What They'll Never Tell You About the Music Business

by Peter M Thall

  Insofar as digital downloads are concerned, while the politicians have been struggling with this issue for some time, no taxes are yet chargeable in the United States. However, it will likely come to pass one day that taxes or some kind of tariff will have to be charged as the Internet begins to interfere substantially with bricks-and-mortar stores—or even catalogue sales. The European Union has been struggling with the tax issue for a while, and, although it is not yet resolved, one must remain alert to the fact that there are government institutions around the world that are intruding on the free and unrestricted distribution of music via the Internet. It is only a question of how intrusive they will choose to be, how alike or different the intrusion will be from country to country, and how complex and costly compliance will be.

  But there is hope. A number of options have become available to artists seeking a presence on the Internet. Once you have acquired your domain name, companies such as cafepress.​com can design your website to your specifications, and there are “powers” who can arrange for your modes to be designed, manufactured, and sold, taking care of all financial aspects of the transaction. For an example of how this has been constructed by a small independent artist with a specific target audience in mind, check out www.​righteousbabe.​com, Ani DiFranco’s website.

  MAKING A LIVING

  What’s wrong with just making a living? There is a level of success in the music business that may not be up to the multiplatinum level demanded by the multinationals or the venture capitalists in the mainstream music world, but that for many is nonetheless worth pursuing. In fact, while you may not sell enough records to make a dent in the Billboard Hot 100, you can still make an awful lot of money if you do it right—in fact, a whole lot more money than most artists will ever see as a result of contracts with major labels.

  A client of mine refers to artists with such modest goals as the middle class of the music business. Think of Ani DiFranco; think of Prince, after he discarded his career-long dependence on a major record company (and before he welcomed it back into his life). To the argument that you have enough to do as an artist, my client answers that you will no longer have to spend time wondering (or trying to fix) what others are doing on your behalf. That saving alone buys you a lot of time.

  What we are really talking about is a good, old-fashioned mail-order strategy with a contemporary twist: the use of the Internet as a means of advertising, funneling traffic, and utilizing digital technology to transmit music via downloads and other means.

  You may be thinking, “But I can’t reach the people this way!” Do you mean the people you want to reach or millions of people? If you mean millions of people, then you are right: you can’t reach the platinum people. But if you mean the people you need to reach, then you can do it. There are ways to target the very audience that will find your artistry appealing—people who appreciate what you do and what you have to say.

  Remember, as an entrepreneur you have total artistic control and you need not make any compromises to fit the agenda of a record label. You are the record label.

  Now you may be thinking, “How can I compete with one hundred years of collective experience represented by many of the major labels?” The answer, of course, is, “How many times does a major label screw up?” Whenever a company is in the volume business, there is the likelihood—in fact, the guarantee—that it will mess up along the way in discharging its responsibilities. A label with fifty or one hundred acts—hoping one or two will succeed—is in the volume business. You are not.

  When you are an artist, as a perusal of chapter 4 of this book will attest, you are at the bottom of the food chain. You are the last to be paid. Some artists compare their royalties to the last little morsels of a cookie. If you do not have the stomach or the patience for the major label paradigm, then don’t complain. Do it yourself.

  STEALING AND PROTECTING AGAINST IT

  The illegal download phenomenon has received almost as much attention and publicity as an elected official’s extramarital affairs. Those who will never set foot in the music business are nonetheless aware of the fact that Internet companies have been making music available for “sharing”—or, as copyright interests put it, “stealing.” One of those consequences has been the heightening of sensitivity of the world’s populations regarding the validity of copyright in the works that are being “shared.” When you make your music available on the Internet, the boundless opportunities to reach consumers is matched only by the boundless opportunities for those consumers to appropriate your product without compensation. This is the lesson—good and bad—that the Napster, Grokster, and RIAA litigations has taught us.

  Thus, we come to the only protection copyright owners can depend on: encryption. Encoding is the sine qua non (“without which nothing”) of digital distribution. Imprecise, inefficient, careless encoding—or even the total absence of encoding that, believe it or not, is still fashionable among many artists (but not their record companies)—will provide uncountable numbers of web surfers with the opportunity to copy—effortlessly—a product that was created only after the infusion of an incredible investment of time and money on the part of the creator.

  I cannot say enough about the necessity of encryption. Such sites as those run by Microsoft, Spotify, iTunes, and e-music, as well as the major record company sites that have finally made their presence known, are fairly well encrypted, although the imagination of the hacker has not had much opportunity to be fully tested. This is another reason artists must trust the institutional sites, rather than the fly-by-night sites, with their music—no matter how appealing they might find their philosophies or demographics.

  DOS AND DON’TS OF INTERNET ENTREPRENEURSHIP

  Don’t be surprised if your search for success through an effort to do it yourself results in exactly the opposite: an inability to fund that effort, a lot of disappointed fans, and even an accumulating debt resulting from the expenditure of money necessitated first by seeking customers and second by trying to satisfy them. The ultimate irony of pursuing Internet entrepreneurship in the manner described in this chapter is that, as a musician, you live in the world of the idea. The abstract. The dream. Doing it yourself on the Internet is another world entirely. Columbia and RCA Records have almost two hundred years of experience between them. (Now they are joined as one company under the Sony umbrella.) Can you really expect the well-meaning efforts of one individual to duplicate this experience?

  Perhaps I have (almost?) dissuaded you from accepting the daunting challenge of becoming an Internet entrepreneur. That was not my intention, and to prove it, I offer a few pointers in case you want to take the chance of offering your creations to the vagaries of cyberspace. Here is my top 11 list of dos and don’ts (actually nine dos and two don’ts):

  1. Don’t make any exclusive arrangements with anyone. The Internet is still too fluid a system to give up the flexibility of trying alternative means to achieve your goals.

  2. Do try to find a distribution method or methods that can aggregate your music in such a way as to focus it sufficiently in a specific genre, for example, so as to target a specific demographic that you must reach in order to have success.

  3. Do make certain that the sites with which you establish links and/or affiliations are trustworthy, both as to the manner in which they make and fulfill promises and as to the manner in which they protect your music.

  4. Do try to use the facilities through which you distribute your music so as to develop databases of persons, Internet addresses, or other sites that inquire about your music so that you can use this extremely valuable information when offering other products and when touring.

  5. Do focus yourself first before trying to target what audience you are going to try to reach. Know who you are, what you stand for, what you are trying to communicate, and who you are trying to reach (their age, their location, and their tastes).

  6. Do view other bands’ and artists’ websites, including those that are not in
the same genre as your music. You will be able to quickly distinguish between those websites that are effective and those websites that are not.

  7. Do be careful when you design your website. If it does not effectively articulate your image and does not have the technical means to achieve the sales and interest in your music that is your goal, it will fail. And so will you.

  8. Don’t expect a lot of sales (for a new artist, anything more than ten CDs a year would exceed the average, believe it or not), but use your site as an information-gathering resource. Through links to, and with, other, similarly styled musical acts, you can begin to collect data that you can use to target and reach new audiences when you are touring. Eventually, you should attract the attention of radio programmers—perhaps find a friend at a station who would program a track or two. This data, at its most basic, will also help you develop a mailing list for gigs and flyers for your tours and for sales of records. MySpace.​com—which is more user friendly and better structured than MyMP3, and Facebook.​com which surpasses all other social network sites and has easily integrated music files in its algorithms—provides the wherewithal to make your artistry available to the audience you want to reach.

  9. Do constantly update your website. Nothing turns off a fan more than a rusting and dust-gathering image.

  10. Do be flexible in how you utilize the Internet. There are a variety of means by which you can do this in addition to the traditional goals of promotion and distribution. (The Blair Witch phenomenon is a case in point: The film was introduced via the Internet, but then distributed and promoted via traditional means.) You can learn from the example of an inspired record company, which will try to find a way to coordinate with artists to utilize the Internet in new and creative ways that not only can reach hard-to-contact consumers but can achieve a certain level of “cool” as well.

  11. I saved the least likely and most unexpected “Do” for last: Do learn double-entry bookkeeping. One hundred years ago Max Weber, and before him the Dutch, understood that absent a proper sounding in double-entry bookkeeping, no one really knows where they are financially and, according to Jacob Soll, where they are morally as well. He said that double-entry bookkeeping is the very source of accountability, that capitalism itself could not exist without it. In those days, everyone who owned land or were merchants knew double-entry bookkeeping. While it’s an ethical idea at its foundation, it is the very essence of fiscal management. Anyone in business that does not understand it runs the risk of failing without warning. For purposes of this section, I will just define it briefly, but will leave it to the reader to bone up on its elements because I cannot suggest a more pertinent body of knowledge necessary to “do it yourself” than understanding the financial underpinnings of how to operate a business. It really is quite simple. double-entry bookkeeping is a system of maintaining financial records whereby every entry to an account (for example, a purchase) is balanced by another entry to the account (a charge). Each entry has a corresponding opposite entry. Each side of an accounting ledger (credits and debits) balances out the other. There is a reason it has formed the foundation of all business since the 13th century.

  A special mention of Snapchat, Facebook, Instagram, and Twitter: Social media have become indispensible in spreading the word about their devotees. In addition to their obvious personal appeal, artists who wish to expand their audience have been utilizing these media to full advantage.

  MANUFACTURING AND DISTRIBUTION

  Using the Internet effectively—as a way to reach potential listeners via your website and by marketing your art, as an information-gathering tool, or as a way to organize the manufacturing and distribution of your CDs—requires time! Time away from writing; time away from rehearsing; time away from thinking about who you are and what the purpose of your art is; time away from performing. Consider the time it will take merely to set up your home studio at the level necessary to produce high-quality recordings. Thus, at all levels of the recording process, time is a commodity that must be husbanded carefully.

  And it requires money! Money for designing the website and keeping it current; money for encoders (software to convert your newly recorded CD so that it can be disseminated via the Internet without risk of having it stolen); money to raise the level of such encryption to CD level, which is not as easy as you think; money for manufacturing and packaging CDs; money for mailings; money for production of the music; money for instrumental rental; money for registering copyrights in both the songs and sound recordings; money for registering trademarks and service marks; money for tape; money for market research; money for club distributions; money for shipping the CDs; money for lawyers, accountants, and managers to negotiate with studios and investors; money for cowriters, professional engineers, and producers; money for negotiating contracts with foreign distributors and representatives; money to manufacture merchandise and then ship it; money for being featured at the top of search engines’ lists; money for designing banner ads. And don’t forget the cost of getting the money for all of the above.

  KICKSTARTING YOUR CAREER

  But behold, Kickstarter to the rescue: Kickstarter is a website service that helps a fledgling artist to establish a fund-raising mechanism to produce and eventually promote, market, and distribute the artist’s record(s). Potential contributors make pledges which eventually turn into donations. The donations may be as little as $1, and depending on the amount of the donations, the artist can give the donor everything from a free download, to a bonus download, to tickets to an upcoming show, to whatever the artist feels is a fair exchange for helping him or her out in the first place (that is, giving the artist a kick-start). To date, already tens of millions of dollars have been raised utilizing this site. According to Kickstarter’s “Stats” page, more than half of all music projects on this site are successful in meeting their financial goals. The service is not limited to music projects, but also includes creative projects in general. Other sites that have developed in the wake of Kickstarter such as PledgeMusic and Indiegogo are supporting this model whereby artists function—at least at the beginning of their careers—without the aid of major labels. Along with a larger piece of the (admittedly small) pie, this business model ensures that, for a time at least, the participating artists do not relinquish creative control. The model is in its early stages and results on average in relatively small sums being raised—surely not enough to replicate what a major label can do with its far more vast resources. (The exception is Amanda Palmer who raised more than a million dollars and then offended her donors by neglecting to pay side musicians who she invited to join her on her tours.) But some artists are making inexpensive albums as a loss leader for their touring, and then are able to raise even greater sums via Kickstarter, and others to finance concerts in costly venues.

  As I noted in chapter 2, while crowdfunding is more practical than borrowing in that it does not lead to an accumulation of debt, there may be securities issues that need to be addressed if the nature of the return to “investors” is more than a gift. Once the return is tied to levels of success, it might be said to have morphed into an investment with respect to which other laws come into play.

  Word to the wise, however: don’t try to be all things to all people. Using funds raised by means such as the above will help a fledgling career to get under way. But once you try to become a “record label,” you will merely be repeating what too often represents misdirected time and money to achieve something that is, frankly, beyond even the most business-oriented creative people.

  An instructive story. In 1919, Charles Chaplin, Mary Pickford, Douglas Fairbanks, William S. Hart, and D. W. Griffith—all frustrated in their efforts to control their own business and artistic lives—established their own motion picture company, United Artists Studios. Apt name. It was not long before they learned that they could not do what they did for a living and run a picture company at the same time. Although Mary Pickford did not leave the studio until 1951, it had been clear fo
r a long time that United Artists would eventually morph into a First National/Republic/Paramount/Columbia/Warner/MGM–type motion picture company—and that was that. Actually, today, United Artists and MGM are one and operate under the same management. So it goes.

  PODCASTING

  What is a podcast? Essentially, podcasts are audio or video programs that are recorded, much as a radio or television program is recorded, then “broadcast”—transmitted—over the Internet. These programs are created by a wide variety of entities, including national magazines, radio stations, politicians, religious groups, and bands and artists, and made available to subscribers whenever they want to play them, via any digital audio player or computer. Podcasting differs from streaming in that a streamed broadcast is live, whereas podcast programs have already been archived by the provider of the service, and the user can store them for future access, much as TiVo stores broadcasts for future playback. Once the program has been downloaded, it can be played and replayed, as well as sent to like-minded friends. Check out www.​PodcastAlley.​com, which is a directory of podcasts available on the Web. The software you’ll need to download podcasts—or transfer them to your smartphone, tablet, or other MP3 player or transmit them to one of your friends—options can be reviewed via www.​podcast-software-review.​toptenreviews.​com.

  The legal issues pertaining to the use of copyrighted elements, such as music, on podcasts are complex. The creators of the podcasts face one set of licensing issues; the users, another. Some podcasters are avoiding the payment of substantial licensing fees by using music whose authors have waived their right to royalties. If you, the user, however, choose to give your friends access to a program that contains copyrighted music, you are inviting the same legal problems faced by peer-to-peer sharers of music, about which we all know more than we want to know.