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Paul's Posts — 21 February 2012

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Imbalance

I have written a lot as of late about the issue of musicians and how they get rewarded for their work.  It has ruffled a few feathers and I think that’s good.

To be clear, I am interested in looking at alternate ways to get our artists and musicians paid – and paid well enough to have their work flourish.  I believe some of my readers have misunderstood my intent – instead thinking I am advocating free music for everyone – while nothing further from the truth could be said.  We need to find a way to get musicians paid for their work so they can continue to make more of it.  Plain and simple.

Here’s something to think about however.  The classic model of the label financing all the work and paying the artists a percentage of the returns is at the heart of the original problem, in my opinion.

The old model is the label takes a chance on an artist and funds the recording, the publicity, the manufacture of the media and the distribution and sale of that media.  In exchange for all this upfront work and risk, the label typically keeps 90% of the revenue while the artist gets 10%.  If the artist is a big name this percentage might shift to perhaps an 80/20 split.

This means that the vast majority of every dollar we spend on our music goes to the people who create no content and the smallest amount goes to the people who create all the content.  The same is true for authors of books as well.

Does this seem right?  Not to me it doesn’t.  It’s exactly backwards in my opinion.  Those that create something of value should always be compensated higher than those that simply facilitate their exposure.

You can have music without distributors but you can’t have distribution without music.

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About Author

Paul McGowan

Paul McGowan is the CEO and co-founder of PS Audio Inc. a Boulder Colorado design and manufacturing company of high-end audio products and services. McGowan has been designing and building high-end products for nearly 40 years. Hobbies include skiing, music, hiking, artisan bread baking, kick boxing and cooking. He lives in Boulder Colorado with his wife Terri and his 4 sons.

(12) Readers Comments

  1. synergyav

    February 21, 2012 at 6:06 am

    You’re spot-on Paul.

    Recently I’d been thinking that the streaming model of getting music might be more fair to the artist, but I was way-wrong!

    If the numbers I’m seeing are correct, artists having their music available on Spotify, MOG, Sirius/XM, and other streaming music services are paying artists between .0001 and .0004 cents per play? That model only encourages music that appeals to the masses, since at that rate you’d need 100,000 plays to make $40.

    How do we encourage the artists that don’t appeal to the masses, and won’t get millions of plays? It’s the same model as Top 40 radio – Play the same 40 songs over and over until someone makes some money; not exactly a recipe for musical excellence, experimentation, or progress.

    There are many similarities to the audio industry. There are those that get rewarded for advertising and producing mass amounts of average products, and there are many more that struggle to get noticed while pushing the limits of technology, innovation and sound quality. The price of goods is often the difference in the audio industry, where a hand-built SET will naturally cost more than a mass-produced AVR. And those that get it, and can afford it, will pay the difference. And even with that price difference, the small hand-built amp maker will never see the kind of net income that the mass-producer will. But at least he can make a living and continue to create his/her art.

    How do we establish that same mindset in the music industry? And how do we reward the artist more than the sales machine that allowed us to hear the artist? Both are important, but only one is creating content that will last forever. I understand that there is a value in popularity, but isn’t there also a value in creativity? If we don’t come up with an answer our artists may have to be solely focused on writing/performing the next Top 40 hit in order to make a living, which would be another race to the bottom.

    Steve

  2. Ballisticman

    February 21, 2012 at 8:04 am

    Steve and Paul, I agree as well. I think each artist should launch his/her own satellite and get the lion’s share of the subscription revenue….

    My programming staff has chanted that mantra for the last 35 years. What is usually left out is the fact that my staff has no skin in the game. I provide the office staff, the advertising, piracy protection, college tuition, medical…..and my staff also feels that my cut is too large.

    Hmmmmmmmm

    as a proprieter my business model offers an arms length opportunity for the whole staff and bonuses if warranted.

    There are a lot of whiskey bar bands that never get past two or three nights a week as they are looking for a free ride in the beginning.

    The initial promotion and startup costs have to be paid by someone…

  3. Gordon

    February 21, 2012 at 8:08 am

    This is an interesting topic and an important one.
    and Let’s not forget the song writer who is not necessarily the artist.
    If you wrote “under the boardwalk” and own the rights how much should you get if someone else sings it or if Pandora plays it?

    The free market system should be able to set it’s own playing field.

    Why does it not?

    Simple.

    We have more individual rights than anywhere else on the planet, yet we sit on our butts and allow Big Business to have their way with us as they please.
    If artists refuse to sign a 90/10 contract then the “industry” will have to negotiate.
    If we return crappy sounding CDs to the store they will have to up the quality.
    If we reject top 40 stations, who will play them?

    The “marketers” supply what the market demands.

    What are we “demanding”?

    The indie wi-fi stations will lure their own “listener profile” customers over time and learn how to keep them
    Artists will deal with them to get airtime and notoriety.

    Many new sites now offer downloadable music including hi-res.
    They too will grow if we support them.
    Just like the small amp builder, if we want niche product, we have to pay niche prices.

    Are we doomed?

    Heck NO!

    All we have to do is educate the masses so the niche becomes the norm.

    WHAT?./……. Are you saying education is for a niche market too????

    Geeeeeze, no wonder we are in so much poop!

  4. Dan Schwartz

    February 21, 2012 at 8:23 am

    Again, way-off; not spot-on.

    I’ve sent you charts that show you how the record industry dollar divides. Have you not looked at them?

    Its true that with most -not all- label deals the artist gets the smaller share. But the percentages you’re talking about are from the retail dollar. Typically an artist gets 12% or greater of retail, not wholesale. The largest share of the record dollar goes to the retailer, as with many/most businesses, including audio equipment sales.

    There area few labels that did it a little differently. The label and artist split profits 50/50 once costs were recouped. These were smaller labels that had much lower overhead, fewer employees, benefits, etc. Even then, it was 50/50 from the wholesale income, and recouping costs is a playing field that can be muddy no matter what the size of the label.

    There is a saying among musicians that has some truth to it: an independent label just screws for a smaller amount of income.

    • February 21, 2012 at 10:37 am

      I did look at them – and that’s where I got my data.

      The retail dollar is the ONLY metric whatsoever. Nothing else is relevant. I am saying the artists should be getting the lion’s share of the retail dollar. They do on iTunes.

      I know, that’ll cause a hail storm of negative stuff when I say that because I have also read the articles you sent about how Apple is screwing everyone. I just don’t buy the argument.

  5. Dan Schwartz

    February 21, 2012 at 8:25 am

    And, of course, even those 50/50 deals have been killed by freely available audio. Small labels have less capital to risk on little chance of return.

  6. Tom

    February 21, 2012 at 8:43 am

    I recall hearing an interview with Joe Williams (Grammy winning jazz/blues singer) in which he with rueful humor recalled his days recording for Roulette Records and his discussions about finance with a certain executive there. Williams named him. I don’t specifically recall the name so I won’t say who I think it was.

    “Wonderful, amazing man!” said Williams. “Every time I’d go in to look over the figures, it would come out that I owed him $10,000! What an astonishing guy!” [That's not verbatim, but it's close.]

    The label system was based on a model of scarcity. You couldn’t get your music out there without the services of the labels’ production, engineering, and distribution. You couldn’t get your music noticed without the advertising by the labels and their promotion of radio airplay on your behalf…on the one station or two in each metropolitan area that might play your stuff at all.

    And without all of that, you couldn’t develop a fan base that would support your live performances.

    Now the scarcity model has collapsed and the potential for success resides in the musicians themselves. Sure they’ll need support teams, for booking venues, managing accounts, printing tickets, designing websites, getting their music recorded and into file form, and such. But effective tools are directly within their reach and can be directly under their control.

    Jazz pianist Steve Kuhn in the notes to his 2006 Live at Birdland CD: “Over the years, you do enough recording you can almost produce it yourself. For this album, I wanted Ron (Carter) and Al (Foster) again, and I rented a Hamburg-D Steinway, my favorite piano in the world. Plus I got an extremely talented engineer, Katherine Miller, and you can hear the results of her work.”

  7. woot

    February 21, 2012 at 3:49 pm

    Paul, I disagree. The vast portion of the money is going to the people putting up the capitol and RISK.. Heck, if an artist wants to do his own thing then, as any business would, he nees to pony up the cash. Or get backers and compromise. Heck, it is pretty cheap to make a CD now, and if your creative, to market it.

  8. Gordon

    February 21, 2012 at 5:35 pm

    Good arguments here but I too do not buy it all.

    At one end we have an artist and the other end we have a listener.

    Who is also an artist?

    Dianna Krall., singer/artist
    What about the artist who wrote the songs?
    What about the guys who invested in all the studio equipment?
    What about the recording engineer?
    What about the mixing and mastering crew?
    ok so machines make and burn the CDs.
    What about advertising and promotion?
    Where do we shop for music? Brick and mortar inventory and staff is a huge investment.

    Yes I understand What’s in the middle and the only savings I can see is to not burn CDs nor go out to buy them.
    The rest are all “artists”.

    So who can level the playing field.
    I say the first two above.
    Artists must demand respect and share or remain “starving artists” or go indie.
    Listeners vote with their dollars for artistic content and Audio quality.

    Both need to get off their butts and make some noise.

  9. Gordon

    February 21, 2012 at 5:59 pm

    For Dan
    I don’t know where your info comes from.
    First of all it’s impossible to track sales at retail, retail pricing hardly exists anymore.

    Also I can tell you[ having owned record stores] that the retail margins are pitiful.

    Look at the big outlets and see who owns them. The record companies. And the few they do not own, they control.

  10. February 22, 2012 at 1:44 am

    I’m really surprised that nobody has mentioned about sites like these,

    Bandcamp
    Magnatune
    Jamendo
    Reverbnation
    Asylum
    ARTISTdirect
    .
    .
    .

    These places have been alive for years… there are much more !
    I think any new one is welcome but, at the same time, I think it is time for some of them to improve their promotion and join forces to be known (as many people as possible). That way, instead of threads like this, we will discuss about which one we prefer…

  11. Gordon

    February 22, 2012 at 6:57 am

    AMEN!
    That would be called “getting off our butts”.

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