be allowed to create, especially in music. While I believe that mashups should be legal, there should be some guidelines, rules, and regulations that protect the original creators. Here are the rules I propose:

  • A mashup should not be made to purposely discredit the original author. It should be used as a building block to create something new, not as a stepping stone to destroy a piece of art. Malice should be prohibited.
  • The original author has to be credited, and he must be entitled to royalties if the new creation is generating revenue. This brings me to my next point.
  • Mashups should not contain more than 9 samples. The more samples that are in a mashup, the harder it is to determine a royalty percentage. If the authors are capped at 10, the process can be simplified by establishing that each author is entitled to 10% of royalties. However, these can be negotiated among the creators, depending on the significance of each sample and the final product.

These three rules should satisfy many of the demands made by music artists and labels when it comes to mashups.

I believe copyright is a necessary law that empowers creators and allows them to benefit from the execution of their ideas. It puts the power in the hands of authors and copyright owners. That’s my personal opinion. Many people can think of brilliant ideas, but it takes effort and commitment to execute on those concepts. People who can make their ideas a reality should be rewarded, appreciated, and protected. However, I believe some changes can be made to improve copyright law. “Broadening copyright protection to encompass new forms of creative expression has been a consistent and driving force behind the evolution of copyright law (Carpenter, 2016)” yet mashups have been consistently resisted in the digital era. That needs to change.

Today’s world is extremely different than it was when the Constitution was created. There is no way that our founding fathers could have predicted a digital era, where written letters, postal systems, and newspapers have essentially been replaced by cellphones, the internet, and computers. They couldn’t have predicted that music would turn into a billion-dollar industry, where an artist has the ability to make money every time a listener hears their song. And they certainly couldn’t have predicted that technology would permit any person to be an inventor/creator. So how can we continue to implement the same laws from the 1700s in a 21st Century world? We have to make changes, in order “to promote the progress of science and useful arts (U.S. Constitution, Article 1, Sec. 8, 1787).” The two changes I would like to be seen made to copyright law include the following:

  1. Reduce the terms of copyright from 70 years after the original author’s death to 10 years. For corporations, change it from 90 years to 20. The logic behind this is simple, get the most out of your creation as quickly as possible and prevent monopolization. If you have a brilliant piece of work, you shouldn’t be idle in capitalizing on the benefits. Get on it immediately. If you cannot get the most out of your work in 10-20 years, someone else should be given the opportunity to realize its full potential. It will put pressure on creators/inventors to make use of their products in the immediate future, as well as prevent corporations from monopolizing music (i.e. Warner and the Happy Birthday song).
  2. Allow others to make alternate versions (derivatives) of the original creation, as long as royalties are paid to the original author. This will solve many of the problems people have with copyright law, and will take the shackles off 21st century creators. Some people cannot pay upfront to secure licensing, but imagination shouldn’t be exclusive to the wealthy. Everyone should be allowed to exhibit their creativity. This proposed change will create a level playing field for all creators, while properly acknowledging and compensating original authors. As long as the derivative shows some level of creativity and doesn’t directly attack the original author, it should be permitted.

Copyright law covers a wide variety of works, but as an artist and music professional, I can only give my perspective through a musical scope. Copyright should protect authors and original creations, but it shouldn’t deter others from building upon those creations in order to push our culture forward. Instead of outlawing creativity and shackling those who break copyright law (figuratively and literally), collaboration should be encouraged and changes should be implemented to reflect a 21st Century world. Only then will our society truly be able to maximize imagination and creativity. Only then will our culture be able to evolve and move forward.

References

Billboard. (n.d.). 21 Savage chart history – Bank Account. Retrieved from https://www.billboard.com/music/21-savage/chart-history/hot-100/song/1034072

Billboard. (n.d.). Jay-Z chart history – The story of O.J. Retrieved from https://www.billboard.com/music/jay-z/chart-history/hot-100/song/1032734

Carpenter, M. M. (2016). If It’s Broke, Fix It: Fixing Fixation. Columbia Journal Of Law & The Arts, 39(3), 355-364. Retrieved from http://search.ebscohost.com.oclc.fullsail.edu:81/login.aspx?direct=true&db=asu&AN=115389537&site=ehost-live

Gerber, R. S. (2006). Mixing It up on the Web: Legal Issues Arising from Internet “Mashups”. Intellectual Property & Technology Law Journal18(8), 11-14. Retrieved from http://search.ebscohost.com.oclc.fullsail.edu:81/login.aspx?direct=true&db=bth&AN=21673641&site=ehost-live

Gil, P. (2018, April 2018). What is an internet ‘mashup’? Retrieved from https://www.lifewire.com/what-is-an-internet-mashup-2483413

Londonip. (2014, September 15). 20 groundbreaking inventions from the last 100 years. Retrieved from http://www.londonip.co.uk/20-groundbreaking-inventions-from-the-last-100-years/

Nielsen. (2018, January 3). 2017 U.S. Music Year-End Report. Retrieved from http://www.nielsen.com/us/en/insights/reports/2018/2017-music-us-year-end-report.html

Rock Hall. (2013, October 18). The roots and definition of rock and roll. Retrieved from https://www.rockhall.com/roots-and-definition-rock-and-roll

[SocialRedChannel]. (2013, August 1). RiP: A remix manifesto. Complete [Video File]. Retrieved from https://www.youtube.com/watch?v=wTH6_MGE98k

U.S. Constitution, Article 1, Sec. 8. Retrieved from https://fairuse.stanford.edu/law/us-constitution/

Unterberger, A. (2017, December 29). The 50 best samples, covers and references of 2017: Critic’s picks. Retrieved from https://www.billboard.com/articles/news/list/8084999/best-samples-covers-references-2017

The Future of A&R

The Future of A&R

A&R’s find and discover talent that can be commercially successful in the music industry. According to Music Clout, they used to “serve as the middleman between the artist and record label and work very closely with the artist,” but now “the power of an A&R rep [has been] diminished” due to the advancements of technology (n.d.). The internet creates a direct path from artist to audience. It also creates a transparent ceiling where music companies can gaze down on musicians and see which ones are making traction. Once they have identified artists that have an established following and show the potential to be commercially successful, they can come down and swoop them up from the indie scene (or at least try). I believe the role of an A&R rep has shifted from seeking talent to seeking people with a paying audience, but there’s nothing wrong with that. According to McCready, “A&R’s primary business function is to… reduce the likelihood of failure in the marketplace (2011).” If that’s the case, then seeking a paying audience rather than talent is fulfilling the primary business function of an A&R. Talent doesn’t pay the bills, but in the world of music streaming, an audience that listen does.

I believe A&R is necessary for small and major labels. Many acts in the music industry are short-lived, but “good A&R’s can… push artists further. (Lindvall, 2011).” A large audience will not always translate to large revenues. Music is basically free now thanks to streaming, so even though an artist can have many listeners, it is not guaranteed that they will turn into paying customers. A good A&R will be able to identify and exploit revenue generating opportunities using an artist’s brand and character. A good A&R can also work closely with the artist to further develop their brand and convince their audience that he/she is worth seeing in a live setting. There are many things an A&R Rep can provide, but that doesn’t mean this support will necessarily come from an A&R rep.

The role of A&R has changed when compared to ten years ago, and will continue to change. The publishing side of the music industry is now more like the A&R Department. They sign artists and catalogues and work with them to get the most money out of the music, whether it be song placement in movies, TV shows, sports, or even video games. They also work with song writers too, which many labels fail to do. I think the role of A&R will eventually be provided by streaming companies, such as Spotify, Apple Music, and Amazon Music. That is where most of the listeners are at, so what better way to develop as an artist and get your music heard than by getting plugged into a popular playlist by a major streaming company like Spotify?

“Big data” is a major factor in the music industry. For people like myself that enjoy numbers, data, and statistics, we thrive on it. It is easy for an artist to download an Excel file from YouTube or Spotify with all of their sales, statistics, and streams. In fact, these reports can easily be acquired from the artist’s digital distributor (TuneCore, CDBaby, etc.). This data has information on the listener and their activity, revealing gender, geographical location, age, and even the device they are using for listening. Many artists are not aware of the importance of this data so it is not vastly used, but for people who want to be involved in the business of music and want to create songs that will captivate their audience, this data is extremely important. Record labels and A&R’s use this data to determine what kind of records are worth investment/attention. As time passes and the value of “big data” is realized, I believe it will be utilized by everyone in the music industry, including A&R’s, artist managers, and even songwriters. The data is extremely valuable.

Resources

Lindvall, H. (2011, January 27). Behind the music: Is the A&R era over? Retrieved from https://www.theguardian.com/music/musicblog/2011/jan/27/behind-music-industry-a-r

McCready, M. (October, 2011). Why the traditional A&R process is failing the industry and musicians alike. Retrieved from http://www.mikemccready.com/wp-content/uploads/2011/10/AR-Position-Paper1.pdf

Music Clout. (n.d.). The ugly truth about today’s A&R. Retrieved from https://www.musicclout.com/contents/article-110-the-ugly-truth-about-todays-ar.aspx

 

The Challenges of Entrepreneurship

The Challenges of Entrepreneurship

When I was a kid in elementary school, I used to sell drawings to other children in my classroom. Images of Pokémon were among my best sellers. I made these drawings because I enjoyed art; I didn’t really view it as a business. I wasn’t the only one making money at my school though. There was another kid in my classroom (Jorge Lucas) that sold candies. Mexican candies were his best sellers, but he would also experiment with other types of treats to see what sold the most. He peddled candies because he loved making money and enjoyed bringing happiness to others. He eventually grew up to become an entrepreneur.

As an adult, he continued to buy and resale products. He had ideas for other business ventures but didn’t know how to acquire the capital to pursue them. His friends would encourage him to attend networking events to find investors and business partners, but he said that wasn’t for him. He looked for business partners on various occasions, but he couldn’t find anyone that approached commerce in the same manner as he did. He decided to run his retail business alone. He locked himself in his office every night, doing market research on his computer to see what products were profitable and why.

One day, Jorge decided to become a vendor at a public event. He paid $200 to set up a stand and sell customized t-shirts at the event (he found selling t-shirts to be a profitable business). When he arrived at the event, he saw that various other vendors had teams of people working together. He, on the other hand, was by himself. He also saw glamorous logos branded on everyone’s stand. He didn’t have a logo because design was one of his weak points, and he never hired anyone for the task. He also saw that vendors were engaging with customers and talking to everyone that passed by. He, on the other hand, was an introvert and did not attempt to communicate with people. Needless to say, he had a bad day at the event. He only sold three shirts. After weeks of sulking, he decided to take a break from entrepreneurship and began looking for a day job.

Many people dream of starting their own business. Being a boss, working on your own schedule, coming up with concepts for products, and having a team dedicated to your enterprise are all ideas that lure people towards entrepreneurship. However, there are various aspects about being an entrepreneur that are not very glamorous. According to a survey conducted by Fits Small Business, approximately 82% of entrepreneurs work over 40 hours a week, with 49% working 50 or more hours every week (Kanapi, 2017). This statistic illustrates that being an entrepreneur is not all traveling and closing deals. There is a lot of hard work that a person must perform in order to be successful. Carol Cox (Internet Marketing Course Director at Full Sail) and Michael LePlante (Full Sail Graduate and Business Owner) discussed they keys to becoming a successful entrepreneur at a Hall of Fame event in February, 2018. They state that starting a business is not easy. One must protect themselves legally, perform market research, and make difficult decisions in order to be a successful business owner (Full Sail University, 2018). Their main points, however, include the following:

  1. Find a contrasting business partner that compliments your skill sets
  2. Seek help from others, including mentors and professional experts
  3. Talk to current and potential customers to improve your products/services

Overcoming conflict can contribute to growth. That’s why it’s important to find people that will challenge your perceptions and opinions. In the story of Jorge Lucas, he wanted a business partner that shared his approach, but he should have been looking for someone with a contrasting style. According to Michael LePlante, when you are seeking a business partner, you should seek “an opposite that counterbalances” your personality and approach (Full Sail, 2018). When everyone conforms to your opinions, you tend to become overconfident in your capabilities. That overconfidence can lead to complacency and a nonchalant attitude, which will bring trouble to any business. You want a business partner that will help you improve as an entrepreneur. For example, if coming up with ideas and products is your strong suit, you may want a business partner that’s strong in the field of product manufacturing or service implementation. Since Jorge Lucas was an introvert with strong research capabilities, it would have been beneficial to join forces with an outgoing partner with a strong background in sales. If two people start a business together and have extremely similar strengths, wouldn’t they have the same weakness as well? You want a business partner that can cover the areas you may be deficient in; a business partner that compliments your skill sets and challenges your ideas. This is the most efficient way to grow and expand an enterprise.

Seeking help is also very important. I remember when my 15-year-old nephew was having trouble with his math class. Although he was passing, he was among the lowest achieving students in his classroom. I sat with him one day and reviewed his homework. While looking through the work, I noticed a trend in the answers he was having difficulty with; they all revolved around square roots and exponents. I asked him if this was the reason why he was struggling, and he replied, “Yes,” almost ashamed of himself. I asked him why he didn’t simply ask for help, and he stated that he didn’t want people to think he was dumb. It turns out he missed a few days of school due to an illness, which resulted in him being absent during the lecture on square roots and exponents. I sat with him and gave a full lecture on the topic (thanks to YouTube and Google). After a few hours, he understood the matters and never had that problem again. The first step in acquiring help is asking for it. Often times, we may be hesitant to ask for help because we don’t want to come across as weak or needy. However, everyone needs help at one point or another. Carol and Michael both pointed out how they have invested money in seeking advice from business coaches (Full Sail, 2018) in order to overcome plateaus and improve as entrepreneurs. Investing money on a business coach can be very beneficial to an entrepreneur. Business coaches can help you see issues from an objective point of view and can identify solutions to problems by providing fresh insight. You’ll never get this help if you are afraid to seek it though. The first step in finding help is admitting that you need it. The second step is to ask for it.

According to McFadden, in order to be successful “an organization needs to continuously change and adapt to their customer’s ever-changing needs (2013).” This requires business owners to constantly communicate with customers. In the story of Jorge Lucas, he didn’t put enough effort in talking to customers. He relied solely on internet research. Not every product or idea will be an instant hit, but a business owner can start with a product and slowly develop it into a better creation using customer feedback. During the discussion, Michael LePlante tells the story of a small business that started with a group of people brainstorming. They combined all of their ideas to create a product and immediately put it out to the market. The CEO of the company would then call customers personally to receive feedback on the product. Using real customer feedback, the CEO would suggest improvements to the team, which will implement them immediately. Once the modifications were made to the product, the team would relaunch it into the market and go through the same process; contact clients, gather feedback, make improvements. Michael goes on to say that the business ended up being very profitable and was eventually sold to Ticketmaster for a large sum of cash. The team has continued to follow this routine and has created several successful enterprises (Full Sail, 2018). This story illustrates the importance of speaking to customers. They are the ones that will buy your product (ideally), so in order to improve you will have to understand what they like and don’t like about the product. The best way to get this information is to have a direct conversation with them.

The most impactful part of the discussion was when Carol Cox stated, “early entrepreneurs spend way too much time chasing funding… rather than chasing customers (Full Sail University, 2018).” I find this to be extremely true. Often times we focus on identifying investors, when we really should be focused on identifying customers. Entrepreneurs should be shifting their mind state from raising capital to creating problem-solving products and services for customers. All the start up capital in the world will not make a a bad product successful. At the end of the day, it’s the customers that will decide whether or not you prevail as a business owner, so it’s best to center your strategy around them and not investors.

References

[Full Sail University]. (2018, February 13). The do’s and don’ts of starting your own business. [Video File]. Retrieved March 20, 2018 from https://youtu.be/8-dg-bmL50E

Kanapi, H. (2017, July 30). 15 entrepreneurship statistics that you should know. Retrieved March 24, 2018 from https://fitsmallbusiness.com/entrepreneurship-statistics/

McFadden, K. (2013, March 19). Why it is essential to put customers first (and how organizations do it!). Retrieved March 24, 2018 from http://smartbusinesstrends.com/why-it-is-essential-to-put-customers-first-and-how-organizations-do-it/

McKnight Kurland. (2016, March 3). 5 visual content statistics and infographic. Retrieved March 24, 2018 from http://www.mcknightkurland.com/brand-experience/5-visual-content-statistics-and-infographic/

Novellus, R. (2017, April 5).The pros and cons of entrepreneurial partnerships. Retrieved March 24, 2018 from https://www.inc.com/young-entrepreneur-council/the-pros-and-cons-of-entrepreneurial-partnerships.html

What Facebook’s Licensing Deals mean for YouTube

What Facebook’s Licensing Deals mean for YouTube

Earlier in the year, Facebook secured licensing deals with Sacem, Socan, and Wix Publishing. The social media company had previously secured licensing deals with Universal Music Group, Sony Music, and Warner Music (Welch, 2018). These licensing deals illustrate Facebook’s desire to attract more users to its platform through music, but more importantly, it show’s the company’s commitment to work with the music community as we try to turn streaming into a sustainable source of income. In order to show their consideration for music creators and rights holders, Facebook hired Tamara Hrivnak. Hrivnak was the Director of Music Partnerships at YouTube for six years, and prior to that position she was the VP of Digital Strategy & Business Affairs for Warner/Chappel Music Publishing (Levine, 2017). Her experience will be extremely valuable to Facebook’s efforts and could give them a favorable advantage as they prepare to battle against YouTube for music video consumers.

I remember when bootlegging was extremely prevalent in the early 2000’s. There was one artist here in my hometown, Houston, that would literally find bootleggers and fight them during that time. But for every bootlegger he battered, two more appeared. Although he was upset about missing out on sales due to the bootlegged copies of his music, he did notice that his fan base was growing. Eventually he set up a meeting with all of the bootleggers in town with the intent of making them authorized sellers. The meeting did not go well. The bootleggers said they could only afford to pay him .05% of his asking price; an asking price he felt was already extremely low. Needless to say, he was outraged. He continued to battle with them for months, but they just wouldn’t go away. After hundreds of brawls, his stamina and resolve were finally depleted. He gave in and allowed the bootleggers to legally sell his product on their payment terms, and he’s been stuck with this awful deal ever since. The bootleggers in this story represent YouTube, and the artist represents music companies and publishers.

YouTube has been a thorn in the Music Industry’s side for quite some time, particularly due to what is known as the value gap. According to IFPI, the value gap illustrates the “growing mismatch between the value that user upload services, such as YouTube, extract from music and the revenue returned to the music community (2017).” In other words, the value gap explains the variance between the benefits YouTube receives from uploading music on their platforms and the money that labels and artists obtain from those activities. As you can see from the chart below, the difference is blatant.

Does FB’s licensing deals prove that the music industry is regaining authority in a tech-driven world? If Facebook is able to take some video consumption away from YouTube, it could give labels, publishing companies, and artists more power in terms of negotiation. YouTube has grown tremendously over the years. One can argue that this growth is primarily due to how YouTube has been able to integrate music into their platform. According to the 2016 IFPI Music Consumer Insight Report, 93% of YouTube users aged 16-24 utilize the platform to access music, while 82% of total users utilize it for music listening (IFPI, 2017). With over 1 billion users, YouTube is the most popular platform for music streaming. YouTube is able to attract a large number of consumers and advertisers due to their music catalogue, however, they fail to pass on suitable revenues to the copyright owners of that music (primarily because the service is free). One may argue that the copyright owners should prohibit YouTube from showcasing their music until a fair price can be agreed upon, but it’s not that simple. With over 1 billion users (82% being music consumers), YouTube has all of the bargaining power. Michael Weston once said, “To win a negotiation you have to show you’re willing to walk away. And the best way to show you’re willing to walk away is to walk away (Wise Old Sayings, n.d.). It’s difficult to walk away from 1 billion customers though. Even if they are not paying for the digital version of the music, artists and music companies can recoup the losses through revenues from live shows and merchandise. Labels and publishers certainly do not want to leave 1 billion potential customers at the table. But if they have the opportunity to serve those same customers on a different platform (like Facebook) then they may not be hesitant to leave. That’s what makes this development so dynamic and noteworthy.

YouTube and Facebook could soon be in a bitter war to see who can reign supreme over the video streaming market. All the while, music labels and publishers will be standing idly by, waiting to see which platform wants their songs the most. As demand for digital music increases, the price will have to increase as well. I believe recorded music is extremely devalued and that people have acquired a false sense of entitlement when it comes to accessing music. Facebook’s willingness to negotiate with labels and publishers shows that they have an appreciation for music and want to create a partnership with our industry. I commend them for that and applaud them for producing a new revenue stream for creators and right holders.

I believe the music industry is taking initiative by engaging with social media companies. This endeavor creates various opportunities for music industry professionals. Facebook hiring Tamara Hrivnak (a former music business expert) is a perfect example of this. Tech companies understand how important it is to have an industry insider on their side, especially when it comes to negotiating deals.

Technology and music have always had an unsanctioned marriage. In order for the music industry to remain relevant, we have to find ways to stay ahead of the curve. Music streaming has proven to be a profitable source of income for labels and publishers for two years in a row, so it’s only right to ride the wave and widen the stream of revenues. As new social media companies enter the market, they will also be required to do what Facebook is doing if they want to incorporate music into their platform. This deal sets the standard for the future of music in the social media era. I just hope we can stay ahead of the next technological curve so we never have to accept terms from a position of weakness again.

References

IFPI (2017). Music consumer insight report 2016. IFPI. Retrieved from http://www.ifpi.org/downloads/Music-Consumer-Insight-Report-2016.pdf

IFPI (2017). Rewarding creativity – fixing the value gap. IFPI. Retrieved from http://www.ifpi.org/value_gap.php

Levine, R. (2017, January 1). Facebook hires YouTube’s Tamara Hrivnak to lead global music strategy. Billboard. Retrieved March from https://www.billboard.com/articles/business/7669971/facebook-hires-youtubes-tamara-hrivnak-to-lead-global-music-strategy

Nicolaou, A. (2018, March 18). Facebook strikes new music licensing deals. Financial Times. Retrieved from https://www.ft.com/content/7b7e71d6-2964-11e8-b27e-cc62a39d57a0

Welch, C. (2018, March 9). Facebook now has music licensing dealsw tih all three major labels. The Verge. Retrieved from https://www.theverge.com/2018/3/9/17100454/facebook-warner-music-deal-songs-user-videos-instagram

Wise Old Sayings (n.d.). Negotiation Sayings and Quotes. Wise Old Sayings.

Nipsey’s Hustle

Nipsey’s Hustle

Over the years, Nipsey Hussle has never conformed to the undeclared rules of the music industry. In 2013, he received critical acclaim for his mixtape “Crenshaw,” and the marketing tactics he used to communicate its value. During a time when most artists were releasing free mixtapes on DatPiff.com, he decided to do something different. He made 1,000 physical mixtape copies and put a $100 price tag on each one. In an interview with Rap Radar’s B.Dot, Nipsey stated the $100 “isn’t the price of the plastic case and polyurethane disc… it’s the price of revolution! The price of rebellion against an industry that has tricked us all into making products that have no soul for fear of not being heard (2013, October).” He labeled the campaign “Proud 2 Pay” and sold every copy he pressed “in under 24 hours… even though the mixtape would be available for free download the next morning (Hunte, 2013).” This move sparked conversation in the Hip-Hop community and gave his core fans the opportunity to show appreciation for his work. Jay-Z bought the first 100 copies (Markman, 2013).

Hussle was recently in the public eye for teaming up with DJ Khaled to “purchase a historic Los Angeles hotel” in Santa Monica, California (India, 2018). He has a history of investing and thinking outside of the Hip-Hop world. In 2013, he invested in Bitcoin and is now a frontrunner in the emerging technology (Kennedy, 2018). He’s very business savvy and diversifies his business portfolio by exploring opportunities outside of music.

During a time when artists are releasing 3-minute singles to capture the diminishing time span of people, Hussle released a full-length album, Victory Lap, that demands attention. He has features from prominent artists, such as Kendrick Lamar, CeeLo Green, Marsha Ambrosius, YG and Puff Daddy, making his project noteworthy. He also has an underdog feel to him, which is why I believe people resonate with his music. He’s inspiration to any entrepreneur, and illustrates how going against the grain can be beneficial in establishing your brand and differentiating yourself from the competition. It’s all a part of the hustle.

References

B.Dot. (2013, October 4). Nipsey Hussle on releasing $100 album. Retrieved from http://rapradar.com/2013/10/04/nipsey-hussle-on-releasing-100-album/

Hunte, J. (2013, October 18). Proud to pay: Nipsey Hussle’s new rule on grassroots marketing. Retrieved from https://hiphopdx.com/editorials/id.2200/title.proud-to-pay-nipsey-hussles-new-rule-on-grassroots-marketing#

India, L. (2018, March 6). Nipssey Hussle and DJ Khaled invest in bid to purchase historic Los Angeles hotel. Retrieved from http://www.xxlmag.com/news/2018/03/nipsey-hussle-dj-khaled-invest-bid-historic-los-angeles-hotel/

Kennedy, J. (2018, January 16). A beginner’s guide to bitcoin and cryptocurrency, according to Nipsey Hussle. Retrieved from http://www.xxlmag.com/lifestyle/tech/2018/01/nipsey-hussle-guide-bitcoin-cryptocurrency/

Markman, R. (2013, October 9). Jay Z spent how much on Nipsey Hussle’s Crenshaw cd? Retrieved from http://www.mtv.com/news/1715301/jay-z-nipsey-hussle-crenshaw-100-cd/

2016 Digital Music Revenues

2016 Digital Music Revenues

The upsurge in digital music revenue has created immense opportunities for the music industry to expand and finally grow. However, there are still challenges ahead. As artist begin to realize the power they have in generating profit, it will become imperative for business professionals to reaffirm their importance to the musician’s career. My experience as an independent artist accompanied with my analytical skills allows me to communicate with both sides and enhance business relationships.

Jose Arroyo

UMG’s Management Approach

UMG’s Management Approach

As an active music artist with a long-term goal of managing my own music company, I admire UMG’s success and influence in the music industry. They have a wide array of artists on their roster, such as Drake, The Weekend, Adele, Nicki Minaj, Rihanna, and Taylor Swift. They also own the rights to many popular albums and songs from music legends, such as John Lennon, the Beatles, James Brown, Stevie Wonder, Kiss, and even Eazy-E. Through asset acquisitions (like album copyrights and publishing rights), artist development, market adaptability, innovative leadership, and customer focus, UMG has been able to provide high quality products while putting themselves in a profitable position.
UMG is currently under the leadership of Sir Lucian Grainge. He has been the CEO and Chairman of the Management Board since 2010. Grainge has over 25 years of experience in the music industry and has an extensive background in music publishing. According to an article published by Variety, Universal Music Group’s value has tripled in value since Grainge became the Chairman and CEO of the company.
The music industry has fought hard to break out of the depressive downturn it’s been in for the past 10 years plus. Pirating and digital music sales are some of the factors that contributed to the despair. Music streaming, however, has created an upsurge in revenues for the past two years, and large music corporations love it. UMG is demonstrating effective management because they are showing adaptability to the new music environment. Instead of fighting the changes and complaining about the marginal payouts streaming platforms distribute, UMG has embraced the changing landscape while increasing their revenue. They are also displaying their customer focus by taking initiative and become engaged in the new market.
According to statistics compiled by midiaresearch.com, UMG has the largest music industry market share when compared to all other music companies, accounting for 29%. Sony and Warner Music make up 22% and 17%, respectively. The other 31% belongs to all independent music companies not named UMG, Sony, or Warner Music. UMG’s grasp on the music industry can be attributed to their diverse catalogue of music, adaptable marketing strategies, and innovative leadership.

I believe the company demonstrates effective management because they are adapting their business approach and using their current assets to maximize profitability, while making further acquisitions that will increase revenue and grow their footprint in the music industry. They are also providing products in a way that satisfies consumer needs. As they say in business, you have to ride the wave. That wave right now in the music industry is streaming.

Last month, UMG struck a licensing deal with Spotify, the biggest music streaming company at the moment. By making this move, Universal is demonstrating it’s market adaptability by investing in the new music market landscape. According to a publication released by Statista, streaming subscription services accounted for 38% of total music consumption in 2016. This upsurge translated to increased revenues in a market that has seen downturns year after year.

Although UMG is allowing Spotify access to their catalogue, they still included some contingencies to that will be advantageous to the company’s long-term goal of making music streaming profits a sustainable source of income. In order to come to terms, UMG required Spotify to “window” certain albums, where only paid subscribers to the will be allowed access to the music for two weeks. This move was made as an attempt to incentivize going from a free Spotify plan to a monthly subscription. Spotify has also agreed to give UMG access to their massive database, which will give Universal insight into current and future trends listening trends. In an article published through Full Sail’s library, Robert Levine quotes an industry analyst saying, “Universal is the one that can call the shots,” and I couldn’t agree more. UMG is the first of the Big 3 to strike a licensing deal with Spotify. Their market flexibility and ability to position themselves for sustainable growth (while catering to the average music consumer) shows effective management and great leadership skills.

Resources:

http://variety.com/2017/music/news/universal-music-group-valuation-lucian-grainge-1202400328/

http://www.ifpi.org/news/IFPI-GLOBAL-MUSIC-REPORT-2017

http://www.digitalmusicnews.com/2017/02/24/umg-streaming-revenue/

https://musicindustryblog.wordpress.com/2017/02/26/global-recorded-market-music-market-shares-2016/

https://www.statista.com/statistics/502908/music-consumption-genre-format-usa/

http://web.b.ebscohost.com.oclc.fullsail.edu:81/ehost/detail/detail?sid=47cf5b1b-36f9-4cc3-bcd6-f1560e14166d%40sessionmgr103&vid=6&hid=125&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#AN=122384889&db=bth

BMG’s Perspective on Digital Music Revenues

BMG’s Perspective on Digital Music Revenues

With Nielsen and The Recording Industry Association of America (RIAA) releasing their Music Industry Revenues Report for 2016, it has been revealed that many record labels are raking in the profits. For the past decade (thanks to piracy and a drop off in physical CD sales) the music industry has been constantly diminishing in value. Last year, however, music streaming earnings allowed the industry to see an increase in revenue, and music companies love it. Technological breakthroughs have given fans the ability to easily discover new music. It has also allowed artists to showcase their musical talents to the world. However, it has created over saturation in the market. Online music streaming has manifested itself into a new wave of revenue, and record labels are riding it all the way to the bank. However, artists have long expressed their discontent with the marginal pay outs that streaming platforms distribute. Digital Music News published an article illustrating how discouraging music streaming royalties are to the average artist. In the article, they exhibited the royalties an independent band received from having over 1 million streams. The results: $4,955.90, an average of $0.004891 per stream. I believe it’s only a matter of time before artists demand higher cuts in royalties from music streaming.

The Financial Times published another article this month discussing this topic. They sat with Hartwig Masuch, CEO of BMG (Bertelsmann Music Group), and asked for his opinion on music streaming and how it will affect the future of the industry. According to Masuch, there will soon be “wake-up calls” for many record labels who believe they are living the dream. “A return to growth triggered by the upswing in streaming is potentially under threat, as artists start to demand a much greater cut of royalty revenues generated.” Streaming and the inevitable demand for higher royalty rates among artists is impacting all of the major labels, but BMG is sheltering itself from the upcoming storm by paying their artists 75% of streaming royalties. According to Masuch, “big music companies spent an average of 19% of their revenues on artists royalties.” That’s a wide gap compared to what BMG pays its artists. Masuch also stated that major record labels use the “complicated” structure of the music streaming market to minimize royalties paid to artists, but even that explanation will soon fall on deaf ears.

I believe BMG is handling the situation very well and is blazing a trail towards future success. Bertelsmann was a media giant in the music industry before, but Sony acquired the company in 2008 for $1.2 Billion. Masuch then reassembled the company with a new vision, “to help artists and songwriters make the very most of their songs and recordings in the digital age.” Masuch created a new company tailored specifically for a digital market, distancing themselves from traditional label business models and adopting a digital infrastructure that allows for songwriters and artists to gain larger royalty revenues. They’re new business model will certainly attract emerging acts. Most artists choose to stay independent, not because they want to do it all by themselves, but because they want freedom to create and higher profitability. By establishing their stance on music streaming and publically advertising their 75% streaming royalty pay outs to artists, they are positioning themselves favorably among musicians seeking the influential power of a music company.

I believe BMG’s response to the growing frustration artists are experiencing due to low royalty rates will bring long term success to the company. In a Financial Times article that was published this month, Masuch stated that “BMG’s ebitda (earnings before interest, tax, depreciation, and amortization) margin of 22.8 percent in 2016 [is] proof that the larger music businesses have cost bases still mired in the physical world.” According to an article published by Music Business Worldwide, “Universal Music Group posted an annual ebitda figure of $712M… representing a 13% [profit] margin.” Sony had a profit margin of 11.5%, and Warner Music Group had a profit margin of 15.9%. BMG, on the other hand, had a profit margin of 22.8%, larger when compared to the Big 3. Although their total revenue was lower than the other companies, when the data is normalized one can see a big difference in the four company’s profit margin.

The article went on to state how BMG has made over 100 acquisitions over the last 8 years and are now focusing on “organic growth.” I believe the company will do just that within the next few years. But there still remains a question to be answered: How are music streaming platforms going to contribute to higher royalty rates for music artists and labels?

Resources:

http://www.digitalmusicnews.com/2016/05/26/band-1-million-spotify-streams-royalties/

https://www.musicbusinessworldwide.com/bmg-revenue-tops-450m-2016-23-profit-margin

https://www.bmg.com/us/about.html

http://www.completemusicupdate.com/article/bmg-boss-says-streaming-boom-will-force-labels-to-offer-artists-better-royalties/

https://www.ft.com/content/e33399ca-1b76-11e7-bcac-6d03d067f81f

Soundcloud’s Future

Soundcloud’s Future

SoundCloud is one of the biggest online music platforms around right now. Boasting approximately 175 million users, it is difficult to see how the giant music streaming company could possible disappear in the next few years. However, they are currently in a problematic situation that will either make or break the company. I believe SoundCloud’s future will consist of rainy days.

After reading the article by KLS.com and understanding some of the warning signs that tell whether a company will ultimately fail, I came to the conclusion that SoundCloud is in jeopardy. Although the music streaming website is popular among musicians and DJ’s because it is a free service, their recent transition into becoming a paid music subscription platform has been anything but seamless. SoundCloud now offers music subscription packages that range from $4.99-$9.99/month (Go and Go+), along with their free package as well. Their free package offers users access to 120M tracks. SoundCloud Go offers access to 120M tracks, offline listening, and removes ads. Their Go+ package offers 150M tracks, offline listening, and no ads. However, there are some flaws in their business model that could ultimately lead to an unsuccessful endeavor.

Ben Stager from MakeUseOf.com published an article in April 2016 titled, “We tried SoundCloud Go so you don’t have to.” In the article, he gives an in-depth look into his musical experience with SoundCloud Go.  One of the major flaws he highlights is SoundCloud’s catalogue. Soundcloud’s musical library is devoid of many well-known artists such as Kanye West, Jay-Z, Rihanna, and Beyonce. This is understandable, seeing as how Jay-Z’s has pulled all of his music from streaming platforms and made them available exclusively on Tidal. Though it is an ongoing battle in regards to whether these big name artists should display their music on Spotify and AppleMusic (seeing as how pay outs are marginal), one thing is for certain: they are not running to SoundCloud for music streaming. While on the website, I did some research of my own as well. I looked up a few of my favorite independent underground artist (such as Papoose and K-Rino) and they had a minimal amount of their enormous catalogue on the website.  I was not surprised.

Although SoundCloud has had a few milestones, for example partnering with Chance the Rapper to make his album, “Coloring Book,” available for free (even though Apple Music struck a deal to stream the album exclusively two weeks prior to SoundCloud), the company has not had many highlighting moments. It was once said that SoundCloud would be the Facebook and YouTube of music streaming, but the fact is that many established artists have not rallied around the platform. In my opinion, it’s becoming the MySpace of music streaming. It is big amongst independent and upcoming artists, but once they establish themselves they tend to move on from the platform. Just look at how Drake abandoned the website a few years ago.

Besides not having the support of many well established artists, examining SoundCloud’s financial forecast will reveal that the money won’t be raining down any time soon. Although the company has been experiencing losses for the past couple of years, they have continued to add employees. According to Digital Music News, SoundCloud expended $28M on wages and salaries for 295 employees in 2015. That means the company spent an average $95,000/employee that year. Their employee wages were less than their total revenues. This does not include any other operational costs, such as rent, utilities, and marketing. The year prior, they spent an average of $80,000 each salary for 236 employees. The costs of acquiring talent and operating in the shark-infested waters of the music subscription sea keeps rising. SoundCloud is basing its future success on the idea that they will be successful. Alexander Ljung (Co-founder of SoundCloud) commented on his company’s business model, “The assumption of a successful launch of the new subscription service is the key element of… financial projections for the next three years… [It] bears financial risks regarding the operating results and cash flows of the group.” According to Ljung, the company might have trouble generating sufficient cash for upcoming expenditures, and may require additional funding from investors, or they could “run out of cash earlier than December 31, 2017.” There is a lot of uncertainty clouding the company’s financial future, and that is an unattractive trait for a business looking to acquire more investors.

Besides reporting losses since 2010, SoundCloud has also explored the possibility of selling the company. According to Hypebot, SoundCloud has been attempting to raise $100M since the summer of 2016 (around the same time they launched their Go+ subscription service). Bloomberg.com also reported that SoundCloud was considering a sale for $1 billion. Business insider made some good points as to why the platform would consider selling. One of the reasons they presented was that SoundCloud might not be able to compete in the rough waters of music streaming, which is dominated by Spotify and Apple Music. Pandora and YouTube also have shares in the market, and consumers are not likely to pay for music subscriptions from multiple platforms. 26% of SoundCloud’s free users are already paid subscribers to other companies.

Spotify initially showed interest in acquiring SoundCloud, however, last year in December those talks came to a mute. Techcrunch.com published an article detailing the unrealized acquisition. With Spotify’s plans of going public on the trading market, they decided not to purchase SoundCloud, as it could negatively affect their preparation. Dealing with the labels is one thing, but SoundCloud caters to independent artists and DJ’s. Acquiring the company would require Spotify to negotiate deals with labels, independent artists, and DJ’s, something they were not up for. It was once approximated that SoundCloud was worth about $1 billion, but an article published by Digitalchew.com reported SoundCloud could sell for as little as $250M, a 75% decrease in former valuation. Complete Music Update also published an article detailing how SoundCloud’s CFO and Finance Director exited the company, causing more concern for a sinking ship. Whether SoundCloud can turn in a profit under different management remains to be revealed, but seeing as how prominent Spotify and Apple music are becoming,  I do not see the music streaming platform being around in the next few years.

Resources:

http://www.makeuseof.com/tag/tried-soundcloud-go/

http://www.news.com.au/technology/home-entertainment/audio/chance-the-rapper-takes-to-twitter-to-defend-649000-streaming-deal-with-apple-music/news-story/47553b67cda08a5f1c01cd4821669bb1

https://soundcloud.com

http://www.digitalmusicnews.com/2017/01/05/google-soundcloud-possible-bankrupt/

http://www.hypebot.com/hypebot/2017/03/as-soundclouds-cash-woes-continue-fire-sale-at-40-of-valuation-seen-as-likely.html

https://www.bloomberg.com/news/articles/2016-07-27/soundcloud-owners-said-to-mull-1-billion-sale-of-music-service

http://www.businessinsider.com/soundcloud-could-sell-for-1-billion-2016-7

https://techcrunch.com/2016/12/08/spotify-soundcloud-deal-dead/

http://digitalchew.com/2017/03/13/soundclod-sale-investment/

http://www.completemusicupdate.com/article/soundcloud-seeks-new-funding-as-key-execs-leave/

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