The Digital Lowdown

Widgetmania

Everywhere you turn, people are talking about the power of widgets.   They are seen as the savior of the music industry and the key to viral marketing.  Yet, most artists do not really understand what widgets really are or how they work.  While the concept behind them is simple, the key, as with any form of viral marketing, is how to make them ubiquitous.

The idea of a widget is not dissimilar to that of a hyperlink (which is now commonly referred to as merely a “link”).  Hyperlinks were designed to make it simple to incorporate references to one piece of content (e.g., an article, image, sound, etc.) into another.  By clicking on the link, you are connected to another page or piece of content.  Hypertext language, which is the basis of links, was created in the nascent days of the Web to make the idea of a world wide web possible to do without having to be an expert in computer programming.

A widget can be thought of as a glorified hyperlink.  Specifically, a widget is a graphic user interface (GUI) that references a specific set of content.  It is like a mini-application that “looks” back to a central location for its content and then displays it with some sort of graphical, frame.  Some widgets can be full-fledged applications that are standalone.  There are 1000’s of such widgets available ranging from games to weather forecasts to currency conversions.   Others, such as those referenced here, are promotional devices to play or sell music.

Anyone who has placed a video or a song in their Myspace page has been using the widget technology.  The only difference between then and now is that it is incredibly easy to create your own content, design a widget and then make that widget available for placement on any website or blog.

A widget is a way to wrap the content into a neat, little package that users, fans, relatives, etc. can pass around and post wherever they want.  This package is actually empty.  The content is a dynamic feed that looks to a source location every time the widget is opened.  This is the key to a widget’s functionality and cool factor.  Every widget has source code that is designed to be easily copied and placed on another web page.

Since a widget is always looking back to its source for the content, that makes it a very powerful marketing device.  Imagine if you placed an ad in Billboard for your new album.  Then, two months later, you want to promote a new artist and wish you had put their name in the ad.  With a widget, it would be like being able to send an update to every copy of that Billboard magazine containing your ad.  It would be like someone picking up a copy of a two-month old Billboard and the ad is suddenly changed.  (Ed: Since I have not referenced a major movie in several columns, allow me to do so now.)   This concept was very clearly and creatively demonstrated in the Harry Potter books (which date back to 1997, years before widgets were used).  If you recall, the photos in the Daily Prophet were dynamic and continuously updated.  They moved and changed depending on the actions of the person in the photos.

A widget is the same idea.  Even if a widget is placed on 1000’s of different websites and blogs, you can update all of them instantly.  This means that you can add new songs, send updates to your tour schedule, post new concert photos, etc.  A widget is always looking back to its source to see what content it should be displaying.  So if you change the source, the widget updates automatically everywhere.  It doesn’t matter how many sites have the widgets.  All of them will updated as soon as you change their source content.

Creating a widget is very simple and the cost is nominal, if not free.  Most of the online content sites have a free widget creation service.  This includes Yahoo, AOL, Youtube, Flickr, etc.  Additionally, there are many other free widget creation sites like Gydget, Sprout, etc.  You can even download software to do this on your own computer.  Some of these software are shareware and freeware. All you need is a place to store your content.  If you have a hosting service for your website, you already have such a place.  If not, then finding a cheap or free hosting solution is amazingly easy nowadays.

It is fun to make your own widget.  Most programs are a click and drag functionality.  It is not an exaggeration to say that you can create your own widget in 5-10 minutes.  But the obvious question is:  then what?  As with any other viral marketing tool, the creation of the tool is the easy part.  Spreading the word is the hard part.  The goal of widgets is to offer your fans and supporters to have an easy way to share the music that they love.  Most widgets come with a “share this widget” link that displays the source code needed to embed the widget into a site. 

Enticing fans to use your widget and share it with their friends is never easy.  There are many pundits offering advice as to the best strategy for such viral marketing campaigns. It may be hard to prove that a widget’s use is specifically tied to the success of a particular song or artist.   The key factor to remember is that widgets represent another powerful tool in the arsenal of artists and labels.  Fortunately, it is as easy as creating a Myspace page.  Every artist and label should explore the power of widgets and start using them right away.

Doom & Gloom? Not so.

This week the IFPI reported that the worldwide sales of music were at a 23 year low. Combining digital downloads, at a equivalent rate of 10 tracks per album (an unrealistically low estimate), with physical sales, there were only 1.86 billion albums sold last year. That is down 11% from 2006. The last time album sales were this low was in 1985 (remember “We Are The World”?). The peak year since that time was 1996 when album sales were 3.4 billion units worldwide.

The knee-jerk reaction to this news is to predict the inevitable death of the music industry. It seems natural to join the chorus of the doom and gloom advocates. I must admit that sometimes I wonder if digital distribution companies like mine are part of the future of the music business or merely the top deck of a sinking cruise ship awaiting our ultimate drowning.

We still mourn the death of most large brick and mortar retailers. The loss of Tower Records and others affected not only the sales figures but severely limited the available shelf space for music product. It appears that not even Walmart, the stalwart seller of CDs, can withstand the relentless growth of iTunes. In April, Apple announced that iTunes was the largest retailer of music in the U.S. They cite a NPD study that credits iTunes with 19% of the U.S. market versus Walmart’s 16%. [Note: iTunes uses an equation of 12 individual downloads per album and not 10 as the IFPI uses. That makes iTunes a more reasonable album count.]

While there are many downward trends in the music industry, there are also very positive developments that, I believe, will lead to digital sales increasing enough to compensate for the declining physical sales. Here are a couple of positive trends that are worth noting:

1. Most of the largest digital music services are ingesting 10,000’s of tracks per month. One of the great benefits of digital store is the unlimited “shelf space”. Even though this can make searching for music unwieldy, it also gives every music creator access to buyers around the world. Often, I am asked, as a content aggregator, if there is a lack of available music to distribute and that every label is already signed up to a digital distributor. Two years ago, I might have agreed to this. However, as I write this column after the first day of London Calling, a prominent digital music conference, I can honestly say that there is still of lot music that has not been made available to the digital stores (and I don’t mean just The Beatles catalog). Today, alone, I was presented with about 20,000 tracks of material that has not been digitally released.
2. Digital sales continue to grow internationally. The U.S. market is still the leader in digital sales. UK is a distant second with the rest of world trailing behind. One reason for this lag is probably the reluctance to use credit cards for Internet transactions. U.S. consumers have been accustomed to give the credit cards out to catalog companies for decades. In contrast, much of Europe, for example, simply distrusted websites and were uncomfortable to use their credit cards online. Amazon should be credited with converting a lot of these skeptics by providing a secure haven. Still, this prejudice lingers and is evidenced by the meager adoption of services like Paypal outside the U.S. The trends for digital music consumption internationally are continually positive. If the rest of the world matched the U.S. purchases of digital sales, then no one would be negative about the prospects of the music industry.
3. The last, and most powerful, major indicator of growth is the launch of music services by strong, retail organizations. I would put AmazonMP3 and Tesco stores at the top of this list. When Amazon launched its download service, the big question is would they steal some of iTunes’ market share. The more important issue is whether or not they could grow the entire digital music market or not. It benefits no one to have market share shift from one online retailer to another. However, it is crucial to create more buyers. Utilizing their powerful search and recommendation engine, Amazon, I believe, is doing just that. Many other retailers are launching music stores and betting on being able to convert buyers of non-music products into digital music consumers. This is a great strategy that I believe is destined to work.

The main take-away from the above points is that the music industry is still in the pains of adjusting to the digital world. Admittedly, it is taking longer than most would have predicted and certainly longer than anyone likes. It is clear that the dust still has not settled and that it likely will be stirred up more before it does. When it does clear up, we will find more artists making more money from their work than ever before and that the music industry will continue to flourish. It may just take a different path and follow a more convoluted timeline. We will get there eventually. The music industry may be in a slump. But it is ultimately a growth market.

DOES MUSIC HAVE VALUE?

At most panels on the future of the music business, there is almost always a discussion about the value of music. Does music have an intrinsic value or does it have value to promote the sale of other goods? I often find myself in the minority opinion in such debates. In my opinion, the short answer is: “yes”. Music does and should have a specific retail value. But that is not to say that it can’t also be used as a marketing tool.

Perhaps a more important question to determine the future of the music business is whether or not people will pay for music. It is awfully hard to compete with “free”. Just ask any one of the many displaced record company employees and you will generally hear that free downloads have killed the industry. But it is hard to accept such doom and gloom assessments at face value when the overall number of legal downloads and total dollar amounts spent continue to rise.

Today’s digital music industry still has a very strong a la carte business. That is, most of the digital music revenue results from uses paying a per-track or per-album fee. This is often referred to as the iTunes-model although there are certainly many other stores that operate in this manner. For now, the subscription services like Napster, Rhapsody, etc., are generating only a small percentage of the overall digital music sales.

However, there are many new music services launching that are using advertising revenue as the main source of compensation for the artists and labels. Spiralfrog, LaLa, We7, and iMeem are only a few. (Some are even using an auction or a supply-and-demand pricing scheme.) Though there are variations between their revenue models, the basic concept is the same. They allow users to listen or download music for free in exchange for viewing advertisements. Then a portion of the ad revenue is shared with the labels on a pro-rata basis.

With these services, music is being used to generate impressions or views that have a certain value to a potential advertiser. It is impossible to predict what the value any given track or album will have. Each accounting period, the per-unit rate is going to vary and, perhaps, do so wildly. It is likely that the rates will be significantly less than the conventional $0.70 wholesale price of an iTunes-type sale.

In other scenarios, one finds artists willing to give away their music for free in order to stimulate other types of revenues. A great example of this is Prince’s recent album, “Planet Earth”. Prince struck a deal to give away 3 million copies of the album enclosed in the Sunday edition of the British newspaper, the Mail on Sunday. Prince surely received a substantial payment from the Mail. But the 3 million readers got the album for free. The strategy was likely designed to promote his live concerts in London. Apparently, it worked since Prince sold out 15 of the 21 shows at the London’s O2 arena within one hour. Estimates have it that this one series of shows grossed $26 million.

Does this mean that his album had no intrinsic value? Was it merely a marketing device to promote his concerts? Even though artists have made more money from touring than they do from albums sales, historically, I believe it would be weak argument to claim that albums were always considered a loss leader. (Note: the concept of albums promoting touring is a major factor leading towards “360 deals” which are starting to proliferate.)

For years, digital gurus have predicted the end of the a la carte pricing model in favor of a “feels like free”, subscription model. While that may be an inevitable end, I believe that it is still years away from becoming a reality. Most users do not prefer the type of restrictions imposed by subscription services and demand complete portability. This means that a la carte services will likely prevail for quite some time.

An oft-overlooked ramification of subscription models is the impact that it may have on the quality of music being produced. Ascribing a specific value to a track or album also has a long-lasting, positive affect on the creative aspect of the music industry. If an artist can anticipate the retail sale price of their work, then it will be easier for them to estimate its earning potential. This is very important because it is not reasonable to expect artists to keep creating high-quality music without sufficient compensation. Though the barrier of entry for releasing albums has never been lower, good recordings generally cost more to produce than bad ones.

All of the existing subscription, advertising, and other new business models remain to be an uncertain revenue stream for most artists. It is quite possible that this may change. For the time being, the reality is indisputable. These services simply are not generating enough revenue to support the creation of new music. Most artists do not have large concerts to promote or trucks full of t-shirts to unload. Album sales are still their main source of income. Unfortunately, many artists cannot and do not want to rely on corporate sponsorships (which is what advertisements really are). Without an ongoing retail value, most artists will be disinclined to producing more music.

So I hope that we can say that recordings will retain its own value for years to come. I don’t think that users really want to rely on their Sunday papers for obtaining new releases from their favorite artists.

Music 2.0

This is just a short plug for a book written by a good friend of mine, Gerd Leonard.

This is a great book of essays about the music industry. Some of it is controversial and some of it is theoretical. But all of it is thought-provoking and should be read by everyone who wants to thrive in the music business this decade.

Music 2.0

DIGITAL ONLY RELEASES: Pros and Cons

“When does your CD come out?”

More often than not, a typical response from an artist is that they are planning a digital only release and then they’ll see how it goes. The decision to press CDs is usually postponed until it is determined if the album sells online or not. Practically every week, there is another digital-only label popping up while all the pundits proclaim the impending death of the CD-format.

Right now, there are probably more albums online than there are currently available as CDs. There may not be hard statistics to substantiate this observation. Yet, it certainly makes sense when you consider all the virtual compilations, back-catalog, homemade albums and other re-purposed material showing up in the digital music stores. It is easy imagine that the total tracks online will soon exceed all of the tracks that were ever released on a physical format.

So what are the benefits and flaws of doing releases for online distribution only?

The benefits are obvious:
• No CD replication costs
• No need to design a full booklet
• No expensive printing costs for the booklet
• Easy, worldwide distribution
• Digital sales count towards soundscan and other retail charts
• No marketing costs (after all, what does a link cost?)
• Instant Fame (“hey guys, my album is on iTunes!)
• No need for fancy mastering studios
• A variety of formats (e.g., singles, EPs, special editions, remixes, etc.)

…and on and on…

The flaws are numerous (and obvious, as well):
• Physical sales still are significant (how many downloads can you sell by the exit doors of your next concert?)
• CDs support digital sales and vice versa
• Booklets help build fan loyalty
• CDs sound better
• Financial investments create a commitment to the product (more on this later)
• CDs are an universal format (e.g., computers, cars, bedroom stereos, boom boxes owned by A&R execs, etc.)
• CDs last practically forever (i.e., CDs don’t crash and lose files)

My company specializes in digital-only compilations. Yet, even our best efforts can be seen as throwing a large amount of darts at a tiny board. Consider, then, an individual artist who puts out 1-2 digital albums in a year or a small label that releases 10-20. It might seem that this strategy must be working if so many people are doing it.

The reality is that most artists wind up lamenting about the lack of revenue from their digital-only albums. They all hope to have the next “Crazy” and have a track from their new album becomes the next viral hit. The reality is that there are approximately 100,000 new tracks added to the online services each month. Unfortunately, there are very tracks that ever exceed 100,000 downloads…ever. Of these, practically all of them are owned, distributed or promoted by a well-established record company. (Even “Crazy”, the first number, digital-only single, was backed by a major marketing campaign budget from their label and also leveraged support from previous CD releases.)

Putting an album online in the hopes of generating enough sales to justify a physical release is merely wishful thinking. That is not to say that every artist should press up 10,000 units. But, there is an old joke about a man who prays to God every week to win the lottery. After years of this, the man shouts out to God: “Why won’t you let me win the lottery?!” God calmly replies, “Meet me halfway…buy a ticket.”

Translation (for those of you who don’t get my odd metaphors): Don’t expect to become a hit sensation without covering all the bases. In a world where the barrier of entry for releasing albums is ridiculously low, a successful artist or label needs to take advantage of every possible revenue source. This means that it would be foolish to ignore the role that physical goods have on overall sales of your music. It would be like having a website but no email address. (Another odd metaphor, perhaps.)

If an artist presses only 500 CDs (a reasonably small quantity) at a cost of $1.25 each and then sells them at only $10 each (also a very reasonable price point), their breakeven point is only 63 CDs. That means that the remaining 300 CDs (after you deduct the 137 freebies to family and friends) are pure profit. Selling 300 CDs is not incredibly difficult and it would net you $3000 in revenue. (Every ready should note that most of the labels that my company represents would be very, very happy to earn $3000 in digital sales.)

If everyone is able to release an album online, then it is critical to ask yourself: how do I differentiate my releases from all the rest? The more creative the answer is, the more likely that you will be able generate the sales that everyone wants, and expects, from online services.

SWITCHING DIGITAL DISTRIBUTORS

When eMusic, iTunes, Napster and other digital services launched, the business of digital music aggregators was non-existent. Very quickly, a business model was created and distributors of physical product saw the “digital light” and began acquiring rights to license digital rights. Very few people actually remember that The Orchard initially only sold CDs, not downloads. CD Baby, an innovator and, in my opinion, the best option for selling physical CDs of indie artists today, adapted to the new digital marketplace rapidly. Other companies, such as BFM Digital (my own company), IODA and InGrooves, were created as digital-only ventures.

Not only did the digital services fail to anticipate the rapid rise of digital aggregators, it had never occurred to them that labels and artists would want to move their catalogs from one to another. In the CD world, it is not very common to have a album distributed by WEA one day and UNI the next. But that is exactly what is happening now in the digital realm.

To give due credit, eMusic was probably the only service to unintentionally anticipate this situation. They set up their database initially to accommodate labels and their sub-labels. This proved to be a perfect scenario for aggregators. It is perfectly analogous to think of them as the primary “label”. Their respective artists and labels would then be considered as “sub-labels”. eMusic is the only service, to the best of my knowledge, that permits a search by “aggregator”. They are also one of the very few that permit a search by label. (A function that would greatly increase sales on other services, in my opinion.)

Many artists and labels originally had grand expectations of the revenue that their digital sales would generate. They also had demands for high-profile exposure on the various services. When you combine these two factors, the natural reaction is for an artist or label to become dissatisfied with their current distributor and seek a new relationship.

It is becoming a commonplace occurrence for our company to be contacted by a label that has already placed their albums online via one of our competitors. Often, they are looking for a solution to generate more downloads. Typically, many of these labels are very small and have nominal physical goods sales. Their desire to switch is usually a “grass is always greener” perspective.

There definitely reasons to switch and reasons not to do so. The three main reasons to switch are:
1) You are not getting paid
2) Your content is not online
3) You don’t like working with someone

The reasons not to switch are:
1) You want more promotion on the services
2) You want more downloads
3) You want a better percentage split
4) You want to make more money
5) Your statements are too confusing
6) You don’t like the 30-sec preview of the track
7) You want to change the name of your album
8) You want better exposure in France
9) You want to sell more ringtones

I could go on.

As you can see, there are many more reasons not to switch than to switch. Some services make this a painless process. You just notify them and they will check a box that says “Distributor B” instead of “Distributor A”. Others require that the existing albums are taken offline and then resubmitted by the new distributor. Obviously, this can cause an undesirable disruption in sales.

From the distributor perspective, It is generally a losing proposition to encourage a label to move their catalog. It either involves a price war or a promise of better sales. Neither option is realistic.

If you are dissatisfied with your current distributor, a much better strategy is to give a new album or part of your unreleased catalog to a new company. Then you can compare results. But the results are not just sales statistics. It involves judging the company on their responsiveness, customer service, and other similar factors.

Jumping ships might make sense if one of them is sinking. But that is rarely the case. Using the above criteria will ensure that any move that you make will be justified and constructive.

RESPONSE TO TUNECORE

(This is a letter published by the RoyaltyWeek in response to an interview with the CEO of Tunecore.)

Dear Editor,

I read the recent interview with Jeff Price from Tunecore. I feel you failed to challenge some of the major points that he made regarding the correlation of the digital to the physical distribution model. The interview seemed more like a two-page ad for Tunecore than an objective portrayal of his business model. Here are some of my criticisms:

1. His description of the watch business versus the record business is fairly accurate in my opinion. However, he completely minimizes the fiscal role that a record company has in the creation of music. A typical record label deal has the label writing all the checks. This includes the musicians, producers, studio, etc. Of course, they get to recoup all of this. But the key fact is that they are the principal funding of the end product. For the watch scenario, Jeff starts off with a watch and does not address the funds needed to create the watch in the first place. The analogy falls apart because of this difference. Jeff, instead, focuses on a label’s distribution arm instead of their creative arm. These are entirely different models and have very different benefits/deficiencies for the artist.

2. Jeff goes on to talk about a distribution deal that takes 25% and how that model shouldn’t translate to the digital world. You respond by saying “That sucks”. That’s hardly an objective opinion. Jeff continues to make his point by saying that there is no truck that breaks down in the digital world, there are no shelving space limitations in the digital world, etc. He makes it sound that digital distribution is as easy and flawless as falling off a chair.

3. There is also the implication that services such as ours continue the old school business model of a revenue share and this continues a cycle of taking advantage of indie artists.

Well, here are my objections.

First, digital delivery is never simple and easy. For Tunecore, it might be because they don’t even do the delivery themselves. They outsource it to IDEA Distribution. IDEA does the heavy lifting. This is not an unusual situation. We even use a third party to deliver to some of our services. The Orchard, for years, used to use a British company. But whomever you use, even if it is all in-house, digital delivery most definitely has its versions of a 3 am truck breakdown. I can’t tell you how many times the digital services have messed up metadata, failed to launch on time, screwed up the files, or otherwise inaccurately launched content.

I would have to say that once a file is sent, it still requires continual effort on our part to ensure it’s timely and accurate posting online. The physical analogy is like ensuring that a truck arrives to a loading bay and the cargo not only gets off loaded but ends on the stores shelves. This all occurs in the digital world. The big difference between the two worlds is that there is a limited amount of trucks/shelves in the store. But in the digital worlds, imagine 1000’s of trucks vying for space at the loading bay!

Secondly, the issue of digital shelve space is a real challenge. Every label who uploads their content to a digital store is trying to get some of the very few promotional opportunities (“what’s new”, “editor’s pick”, banners, newsletters, etc.). This requires constant contact and relationships with the services. Companies like Tunecore disregard that component. They feel that their job is done when the file is delivered. But that’s just not the case.

The first question that comes out of a prospective label who is shopping for a distributor is “what can you do to market my music?” The underlying tone is why should I pay you 20-25%. What are you going to do to earn it. Aside from the first point, aggregators like ourselves are being pressured into doing more and more marketing on behalf of our clients. Tunecore steps aside from this process. Labels/artists don’t just want a delivery driver. They want a driver that can also sell.

When you look at that as compared to the physical world, the revenue share percentages are much, much better. In the old days, a label did a 85/15 split with a new artist (85 for the label). But they paid for all the hard costs, marketing, distribution, etc. True, most, if not all, were recoupable. But they still fronted the costs and shouldered the burden.

In the digital world, the split is exactly opposite. And yet, the aggregators are being asked to handle the marketing and distribution costs and efforts. Instead of asking what the aggregator is doing to earn their piddly share, the real question should be what the heck are labels doing to earn their share. I can’t even get labels to put together one-sheet promotional flyers. If they want us to do all of their marketing online, then an 80/20 split in their favor is a remarkably good deal.

In other words...IT DOES NOT SUCK!

Thirdly, what Jeff also failed to mention is that the vast majority of Tunecore’s labels/artists will make less than Tunecore. That is because he charges a fee for tracks that wind up never selling even a single download. I don’t believe that this is fair. With Big Fish Media, we feel that the artist/label made a strong commitment to the creation of their music. We should mimic that. Therefore, there should not be a situation whereby we make more money than the label. In fact, we often lose money on many labels who wind up never selling anything. Yet, because we have a revenue share situation, we are in the same boat as the label/artist. It’s our motivation for them to make more money. With Tunecore, they don’t really care. They’ll make the same whether a track sells or not.

I could on and on. Clearly, the Tunecore model works for some labels. But the way that Jeff and you presented their benefits and compare it to their competitors (me), was inaccurate and filled with misinformation.

I realize that interviews are a tricky item in journalism. It’s really hard to avoid it being blatantly self-promoting. Next time, I would wish for a bit more objective perspective to his statements instead of a complete acceptance as truth.

REQUIRED BUSINESS TOOL KIT FOR ARTISTS

It is incredibly easy for anyone to record an album and call themselves a “label.” What is even worse is when they use the moniker “digital label.” This designation is meant to imply that there is no release of physical products. But too often, it means that there is no real company supporting their releases. We live in a world of virtual reality, virtual assistants, and virtual companies. An unexpected result of the lowered barriers of entry to the music world is that many labels and artists do not have the basic tools necessary to be a music company.

So here is a list of the essential survival tools that every artist must have. (it does not matter if you are not a label. If you are in the music business then you need the same tools as any other business.)

Item #1: Microsoft Excel
The days are long passed when an Artist could wait by the mailbox to get their statements. If you are not receiving statements electronically, then you must demand that to change. The two most popular formats for statements are PDF and Excel. Practically every computer ever made has Adobe Acrobat Reader preinstalled. So, it is no problem to read such statements. However, the preferred format for Artists and Labels statements should (and is) Microsoft Excel. Many artists will shudder at the thought of buying a spreadsheet program that they view as used only by accountants. That is simply not the case. A digital royalty statement requires sorting and resorting in order to calculate any royalties due payable. Doing such sorting can also unveil valuable marketing data (e.g., which countries bought which tracks). If you get a statement in a spreadsheet format, don’t complain that you can’t open it. Buy Excel and you’ll thank me.

Item #2: Dummies Guide to Microsoft Excel
Excel is a very powerful program that can be counter-intuitive for many artists. In order to get up to speed quickly, it is important to buy such a guide and read it. If an Artist bought a complicated reverb machine, they would likely read the manual. Same theory applies here.

Item #3: “All You Need To Know About The Music Business” by Don Passman
‘nuff said

Item #4: Billboard Magazine
This is the source, as far as I am concerned, for all things music. It represents the mainstream music business which, for better or worse, always has an impact on everything else. If you subscribe to the magazine, you also get the digital version for free. If you can’t afford to subscribe, then make a weekly trip to your public library and spend an hour reading it.

Item #5: “Atlas Shrugged” by Ayn Rand
Buy the hard cover version of this book and then read it twice. Regardless of the political interpretations or leanings of Ayn Rand devotees, this book is a wonderful lesson in the dangers of entitlement.

Item #6: Constant Contact (www.constantcontact.com)
Just about the best html newsletter system out there. It is affordable (starts at ~$16/mo) and very easy to use. It has some excellent features like adding subscription fields to your website, list management, safe unsubscribe, and more. If you are still sending out ASCII-formatted emails, then you need this service.

Item #7: “Kohn on Music Licensing” by Al and Bob Kohn
This is the Bible of all things music licensing. It may be a bit out of date with regards to very current Internet licensing issues. But if you get a request to use your song in an indie film, this book will have all the answers including sample license agreements.

Item #8: Paypal account
Sending checks around the world is unwieldy and expensive to process. In some countries, cashing a paper check is often more pricey than the amount of the check. Everyone who is collecting money from digital sales should have the ability to receive money electronically. Wire transfers are way too expensive and time consuming. There are competitors to Paypal (e.g., Worldpay). But Paypal is incredibly reliable and affordable.

Item #9: A Large Email InBox
There is no reason why an email should get kicked back because the recipient’s box is full. That is simply poor planning and bad business. Storage is cheap and there are many affordable (and some free) options for email accounts that are 1 gig or larger. You may think that this is overkill. Just send a few MP3 files back and forth without cleaning your in box and you’ll see how quickly a 200meg account can fill up.

Item #10: FTP Client (CuteFTP, SmartFTP or Fetch)
These are very, very simple programs that enable artists to upload and download large files via the ubiquitous “file transfer protocol.” Since item #9 is a common problem, many companies will opt to send and receive files using FTP. These programs are usually free or very cheap and easy to learn.

If you paid full retail price for each of the above items, it would total approximately $900 for the first year. With industry discounts and other bargain-hunting strategies, you could probably reduce this by $100-200. This may seem like a lot of money to some. But if you compare it to the money an artist might spend on recording, graphic design, manufacturing, and promotions, it winds up being a relatively small percentage of their entire costs.

It really comes down to the commitment level that one has for their business. If you are creating music and don’t really care about making any money, then you can disregard all of the above. But if you want to earn money or even sustain yourself with income derived from your music, then the above list are essential items to have.

(NB – In the spirit of full disclosure, the writer has no financial interests in any of the services or products recommended here nor will he benefit in any way if purchased.)

Top Ten Predictions for 2008

It is the time of year to join the gaggle of futurists and pundits to predict what filmmakers call the “reproduceable future.” There is really no sense to estimate the size of the digital music market in the year 2010 or how many tracks will be purchased via Bluetooth, cellular devices years from now. I’ll leave this up to high-priced consulting firms to pluck such numbers out of the ether. (They have been proven wrong so many times that I wonder who is actually buying such reports.)

Here are my top ten predictions for the year 2008 (in no particular order):

10) David Bowie will pull down all of his catalog from iTunes and sell the exclusive digital rights to a commercial bank operating out of the Cayman Islands. This bank will leverage the asset into shares of offshore development rights in Dubai.

9) Korea will announce a new cell phone that comes preinstalled with a program that buys music according to the styles that you indicated on the sign up form. The only way to disable this feature (and avoid a $1000 monthly bill) is sign up for a 5 year, binding contract with AT&T.

8) Russia nationalizes ownership of all computer servers in its countries and collects a 3% “bandwidth charge” for every song or movie sold on sites such as AllMP3.com.

7) The new director of national security for the U.S. decides to make the Sony Walkman a required accessory for all border guards. Only DRM-protected cassette tapes will be permitted for use in these devices.

6) Southwest Airlines starts its own music company. Somehow, they get it right and the music industry is saved.

5) Surviving members of The Beatles and The Rolling Stones go on tour to promote their new album “We Won’t Go Quietly”. Tickets sell out in 1/10 of a second with seats going for a record $105,500. (Those come with a free program.)

4) Disney and Apple merge and make an offer to buy Google.

3) Google buys Disney and Apple instead.

2) U.S. government plans to embed micro-drives into existing pennies. Such drives can hold 5000 MP3 files and saves the government millions of dollars which would have been spent melting down these useless coins.

1) People buy music that they want to enjoy. Artists and composers make some money and decide to create even more music.

Only time will tell if any of these prognostications will come true or not. But just remember that you heard it here first.

CATCH THE NEXT TRAIN TO CLARKSVILLE

“The genie is out of the bottle.” “The train has left the station.” “The toothpaste is out of the tube.” “You can’t close the barn doors after the cows have left.”

All of the above phrases have been used ad nauseam to describe the effects of the Internet on the music industry. They are all very tired, albeit accurate, expressions of frustrations concerning how technology has challenged the normative business models. Futurists and pundits warned the record industry during the heyday of Web 1.0 that they would be left behind if they didn’t adapt and conform to the new methodology of the Internet.

When Napster 1.0 was taking off, it seemed that it would be an impossible task for the major record companies to have any degree of flexibility. They had a lot of money invested into the infrastructure of the traditional brick and mortar method of distribution. I can recall an excellent digital music conference called MB5 hat occurred in the fall of 2000. (It was, perhaps, the best music conference that I ever attended for reasons that I may explore in future columns. Certainly one of them is that I met one of my creative idols, Alan Parsons.)

At that conference (remember, it was in 2000), there was a panel called something like “The Future of the CD”. Many of the leading digital music experts were either on the panel or in the room. Alan and I sat in the audience listening to the panel agree that the CD had maybe one or two years left before it would be supplanted by some, as-yet, determined digital format. Alan and I were among the minority of people – perhaps the only two - in that room that said that the CD had at least 5 years left in it. Not only were our viewpoint vindicated, there have been many formats to rise and fall since the year 2000. The buzz of that conference was a quarter-sized hard disc that could hold, believe it or not, 500 MB of storage!!! It’s inventor was hoping that it would replace the CD.

As we move forward from 2000 to present day, we see that CDs are still the predominant music format (85% of all music sales are still non-digital nowadays). But the most significant development in the past 7 years is that practically every record label, large or small, is now distributing their releases digitally as well as physically (although some are doing only digital releases, of course).

It is reasonable to say that the labels have jumped on the train albeit just in the nick of time. To complete the analogy, it is tempting to imagine that they jumped on the train while trailing a gigantic, metal anchor that is trying to slow down the train. But that is not really the point of this column.

The labels have, for the most part, created a path towards total digital distribution. They have not quite arrived at the destination. But they are, at least, moving in the right direction.

Contrasting the progress that the labels have made, music publishers look like the commuter who missed the train and is standing alone on the platform. All across the world, publishers, and the societies that represent them, are struggling to find a way to take advantage of new distribution models while still protecting their copyrights. It seems anachronistic that 11 years after the explosive growth of the Internet, licensors are still fighting new media business models. They are trying to figure out how to take an old, brass key and fit it into a lock operated by a plastic card.

The past few weeks has seen a tremendous amount of press about the writer’s strike in Hollywood. A key issues are the demand that writer’s receive 8¢ per DVD instead of 4¢ as well as establishing a formula for sharing Internet revenue (i.e., downloads) of TV shows and films. In this battle, the producers are fighting tooth and nail to keep from paying the writers a share of such downloads claiming that they don’t know the economics well enough to establish criteria.

This differs from music-oriented websites who are actively seeking out publishers and licensing societies to strike deals and put money into the pockets of publishers and, in turn, their composers. Many large websites are more than willing to share their revenue with songwriters and their representatives. And yet, most of their advances are either spurned or met with overly ambitious revenue share calculations.

In many cases, the lack of any common compromises serves to hamper services that want to be legitimate and drives consumers to illegal sites that are not paying any music royalties whatsoever. As a copyright holder and music publisher myself, I can totally respect the concept of copyright protection. I would fight against any unauthorized use of my music.

Yet, in the effort to protect the value of a copyright, very often publishers and societies are actually losing new revenue opportunities. A writer could argue that a publisher that chooses to be highly restrictive with its catalog is only damaging the value of copyright. That is because it fails to capture the consumers who wind up going to services that are properly licensed.

Whenever a publisher goes to a writer to pitch an administration deal, one of the most common questions a writer asks is why should they give up 10-20% of the income. The usual response is that with the publisher’s help, the remaining 80-90% will be worth more than if the writer kept 100% to themselves.

The labels have learned that any DRM, which is so tight as to insure absolutely no copyright infringement, will ultimately result in little or no revenue. There is an obvious, analogous question for the publishing industry: Will their efforts to protect their copyrights ultimately impair their ability to monetize all the new opportunities that will continue to arise? I think so. And I think that they need to get on board the train before the genie slips on all the toothpaste that is out of the tube and spread on the floor of the barn.