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Here is a guest post excerpt from my friend and artist MC Lars from the Huffington Post UK.

“In last week’s State of the Union, President Obama stressed the importance of creatively revitalising our nation’s economy. He called for “an economy built on American manufacturing, American energy, skills for American workers, and a renewal of American values,” the blueprint for lasting domestic prosperity. There are some parallels to this shift in thinking in today’s indie rap game, specifically in application of sustainable new media economics.”

“What this means then is that in order for artists like me to survive, I must be creative with how I let people hear my music. A primary means of distribution in 2011 was my USB robot, a two-gigabyte hard drive keychain that housed all of my albums digitally. I also sell t-shirts with cartoon characters I draw myself and I try to print on shirts manufactured domestically when I can. 47% of my income comes from merchandise, 40% from ticket sales, and 13% comes from iTunes, Spotify or other paid music services through the internet. I used a crowdsourced funding site called Kickstarter to produce my last album, with added bonuses of drawings and personalized songs to the highest contributors.

If the internet were compromised or regulated to the point where the 13% of my traditional digital income (from iTunes, Spotify, and others) were to disappear, it could likely mean that people would turn to getting my music for free, which would then mean that I would need more ticket and t-shirt sales in order to maintain my income level. (My income, by the way, covers my expenses, taxes, and health insurance, and that’s it.)

“Economically, we are living in an era that takes us back to the punk and indie roots of the 70s and 80s. Musicians must be able to go out and perform for years in small clubs to tiny crowds; it’s the way one perfects his or her craft and pays his or her dues. It’s how bands like Black Flag and Minor Threat became legendary, they had explosive, powerful shows and were willing to sacrifice everything to make their music heard. Henry Rollins of Black Flag tells his story in his classic book of journals, Get in the Van, an important read for any indie musician today.

We live in an era of innovative fusion of old and new. Being a musician no longer means simply being a songwriter and performer. One must also know a little bit about business, branding, t-shirt design, social networking, production, publicity, accounting and tour managing.

Ultimately, what this is means is that if you own and run your own business, no one can take that away from you. (The MPAA and RIAA exist to maintain the status quo of the entertainment industry, but I don’t need someone with a large salary lobbying for my interests as an artist when that person is disconnected from the reality of new media economics that I’ve described above.)

The internet in its current free and open format is important to me as an independent indie rap musician and artist. In fact the internet is essential to me and to all of the other artists who are like me. The government’s harnessing and regulating the internet and its free flow of information would be a dangerous thing in that it could lead to government control of a very important channel of a portion of the income that I earn – and through which I express myself freely, exercising my First Amendment rights as an artist.”

Read the whole thing here from the Huff Post UK.

A new survey from the Gartner group shows digital music revenues forecast to grow less than 5% per year.  This is close to flatlined if you factor in inflation.  Not good news for most of the world.

■ Online music revenue from end users will grow more than 31% by the end of the forecast period: from $5.9 billion in 2010 to $7.7 billion in 2015. By comparison, consumer spending on physical music (CDs and LPs) is expected to slide from around $15 billion in 2010 to around $10 billion in 2015.

■ Online music subscription services, such as Spotify, will be the main growth sector in this market, showing fivefold growth from 2010 to 2015. A la carte sales will drive the bulk of overall revenue.

■ The highest growth rates will be in regions such as Latin America and the Middle East and Africa, which have not historically been strong in paying for tracks or albums from online services or stores (although perhaps stronger in paid-for ringtones from their service providers).

digital music sales chart

Read more from Gartner here.

Andrea Leonelli from Digital Music Trends recorded a series of interviews with many of us from the Midem show.  You can listen to the interviews here or go to his site for lots more.  Thanks Andrea!

This Midem 2011 series includes:

http://player.soundcloud.com/player.swf?url=http%3A%2F%2Fapi.soundcloud.com%2Ftracks%2F9483455&show_comments=true&auto_play=false&color=ff7700 Episode 71 – Midem 2011 Coverage Day 1 by digitalmusictrends

Photo credit: bit.ly/HXtUQx

Photo credit: bit.ly/HXtUQx

According to the latest report from Nielsen and Billboard, digital music accounted for 46% of all U.S. music purchases in 2010, up from 40% in 2009 and 32% in 2008, and digital track sales hovered around 1 billion sales a year for the third straight year.

The top-selling digital songs of 2010 sold about 4 million, while the top digital albums were around 500K.

The top selling artists of 2010, based on digital track sales,

– Eminem (15.7 million)

– Ke$ha (13.5 million)

– Lady Gaga (11.9 million)

– Katy Perry (11.8 million)

– Black Eyed Peas (11.3 million)

Read more on Digital Media Wire

musicians&money

From Hypebot.  It’s no secret that the amount of money artists are earning from recorded music is declining.  But by how much? And as digital sales replace physical and streaming music gains traction do the numbers shift in the artist’s favor?  Infographic created by David McCandless of Information Is Beautiful from a spreadsheet of data.

The music industry is being reinvented before our very eyes. Learn how it is developing from today’s entrepreneurs including Ian Rogers from TopSpin, Steve Schnur from EA, and Derek Sivers and how you can capitalize on the changing opportunities.

MPN is my latest project and an online service for music business people and music and artist managers creating the future of the industry. MPN provides online music business lessons, exclusive video interviews and advice, career and business planning tools and thousands of specially selected resources designed to help you achieve success in this ever changing industry. MPN gives you the tools, expertise and guidance to help you get organized and take your music career to the next level. Learn from industry experts, set your goals and realize your vision.


Another Wordle rendering.

This is how Wordle sees my blog

This is how Wordle sees my blog

Here is a great info-graphic from the New York Times showing the relative performance of various music formats over the past 37 years.  Unfortunately it does not show the impact of free music online.  That would be an interesting addition to see how big file sharing and torrent downloads really are, relative to the physical formats of the past and the new “paid” digital formats.

A Timeline of recorded music format performance

Does selling records have anything to do with the music business anymore?  What do you think?

115,000 new albums were released in the U.S. in 2008.   Of those, only 110 sold more than 250,000 copies.

Only 1,500 titles cracked the 10,000 mark.

Read more from CNN here.

A friend just sent over this post on how the newly elected Chairman of the Entertainment Retailers Association,  said that illegal P2P filesharing is the greatest challenge facing entertainment retailers and urged members to lobby Government for a crackdown on a problem he said “is bleeding our industry dry”.

Speaking at the association’s annual general meeting, Quirk said, “Too often the debate over illegal filesharing is portrayed as an ideological battle, but for us this is a commercial matter. Illegal filesharing is damaging our businesses, both physical and digital, on a daily basis, and the Government needs to tackle it swiftly and decisively in order to protect jobs, businesses and investment.

“First the filesharers targeted the music business and the Government did nothing. Now the filesharers have come again for TV and movies. Unless action is taken the filesharers will come for computer games, books, in fact anything which can be digitised and what will be at stake will be not just the entertainment industry but huge swathes of the UK economy. We need action now.”

Read more of this insanity here at Mi2N

Well now…

I was visiting with my Dad last weekend and thought of an interesting parallel between digital music and encyclopedias.

When I was a kid, my father had a summer job going door to door selling Comptons Encyclopedias.  He would carry a couple of these huge books under his arms and try and get the husband or wife to buy the complete Comptons collection for the kids.  This was big business and my dad made a healthy living during the summer.

Well, over the years the encyclopedia book business began to dry up.  To start it all off, Comptons put their entire encyclopedia library on a CD-ROM and sold it via a new company they formed, called Comptons New Media.  They put the CD-ROM in a chipboard box and sold it at Comp-USA,  Software Etc and other retailers for $200-$300.  It became big business for a while in the early 1990’s, and Comptons New Media flourished and was eventually purchased by the Tribune Co for a lot of dough.

It didn’t take long before some hackers cracked the CD-ROM and then pirated versions of the whole enchilada began making their way into stores and online outlets.  By now, of course, the multi-volume Comptons Encyclopedia Book business had gone the way of the dinosaur, and countless pavement pounding salespeople were no longer going door to door selling encyclopedias – and the entire book business basically went away.  Gone in a matter of a few years.  I think they still sell some to schools somewhere.

The same thing soon happened to Comptons New Media as digital competitors emerged, from Microsoft “Encarta” and others, and soon price competition and the internet gave way to this information moving online for free.

Now we have something called “Wikipedia”.

The information contained in the encyclopedias is still being researched and published and edited by now, tens of thousands of people who put it online in a living, dynamic format.  By and large, no one is getting directly paid to do this work, yet no-one can dispute the fact that society in general is benefiting from Wikipedia and other community-based information resources.  You might even notice that there is a lot more information being produced and updated and cross referenced than ever before.  This is all without the infrastructure of the past (ie Comptons) being in-place anymore, and almost no money changing hands.

Just like Comptons, the record industry digitized all of its assets and put the entire thing out there for the public to enjoy.  And just like Comptons the record industry in now suffering from price erosion, shifting formats and piracy.  They can try and hang in there and bash the problem away with legislation, or they could seriously consider other methods of delivery and renumeration, or they could sell off their remaining assets and shut down.  No matter what, the game they have played is over, caput.  Time to face the music and change.

There are no guarantees in business that things will remain the same.  Indeed, the only real constant is change and businesses that try and hold onto the past will be crushed by their own weight and failure to adapt, or in some cases, to just shut down.  Nothing is forever except change.  People should stop complaining about it and start working on creating a future that benefits us all.

Do I know exactly what that future is going to be?  Of course not.  I wish I could say with certainty but I can’t – for now.  But I think it will look a lot more like wikipedia than comptons encyclopedia sets.

My friend Terry McBride was recently interviewed by Carter Smith of Rollo & Grady. Talk about the Future of Music, Nettwerk is doing it now. Here is the interview:

R&G: What made you decide to focus your business on digital products versus physical ones in 2002?

Terry: It was an intuitive thing for me. Obviously, digital had been seeping into our world for about three years and the Napster effect was apparent. Being a small company and working directly with artists, we could really hear and see what was starting to happen. It was a realization that fighting it wouldn’t work; understanding it and being able to grow it was what was going to work. It was a psychological shift for us. It took a few years to get the rest of the company and analysts focused towards that, but that was the psychological shift for me, which means that the company shifts.

R&G: About 80% of your business is from digital sales now, right?

Terry: Yes, that’s correct.

R&G: Why did you drop DRM in 2003?

Terry: I didn’t see any purpose in locking down files; it made no sense to me. People have always been sharing music. Why would I want to stop them? Why would I want to tell them what to do? The way to win was to get them to support my artists, not to force them to do it a certain way. I know I wouldn’t like anyone telling me that.

R&G: You recently spoke about cloud-based servers, mobile applications and smartphones being the future of the music business.

Terry: What’s happened in the last ten years is kind of moot. The next 18 months will determine the future of the music business. It’s a situation where the turnover on phones by the average consumer – now I’m being generous here – is every two years. It’s probably shorter. The smartphones that are starting to dominate the marketplace are specific platforms now open to applications that are being developed outside of the R&D departments of all of the various carriers. Apple, when they opened up their App Store, I think they sold, what, 150 million apps in maybe 9 months. It stunned the world, and Apple is a small player. They might be a noisy player, but they’re a small player within the mobile space. Research In Motion launches their store this month, Nokia is launching Ovi in April and Google has already launched their Android site. You’re going to see millions of applications come onto the marketplace. You’re going to see social filtering of the really good ones, and what’s going to be in there are applications that change the behavioral habits of how you consume music. The need to download music will no longer exist. If anything, it will be a hassle. You’ll have smartphones that can probably handle two to three hundred songs. That’s a gradual download; you’re actually not streaming it. It’s actually on your phone but it’s pulled from some sort of server, whether it’s your own server or a cloud server. To make all of these applications work, you have to have really good metadata, which means that business has to focus its efforts on really good metadata. Rich metadata is going to work with all of these applications. You’re going to see digital maids, digital valets. You’re going to see applications for maybe five bucks a month where you can access all the music that you want, how you want it, when you want it, imported to any device. So why would you want to download? Why would you want to go online to try to find it for free? Besides, something you find free might not work with these smartphone apps. Five bucks is no big deal to have unlimited access. That’s where everything’s going. All of the current arguments and debates are moot. I would even say that the ticker has now started on when the iPod goes away. I think Apple saw that.

R&G: So their primary focus will be to promote the iPhone?

Terry: They’ve been pushing the iPhone more than anything, and when they opened up their App Store, their intuitions were proven right. It is the App Store that has driven iPhone sales.

R&G: Do you think the major labels will sign off on these applications?

Terry: I don’t think they have any choice in the matter. It’s really just a subscription model, but it’s the application. A subscription model has never worked to date because it’s always been a hassle. It only works on your laptop, you can’t port it between devices, and it’s always streaming and always a pain in the ass. Last.fm and Pandora have been nice, but transferring that around has been really difficult. The applications coming with these smartphones will change all that and make it a hassle not to use them. Downloading will seem like a hassle two years from now. It will be like, ‘Download something? Are you nuts? Here, I can instantly access it. Watch, I’ll just type it in and my valet will go find it for me.’

R&G: Your valet, meaning your filter?

Terry: It’s an app. You’ll program your valet to look at what your 20 closest peers are listening to and create something for you to listen to. Maybe you’re a Led Zeppelin fan and all you want to hear is Led Zeppelin today. Maybe something bad happened and you want to listen to Sarah McLachlan today. Your valet will do that for you, and your digital maid will clean up your library for you.

R&G: That will be huge. It will make music consumption easier for the end user.

Terry: I always call it the hassle factor. It’s a hassle right now to be part of a subscription model. It’s even a hassle to download. These smartphones are radically going to change that. I mean, with Shazam you go, ‘What is that song?’ and you can instantly know what it is and instantly buy it, if that’s what you want to do. Slacker is the first one that comes close to being a digital valet. It’s only going to get better. Anyone with a really good idea can actually make it happen. You’re going to see this coming out of garages and university dorms, not Apple and Blackberry campuses.

R&G: You’re a member of the RIAA. What are your thoughts of them monitoring ISP usage?

Terry: Here’s my whole view of this, and this hasn’t changed for quite a long time. Out of all of the sharing of music, who’s making an economic return? Whoever is should then share that with all the people that allowed it to happen, creating a nice alignment of interests to grow any business. A lot of the providers have viewed music as free content, while at the same time paying for the cable content to grow their networks. They’ve been making money off the backs of the artists without any compensation for the artists at all. I think that’s fundamentally wrong. I’ve also said it’s fundamentally wrong to go after the consumers that are using that opportunity. That’s not the right approach either. The phone companies and the cable providers have gotten away with murder in this whole situation.

R&G: What’s your opinion on music blogs?

Terry: I love music blogs because they’re music fans. They’re authentic and passionate about music. They’re no different than me. All they’re doing is spreading the word about stuff they like. The authentic will rise to the top, which is why I like aggregators like The Hype Machine. I think it’s brilliant. It’s a great way of seeing what music fans are talking about versus some other filter. I’d rather the filter be a social filter, and then you can go into niches. Maybe it’s a bluegrass filter or a country filter or a hard rock filter or an ambient filter. Whatever. Those people are really passionate about that music. You know what? That’s what it’s about. Songs are not copyright. Songs are emotions.

Read more great interviews at Rollo & Grady here.

The Nielsen Company Soundscan report for 2008 shows some interesting statistics. Legitimate digital sales continue to climb with some truly astonishing numbers.

• Music purchases (transactions) in 2008 reached 1.5 Billion, marking the fourth consecutive year music sales have exceeded 1 billion; 1.4 billion (2007) vs. 1.2 billion (2006) vs. 1 billion (2005).

• Overall Album sales (including Albums and Track Equivalent Album sales) declined 8.5% compared to 2007.

• Total Album sales declined 14% compared to 2007.

• Metallica’s “Death Magnetic” is the best selling Internet album for the year with 144,000 sales.

• During 2008, more Vinyl Albums were purchased (1.88 million) than any other year. The previous record was in 2000, with 1.5 million LP album sales.

• Digital Track sales break the 1 BILLION sales mark for the first time with more than 1,070,000 digital track sales. The previous record was 844 million digital track purchases during 2007; an increase of 27% over 2007.

• Digital Album sales reached an all-time high with more than 65 million sales in 2008; up from 50 million in 2007; an increase of 32% over the previous year.

• Digital album sales account for 15% of total album sales compared to 10% in 2007 and 5.5% in 2006.

• 2008 is the first time a digital song broke the 3 million sales mark in a single year. Leona Lewis’ “Bleeding Love” and Lil Wayne’s “Lollipop.

• In 2008, there are 19 different digital songs with sales that exceeded 2 million compared to 9 in 2007.

• 71 Digital Songs exceed the 1 million sales mark for the year compared to 41 digital songs in 2007, 22 in 2006, and only 2 digital songs in 2005.

• Rihanna is the biggest selling digital artist in 2008 with nearly 10 million track sales compared to Fergie in 2007 who had 7.5 million track sales.

• There are more than 450,000 different physical albums that sold at least one copy over the Internet during 2008 compared to 390,000 in 2007. More long tail support.

Wall Street Journal quotes Kusek and Leonhard:

The music industry played one sour note after another as digital technology undermined its traditional business models. But after suing some 35,000 music fans for illegally downloading songs, music honchos decided not to sue the more than seven million others. Instead, the industry has concluded that if it can’t beat them, it might as well join them in enjoying the benefits of technology. This marks a milestone in what might be called the Great Unbundling.

Digital technology is a powerful disaggregator, giving consumers the power to pick and choose what we want, how we want it, and when and where we want it. Instead of buying a 14-song CD, people can download one favorite. Instead of owning physical CDs, we own access to digital copies. Instead of having to use a stationary stereo, we can play songs on our iPods, phones or laptops.

Other industries are still coming to terms with the unbundling power of digital technology — think of video, books and news — which makes the music industry’s story timely. Recorded music for decades was sold as physical products, albums via phonographs, cassettes, then CDs. For young programmers, finding ways to download and share songs digitally (and usually illegally) became an early application of the Web. Napster and similar file-sharing services were shut down in the early 2000s as the music industry fought illegal downloads.

But shifts in how people access music can mean rethinking the entire value proposition. As music-industry critics David Kusek and Gerd Leonhard predicted several years ago, “Access to music will replace ownership of it. We have passed through the Industrial Age to the Information Age, and music will never be the same again.” There are now about half as many CD sales in the U.S. as in 2000. A few years ago, record executives in London were shocked when young people refused even free CDs.

The industry should by now understand that the way to get “Back in Black” is not in album CDs, which remain the biggest source of revenue. Instead, the future is sales of digital songs and ring tones, licensing to video games, and trying to get rights to concerts and other revenues associated with the musicians.

Read the whole OpEd by L. Gordon Crovitz in the Wall Street Journal

Wall Street Journal quotes Kusek and Leonhard:

The music industry played one sour note after another as digital technology undermined its traditional business models. But after suing some 35,000 music fans for illegally downloading songs, music honchos decided not to sue the more than seven million others. Instead, the industry has concluded that if it can’t beat them, it might as well join them in enjoying the benefits of technology. This marks a milestone in what might be called the Great Unbundling.

Digital technology is a powerful disaggregator, giving consumers the power to pick and choose what we want, how we want it, and when and where we want it. Instead of buying a 14-song CD, people can download one favorite. Instead of owning physical CDs, we own access to digital copies. Instead of having to use a stationary stereo, we can play songs on our iPods, phones or laptops.

Other industries are still coming to terms with the unbundling power of digital technology — think of video, books and news — which makes the music industry’s story timely. Recorded music for decades was sold as physical products, albums via phonographs, cassettes, then CDs. For young programmers, finding ways to download and share songs digitally (and usually illegally) became an early application of the Web. Napster and similar file-sharing services were shut down in the early 2000s as the music industry fought illegal downloads.

But shifts in how people access music can mean rethinking the entire value proposition. As music-industry critics David Kusek and Gerd Leonhard predicted several years ago, “Access to music will replace ownership of it. We have passed through the Industrial Age to the Information Age, and music will never be the same again.” There are now about half as many CD sales in the U.S. as in 2000. A few years ago, record executives in London were shocked when young people refused even free CDs.

The industry should by now understand that the way to get “Back in Black” is not in album CDs, which remain the biggest source of revenue. Instead, the future is sales of digital songs and ring tones, licensing to video games, and trying to get rights to concerts and other revenues associated with the musicians.

Read the whole OpEd by L. Gordon Crovitz in the Wall Street Journal