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The music industry sucks now, but it used to suck a lot more

I’ve been going through a lot of old boxes of stuff, doing some spring cleaning. It has reminded me of what it was like running a record label in the not-very-distant past. I started Unit Circle Rekkids at one of the best and worst times in history to start a label, 1994. I’d been doing some cassettes on my own before then, but after moving to Seattle and joining Vassily, I decided that I wanted to put out our 7″, and to me that meant that I wanted to start a label for real. I’d already been doing a zine for a few years, but a label was closer to my heart.

1994 was a great time to start a label in many ways. Indie labels were pretty well established as legitimate members of the music industry and there was a good network of college radio stations and magazines that catered to indie label fans. Production costs of vinyl (pretty much dead and not yet revived by DJ and hipster culture) and CDs had come down into the range of reasonable for a small operation. There were still a lot of distribution outlets as well. Labels like K, Sub Pop and others had shown that you could actually survive putting out good music that wasn’t overtly commercial. A ton of great labels started in this time.

1994 was also a crappy time historically to start an indie label. There was an indie explosion for all the reasons stated above. A ton of labels jumped onto the scene and would flame out after one or two releases, but they would be competing for all the same eyes that your labels was. The cost was reasonable, but it was still pretty high if you were doing multiple releases. The cost of a single CD release could easily cost five or six thousand dollars or more depending on the contract with the band and what the label paid for up front. At that cost, you needed to sell a thousand or two discs just to break even. We didn’t know it at the time (although there were certainly inklings), but the whole model of music distribution was about to be blown away by the internet and bad business designs. The larger labels were getting into a funk that was what was allowing the indies to thrive, but at the same time it was affecting the whole business, especially distribution.

In the mid-to-late 90s, there was a wave of distributors failing and dropping labels. Many distros had been doing their own semi-pyramidal schemes. Distros were always waiting to be paid by the stores, but stores were always waiting to pay until they had to (records stores have always been low margin businesses). If there was a release that was doing well, the distro would be selling it as fast as it could. The label would demand payment for “sold” inventory immediately before sending more (the one time in the relationship when the label had any power). The distro wouldn’t have been paid yet by the stores, so it would “borrow” money from less-successful labels accounts to pay the label with a success. The distro would be essentially going into a situation where it was paying money it owed to record label A to record label B while waiting for the record stores to pay it back for the already sold copies of label A’s release. This was a pretty fragile situation. All it took was a big chain of record stores to go under, or the distro to get too extended, and the whole thing would fall apart. When the distros went under, you were lucky to get your unsold inventory back. Chances of even getting pennies on the dollar for your sold inventory were pretty slim. Lots of small distros went under then, but some pretty big ones went down too and they took out a lot of labels as they fell.

The internet was starting to happen as far as digital sales went, but there wasn’t an established mechanism or even file format. There were a ton of start-ups trying to become something like iTunes. Most of them were funded about as well as the labels that they sought to work with. I lost a ton of time and money dealing with these various start-ups promising to become the answer to digital distribution for music on the internet. A lot of them wanted all the digital rights to our music, others wanted per-song and up-front fees to serve our music, others were selling our music or CDs but weren’t ever paying us for them. It was a complete and utter mess.

The hardest part though was that as a label, you had to deal with the gatekeepers. In those days, aside from touring constantly, a band had to build up their fan base via the press and radio. While there was an explosion of music magazines in the 90s (the cost of their production had also come way down), it was a serious amount of effort to track down all the places to get your music heard and then get those places to actually hear it. For years, I made it a habit to walk into any music or magazine store and buy any magazine I saw that I thought would possibly review Unit Circle’s releases. Any time I traveled, I would return home with stacks of free weeklies, zines, import music magazines or just new magazines I hadn’t seen before. I would put the stack on my desk, read through them and then enter their info (and any other info I saw in their pages) into my database. To find radio, it was a lot easier. CMJ tracked all college radio, a subscription to their trade edition was pricey, but it let you know what every college station in the country was playing. Over the years, I built up a database of a few hundred magazines and a few hundred radio stations that would possibly be interested in my releases. The care and feeding of this radio and press database easily took 25% of my time running the label.

When I was preparing for a new release, I would spend weeks putting together promo kits for all the various venues. Then I would send out all the press copies (as early as I could) and then the radio copies (closer to the release). Then I would wait a little bit and try to follow up with every outlet. There was no mechanism to go directly to fans except direct mail which was very expensive and time consuming and only got to the people who had already contacted you. Radio stations and magazines got hundreds of releases each week (I know, I worked at both in the 90s). Getting them to even open your packages was incredibly difficult. For 300 press copies sent out, you’d be lucky to get 75 of them to even send back the postage-paid reply card to say that they received it. You’d maybe get a dozen reviews if the band had any sort of recognition. For 300 radio copies, you might actually get enough air play to make the charts on a few stations. Back then, though, this was all done on paper. To find out if you were charting on any radio stations each week, you had to actually scan the top 30 lists for every college station in the country that reported that week. Every week. Nothing makes you want to rip out your eyes than scanning a few thousand lines of text to check for a couple band names every week. Sending out promotional copies and tracking my recent releases was easily 50% of my efforts running the label.

The one thing that would get you reviews was buying ads in the magazines, but of course that also added to the cost of each release and put the label (and artist) further into the hole. Plus, for all the ads that I ran in all the magazines over the years, I can pretty much say that I saw almost no sales from it directly. I was mostly acting as a benefactor to the magazines to get some good press.

The reviews and radio play you got was your currency though. It was what got you more reviews and radio play. Reviews and radio play helped you convince distributors to carry your releases, actively sell them and get them into stores. The problem was that unless you had a real hit record, getting good press or radio play didn’t necessarily translate into sales, and then you were still dependent on the store to pay the distributor, and the distributor to pay you.

It was multi-directional chain of sucking. In one direction many bands were trying to get the attention of fewer labels who were trying to get the attention of fewer radio stations and magazines to get the attention of distribution sales folks to get the attention of record store buyers all of whom were getting constantly barraged by folks seeking their attention. In the other direction, record stores were avoiding paying distributors who avoided paying labels (some of whom) avoided paying their artists.

About 20% of my time was spent working with the distros. Making sure they were stocked and trying to sell Unit Circle releases, bugging stores to request Unit Circle releases from the distro, packing up CDs to mail to the distros, and bugging the distros to pay me the money that they owed me.

The remaining 5% of my time was the “fun” stuff: listening to demo tapes (which I almost never did because I didn’t have time (sorry bands who sent me tapes)), working with bands, and working on new releases. 95% of what I did was mundane office work and was no different than any other manufacturing business. It was The Office, except that I was everyone from the regional manager, to the receptionist, to sales, to accounting.

Where was the music fan in all of this? No where. Really, they were divorced from the music on so many levels. They bought the record (hopefully) from the stores, they maybe read the reviews (I doubt many folks ever read reviews of bands they never heard of), they possibly heard the music on the radio. From the label perspective though, the music fans were out there somewhere. If you were lucky, you might get a nice note in a mail order envelope, but mostly not.

There was only one way for the musicians to connect with the people who bought their music and that was to tour constantly. It was the only true way to actually build a following then (and it is still the best way now, I’d say). It took years of hard work playing the same cities over and over, slowly building a fan base, earning no money, sleeping on people’s floors. That was what really sold the records and made the band successful because that was the true connection between the people that made the music and the people that listened to it.

Now, we are in a new world.

There still are the places you want to be covered in, but they aren’t the gatekeepers. Musicians can interact directly with their fans, build their fan bases, get their music to new people, and even sell their music all without middlemen. It is still a lot of work, but it is very different work because it is about the direct interaction rather than trying to get the attention of the gatekeepers. The cost of production continues to decline and distribution continues to get easier. Word of mouth spreads faster as well. All of this has changed the equation to put the power into the hands of the actual creators as opposed to the middle men and distributors.

Of course, the downside today is that lowered costs of production and easier access to potential fans means that the competition for attention is fiercer than it has ever been. It is just as easy for an artist to produce quality work and go completely unnoticed today as it was 10 years ago. Instead of not being able to get a label to release their work, they can’t get anyone to come to their myspace page. The new technology lowers the bar and democratizes the process, but it still doesn’t make sure that the cream will rise to the top. A current artist may now spend 75% of their time tweeting, friending people on social networks and trying to get people to hear their music and only 25% of their time actually making music.

At least now though, everyone has a shot.

[Update 7-12-09]
Trent Reznor posted some pretty sage advice about making your way as a new music artist in the current world in the NIN forums.

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How to turn user indifference into user anger

When Google turned off Google video, they gave their users credits for the videos that they had purchased. Sure, a lot of them were annoyed, but there weren’t that many paying customers in the first place (hence the shuttering). Now MS is following suit, but has no “upgrade” path for customers of its Plays For Sure technology. Again, this wasn’t a successful service (obviously), but what would happen if a bigger DRM-house closed down. You’d see class action lawsuits and bills introduced in congress right-quick. If content providers insist on DRM then content providers must make provisions in their contract for support of their customers for a long, long time. It’s not just the users that should sue Microsoft (per se), it’s the record labels and the artists. Otherwise, users will start to distrust the digital stores and they will go straight (back?) to piracy.

DRM sucks redux: Microsoft to nuke MSN Music DRM keys (Ars Technica)

Customers who have purchased music from Microsofts now-defunct MSN Music store are now facing a decision they never anticipated making: commit to which computers and OS they want to authorize forever, or give up access to the music they paid for. Why? Because Microsoft has decided that its done supporting the service and will be turning off the MSN Music license servers by the end of this summer.

[via techdirt]

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Music Tax Details From Source: “Pay Us Not To Sue You”

Music Tax Details From Source: “Pay Us Not To Sue You” (TechCrunch)

We learned yesterday that Warner Music, the third largest music label, is gunning for a $5/month music tax on U.S. residents.

The death throes of an industry that hasn’t figured out how to adapt. One thing that I never figured out about the music industry was it’s inability to be innovative around it’s business models. At the independent level, sure. But at the top-end, they are working on nearly the same model since the day the industry originated. For an industry that is all about “cool,” this is surprising. Their current set of challenges aren’t new. They are dating back twenty years! Remember “Home Taping is Killing Music?” The technology has been evolving for decades and rather than embrace it and figure out how to work with it, the music industry has fought it every step of the way until we reach this point: “Pay us in case you might want to pirate music.”

This is extortion and the ISPs need to band together to fight it.

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Recorded music should be free?

As one of many artists who has made more money over the years from live performance than from selling records, the argument that we might be moving to a system where music would be free in order to draw people to live performances has resonated with me. I just came across the Stretta blog today and saw this:
The Stretta Procedure

The fact of the matter is Recorded Music and Live Music are separate art forms. Theyre lumped together in our minds for many reasons, but for people who push the idea that recorded music should be free, it is convenient to exclude all other types of musical expression that dont fit into their new world order business model, which, incidentally, benefits them the most Will we soon justify torrenting movies for free because theyre simply promotional material to drive awareness of actors, who should derive all their income from performing in stage plays?

I just really liked that…

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Trent Reznor Walks the Walk

After his previous experiment with Saul Williams was not quite a rousing success, I figured that Nine Inch Nails frontman Trent Reznor was done toying with the music business model. Turns out that he was just getting started. The new Nine Inch Nails album is now available in multiple forms. The first part is available for free in high quality on bit torrent sites. The whole thing is available for download for $5 off the Nine Inch Nails site with a killer booklet in PDF. You can buy the 2 CDs for $10, and then there are two limited edition packages for $75 and $300.

I think this is just brilliant. Basically, he gives his fans choices at reasonable price points and makes it hard for them to not do the right thing.

As other high-profile artists emerge from their traditional contracts, I expect that we’ll see a lot more movement towards self-distribution. Especially, with artists like NIN and Radiohead who have a large percentage of their audience on-line already and can do better without the overhead of a large record label.

via Mashable

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Big day in music news

U.S. Album Sales Fell 9.5% in 2007 (New York Times): when the year’s top albums are Josh Groban’s Christmas music album, a High School Musical soundtrack and the Eagles, why is anyone surprised that sales are down?

Sony BMG Plans to Drop DRM (Business Week): The last major label hold-out on DRM has finally realized that punishing your customers is not a good business strategy.

Trent Reznor releases numbers on his Saul Williams download experiment ( Trent is not only willing to show the data from his experiment, but also to talk about the notion of allowing a pay-what-you-will strategy as a business model

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I think that the RIAA is starting to get desperate

Download Uproar: Record Industry Goes After Personal Use –

Now, in an unusual case in which an Arizona recipient of an RIAA letter has fought back in court rather than write a check to avoid hefty legal fees, the industry is taking its argument against music sharing one step further: In legal documents in its federal case against Jeffrey Howell, a Scottsdale, Ariz., man who kept a collection of about 2,000 music recordings on his personal computer, the industry maintains that it is illegal for someone who has legally purchased a CD to transfer that music into his computer.

The industrys lawyer in the case, Ira Schwartz, argues in a brief filed earlier this month that the MP3 files Howell made on his computer from legally bought CDs are “unauthorized copies” of copyrighted recordings.

There is no way that this was a good move by the RIAA. The digital intelligentsia is already against them, and most others who have heard about them aren’t too supportive. If they continue to pursue this line however, they will encourage a full scale revolt by the normal folk who never cared too much before. I can’t see them winning this case, but if they do, I would expect congress to enact a law protecting the millions of mp3 player-owners tout de suite.

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David Byrne, Tom Yorke and the Idolator on Music Business 2.0

David Byrne interviewed Tom Yorke from Radiohead about their on-line sales experiment for Wired. It was an interesting article, but David Byrne’s sidebar has been gathering even more attention. Here he tries to spell out the 6 different possible business models for musicians now. I actually thought that he summed it up pretty well. Lets ignore for the moment that if you aren’t Radiohead or David Byrne, your options (at least at first) are really limited to two business models at most. He at least says that he thinks the true independent path will be the only path eventually.

I think these discussions are really interesting and it is exciting to see some folks as smart as Byrne and Yorke discuss it, especially given their perspectives.

Idolator also had an interesting take on this discussion.

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Convenience Wins, Hubris Loses and Content vs. Context

Convenience Wins, Hubris Loses and Content vs. Context, a Presentation for Some Music Industry Friends at FISTFULAYEN

I’m sorry I didn’t post a link to this sooner. This is a nice perspective on the whole digital music landscape from the boss over at Yahoo Music. We’ve heard from the major labels and we’ve heard from the retailers, but Y! has a different view which is interesting. I’ve followed this since the beginning. I started Unit Circle Rekkids right near the start of the Internet’s explosive growth period. I saw different digital solutions emerge and fall by the wayside. After getting burned on Liquid Audio (if you can imagine, back then you paid them (A LOT) for the software to encode your music so that they could sell it and take a cut).

Over the years, digital distribution has changed from an interesting idea to I think the best solution for indie music. If we can get the majors to get over themselves, I think the days of manufacturing CDs are at an end.

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why do people buy from cdconnection?

Once in a while I would notice cdconnection popping up as a customer in my sales at cdbaby. After seeing it again this morning, I decided to check out who the heck they were. It turns out that all of the albums from my label are listed there, for sale, at nearly double the price that they are available elsewhere.

So, what cdconnection is doing is listing my albums in their inventory and when a customer buys from them, they buy from cdbaby and then mail it to their customer. This is incredible. Not that cdconnection is doing this. I mean, kudos to them for thinking this scheme up. What amazes is me is that people are buying these overpriced albums from them when they are available much cheaper even at, cd baby or direct from unit circle.

I just did a search on a random unit circle album and I see that cdconnection is paying for #1 placement on google for my artists and albums. The first “real” search result is Amazon. I mean how dumb do you gotta be to not notice that?

This is sort of the genius/evilness of web 2.0. With the magic of technology you can suck in the entire All Music Guide and use it to populate a database for your on-line store. Then you can go find the cheapest prices for your “inventory,” mark it up %200 and fulfill on sales only. The customer is happy, they got the record they wanted (little do they know that they are way overpaying for it), the on-line distributor is happy (a sale is a sale and they’ve already got their mark-up), even the label is happy (a sale is a sale, as long as they don’t do the math and realize that cdconnection is making more money off this sale than ANYONE else including the label/artist/whatever), cdconnection is happy (they don’t have to warehouse anything, they just resend whatever they receive, so it is a nearly pure-profit operation).



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