Tag Archive for: recording

The Invisible Common Denominator.

I’m known in the music industry for doing thorough research. Some of my research projects have spanned more than a thousand hours each. This particular journey led me to discover something I call vice watch. Let me explain.

A lot of my research began while I myself was being mentored and apprenticed by some of the most admired names in the music industry; Phil Collins, Quincy Jones, Phil Ramone, Steve Lillywhite and more.

There is a definite common denominator that has been practiced by all of my mentors. That common denominator when I tell you may sound wrong, or too trite and simple at first glance to even mention.

So often it seems that the actual power of truth is made invisible by the effective mask called simplicity.

I’ve grown enough wisdom over the years to learn something fascinating. The more simple a truth, the harder it is to see. And yet when discovered and applied it becomes life changing.

The Simple Truth

The common denominator of all my mentors was not just that they NEVER GAVE UP, it was HOW THEY NEVER GAVE UP.

“Don’t give up.” I know, you’ve heard it a million times before. No need to write another article about it. Right?

Maybe. But maybe not. Maybe this article shines a new light on a trite subject that could help save your career.

I took that simple truth, “Don’t give up,” and researched the hell out of it until I could deliver to my students a WAY of never giving up that worked every single time it was applied.

Like most discoveries, I found it when I needed it most (necessity IS the mother of invention after all). Vice watch.

There was a time in my career (actually TIMES) I felt totally overwhelmed. I felt I could NOT keep going with my home studio, that I could not keep going with my music career. Too many challenges and problems all happening at one time. I call these times in my life my “Trial & Terror” days. (Months is more like it).

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Challenges and Problems

See if you can relate to any of these challenges and problems which can, when added up, create the feeling of overwhelm. Especially when you sit down to work on that one thing that should be giving you complete joy in your home studio: music!

  • Computer Frustrations
  • Financial Stress
  • Lack of Exercise
  • Relationship Drama and Family Stress
  • Certain People in Your Life Pulling You Down
  • Contrary & Confusing Tutorials, Lessons and Courses on Music Production
  • Not Enough Time to Learn Enough About Your DAW
  • Not Enough Time to Make Your Recordings Sound Polished
  • Lack of Confidence In Your Ear
  • Lack of Confidence In Yourself as an Artist, Musician, Producer, Engineer
  • Lack of Confidence in Yourself as a Person
  • Stress from Your Day Job
  • Not Having Enough Good Contacts
  • Not Getting Any Breaks in Your Career
  • Too Much Time Needed for Social Media Promotion and Distribution
  • Too Many Distractions on the Internet and Social Media
  • Health Problems Arising from All of the Above

How & Why I Never Gave Up With My Home Studio

I’m going to save you time by getting straight to the bottom line. One thing I know for sure: If you are still reading this article you don’t have time to waste.

Over the years, I developed a way of mentoring and apprenticing as a Life Coach that always works for my students when followed.

From my direct observation, this approach parallels HOW my mentors kept going. HOW they never gave up.

It has to do with character and responsibility.

Vice Watch – A Step-By-Step Approach to “Self-Serve” Life Coaching

You can do this on your own. If you have trouble mustering up enough discipline to maintain this approach — collaborate with someone and help each other through.

This approach to Life Coaching is called “Vice Watch,” so named by one of my students, Robin Kaye of Australia, after he found success by following it.

STEP ONE:

Make a list of all the conceivable vices in which humans could engage on this planet.

Definition of Vice:

A Vice is a practice, behaviour, or habit generally considered wrong, immoral, sinful, criminal, rude, taboo, depraved, or degrading in the associated society. In more minor usage, a vice can refer to a fault, a negative character trait, a defect, or a bad or unhealthy habit.

This is a very personal step. Everyone’s list will be different.

Divide the list into two categories: ACTION and INACTION.

Important Note: Pay close heed to the definition of Inaction: Lack of action where action is expected or appropriate.

Here are a few of many possible examples:

A List of All Possible Human ACTION VICES
  • Excessive Drinking
  • Taking Drugs
  • Gambling
  • Gambling in Life (Taking Stupid Risks and Knowing It)
  • Putting Oneself Down
  • Stealing
  • Cheating
  • Lying
  • Being Rude to Others
  • Bad Sportsmanship
  • Eating Junk Foods
  • Eating Too Much
  • Releasing Music Knowing It’s Not Done Yet
  • Excessive Time On Social Media
  • Excessive Time Playing Video Games
  • Using Cracked Software and Plug-Ins
  • Etc., etc., etc.
All Possible Human INACTION VICES
  • Ignoring One’s Children, Spouse, Boyfriend, Girlfriend, Family, etc.
  • Neglecting Needed Paperwork (Taxes, Licensing Contracts, etc.)
  • Not Educating Oneself Daily Regarding One’s DAW
  • Not Educating Oneself Daily Regarding Music Theory
  • Not Educating Oneself Daily Regarding (Fill In The Blank)
  • Not Exercising
  • Not Sleeping Enough
  • Procrastinating (List Specific Areas of Life)
  • Giving Up on One’s Dreams
  • Etc., etc., etc.

STEP TWO:

Look over your list of ACTION VICES and INACTION VICES in Step One above.

Place a checkmark next to the vices that you consider apply to you. Be as honest as possible.

STEP THREE:

Rate each vice that you have checked off using the following system:

The lowest Minus 10 up to the highest Plus 11.

Keep your list and your ratings written down and updated on a weekly basis.

How the Rating System Breaks Down

Minus 10 means the particular vice in question is literally ruining your life. Regardless of how things look on the outside to others, you know honestly that that Vice is literally ruining your life. Left unchecked, other areas of your life will get worse.

As you improve each vice that you checked off, the numbers will move closer towards zero. Minus 10, minus 9, minus 8, etc.

Zero = Vice conquered.

A Zero means the vice in question is no longer a problem in your life – at all. Period. Gone. Vanquished. This is a big deal and can take some time to accomplish. The point is to work on this vice watch daily, and to note down your ratings weekly. Some people go so far as to note down their ratings daily.

Collaborations

When collaborating (which is a great way to hold yourself and another accountable) there is no need or pressure to share what your vices are. Simply assign each vice a letter, such as A, B, C, D – and a number. All you have to do is let your collaborator know the letter of your vice and the number rating for the week. Some people are OK with sharing what their vices are, some are not. I found that even if one keeps their vices to themselves and shares only letters, this approach still works just as well.

What the Positive Numbers Mean

During my initial research, I set up this approach to life coaching where conquering one’s vice was the final goal and the end of the game.

And then I discovered something that changed my life.

Once you reach zero (vice conquered), it’s now time to help OTHERS conquer THEIR vices. Therefore, a Plus One means you have conquered your vice and are now actively helping one other person conquer that same vice.

Plus Two means you are actively helping two other people conquer that same vice, and so on (Plus Three, Plus Four, Plus Five, etc.) Once you get to Plus Ten (meaning you are actively helping ten other people conquer that same vice), there is one more level up you can achieve: Plus Eleven.

The Goal

Plus Eleven means you are actively helping more than ten other people conquer that same vice.

What is the goal of this approach to Life Coaching?

The Goal is to improve your “numbers” until you achieve an eleven on each of your vices.

Why does this work so well?

I learned from my Mentors that life is a group activity. One cannot be an island and truly achieve one’s potential. You need a team.

Just improving yourself IS NOT ENOUGH.

However, you can’t just “build a team” either, you’ve got to work on yourself as well. You see the balance here?

In my online course The Lucrative Home Studio, I lay out exactly how to build your team by hiring interns, and how to help them achieve their goals and dreams – by being PART OF A TEAM.

Besides the legendary mentors I listed earlier, I was also very lucky to apprentice under the team that supports 25 Time Grammy Award Winning Legendary Musician Chick Corea (Nominated 51 Times!). For two years I learned an incredible amount of wisdom about how to run a business in the music industry and how to organize your personal life and professional life. One reference shared with me, which has helped me successfully apprentice many musicians around the world, is a common sense guide to morals called The Way To Happiness.

The Results

The results are nothing short of life changing and mind-blowing. What this does to someone’s music career can only be described as miraculous. That is all I can say. Here is one of many testimonials I recently received:

“Gary, as important as everything you have taught me about music and music production truly is, I NEVER thought this seemingly unrelated and counterintuitive approach to shattering the “glass ceiling” of my career would result in achieving not only my goals in the music industry (including making more money!), but going way above and beyond what even I believed my potential for success was! I was ready to GIVE UP FOR GOOD. In fact, I had already started packing up my studio. Thank you is not enough! I’m giving back by working hard on a daily basis to get my Vice Watch “numbers” up to eleven!”

Summary

I found that when people give up on their home studios and/or their music careers, it’s usually the result of not working hard enough at strengthening themselves, followed by not building up a team for real. The secret is to work on both at the same time. That’s how you achieve success you can bank on.

When people work on both at the same time, their lives achieve a much better balance, and they become what I call “magnets for miracles.” And many of those miracles show up in the form of unexpected music career successes.

You can see the results of not addressing your vices show up in the following ways; distractions pulling your focus away from what you are doing, feeling exhausted, repeating the same mistakes over and over, not able to persist on an action until it’s truly done, allowing others to pull you down, and ultimately — giving up.

The Vice Watch approach to Self-Serve Life Coaching is an amazingly simple and effective insurance plan against giving up.

The bottom line is this — give it a try. Do it. And let me know how it goes. You might be pleasantly surprised. And don’t be afraid to reach out for help along the way.

I’m always here to listen and to help.

I do believe this article is the most important article I will probably ever write. I am, in essence, working right now on getting my Vice Watch “numbers” up to eleven by helping you!

My personal mission statement is simple. “To create a Renaissance in the entertainment industry which will then create a Renaissance in the world culture.”

Here’s to a balanced life which leads to a productive and successful music career for you!

That’s what we are trying to do at the New Artist Model.

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Written by Gary Gray creator of The Lucrative Home Studio. Out of his one bedroom home studio, he’s completed major projects for The Disney Music Group and 20th Century Fox, CBS Daytime Television, A&E, Megatrax, EMI Production Music London, and others. 

Check out Gary's free Mastering Music for Licensing and Streaming webinar

Check out Gary’s free “Mastering Music for Licensing and Streaming” Webinar

For more information regarding revolutionary approaches to life and music production for the home studio developed by Gary, check out The Lucrative Home Studio.

If you want to work directly with Gary, sign up to get one of your songs critiqued.

A version of this post was also published on the Tunecore blog.

Hang on a moment while we redirect to the new TEAM site! Thank you!

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Photo credit: http://bit.ly/1de4Yfe

In the past the standard model was to release a full length album every year or so, and while a lot of musicians today still go by that model, more and more are starting to do smaller, more frequent releases. Especially if you’re an indie artist, this strategy is great for building a fan base and staying in the front of your fans’ minds.

Here CD Baby lists out some of the key benefits to the frequent release strategy. If you want to see all 10, check out the full article.

1. Keep your existing fans “tuned in” – Our attention spans are getting shorter and our entertainment options are increasing. If you disappear for three years without any new music, you can’t expect your old fans to pick right up where you left off. You need to stay on their radar if you want them to continue supporting you with equal fervor. The more frequently you release music, the more chances you have to remind them of why they love you.

2. Generate more opportunities for press – Likewise, the more music you put out, the more chances you have to contact bloggers, music magazines, local weeklies, etc. Pinning all your PR hopes on one album release every few years really limits your chances to get the press talking about your music.

3. Pace your creative and recording workload – It’s very time-consuming (and potentially expensive) to complete a major recording project all at once. Generally to finish tracking and mixing a full album in one stretch, you’re looking at anywhere from two to twelve weeks’ worth of work. But what about one song a month? That sounds more manageable, healthy, and realistic, which probably means it’s more likely to happen!

You’ll put everything you have into one song at a time to get it right; then have a little break from recording until next month — rather than exhausting all your energy or ideas. You can release a single every month for a year (and even do a release party for each one if you want to draw some extra attention to the new music). At the end of the year, compile the best ten tracks into an album.

4. Highlight your best songs in multiple ways – Fans love bonus material: remixes, rough demos, alternate takes, b-sides, etc. You can either release these bonus tracks as singles throughout the year, or include them in a special edition of your next album (which gives diehard fans another incentive to purchase the full album even though they already bought the singles that appear on that album separately).

5. Show off your live chops – Whether you produce your own concert recording or do an in-studio for a radio show, TV program, or music blog — turn those sessions into albums or EPs. People love to hear raw, live performance versions of their favorite songs.

How often do you release music? Share in the comments!

 

My friend Roger McNamee, a founding Partner and Managing Director of Elevation Partners has been getting some great press lately on his thoughts on the new music business, investing in technology, Apple, Google, Facebook and much more.  Here is the transcript of a speech he gave at NARM earlier this summer, a must read.

“Our band – Moonalice – is inventing new opportunities in music. We would like you all to join us.

I have been a working musician for more than 30 years, and a technology investor for 29 years. I have played about 1000 concerts over the past 15 years, which means I have personally experienced everything in Spinal Tap except the exploding drummers. I also spent three years helping the Grateful Dead with technology and many more advising other bands, most notably U2.

My band is called Moonalice. We play 100 shows a year in clubs and small theaters, mostly on the coasts. Moonalice was the first band broken on social networks. What broke us was 845,000 downloads – and counting – of the single “It’s 4:20 Somewhere.” We’re the band that Mooncasts every show live, via satellite to thousands of fans on iPads, cell phones, and computers. We’re the band that has a unique psychedelic poster for every show. After four years, Moonalice has 371 poster images from the likes of Stanley Mouse, Wes Wilson, and David Singer. Licensing those images will eventually a big business for us. We’re the band that offers the EP of the Month for $5. And we’re the band that uses the latest technology to radically improve both the production cost and commercial value of the content we produce. Now I’m looking for people who want get on this bandwagon with me.

The first question I hope you ask is “Why now?” The world of technology is beginning a period of disruptive change. The old guard – represented in this case by Microsoft Windows and Google search – is under assault and hundreds of billions of dollars may become available for new and better ideas. I hope that gets your attention!!!

The biggest beneficiaries of this disruption should be the people who got the short end of Google’s business model, especially creators of differentiated content. For the past twelve years the technology of the internet has been static. Every tool commoditized content by eliminating differentiation. The most successful companies monetized content created by others. Google was king.

I believe Microsoft and Google are about to get a taste of what the music industry has been dealing with for a decade. Their world is going to change and they won’t be able to stop it. Not so long ago Microsoft’s Windows monopoly gave it control of 96% of internet connected devices. Thanks to smartphones and tables – especially the iPhone and iPad — Windows’ share of internet connected devices has fallen below 50% … and it will fall much further in the years ahead.

Consumers are abandoning Windows as fast as they can. I expect businesses to follow suit.

This is a HUGE deal. Businesses whose employees use smart phones and iPads instead of PCs will save up to $1000 per employee per year in support costs.If corporations buy fewer PCs, they will save tens, if not hundreds of billions per year.

This is happening because today’s strategic applications – email, Facebook, Twitter, LinkedIn, YouTube and other internet applications – don’t need a PC . . . in fact, they are far more useful on a phone.

Microsoft has been in trouble since it first missed the web in 1994. Then it was unable to prevent Google from taking charge in 1998. When Google showed up, the World Wide Web was a wild environment. No one was in charge. The prevailing philosophy was “open source” . . . and free software.

Google had a plan for organizing the web’s information that treated every piece of information as if all were equally valuable. To create order, Google ranked every page based on how many people linked to it.

What we all missed at the time is that by treating every piece of information the same, Google enforced a standard that permitted no differentiation. Every word on every Google page is in the same typeface. No brand images appear other than Google’s. This action essentially neutered the production values of every high end content creator. The Long Tail took off and the music industry got its ass kicked.

Google captured about 80% of the index search business, which gave it a huge percentage of total web advertising. Google’s success eventually filled the web with crap, so consumers began using other products to search: Wikipedia for facts, Facebook for matters of taste, time or money, Twitter for news, Yelp for restaurants, Realtor.com for places to live, LinkedIn for jobs. Over the past three years, these alternatives have gone from 10% of search volume to about half.

As if all this competition wasn’t bad enough for Google, then along came Apple with the iPhone and App Store. Apple offers a fundamentally different vision of the internet than Google. Google is about the long tail, open source, and free, but also had to remove 64 apps from the Android app store for stealing confidential information. Apple is about trusted brands, authority, security, copyright and the like. In Apple’s world, the web is just another app; it is called Safari.

People who have iPhones and iPads do far fewer Google searches than people on PCs. The reason is that Apple has branded, trustworthy apps for everything. If they want news, Apple customers use apps from the New York Times or Wall Street Journal. If they want to know which camera to buy, they ask friends on Facebook. If they want to go to dinner, they use the Yelp app. These searches have economic value and its not going to Google, even on Android.

When Apple and the app model win, Google’s search business loses. Like Microsoft, Google has plenty of business opportunities, but the era of Google controlling all content is over. Consumers compared Google’s open source web to Apple’s app model and they overwhelmingly prefer Apple’s model. Software development and innovation has shifted from “web first” to “iPad first” . . . which is a monster long term advantage. Get this: Apple may sell nearly 100 million internet connected devices this year!

Apple’s strength can be seen best in the iPhone vs. Android competition. There are many Android vendors. Together they sell more phones than Apple does. But Apple gets around $750 wholesale for an iPhone. The other guys get between $300 and $450. This means Apple’s gross margin on the iPhone is nearly as big as its competitors’ gross revenues. Game over.

The other thing that makes Apple amazing is the iPad. No electronic product in history – not even the DVD player – can match the adoption rate of the iPad. Apple may sell another 30 million this year. At this point, the competing products have not put a dent in the iPad. Image what happens if Apple’s share of the tablet market remains closer to the iPod (at 80%) than to the iPhone (20%)?

This sounds like, “Game Over, Apple wins” . . . but it’s not . . . at least, not yet. The open source World Wide Web has finally responded to Apple. A new programming language has come to market called HTML 5. HTML is the foundation of the World Wide Web. For the past decade, HTML has been static, which allowed Google to dominate.

HTML 5 is a new generation of HTML and it changes the game fundamentally. It allows web developers replicate the iPhone experience, but with many extra bells and whistles … and no App Store. One reason HTML 5 matters is because it eliminates Adobe Flash, which has been an inadvertent barrier to creativity

Creativity enables differentiation. Differentiation can be monetized. Huge differentiation can be monetized hugely. With HTML 5, creative people can now use the entire web page as a single canvas. For the first time in a dozen years, web pages will be limited only by the creativity of the people making them. They can create experiences that will be more engaging to consumers and more profitable for advertisers than network television.

New forms of entertainment will emerge. New forms of business. Companies the size of Facebook and Google will develop in categories I can’t guess at. Companies as important as Amazon, iTunes, and Netflix will emerge to support what new content comes to market.

Whether you view Apple as friend or foe, HTML 5 offers real opportunity. Why?

Because you can deliver a better experience than an app . . . without an app. HTML 5 is cheaper to build, cheaper to support, no 30% fee . . . oh, and the apps perform better, too.

I believe Apple’s best response would be to focus on selling hardware and accept that consumers will demand products that happen to bypass the app store. Based on the argument with Amazon, I sense Apple is not ready to concede the point. That’s ironic, because the only way Apple can get hurt would be if they try to force all commerce through the App Store. The would create a real reason for customers to buy a tablet other than iPad.

Let me review my key points so far:

Google and Microsoft will remain huge, but their influence is evaporating, which means we can ignore them

Apple is winning big, which means we have to support their platforms first

For people who make content, Apple is a better monopolist to deal with than Google.

HTML 5 will give you a better product than the Apple app model at a lower cost and with more value.

Now let’s figure out what we can do together. My band Moonalice exists because T Bone Burnett wanted to produce an album of new and original hippie music in the old school San Francisco style. We put together an all-star band with in late 2006 and recorded the album. T Bone was about to win the GRAMMY for the Alison Krauss/Robert Plant album, Raising Sand, so we thought we were made.

We had a budget
We had an A-list PR guy
We had a really fine manager
We had custom label deal with a nice budget
T Bone’s innovative sound technology would make the album cutting edge

Old school music is good. Old school marketing wasn’t going to work for us. About four months before release, I reviewed the media plan with our PR guy. He said, “Sorry, man, but nobody cares.”

A few moments of somber reflection followed. Then, with great regret, I let our manager go. I let our publicist go. I let our label go. For all intents and purposes, we wrote off an album everyone was extremely proud of and which accounted for half of T. Bone’s portfolio the following year when he was nominated for Producer of the Year.

But I freed up most of our operating budget. Real money. And I focused it all on Twitter and Facebook. Our goal was to build an audience of dedicated fans around a Moonalice lifestyle. Three years later, we have 57,000 fans on Facebook and 75,000 on Twitter. We learned a great truth: as hard as it is to get people to spend money, it is much harder to persuade them to spend enough time listening to you to become a long term fan. We traded our music for their time. We discovered we could build an audience by giving away stuff that costs nothing to produce and distribute. These are serious fans who engage with us dozens and often hundreds of times a year.

The first thing we invented was the Twittercast. Before us, no one had ever done a concert over Twitter. Now we have done 103. Our marginal cost is exactly zero. Next we created Moonalice Radio, which has broadcast one song every hour on Twitter for the past two years. Then our drum tech bought a video camera and started recording the shows. Then he bought more cameras, put them on mic stands and started doing live video mixes. About a year ago, he figured out how to mooncast our concerts over the net for free.

Nearly all of our past 100 shows have been mooncast live on MoonaliceTV and then archived. Because we play mostly late shows on the west coast, only 10% of the audience watches in real time. But approximately 3,000 people watch EVERY show on a time shifted basis. Fans like the Moonalice Couch tour because they can chat, make friends, and do things that are not permitted at a live venue. They even buy Couch Tour tee shirts. And they are helping us create a new ecosystem where most of the music is free, because Moonalice art and life style products have huge economic value.

Thanks to HTML 5 and a satellite dish, Mooncasts can now be viewed on a smart phone without an app. Our video quality competes favorably with the best you have seen on an iPhone, and the technology to do all this costs the equivalent of six months of our former manager. He was a really good guy, but a satellite-based tv network is more valuable.

I want to finish up by recommending a course of action for you

Step 1: Remember that HTML 5 is just getting started, but the learning curve is less expensive and more profitable for those who commit to it from the beginning. The new business is going to emerge over a few years, not overnight

Step 2: Don’t wait for the labels to figure this out. Labels are not organized to get this right, which leaves a big hole in the new music market where labels used to be.

Step 3: Don’t wait for major artists to figure it out. The great new stuff is going to come from artists who have nothing to lose. Artists who come out of nowhere will create huge value for next to no cost.

Step 4: Make sure you are successful addressing the needs of next generation content creators … not just listeners. There are WAY more of content creators than you may realize. Thanks to Moore’s Law, Karl Marx is right at last: the means of production are in the hands of the proletariat. At the peak, there were 8 million bands registered on Myspace. They weren’t playing gigs, they were creating stuff, mostly for their own entertainment. Those people spent a lot more money creating the content they posted on Myspace than they did on recorded music. Thanks to Apple’s Garageband, the population of people capable of mixing something is now measured in tens of millions. Making these people successful is the key to creating new markets and new music products.

Step 5: Do everything in your power to encourage new product ideas and new forms of content. HTML 5 is a blank canvas and there is no telling what people will do with it. For all I know, HTML 5 may produce five or even ten amazing categories of product.

Contests, prizes and publicity will give you an opportunity to associate yourself with whoever creates the cool new stuff. If you have local stores, do local events. Think Alan Freed.

Step 6: Near term, focus your platform strategy on Apple.

Step 7: Long term, focus on HTML 5. The sooner you commit to HTML 5, the more likely you will produce something of economic value.

Step 8: Remember that HTML 5 will produce companies as important as Amazon, iTunes, and Netflix. It costs musicians practically nothing to create good digital video and fantastic audio, but they need distribution systems optimized for their content.

Step 9: Make music fun again”

And if that isn’t enough, Roger was kind enough to share with me his thoughts on investing in technology related businesses.  TechInvestingHypotheses

For the past 5 years I have been delivering presentations, in a wide variety of contexts including Digital Music Forum, AES, Billboard, IEBA, Music Hack Day, NAMM, Digital Hollywood and at many, many other private consulting gigs.   The essence of the presentation I have been making since 2006 is shown below with a couple of updates, roughly based on the Top 10 Truths described in our Future of Music book.  All along I have been advocating for artists, songwriters and publishers to challenge the way iTunes transactions were accounted for by the labels on the legitimacy of the splits.  The way iTunes royalties have been distributed is just wrong, a scam and a holdover from the accounting practices of the record companies past.

http://static.slidesharecdn.com/swf/ssplayer2.swf?doc=kusekkeynote-101024210138-phpapp01&stripped_title=kusek-keynote&userName=davekusek

Kusek keynote

Finally someone (Eminem’s production company), challenged Universal Music Group in the way that artists and labels split the money generated by iTunes transactions and won an initial ruling in their favor.  Just this past week Universal Music Group’s inevitable appeal was rejected meaning that the industry giant may now have to split its digital music royalties from money earned from ringtone sales and iTunes.

San Francisco’s US 9th Circuit Court of Appeals decided last month that all royalties made by the record label from such sales must be shared in higher proportions with producers. The recent court rejection will result in this case proceeding in a lower level court which will then determine exactly how much Universal owes Eminem and his producers, taking into account both damages and royalties.

This could be a very significant development for the entire recorded music industry.  When Steve Jobs and his team negotiated the original iTunes deal with the major labels, the economics of what iTunes would receive from transactions was roughly 35% of each download, a similar number as a  distributor/retailer of CDs would receive and the remaining 65% would flow to the labels and be split as with a traditional CD sale.

This was a masterful negotiation by Apple, effectively granting itself amnesty from claims of copyright infringement or inducement to infringe copyright on the part of the major labels and publishers in exchange for the promise of digital cash flow, potentially reigniting the recorded music business for the labels.  Even if most of the music contained on iPods was pirated, now the labels would have a new revenue stream and Apple would be safe from litigation.  This move paved the way for Apple to become the dominant company in the music business and one of the most valuable brands on the planet.  A transformational revenue shift was underway whereby Apple would effectively eat the labels lunch.  The ultimate iCon.

But what artists and writers failed to question at the time, was the way the 65% label share would be split.  The labels assumed that these downloads were “sales” of copies of the songs and that artists would receive their royalties based on traditional accounting practices.  In the early days of payments from iTunes, labels often continued to deduct fees from the artists share for “packaging” and “marketing” and “coop” often when there were no actual costs being incurred.  No one questioned whether iTunes downloads were “licenses” versus “sales” which would have tipped the accounting in favor of the artists.  Indeed Steve Jobs himself referred to his deal with the labels as a “license” in his rare and open “Thoughts on Music” letter posted February 6, 2007.

Now fast forward to 2010.  Although not directly listed in the UMG suit, Eminem could benefit from the results, as he could get a much larger share of the payments. The case is being touted as a landmark decision for the music industry as it could determine a precedent that could see 90 per cent of contracts signed before 2000 change for the benefit of the artists and songwriters.  If this ruling holds up and is widely interpreted, it will destroy the traditional record labels.

The ruling will hinge on the standard record deal contract, which predates the digital era and changes that have come with it. New rulings will most likely govern how digital royalties will be accounted for.

In the most recent decision the court has defined record companies’ deals with such firms as Verizon and iTunes as ‘licensing’ contracts as opposed to music sales, meaning the 50/50 split would apply.  This will be devastating for the labels and great for artists.

When I commented on this issue in an earlier post, one of my readers wrote “if Eminem eventually prevails it will be the end of discovering and nurturing new talent by record companies and will throw the music scene into more disarray that P2P ever did.”  While this may be true, I am completely convinced that the old record company model must change, will change, and will eventually be replaced by something more clearly aligned with the times and the new digital reality.  There is no doubt that these times are truly wrenching for the music industry – but music will prevail and the interests will realign into something sustainable.

Read more here and stay tuned to see how this all turns out.