The True Cost of Free

When it comes to recorded music, today’s consumers enjoy a free ride and seem to have all the answers. Song sharing is there for the taking and, in any case, the old music sales model is archaic. But if out with the old and in with the new is stylish in music, the same is not true of music recordings.

For the business, it seems, free is good. However, the decline of recorded music sales has been catastrophic since 2001, when piracy became rampant and the single song Apple economy banished the album. Now, hope for the sector requires a giant leap of faith. In the meantime, the tough job of finding new ways to compensate for this loss of profits falls to the record companies. It may appear that artists are gaining more exposure as music changes hands often and easily. But is the moneymaking of old within the reach of the business?

In recent years, the recording industry has endeavored to replace its album-based revenue stream with more panoptical and commercial based income. For instance, it has used 360 degree type deals, whose object is to secure additional revenue for the label by tapping on artists’ live performances, branding, and merchandising. This has been seen by some, including well known trade writer Donald Passman, as the cornerstone of an industry response to the crisis of recordings.

What this means for record companies is total alienation from the traditional business model, and near zero emphasis on recorded music and no money for artist development. The supply chain, and especially talent, has been taking a hit, with the U.S., for example, suffering, by any standards, a catastrophic drop in the value of recordings (from $12 billion in 2001 to about $6 billion today). Moreover, successfulinstances of ‘free’ seem exaggerated and are often only suited for top ranking stars who have plenty of access to multimedia and residual bankroll. Radiohead’s attempt at financing a new release with fan donations in 2007 met with poor results; the band, at the time the poster child for the new music economy, has since regretted the move.

In the meantime, subscription and/or ad-based streaming services deliver poorly for artists–which does not help engrain the concept of music recordings as a valuable commodity for investors or the public. In the clamor for ‘free,’ honest, good work, is getting lost in the shuffle, with the business community oddly silent about the time spent by artists honing their craft, writing music, practicing, studying the music of others, performing, and mimicking until they come up with the best possible material they can muster. Music production, one of the leading edges of our culture, seems to be held hostage to a vague and ill-suited business proposition: that marketing reigns supreme.

For sure, artists end up in atypical situations in order to stay alive and relevant. The public is most plugged into entertainment that promotes an escalating shock and awe standard, and this means that writers, producers, and performers must continue to push boundaries in order to keep their jobs and/or remain in the public eye. Stars like Miley Cyrus and Britney Spears stun the public by baring skin on camera, while lyrics, such as Robin Thicke’s “Blurred Lines,” are used ever more provocatively. Similarly, the media will only sign artists with all eyes and ears on them. Therefore, it is not enough for a musician to be noticed; they must pop-up and make an indelible impression by any means. This was not so when recordings were valuable.

The whiplash of free, in conclusion, may well be the complete erosion of recorded music as a commodity. This is a very steep price to pay for the industry.

Athena Butler is a student at Berklee College of Music. The Cost of Free is from the Music Business Journal’s October, 2013 issue.

How to Make Money Selling Recorded Music

The most valuable music is paired with something else. Possible pairings:

Video - For example, every television show or movie since the invention of the medium
Identity - See Parrotheads or Little Monsters
Events - For example, concerts are not just music - they are a social activity that people do with friends, family, lovers, etc. People often buy music after concerts not just because they love the music, but because they had a good time at the event and want a souvenir
Theatre - Similar to video. Music is very valuable when paired with storytelling. Gone with the Wind has grossed $1,626,459,200 since its release in 1939. Mamma Mia, the Broadway show, has grossed $2,000,000,000 since its opening in 1999. Taylor Swift’s entire net worth is $17 million, according to therichest.org. I’d rather beMamma Mia.
Video gaming - I can’t prove it, but I’d bet more people, worldwide, can sing the theme to Mario Bros. than Michael Jackson’s Thriller.

There are plenty of others. Furthermore, you’ll probably have the most success if you pair music with one of the seven deadly sins - lust, gluttony, greed, sloth, wrath, envy, pride. I can think of a successful band that exemplifies every one of those characteristics.

My most successful attempts at selling recorded music have been when I paired music with movies, cell phones or mobile apps.

If you are only selling pure music, you shouldn’t be surprised if you don’t get much traction. For example - look at the major U.S. symphonies. They are primarily selling pure music (although there is a little identity associated with their product). It’s no wonder they can’t find funding, and it’s no wonder they can’t fill the seats of their over-sized halls. They’d have a lot more success if they starting pairing their concerts with multimedia, apps, experiences, etc. Who wants to sit on one side of the room and watch people playing music on the other side of the room? Apparently 1.9% of the market in 2012, according to Nielsen Soundscan and Statistica.com.

Should You Give Your Music Away?

The Great Debate.

by Andre Calilhanna

No one’s arguing that the changes in the music industry haven’t tipped the scales in favor of the independents. Not only can you forge a path to success without the help of a label, you can choose from a variety of means to achieve it. But that leaves a number of questions on the table, including whether or not you ought to give your music away for free.

As an indie, CD and download sales can be a huge part of the equation in regard to your income. But building a rapport with new and existing fans and widening your reach by means of song giveaways is an easy and obvious way to get people to listen – and isn’t that ultimately what you’re trying to do?

For the indie artist, the scales seem to be tipping toward “yes!” on the question of free tracks. But before you go headlong into a giveaway frenzy, it’s worth listening to voices from both sides of the fence. And it’s always best to have a larger plan in mind. What follows are excerpts from a couple of books and blog posts that address some aspects of this debate. And we’re eager to see what comments come in from you, our intrepid readers. (I couldn’t help but insert a few of my own comments below).

(Do it!) Your Music Is Your Marketing

Excerpted from Music 3.0, Making Music in the Internet Age, by Bobby Owsinski.

The major marketing tool for an artist today is your music. It’s no longer the major product that the artist has to sell (although it still is a product), so it has to be used differently and thought of differently as a result.

Perhaps recorded music was never the product we were led to believe it was. With a vinyl record or CD, the container that holds the music is the product. While the songwriter always made money when a song was played on the radio, the artist never did, and the artist made only a small percentage of CD and vinyl sales (10-15% of wholesale, on average). [Keep in mind, he’s talking about the major/indie-label model here, not the indie/CD Baby model where you’re keeping all the proceeds from your gig sales and 60% or more of your retail sales.]

In fact, the artist made the most money on concert tickets and merchandise while touring. There was a cost involved in the manufacturing of the container that transported the music (physical material costs, artwork, and so on) that had to be recouped, as well as the production costs of the music. But if you look at music in terms of the advertising world, you see music in a different light.

If you’re selling a soap product, for instance, the production cost for a commercial to broadcast on television or the radio is trivial. It’s the total ad buy (the agency purchasing the radio or television time for the sponsor) where most of the money is spent. Even then, it’s considered part of the marketing budget of the product, which might be about 3% of total sales.

If you consider the music-production costs as part of the marketing budget in the same way as a national product, it takes on a whole new meaning. [That’s a mighty big leap, IMO.]. Since the music is considered the major marketing tool for an artist, it should be considered a free product, a giveaway, an enticement. Give it away on your website, place it on the Torrents for P2P, let your fans freely distribute it. It’s all okay. Since most millennials already feel that music should be free and have lived in a culture where that’s mostly so, don’t fight it. Go with the flow! Just as it was during the past 60 years, the real money in the music business is made elsewhere anyway. [Again, not necessarily for the indie artist.]

Further, just because you’re giving it away doesn’t mean that you can’t charge for it, either at the same time or at sometime in the future. There are numerous cases in which sales have actually decreased for an artist’s iTunes tracks when the free tracks have been eliminated.

One such musician is Corey Smith. After six years, Corey has built his gross revenue to about $4.2 million, and free music has been the basic building block of his tribe. You can buy his tracks on iTunes (he’s sold more than 400,000 so far), but when his management experimented by taking the free tracks down from his website, his iTunes sales went down as well! The free music Corey offers allows potential fans to try him out. If they email and ask for a song that’s not available for free, he just emails it back to them. He’s tending his tribe!

Another example of reaping the rewards for giving it away for free is the techno and electronica artist Moby, whose “Shot in the Back of the Head” became the best-selling iTunes track after he gave it away for free on his website for two months! Of course, you can charge for your music with enhanced products like box sets, compilations, special editions, and other value-added offerings. But the initial releases for an artist on any level (except for the already-established star) must be free to build a buzz.

(Don’t Do It!) The Value of Music

Excerpted from The Plain and Simple Guide to Music Publishing by Randall D. Wixen.

Music is a unique commodity with the ability to touch the soul or evoke an emotion or feeling. In a film, it might take minutes of dialogue or visual exposition to create a mood or tell a story, while music can instantly convey a mood and give cues to the director’s vision. Likewise, some sports – figure skating, for instance – would not be possible without music. Restaurants and stores set the ambiance for you by playing background music.

Yet in the music publishing industry, no day goes by without someone who recognizes the value of music nonetheless belittling its value, complaining about its cost, and trying to pay less than a fair fee. It is important that writers and publishers stand tall and recognize and respect the value of their own property. If they themselves fail to recognize the worth of their product, how can others be expected to see its worth and pay a reasonable price for it? [Mr. Wixen is speaking mostly about publishing with a focus on recognizable content in this section, but there are a lot of relevant points as they relate to you as artist devaluing your music.]

The media is full of articles about “file sharing” and how it hurts the music industry. What a nice euphemism, file sharing! Sharing is good, right? We are taught to share from the time we are little. But why does the media not do stories about the theft of intellectual property or copyright infringement? “File sharing” sounds so much more innocuous than “willful copyright infringement,” which, by the way, is a felony. If I steal your car, is that “ride sharing?” By spinning articles and headlines in this manner, the media contributes to the devaluation of songs and artists.

This is not a simple problem, with only one cause and one solution. While piracy and copyright theft each play an important role in this phenomenon, and while overpricing makes theft feel more justifiable, writers and publishers who lack enough self-respect to value their songs appropriately contribute to the problem.

“This Is a Low-Budget Production.” Almost every license request a music publisher receives includes somewhere in it, “This is a low-budget film, TV show, ad campaign, etc.” No one ever sends license requests that start off with, “This is a big-budget film, with two stars who are each getting $20 million and a director who won the Academy Award last year. We would like to use the ‘cherry’ of your catalog and pay you a really nice fee for doing so.” Budgets are low because people set them low. If there is no money in the music budget of a TV show, it is because the money they put into catering and hairdressing and makeup artists dwarfs the money allocated for music. Don’t stand for it! [Except of course, that if you turn down the opportunity, another act will step up and take it in a heartbeat.]

If you tried the same tactics in real life that are used in licensing music, you’d be laughed at. If you went into a Bentley dealership and said, “Gee, I sure like that $375,000 Azure, but I only have $30,000 to spend on a car, so do you think you could accept that?” you’d be shown the door along with some shoe leather. The idea that music has no intrinsic value leads to the proposal that “you should price your product according to our budget.” Don’t do it – especially if the song being inquired after is a standard, was a major hit, or has a lyrical or other connotation that is truly special. The situation may be different, though, if someone is inquiring about a generic punk song and the artist and song could be easily interchanged with many others. [Aha! That warrants a lot more consideration. Not to mention that none of your songs are generic, right?]

“It Will Be Good Exposure.” Once they get done telling you how low they’ve set their budget and how you have to conform to what they’ve predetermined, they will pull out the old “good exposure” argument. While the licensers themselves are only working for real dollars and maybe profit participation, they would like you to please take your compensation in the form of good exposure.

Vaudeville entertainer Sophie Tucker, so the story goes, was once offered a gig at far less than her normal fee. The reason she should do it, the argument went, was that it would be good exposure. “Exposure?” she is said to have replied. “Isn’t that what you die from?”

The worst cases of “licensing by exposure” lately seem to be in the realm of video-game music licensing. With games selling for $30 a pop and shipping 4-5 million units, you’d think they’d be able to spare more than $5,000 as a flat fee to license a song. Let’s do some made-up math.

Let’s see, that’s around $150 million in gross over-the-counter revenue, and maybe half filters back to the game developer. And paying $5,000 for each of 50 songs would be $250,000. And double that fee to clear the master recordings, so we’re up to $500,000 out of the $75 million. It doesn’t seem fair, does it, when music is so integral to the game? Why not at least pay a royalty instead of a flat fee? We’re just now starting to see meaningful royalties on video games in lieu of flat one-time buyouts.

Unfortunately, some potential users will not be willing or able to pay a fair fee. But for the long-term health of the music, it is important not to devalue the song by licensing it for whatever a user offers. Bentley would go out of business if its dealers negotiated car sales that way, and so will you.

(Do IT!) Free Music = Free Advertising = Smart Business

Excepted from blog posts by Dexter Bryant, Jr

Free music is free advertising. Think of free songs as product samples: the music-buying public samples your product at no cost. For those who don’t care for your music (no matter what the reason) they can easily sever their relationship with you and your product right then and there.

For the people who like your product, they can easily dig deeper and sample some more of your music to get a better feel for your identity and what your brand represents. From there they can decide whether their values align with yours and if they would like to continue their relationship with you. If you and a potential fan are birds of a feather (so to speak) then chances are they will be ready to forge a deeper bond with you and take your relationship to the next level.

Free music increases the potential for engagement with audiences because anyone can participate. Free eliminates risk and lowers the barrier to entry for consumers. If I may use a food-related metaphor, your songs are the appetizers that will lure audiences to dine with you for a full meal – free mixtapes/EPs/CDs/whatever. [Sounds good, but restaurants charge for appetizers, too!]

A full meal provides your audience with a clearer picture of your overall vision and your artistic identity. If people really enjoy your meal(s) then they will seek yet another option (or options) for consuming the deliciousness that you offer. These additional options for engagement with you include live music, merchandise, premium products, and any unique experiences that you can offer your hungry, eager fan base.

In short, free songs lure consumers to sample your free mixtapes, and free mixtapes are the bait to lure fans to spend money on live music, merchandise, deluxe edition mixtapes, and premium-priced music products and experiences. At every stage in this chain your product must gratify whatever desires your audience is seeking to fulfill, otherwise they may be inclined to discontinue their relationship with you. [This all speaks to having a larger plan in mind.]

Give the Customers What They Want. When a song or artist has captured someone’s interest enough that he or she seriously considers a purchase from that artist, many of us will download the music for free before we buy it. This allows us to become intimately familiar with that piece of music so we can be absolutely sure that buying it will be worthwhile. However, as you all know, downloading one simple song can sometimes be a more frustrating process than need be –navigating through treacherous, spam-infested illegal download sites and P2P software for just a few minutes of free music to put on your iPod.

Eliminate this pain point for your customers and you will endear yourself to them. Let your fans have the option of downloading for free or purchasing downloads from you and make it easy for people to download your music for free right from the same online destination they can buy it from: your website.