Music Marketing

Yes, I was humming the Boyz II Men song when I wrote that title.

I got an email yesterday announcing that one of my favorite magazines is ceasing publication. I’ve been a fan of No Depression, an amazing pub mostly covering the alt-country world (the magazine was named after the debut record from Uncle Tupelo, the band Jeff Tweedy was in prior to forming Wilco) since 1998 when I started advertising there for Rykodisc. The editorial was great, and the folks running it were absolute pleasures to deal with.

We all know the Internet has changed the music and publishing industries forever, and No Depression really was caught in the perfect storm between the two. The editors wrote a goodbye letter of sorts, which laid out their dilemma:

“…advertising revenue in this issue is 64% of what it was for our March- April issue just two years ago. We expect that number to continue to decline.

The longer answer involves not simply the well-documented and industry wide reduction in print advertising, but the precipitous fall of the music industry. As a niche publication, ND is well insulated from reductions in, say, GM’s print advertising budget; our size meant they weren’t going to buy space in our pages, regardless.

On the other hand, because we’re a niche title we are dependent upon advertisers who have a specific reason to reach our audience. That is: record labels. We, like many of our friends and competitors, are dependent upon advertising from the community we serve.

That community is, as they say, in transition. In this evolving downloadable world, what a record label is and does is all up to question. What is irrefutable is that their advertising budgets are drastically reduced, for reasons we well understand. It seems clear at this point that whatever businesses evolve to replace (or transform) record labels will have much less need to advertise in print.

The decline of brick and mortar music retail means we have fewer newsstands on which to sell our magazine, and small labels have fewer venues that might embrace and hand-sell their music. Ditto for independent bookstores. Paper manufacturers have consolidated and begun closing mills to cut production; we’ve been told to expect three price increases in 2008. Last year there was a shift in postal regulations, written by and for big publishers, which shifted costs down to smaller publishers whose economies of scale are unable to take advantage of advanced sorting techniques.”

I get a lot of my music news updates from RSS feeds from maybe a dozen or so outlets, but I love kicking back with Paste, Magnet, Harp and No Depression as well. As Barack Obama says, change is what’s happening, but in the case of No Depression, it doesn’t mean that I have to like it.

The NYT had a great article this AM about Microsoft’s offer to purchase Yahoo. What I found interesting is the commentary on the reason why Silicon Valley is lukewarm on the idea: they prefer innovation from forward-thinking smaller companies rather than acquisitions by major companies trying to play catch up.

Here’s a link to the piece:

http://www.nytimes.com/2008/02/03/technology/03valley.html?hp

I think some parallels could be made to the music industry – the folks that I think will make it are innovators, developing and refining the way we listen to, distribute, and buy music; they are doing something that’s different. I think it’s important to recognize the fact that the music industry is not immune to the same basic economics and trends that affect the technology sector. Building a creative business from the bottom up that fills a defined niche seems to me to be a much more sound approach than creating a business that relies on the traditional industry gatekeepers, particularly given the current state of the music business.

Ten months after Warner Music head Edgar Bronfman said that Apple’s Steve Jobs suggestion that dropping DRM copy protection from digital music was “completely without logic or merit,” Bronfman reversed direction last Thursday by licensing its catalog, DRM free, to the Amazon MP3 music store. Warner joins EMI and Universal in offering higher quality (256 kbps), DRM free mp3s through Amazon’s online store, leaving Sony as the odd man out in the major label circle.

On the surface it would appear that the majors are simply responding to consumer demand and giving music fans what they want. But the fact is, the majors hate the digital monopoly that Steve Jobs has with iPod/iTunes. They understand that the only way to increase their margins on digital music and regain some of the control that Apple has taken from them is to reach the billions of iPods floating around. Their endgame is almost certainly to get customers in the habit of purchasing mp3 files from a place other than iTunes (which currently accounts for 70% of all digital music sold).

DRM (digital rights management) is technology that copyright holders place on a digital file to restrict its usage. It’s a flawed, user-unfriendly tactic, and it will go away. But while it exists, I will continue to do my online music buying with DRM-free retailers emusic and Amazon.

Nothing in David Byrne’s Wired analysis of the record and music industry is earth-shattering, but I like his straightforward definitions of the 6 forms of music distribution that currently exist, as well as his explication of where the money goes for every record sold in traditional stores and on iTunes. Cool interviews with Radiohead and Amy Mann’s managers, as well as Mac McCaughan who founded the independent label Merge Records (who’ve had great success with Arcade Fire).

In my course (which starts on January 7th!) I have a lesson on radio. We go through the opportunities available to musicians at noncommercial radio (the stations that are not funded by advertising, typically located on the left side of the radio dial), commercial radio (those that are broadcasting for profit), and non-terrestrial radio (online and satellite). It’s likely no surprise to hear that the amount of money and resources it takes to get your music played on commercial radio during peak listening times makes it an unrealistic avenue for almost all independent artists and labels. I would argue that there are plenty of more effective outlets for the $250,000 you’ll need to spend on indie radio promoters, $50,000 on the necessary trade ads, and $50,000 on on-air ads that it takes to get considered for non-specialty show radio play on an active rock station in a major market. And even if you do have the money (and really feel that commercial radio is where you want to spend it) the stations have long lasting relationships with the major label promoters that they do not want to hurt, and it’s unlikely you’ll get much support anyway!

That being said, non-commercial radio (community stations, college stations, NPR stations) and some commercial radio (Triple A and Americana / some specialty shows) do have opportunities for independent musicians. But it’s still expensive – to really make national headway you’re going to need independent promoter help.

Which brings me to my point – not only is online radio inexpensive to target (in some cases as easy as downloading a submission form, as is the case with Pandora), but it brings excitement, variety, and most importantly, NEW MUSIC into a medium that has exposed the public to less and less new music for years (I am speaking primarily of commercial radio). Online radio is a medium that is continuing to gain momentum and listeners, which means, of course, that the labels are looking for their cut of the profits. In March, the United States Copyright Royalty Board announced new royalty rates for webcasts, effective to 2010. The CRB endorsed the proposal of the RIAA-associated Sound Exchange royalty organization, which represents the major and some indie labels. The new rates would force webcasters to pay for each song streamed to each user, and increase over the next few years as follows: (details from Wired magazine)

2007: $.0011 to stream one song to one listener
2008: $.0014
2009: $.0018
2010: $.0019

These rates would put the smaller Webcasters that do not have significant advertising revenue out of business. And last week, Bloomberg announced that Yahoo and AOL may abandon Web radio as well with the raise in rates (“We’re not going to stay in the business if cost is more than we make long term,” Ian Rogers, general manager at Yahoo’s music unit, said in an interview). The rate increase is not a done deal, however. Webcasters have launched an appeal of the rates, which begins in February.

I’m all for musicians being paid fairly and taking advantage of all revenue streams, but from a marketing standpoint, does it really make sense to impose rates on a developing outlet like this that will essentially kill all but the largest players? Check out more opinions here.

You might be familiar with Lawrence Lessig as a long-time advocate for copyright reform and information freedom, and as the founder and architect of Creative Commons, a non-profit organization dedicated to grassroots copyright reform through the means of providing free tools to all content creators to mark their creative work with the freedoms they want their work to carry.

Lessig gave a speech in March for www.Ted.com (the site is amazing, I recommend you check it out), where he talks about the history of the battles over the control of creativity, and the balance that he feels is needed between extremists on both sides of the copyright law fence. This is essential viewing. Check it out here:

Radiohead Rocking The Online Marketing Campaign (And You Could Too!)

Following up on the DJ set that Thom Yorke did on Thursday evening, radiohead.tv hosted a second straight night of live performances, videos and cover songs in what is appearing to be some sort of Webcast series. Excellent stuff – a homemade video for the new 15 Steps song using images from the Brad Pitt film Se7en (with Thom’s head playing the role of Gweneth Paltrow), a great Smiths cover, and a red hot live version of Bodysnatchers, the second song from the “In Rainbows” record.

Radiohead is, of course, in a unique position as one of the biggest bands in the world, and they are going to be getting a ton of publicity no matter what they do. But what’s interesting to me is how fun this all is, and the fact that any band can pull off essentially the same thing. The Se7en clip looks like it took someone about 25 minutes to make using iMovie!

Check out Thom’s DJ set from Nov 8th here:

Bodysnatchers clip from last night’s Webcast is here:

Se7en/15 Steps video:

Smiths Headmaster Ritual live cover:

Chris Anderson, the fellow who coined the phrase “Long Tail” in 2004, has a great post on his blog about the current state of the music industry. The short of it: every part of the music industry except the sale of compact discs is up.

Here’s an overview from his post:

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* Concerts and merchandise: UP (+4%)
* Digital tracks: UP (+46%)
* Ringtones: UP (+86% last year, but probably just single-digit percent this year)
* Licensing for commercials, TV shows, movies and videogames: UP (Warner Music saw licensing grow by about $20 million over the past year)
* Even vinyl singles (think DJs): UP (more than doubled in the UK)
* And, if you include the iPod in the music industry, as I’d argue a fair-minded analysis would: UP, UP, UP! (+31% this year)

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It’s key to realize that the music business is NOT the same as the record business. This is a fundamental concept featured in one of the courses I’m teaching: The Future of Music and the Music Business, authored by Dave Kusek. People are more into music than ever, it’s just the revenue streams that are adjusting. Great time for entrepreneurs to be sure.

Surely as a response to Amazon’s more competitive pricing structure for DRM-free music, iTunes has announced that they will drop the price of their iTunes Plus songs (256kbps, DRM-free) from $1.29 to $.99. iTunes Plus includes songs from EMI as well as a number of larger independent labels. Amazon’s mp3 store, which launched on September 25th, offers DRM-free songs for between $.89 and $.99. The battle is likely to continue as it’s clear that the majors, and in particular Universal, are not pleased with Apple’s dominance of the online music world (70% of all digital music sales are currently through iTunes).

I got this email first thing today:

THANK YOU FOR ORDERING ‘IN RAINBOWS’.

THE LINK BELOW IS YOUR UNIQUE DOWNLOAD ACTIVATION CODE.

PLEASE CLICK ON THE LINK OR CUT AND PASTE INTO YOUR BROWSER TO OBTAIN YOUR DOWNLOAD.
IF YOUR LINK APPEARS AS TWO SEPARATE LINES, PLEASE CUT AND PASTE THEM CAREFULLY INTO YOUR BROWSER.

THE ALBUM WILL COME AS A 48.4MB ZIP FILE CONTAINING 10 X 160KBPS DRM FREE MP3s.

IF YOU HAVE ANY QUESTIONS OR PROBLEMS DOWNLOADING YOUR FILE, PLEASE CONTACT OUR DOWNLOAD CUSTOMER SERVICE TEAM: downloadinrainbows@waste.uk.com

WE HOPE YOU ENJOY ‘IN RAINBOWS’.

—

Well, I do enjoy ‘IN RAINBOWS.’ Very much. And from what I can tell, there’s a whole lot of other folks that are enjoying this record today too. Nicci and I went down to Cambridge 1 for dinner (a hip pizza place in Harvard Square), and they were playing the record to a room full of folks there too.

Over and above anything else, this coordinated experiment shows that it’s still possible to build a huge buzz around a new record (not easy). Radiohead has succeeded in having many people hear their record for the first time, at the same time. If the new music business model involves using a discounted (or free) digital product to corral these folks into creating a word of mouth groundswell that can support a tour, merch, licensing opportunities, ringtones, etc, then it looks like they may have nailed it. They also have 6 other records (now available digitally for the first time on Amazon). Long tail anyone?