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Making Money When CDs Don’t Sell

Great coverage from Rolling Stone.

While up-and-coming bands may find most of their licensing offers in the $2,500 range, established bands can make much more: from $30,000 at the high end for TV shows to $100,000 for movies and $250,000 for commercials. To introduce last year’s Sky Blue Sky, Wilco licensed six of the album’s songs to Volkswagen for ads. And the veteran duo They Might Be Giants, who have been releasing recordings on their own for the last six years, made a deal with Dunkin’ Donuts for around $1 million to create original music for over two dozen spots, according to industry sources.

Perhaps no band has been more aggressive — or creative — with its licensing than OK Go. When the group treadmilled its way to YouTube stardom in 2006 with the no-budget video for “Here It Goes Again,” it was having the kind of careermaking hit that bands dream about, just as the commercial record industry was tanking. So OK Go manager Jamie Kitman sought licensing opportunities for the group — making deals for its music to be used in everything from TV commercials and video games to corporate seminars and cable TV “bumpers” (the music that’s used to come in or out of a program). Kitman estimates that when all the uses are tallied, OK Go will have granted more than 200 licenses and made old-fashioned hit-record money. “The accepted wisdom now is that no one is selling records,” Kitman says. “So how do you keep the wheels on the bus? There’s a person in my office who spends half her time fielding licensing queries.”

Ian Montone, whose Monotone Management handles the White Stripes, Vampire Weekend, the Shins, M.I.A. and the Raconteurs, says his bands no longer make most of their money on CD sales. “A lot of artists are looking toward touring and merchandising sales at shows, because that market is still vibrant if you grow it methodically,” he says. The Shins have licensed songs for use in commercials for McDonald’s and Zune. Still, Montone says the Shins turn down 90 percent of the licensing deals they’re offered. So why McDonald’s? “Why not?” says Montone. “They have kids and want to own houses.”

By comparison, the White Stripes have focused on touring and coming up with creative merch: The band sells limited-edition CD singles on the road, as well as unique posters created for each show. “We do that because it’s something special for the fans, but it’s also a way to make money,” Montone says. “I think you’re going to see artists doing more direct-to-consumer sales.” The Stripes have already been able to reapportion the record-company pie to their advantage: The band owns its masters and strikes distribution deals with the major record companies on an album-by-album basis.

Those kinds of partnering relationships are also being sought by the major record companies, who are offering artists better money if they sign deals that include more than just recording rights. Generally referred to as “360 deals” because they seek to cover every facet of an artist’s career, including publishing, touring, merchandising and licensing, the new deals are a way for record companies to hedge their bets in a declining record market and to recast themselves as music — rather than just recording — companies.

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One of the savviest labels is Fueled by Ramen, which boasts Fall Out Boy, Panic at the Disco, Paramore and Cute Is What We Aim For. “A lot of people hear about 360 deals and think it’s a land grab, but when you own the content, there are so many interesting things you can do,” says John Janick, who started the label in 1996 while going to college in Gainesville, Florida.

Unlike conventional labels, Fueled by Ramen, which has a partnership with Atlantic Records, does everything in-house: from building Websites that sell merchandise and recordings to producing the T-shirts it sells at chains like Hot Topic. In fact, Fueled by Ramen uses T-shirts to introduce fans to new music — both Panic at the Disco and Paramore placed tags on shirts with PIN codes that enabled buyers to download advance singles at home. “We’re creating a culture for each artist,” Janick says. “Obviously everyone is still looking for new ways to monetize recordings, but our company is growing into many other areas, and that’s great.”

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4 replies
  1. JaWar says:

    Another good practical article on how some bands or in the mix making things happen for themselves. For the independent artist or band I think they often get consumed by a conversation that isn’t relevant to them. For instance, indie labels and bands often talk about declining CD’s sells, but they weren’t selling many CD’s to begin with. lol

    Perhaps if they focused on building their brands and business they would have greater levels of success with their music.

  2. Helen says:

    , I’m still fooling with halindng the interim technical details, and haven’t personally dived into the wording of the related legal stuff. So, I should not speculate. Like I mentioned, I’ve heard both ways on the streaming.

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  2. […] in daily links, links, music by Josh Kimball on May 21st, 2008 *The music biz (great headline): Making Money When CDs Don’t Sell. [why i […]

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