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< | Fighting for their Rights: Recording Artists and the Battle over Royalties | >
> | Supporting Artists in a World of Free Distribution of Music | | | -- By BradleyMullins - 17 Nov 2009 | |
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< | Much of the discussion surrounding the effects of zero-cost distribution of music has focused on the “music industry” – with particular emphasis placed on decline of record labels. Less attention has been paid to how free access to music will affect artists themselves. Perhaps one reason for this is that artists themselves have been unable to reach a consensus opinion as these inevitable changes in the distribution of music. This dissonance amongst various artists was thrown in into the spotlight due to a recent spat between two British artists, Joss Stone and Lily Allen. Allen received major media attention after blogging her view that illegal filesharing was a disaster for the development of new artists. Stone responded by claiming singers such as herself do not need income derived from record sales, as people will come to a concert to see artists like Stone perform “real music,” and these performances from the only income necessary for an artist – “enough to make music, eat and go on tour.” Neither is completely correct -- all artists can likely thrive in a world of free distribution. | >
> | That the music industry is changing is undeniable. As free distribution of music over the internet becomes a practical, if not legal, reality, the current business models of record labels become increasingly challenged. While people continue to debate whether music should be free, there is no dispute that free distribution will have an inevitable impact on artists themselves. Lily Allen, British singer/songwriter/tabloid fixture, was recently thrust into the spotlight after she blogged her view that filesharing was a disaster for the development of new artists. While Allen’s opinion is not universal amongst artists, she does raise two important questions: Can labels continue to support artists without revenue from album sales? Do new artists need labels at all? | | | | |
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< | Unreliability of Album Sales | >
> | The Future of Record Labels | | | | |
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< | It is difficult claim that record sales are a particularly beneficial source of income to most recording artists. First, the sharp decline in actual record sales has been well-documented. Between 2007 and 2008, physical album sales fell by 60 million, and increased digital sales accounted for only 22 million of this loss. Second, recording labels share very little revenue derived from album sales with the artists themselves. For an artist that receives a 12% royalty, a typical digital sale will result in a payment of only twelve cents. These royalty rates for digital sales are especially alarming, as they often include deductions for packaging and distribution costs. As these costs are effectively zero for digital sales, there is little justification for providing such low royalty rates to artists. Third, many artists never actually recoup royalties from album sales because they are so in debt to their record labels. As albums become less reliable a source of income, it is important for artists to focus on other means of deriving income from their music. | >
> | The free distribution of music has undisputedly contributed to the deterioration of record labels, which have been largely dependent on album sales. Between 2007 and 2008, physical album sales fell by 60 million, and increased digital sales accounted for only 22 million of this loss. Artists have historically benefited less directly from album sales. The cautionary tale of TLC serves as a reminder that stellar album sales do not guarantee an artist personal wealth. Under the typical label contract, an artist receives only a 9-15% royalty on album sales. These rates seem especially low for digital sales, as they often include include deductions for packaging and distribution costs – an inclusion that is less justifiable for digital sales rather than physical sales, as the costs of packaging, manufacture, and distribution are effectively zero for digital sales. | | | | |
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< | Alternative Income Streams for Artists | >
> | Free distribution of music need not signal the apocalypse for record labels. Already recording contracts are being altered to place greater emphasis on alternative revenue streams. The most well-known new model is the “360 contract”, under which labels take a percentage of profit, typically 30%, from all income streams available to the artist. Three sources of revenue are of particular interest: touring, merchandising and licensing. | | | | |
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< | There are numerous alternative means for artists to derive income from their music. Perhaps the most obvious is touring. A major artist can expect to take home 50-60% of gross revenue from a concert, much more than he or she can expect from the sale of an album. And contrary to Stone’s argument, such touring revenue is not limited to certain categories of artists. Stone implies that artists known solely for “their track, their personality and their celebrity” must rely on album sales, but the fact that Britney Spears’ most recent tour grossed $24 million in its first three weeks indicates otherwise. The touring success of Spears, an artist infamous for her lip-syncing, demonstrates that, while many consumers are only willing to pay to see a talented live performer in concert, others are clearly happy to pay to catch of glimpse of the “celebrity” that Stone derides. | >
> | Yet the move to 360 contracts may present a significant risk to artists. Signing a record deal always requires an artist to balance important considerations – an artist must decide whether the advances, financial backing, and marketing support are worth relinquishing control over his or her artistic product. Before 360 contracts, touring, merchandising and licensing were areas left largely in the artist’s control. Not only did this mean a greater share of profits, but also a greater ability to manage an artist’s own brand. Under a 360 contract, however, artists are required to forsake even this limited control. And control over one’s career should be a concern of every artist, a concern heightened by the potential nuptials between Live Nation, which helped spur the move to 360 contracts through its deal with Madonna, and Ticketmaster, the dominant (if not monopolistic) seller of concert tickets. While there is certainly an appeal to being aligned with the king, any artist should be frightened by a single entity that would largely control concert venues, tour promotion, merchandise production, ticket sales, and, through Live Nation’s parent Clear Channel, radio access. | | | | |
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< | When it comes to touring (and related sources of income, such as merchandising, endorsement deals, songwriting, etc.), free distribution of music has the potential to actually increase an artist’s income. An essential aspect of convincing people to buy a ticket to a show is making those people familiar with an artist’s music. Promoting the sharing of music amongst friends, or even amongst strangers with similar musical tastes, has the potential of exposing an artist to a much wider population than is possible with restricted distribution. The repeated listenings made possible by transmission of an actual copy of a song rather than just a one-time broadcast may make consumers more likely to develop the familiarity necessary to attend a concert. Additionally, if consumers no longer have to devote resources to the purchase of albums, they may be more likely to spend money to attend a concert. | >
> | Artists Without Record Labels | | | | |
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< | Artists Development Without Record Labels | >
> | Labels may survive free distribution of music, but that does not mean that they are a necessary component of new artist development as Lily Allen contends. The story of Allen’s own success runs counter to her argument -- her initial popularity was due in large part to her posting of demos on her Myspace account. Perhaps more importantly, new business models continue to provide opportunities for new artists to develop without resorting to the support of record labels, and suffering the resultant relinquishment of control. One such label alternative is the venture capital model represented by Polyphonic. Polyphonic treats new artists like a start-up company, providing an initial investment, typically $300,000, in return for a share of profits. Unlike a record deal, however, artists maintain control over their careers, recording their own music and handling decisions about publicity and touring. Additionally, Polyphonic artists retain ownership of their copyrights and master recordings.
Abandoning records labels for alternatives like Polyphonic or self-distribution does represent a risk for artists, particularly the risk associated with forsaking the marketing machine of the major labels or the brand recognition of the more niche labels. This is an area where free distribution of music may actually play an important role in supporting the income of artists that decide against label control. This is especially true as artists recognize the importance of the alternate revenue streams that labels are attempting to envelop through 360 contracts. In 2002, for the top 35 artists as a whole, touring income exceeded income from record sales by a ratio of 7.5 to 1. Licensing is also increasingly significant, as new opportunities, such as licensing music for use in video games, continue to emerge. | | | | |
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< | One of Allen’s primary concerns is that, without income derived from album sales, record labels will be unable devote resources to the development of new artists. Yet the story of Allen’s own success runs counter to her argument – her initial popularity was due in large part to her posting of demos on her MySpace? account. In addition, new business models are continually providing opportunities for new artists to develop without resorting to the support of record labels, as represented by a new venture called Polyphonic. Polyphonic treats new artists like a start-up company, providing an initial investment in return for a share of profits. Unlike a record deal, however, artists maintain control over their careers, recording their own music and handling decisions about publicity and touring. Perhaps more remarkably, Polyphonic artists retain ownership of their copyrights and master recordings. Contrary to Allen’s argument, as the fixed costs of music creation decline and new potential investors emerge, it may actually become easier for new artists to emerge. | >
> | When it comes to potentially profitable activities like touring and licensing (as well as related sources of income such as merchandising and endorsement deals), free distribution of music has the potential to actually increase an artist’s income. An essential aspect of convincing people to buy a ticket to a show is making those people familiar with an artist’s music. Promoting the sharing of music amongst friends, or even amongst strangers with similar musical tastes, has the potential of exposing an artist to a much wider population than is possible with restricted distribution. The repeated listenings made possible by transmission of an actual copy of a song rather than just a one-time broadcast may make consumers more likely to develop the familiarity necessary to attend a concert. Additionally, if consumers no longer have to devote resources to the purchase of albums, they may be more likely to spend money to attend a concert.
The Embrace of Free Distribution
It is likely that, in the foreseeable future, labels will remain an available option for developing artists. As new alternatives mature, however, artists should become more cautious about forsaking control of their career, and focus on utilizing free distribution to support alternate revenue streams. As artists are able to retain control over their creations, a greater diversity of new artist may be the actual result. | | | | |
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< | Letting the Artist Decide | | | | |
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< | The recent actions of one artist demonstrate the potential benefits of accepting a world of free music distribution. Just last week, Solange Knowles, sister of Beyonce, released a cover of a song originally performed by the Dirty Projectors, a Brooklyn-based indie band. Her record label quickly removed the song from websites, but Knowles was resistant. Rebelliously, she took to her Twitter account to advise anyone who had downloaded the song to “send away!”. She seems to have realized what Allen has not – by sharing the song, people were spreading familiarity with both Knowles and the Dirty Projectors. And maybe because of that increased familiarity, one or two people will be attending a Dirty Projectors concert in Williamsburg later this week – providing income that would not have existed without free distribution. | | | | |
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< | For a Taste of the Music: | | | | |
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< | Lily Allen, Smile | | | | |
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< | Joss Stone, Son of a Preacher Man | | | | |
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< | Solange Knowles, Stillness is the Move | | |
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