Digital Audio Insider -- blogging the economics of digital music

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Digital Audio Insider is David Harrell's blog about the economics of music and other digital content.

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March 10, 2010

Soundexchange Makes Some Calls
by David Harrell

After Paul Maloney of RAIN wrote about the Reuters coverage of Billboard's top-40 money makers piece (Reuters reported that only 10 artists have received more than $1,000 in streaming performance royalties from Soundexchange) he received a call from a spokesperson for the non-profit royalty collection/distribution organization:

Contrary to the statement that only 10 artists earned more than $2,000 for their play on Internet radio, Williams revealed, "In fact, more than a thousand artists received more than $2,000 from SoundExchange for non-interactive webcasting only..."

Williams further revealed to RAIN that more than 500 artists earned "well above $9,000 in 2009" webcasting royalties. Beyonce, who allegedly topped the list of non-interactive streaming royalty earners, "made exponentially more than the $5,000 reported by Billboard, and actually isn't even close to #1 among earners." Although SoundExchange won't disclose exact earnings of specific artists, they revealed 2009's top-earner made "well into 'six-figures'" from Internet radio.

And Jonathan Segel of Camper Van Beethoven, who said in an interview with this blog that his band had yet to receive a payment from Soundexchange, despite hundreds of thousands of plays on Pandora, e-mailed yesterday to say that he had received a call from the organization. A Soundexchange representative offered to help expedite the paperwork for unpaid royalties for Camper Van Beethoven. While it won't be a six-figure check, the preliminary total, which Segel revealed in a comment to the interview, actually exceeds the amount of money the band raised with its recent SXSW song sponsorship campaign!

tags: digital music Soundexchange streaming royalties Pandora

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March 08, 2010

An Interview with Jonathan Segel of Camper Van Beethoven
by David Harrell

I thought the most informative comment about my recent post on Camper Van Beethoven's song sponsorship drive to fund its 2010 SXSW appearance came from CVB founding member Jonathan Segel. So I sent Segel, who in addition to his work with Camper Van Beethoven, has released many recordings under his own name and with his bands Hieronymus Firebrain and Jack and Jill, some questions for an e-mail interview, asking him to expand on the original comments he left. As he said in his response, he really "went to town" with his answers -- read on for his thoughts on the economics of releasing CDs, the patronage model, free music, broadcast and performance royalties, and why so many "professional" musicians are actually hobbyists.

Congratulations -- it looks like you've sold all 35 sponsorship slots. Is this something you'd do again for future performances or tours and/or would you consider a fan-funded recording? (CVB clearly has a passionate fan base, it seems likely you'd be able to raise funds for future projects.)

As it turned out, 90% were fans that purchased these spots. I was hoping it would be more actual companies doing real advertising, but the campaign worked out to get us to the shows! I don't think we'd want to do this for future performances, this was really just a way to fund our travel to this particular festival that expects bands to play but doesn't pay them, while charging immense amounts of money to the conference participants. I think a fan-funded recording would be a good, idea. I like the way, for example, that Einsturzende Neubauten did their subscription service where the fans could look in on the studio via web cam! Of course, it seems highly unlikely that we could afford that much studio time, nor be able to have such a concentrated work period (given that we must actually work our "real" jobs as well) so if we do this it will more likely be a fan sponsored CD product, with perhaps some extras available on the web.

Your comments about CVB's income stream from your recordings were something of an eye opener. While I obviously didn't think the band was living Sting-style in Italian villas, given your impressive back catalog, coupled with the fact that your early albums were released on your own Pitch-A-Tent label, I had assumed you might be earning a modest annual income from CD and digital download sales. A four-figure amount at least, but you said it's three figures at best. Are you in a situation (due to releases that haven't their recouped recording/promotional costs or publishing advances -- the two Virgin albums?) where you don't receive royalties on some of your music? Or is it just that the total sales of your entire catalog are modest enough to preclude any real income?

There are several things here. One is that in the past decade, any income from cd/record sales has basically disappeared. The cost of making a cd is not a very easily recoupable investment these days, especially if you want it to sound decent. Many recording studios have folded in that past decade, as nobody makes enough in sales to justify spending hundreds-to-thousands of dollars per day to record for several weeks and expect that it can be recouped. This means of course that more people record on home systems, but there is a real audio quality difference between home recording and studio recording -- but would that matter when the audio quality is reduced to MP3 compression? Are there even listeners who care to listen to higher quality audio anymore?

Back 20 years ago, when we signed to Virgin, the advances were like $100,000. In those days they sold LPs, CDs and Cassettes, each at like $10-15 retail. We spent a week at $1000 per day to do basic tracks, do overdubs at a smaller studio for two months, then another week or so at $1000 a day to mix it later. Plus the "producer" and other engineers get paid many thousand dollars from this budget. Plus you buy some equipment to play on (why didn't I buy that 1959 Les Paul back then...?) Then you get some tour support to rent a bus to tour, etc... it pretty much eats the advance, all of which must be paid back out of company profits before the band gets money (see Steve Albini's famous article in "Commodify Your Dissent") I believe the band broke up in 1990 owing Virgin some ridiculous amount of future royalties, so, no, we've never really seen much money from those sales! So even if Our Beloved Revolutionary Sweetheart has sold 150,000 copies, it's still not enough to get to the point where the band gets paid artistic royalties.

Any advances we have received on cds or cd packages made in the past decade have been small, on the order or $5-10k at maximum! We will spend at least half of that or more on recording the cd. Then of course you have to provide the band with food and lodging while recording, while they aren't working at their other jobs that actually pay them. The most we can expect as individuals from this sort of process is maybe 10% of an advance, and that will pretty much get eaten the next month by mortgage or rent, especially when we haven't been at home working to make that money! And on the cds we have put out ourselves ("Camper Van Beethoven is Dead...", for example) we also have to pay for the manufacturing of the thing.

So if a company like Vanguard or Cooking Vinyl spends $10k on us to record a cd or set, they also have to spend money on manufacturing and promotion and marketing to sell some copies not to mention the human beings that they pay to do all that work. How many do they sell before they pay us any money? Let's say they are selling at wholesale in general, $6 or so per (physical) CD. Theoretically they must pay mechanical royalties per cd pressed right off the bat, about $1 of that which gets paid to the rightsholders of the songs (us!)... uh, at some point...

So even if they only spend $1 or 2 to manufacture each cd, that's going to add $1-2000 per 1000 cds manufactured… let's be cheap and say $1.50 per. our cost per CD is up to about $2.50 now. Then they have to pay for the people who worked the CD in it's pre-release stages, and then the people who work it in post release stages. That's several thousand dollars of labor. They probably want to send out promo copies, maybe $500 in postage. (we're just gonna forget about the cocaine and hookers for radio personalities, i guess...?) So lets imagine an initial pressing of 5000 copies. that has cost $12500 in manufacturing costs, probably another $5000 in human labor, another $1000 in postage and office supplies, another $10k that was the recording advance, we're up to about $28500, and then there's advertising -- small magazine ads are $500 - 2000 for one month's issue per magazine. Before we get there, let's regroup. Imagine we could sell 4500 of the 5000 (some have to be promotional!), we're still short of the initial investment by a bit. Publicists? Oh I forgot about mastering costs, another thousand dollars. So we'd have to go in for a larger pressing… but in this digital age, once 5000 cds are out there, the music is available digitally already... and copied. We're still dealing with this generation of folks who are under the impression that it comes from nowhere and doesn't need monetary support to spring fully formed from the head of Zeus. But you get what you pay for, really. If you like crappy sounding recordings, they're easy to come by. Especially made by people who have just learned how to play.

So the band is still waiting for our additional $5000 in mechanicals, which get divided up 50/50 between the publishing company and the rightsholders, and the publishing company uses its portion to keep itself in business (it's our company: we figured that one out pretty early) and the remaining $2500 can be sent out to the writers. So each of 5 members gets $500 for 5000 cds pressed. The recording advance is of course against artistic royalties, we won't see those until all of the expenses are recouped and the company is showing profit.

So yeah. on our level there's not much money in cds. So then we use whatever we make to make more cds on an even lower level -- In my own case as a solo artist the finances are even worse -- in the last 20 years I've made numerous cds under my own name or my various bands' names, but as I have to record, press, promo (meagerly), etc., myself, my investment has to be manageable on a small income -- it's basically a hobby. I press 100-1000 of any cd, sell maybe half of any pressing. They'll never actually *make* money! I almost had a "real" label last year for a few months, they were gonna put out a compilation of my older stuff, but they backed out later... I guess they figured it out!

So, what are the other ways to make money from recordings? Digital sales, for us, really don't amount to much. I realize that there is the promise of iTunes paying $0.60 per track sold, $6.00 per record. I believe that this is paid to the companies that place them there (like those that put out our physical cds). I don't actually keep track of CVB income, I think it would just make me angry. I'll just accept my few hundred dollars when it comes. For my own boutique label, Magnetic, where Victor and I "release" our own cds, I can tell you that we get it digitally placed via CDBaby, and those reports are looking like $20-50 a month for about 15 releases through Rhapsody, iTunes, etc...

Broadcast royalties, again, are not very high. I believe they are up to 9 or 10 cents per spin on terrestrial radio? The companies like BMI pay MORE to people that get played more, too, as if that were some sort of inspiration to us all. I personally am offended when I read how radio plays above 1 million spins will make them more than 10cents per spin, that just eats money smaller artists could make.

Additionally, please read Tim Quirk's blog about Too Much Joy's royalty distribution. I think this is very enlightening. It sort of points out that the high end gets paid, and anybody below $10k can fuck themselves. I think that similarly, the legacy of the digital revolution will prove to be economically the same as the legacy of the last 30 years' Republican administrations: a very small percentage of people with a lot of money, and a very large amount of people with very little money; there will be little or no artistic middle class.

What's your take on the music industry today vs. 20 years ago, in terms of a non-platinum act being able to earn money from music sales? Is the ready availability of free music -- both authorized and unauthorized (file sharing, etc.) -- the main reason for declining sales?

During the initial throes of the music business' movement into digital realms, I heard a lot of people trying to pep-talk to musicians about the changes to the political economy of music wherein they saw it as a movement back to a patronage model.

To recap recent history briefly, 200+ years ago the luckier composers were kept alive by patrons, who at the time were either the Church or Royalty. Their compositions were written mostly at the request of these patrons, but then ultimately disseminated to a larger non-paying audience.

The beginnings of ubiquitous physical media duplication started an era where composers had some control over the actual physical sales of their music -- first by paper (Beethoven sold/pre-sold pieces to publishers!) and later by analog duplication of the sound -- shellac, records, tapes, cassettes, cds, etc. That was certainly a high time for control of dissemination of music. As the release of the musical information from the physical medium took place, composers and artists began losing control of the dissemination of their music, hence a loss of what is referred to as Value Exchange.

I think we've all heard many pro and con argument regarding the vast potentials of digital distribution of music, or even that music is information and it should be free!* ...but the real outcome for musicians and most music-based business has been lowered income. Among the pundits there were many who proclaimed that this was a return to the patronage system, in that composers themselves now had the ability to sell directly to a vast number of patrons directly, i.e. a thousand fans buying one digital download directly was the equivalent of one Duke paying for the composer's room and board for a month.

In some cases this is true. But generally, and finally to my point, people don't pay; the vast populace waits around to hear what the Duke and Duchess have already paid for. In the case of what we are experiencing now, we are indeed in a patronage system: our patrons are the people who buy the ads. In many cases it's the same with respect to music worldwide, television or radio ads that use music are paying for it to be made and heard. To a certain extent, we could say that record labels were paying for the bands to advertise the label itself!

My second point is, the advertisers are not only the patrons of the composers, but by proxy the patrons of the internet (last.fm, pandora, lala, rhapsody, etc.). They pay room and board to various services while "the internet" disseminates the music "for free" to the greater populace. But who is getting paid? The middle man, yet again. Does he make any money? Hardly. The actual business costs of streaming or serving music are heavy, server time is heavily monetized. Somebody is paying for this (you, to your ISP, an internet radio station to their ISP).

So far, where terrestrial radio has had to pay broadcast royalties, those royalties have been very low (<$0.10 per song played). With the final wrangling of the Digital Millennium Copyright Act, internet radio has to pay a bit of this and a bit in performance royalties (not to "rights holders", or whoever owns the copyright, as the terrestrial radio does, but actual royalties to the performers of the music. Note that most other countries pay performance royalties on terrestrial radio as well, just not the US, China, North Korea, the Congo, for example.) Performance royalties are like $0.001 per song per listener. The DMCA has some interesting ways around an on-demand performance royalty thing, they make rules for internet streaming radio about number of skips allowed, no back and forth in the stream, trying to deter predictability in the music stream. Song-on-demand royalty rates are higher, so most streaming sites try for unpredictability. The Performance Rights Act in congress recently is trying to get regular radio to pay performance royalties also, the big complaints are about how much this will cost small radio stations, but the actual cost will be flat fees of $500-1000 per year, which is way less than the NAB is charging those same stations to broadcast at all! Note also that most people (like the techdirt.com writers and commentary, it seems?) seem to think this is a "tax", completely misunderstanding the difference between fees and taxes. It would be great if taxes paid for music, don't you think? I'd be in favor of moving all the money spent on guns and bombs to pay for shovels and fertilizer so the army could go in and make sewers and vegetable gardens in Iraq, Afghanistan, Sudan... Then we could probably have enough left over to fund ubiquitous music! One graphic artist friend of mine who grew up in Soviet East Germany lamented the state of an artist's economy once the wall came down. No more state sponsorship.

Most of the musicians I read about who are in favor of "freedom of information" are either already wealthy due to hard-copy sales or never made a dollar ever. That's sort of classic supply-and-demand. Once again, capitalism rears it growth-oriented head: there is no such thing as sustenance level capitalism, it can only exist in a growth oriented market.

To say that merchandising or concert ticket sales should pay for the creation and distribution of music is asinine. Take a quick look at the actual money made from these things -- it virtually precludes anybody from making money unless they are assured of having 300+ people per night for extended tour (and that the club is paying them!) How many bands can do that and how long can they do that? Rock music is ghettoized the same way jazz was. Imagine jazz musicians trying to monetize the music by means of merchandise. How could an act playing at nightclubs where ~50 people listen support a tour, much less further CD recording. The financial breakdown of time, equipment, musicians, travel, merchandise manufacturing, etc. means that almost all "professional" musicians you see, have seen or will see are basically hobbyists; their time and materials are almost never paid for by listeners. like 98% of them. I recently heard an interview on KALX, one of our local college radio stations, with Jon Vanderslice, a musician I know from SF who seems to be doing pretty well these days. One of the things he talked about was the pressure to write the next record while still touring the last so as to stay in the stream of currency (I paraphrase here) and the fact that, especially as a solo artist, everybody involved in making a record gets paid before he does. He's in debt as much as I am despite the exponential difference in numbers of CDs sold or concertgoers. That's the way it seems to be to continue.

The idea of recording is whole different ballgame as well. Despite the DIY wave of home recording, do we really want mid-fi? Ok, a musician can make a record for the cost of equipment (still several hundred dollars or more..) but then there's the time, the instruments (or not), paying the other musicians, etc. Well-made recordings sound better. A decent studio costs many hundreds of dollars a day. Decent microphones, preamps, compression, all these things cost thousands of dollars. To say nothing of manufacturing, if they choose to make cds. Or artwork.

The "leveling of the playing field" produces a level field, that is to say: mediocrity.

If you take a look at Jaron Lanier's new book "You Are Not a Gadget" you can see that there seems to be a point of view developing wherein even the earlier free-internet pundits (such as Mr Lanier) are regretting the way that mob psychology has anonymized human presence on the internet, releasing most user's inner criminals -- where they can get things without paying, they will. In Sweden, the home of Pirate Bay (and idiotically a "Pirate" political party! -- but they are open minded...) they did a study of the people who were pirating media by downloading songs and movies, and it turned out that for the most part, they did so simply because they could: they were anonymous, they had 8MBps-100MBps download speeds (yes, we are way behind here in the US) and they could find the media. But did they actually watch or listen to it? No, not really. In fact, most of the greatest piracy offenders had drives full of media that they had never listened to or watched. It was useless, essentially. They refer to this behavior as "Hamstering".

**********************
*Does it? Does information want anything? Information exists in a stone, a great deal of it, but what makes it information at all is a human being cogitating and deciphering it. That is where its value come into being, in the mind of a human. Information is valuable to people, and people for the most part should have to pay for information -- if it were all free, hence valueless, it would not be interesting to the human mind. You essentially pay with brain usage!

I'm not necessarily advocating free music (and realize of course that you can't flip the switch and give away all of your back catalog). But if your sales are modest enough, at some point can you make the case for giving away digital downloads of your music?

Actually I do give away a lot of music. http://jsegel.bandcamp.com, for example, holds many hours of music that I have made for films or dance companies, of which I already essentially got paid the $200 for making it for an ephemeral performance (in the case of the dance company music! never been paid for those films!). Now, as a recorded medium, I have chosen to put it up with a user-declared price (including $0). But again, most of this has been paid for, on some level. Its value was ephemeral.

So I guess what you mean is, if we make so little money from it, why not give it away? Perhaps. We are a "taper" band (as are all of our side projects) in that if it's an ephemeral performance of music, you are welcome to tape it and listen to it later, or give it away: but of course you cannot sell it. Take a look at http://www.archive.org, do a search for Camper Van Beethoven or my name, or Cracker, or Victor Krummenacher, you'll find an awful lot of free music to listen to!

I still believe that the recordings of songs one makes for an album collection are different - it's a process of sculpting. Playing, recording, editing, mixing, these skills are learned skills and we get better at them as we do it more and more. The time put into a good recording is multiple times the length of the track itself, the refinement of a recording is an art in itself. This is highly skilled labor (not to mention the time we've taken to learn to play!) Should that be free as well? I'm not in favor of that any more than a surgeon would be in favor of performing surgery for free (at least all the time! of course charity work is good...!)

This reminds me of something that was asked in the comments of the internet posts about our SxSW sponsored shows: Why is an "established" band even playing at SxSW? I think they have always had relatively big bands of various sorts play at the conference there, partly for fun for the attendees to see their old favorites, but also there's another aspect. Listening to a band that's been playing together for a long time is different than listening to a young band that has recently come together or even learned to play. There is a completely different musicality to seasoned musicians (or actors, or other artists), in any genre. We don't tend to value that very much in our culture. Having a band like Camper or Cracker at SxSW can be a reminder of that. The fetishization of youth brings a cult of assholes, unfortunately. Look at Hollywood! People even drive badly to emulate teenagers! (...that's what they're doing, right?)

You mentioned SoundExchange in your comment to the original post. While the organization is paying out millions in performance royalties for streams, that's not translating into a lot at the individual artist level. If you're not making much from music sales, performance rights payments, or merchandise sales, is earning income from touring all that's left? You referred to the inclusion of "Take the Skinheads Bowling" in the Bowling for Columbine movie. Is music licensing an area you've actively pursued?

Again, see Tim's Too Much Joy blog. Working for Pandora.com, I am acutely aware of how much we are obligated to pay to SoundExchange and BMI/ASCAP - it's millions. I've actually never seen anything from SoundExchange. I do know, for example, that Camper Van Beethoven has many songs spinning on Pandora, some of which have topped 100,000 spins, (nowhere the millions of spins for some other bands' tracks, of course) which should have meant $100 somewhere along the line (for that one song) but like I say...

Oh yeah, licensing nowadays is probably the only way to make money from a recording! We've licensed a couple things, one or two TV commercials. They pay a couple thousand dollars per. The market is notoriously tough, and like the major label world of the late 80s and 90s it's ruled by people who think they themselves are cool and want to use the hippest, coolest stuff, gleaning ideas from other ideas that have previously worked without ever trying to extend their world by making an actual statement. So there are now these pay services like SonicBids and SongPlacements.com that prey off the desperation of poor musicians and the gambler's mentality that one placed track will net them a couple thousand dollars so they pay into it, either bit by bit ($5-10 at time like SonicBids) or in subscription sums ($250 per year for SongPlacements) and musicians with little or no income pay like a slot machine hoping it pays off one day. I'd love to see more Camper Van Beethoven on TV, or in movies. I'm all for it. "We'd sell out if someone would buy in!"

Anything else you'd care to add about the challenges of making/selling music in 2010?

Here's what I think:

1) the royalty rates should be higher, like 100x higher. or more.
2) advertisers should be charged way more so that radio stations can pay the higher royalty rates and these rates should be offset by the federal government (yes, I'm talking arts grants)
3) subscription services should be included in internet service fees, ISPs themselves should pay these royalties. There is no reason why aac/mp3/flac/wav/aiff file tracking can't be done when in transit.

I think further on: nobody should own music in any uploadable or downloadable format. It should be available on demand for subscription fees Whatever device you listen on should connect to the source at the moment. No ownership of soft copy.

Hard copy might be better off in an analog format. Vinyl?

So none of that is probably gonna happen.

I know everything I wrote here sounds crabby or cynical, but it's not like I'm gonna quit playing music. Like that guy who cleans up after the elephant at the circus and hates the sheer amount of shit but won't quit? "What, and leave show business!?" I mean, I love music and sound, and my instruments, and recording. I'll do it til I die. I've made how many records now? (I don't even know) and I'll do it for my own entertainment if nothing else. Really there have only been a few years of my life that I've actually made a living as a musician and didn't have to rely on other jobs -- there were two years at the end of the 80s where Camper was touring or recording constantly, and another year and a half in the late 90s when I was playing in Sparklehorse and getting paid $800 a week by Capitol/EMI when we were on tour (money that no doubt came out of Mark Linkous' future artistic royalties!) The rest of the last 25 years I've worked other jobs to support my habit! I presently work full time for Pandora and also teach at community colleges in the bay area. Even with all that work, it's hard to have enough "extra" money to record and make new records (or the time or energy! dang.)

Thanks Jonathan!

One last note: just to clarify, Segel sent his responses to me before he heard the sad news about the death of Mark Linkous of Sparklehorse. As he noted on his Facebook page, where he cross-posted this interview, the reference to Linkous's future royalties was not meant as a comment on his passing.

related: More On Buddy, Can You Spare A Hundred Dollars? , Buddy, Can You Spare A Hundred Dollars?

tags: digital music music economics Jonathan Segel Camper Van Beethoven fan patronage SXSW

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March 04, 2010

Egg, Chicken, Sony, and eMusic
by David Harrell

Many eMusic subscribers assumed that the 2009 price increases were instituted to lure Sony to the eMusic catalog. (I also wrote that the Sony addition was likely a major factor in the decision to raise prices.) But in an Inc. magazine piece titled Coping With Fury at a Price Hike, Adam Bluestein lays out a chronology where the introduction of the Sony material to the eMusic catalog was meant to make a change that had already been decided upon more tolerable:

Stein knew there was only one way to prevent even more labels from jumping ship: raise prices for subscribers. He also knew that eMusic couldn't get away with another price hike without offering something in return. He sought ideas from his executive team and eMusic subscribers, and he held a series of focus groups. All the feedback pointed in the same direction: eMusic needed to broaden its catalog. And given that eMusic had nearly exhausted the universe of independent labels, Stein says, "It was pretty obvious that in order to take a big swing, we needed to start working with the major labels."

At the time, eMusic did say that a rate increase was necessary to keep current labels happy. However, given that the price increases weren't disclosed until after the Sony announcement, it's easy to understand why so many subscribers (and industry observers) thought the changes were made specifically to accommodate Sony.

While some of their longstanding subscribers (those who saw the biggest changes in their plans) no doubt would've preferred to keep their more-generous pre-Sony plans, the eMusic subscriber base is growing and turnover among new subscribers has decreased:

By fall, the dust appeared to have settled. Despite the uproar in the blogosphere, the site's subscription base held steady, rather than dipping slightly, through the traditionally slow summer months, and by year's end it was growing again. Among new subscribers, first-month turnover, or churn, was down 7 percent by early fall and has continued to decline.

As I noted in December, the change in subscription plans didn't result in a meaningful increase in per-download payments to labels for the third quarter of 2009. The fourth quarter of 2009, though, produced the largest per-track payment that I've seen in the past five years -- 39 cents per download.

related: eMusic's Per-Song Payout for Q4 2009, eMusic's Per-Song Payout for Q3 2009, eMusic's Per-Song Payout for Q2 2009, Sony and eMusic: Why the Per-Track Label Payout Might Not Change

tags: digital music eMusic eMusic royalty Sony

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March 02, 2010

More On Buddy, Can You Spare A Hundred Dollars?
by David Harrell

My post last week about Camper Van Beethoven selling song sponsorships to fund its trip to SXSW generated a ton of traffic and a slew of comments -- 33 and counting, the most ever for a post on this blog. Three fifths of Camper Van Beethoven weighed in, as well as a couple dozen ticked off CVB fans.

In fairness to David Lowery, the first CVB member to respond, there were a couple of factors that I didn't know/mention at the time: The band originally thought the sponsorships would be purchased by companies, not individual fans. Even so, the band also vetted the idea with a Facebook note back in January and received an enthusiastic response from its fans. Finally, as a friend pointed out to me, there was a certain element of irony and humor to the whole sponsorship thing that I didn't pick up on.

In fairness to myself, however, I thought the post was a little more nuanced than most of the comment leavers perceived. I certainly understand the costs involved for travel and lodging for a SXSW appearance -- and that the artists receive a very nominal fee. The post wasn't an outright slam of the fundraising idea, more a musing on why I personally found it less appealing that the recent trend toward fan-funded recordings, and whether or not alternative fund raising activities by musicians will be a sustainable model. Believe me, I'm all for new ways for musicians to earn a living, given that they are the last ones paid under most music business models. (Also, I have to think there was at least a tiny element of calculation to Lowery's outrage, as he linked to the post from his personal Facebook page, the Camper Van Beethoven Facebook page, and the Cracker Facebook page.)

Anyway, I have no interest in feuding with Camper Van Beethoven. I'm actually something of a fan. Obviously, I didn't think the band members were living Sting-style, in Italian villas. But given its back catalog, coupled with the fact the early CBV albums were released on the band's own Pitch-A-Tent label, I had assumed the band might be earning a modest annual income (in the four-figure to low five-figure range) from CD and digital download sales. Yet CVB member Jonathan Segel, who left the most insightful comment to the post, paints a far bleaker picture of the band's finances, and the current state of the music industry:

...I don't think we've seen more than a couple hundred bucks in CD sales in the past decade. Digital sales are meaningless. Digital royalties are even more meaningless -- do you know anybody who's actually been paid by SoundExchange? Right's holders' royalties (BMI) make us a couple hundred dollars a year each, mostly due to Michael Moore having used Take the Skinheads Bowling in Bowling for Columbine in 2004 and its subsequent play on television. My own cds outside of CVB that I have released over the last 20 years are still hovering in the ~$10k region of debt.

The only money we make nowadays is touring, and the only way for a band to make money touring is

a) playing to large audiences in venues that will actually pay you and
b) scrimping.

It's not super fun much of the time, especially at our "advanced" ages (with respect to rock and roll!) and obviously we can't do it all the time due to market saturation, not to mention the fact that we have to go back to work. David is the only one who is full time professional musician, when he's not playing with Camper, he's playing with Cracker, and he bears a hellish touring schedule to make ends meet that way!

Anyway, the whole "fanbase as patrons" idea that was so touted at the onset of the digital music age has proven to be very much like the old patronage system -- if you have a patron (advertiser, record company, whatever will pay) they will pay and the rest of the peasants listen to what's been paid for. The masses don't pay for much of anything.

I exchanged several e-mails with Segel and sent him some questions for a follow-up e-mail interview. Look for something later this week or early next week!

UPDATE: My interview with Jonathan Segel.

tags: digital music Camper Van Beethoven sxsw fan patronage

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February 26, 2010

eMusic's Per-Song Payout for Q4 2009
by David Harrell

Back in December, I reported that eMusic's per-song payout rate for the third quarter of 2009 increased only slightly from the previous quarter, despite a major price increase, via the reduction of the number downloads allotted for various subscription plans. (Rather than a fixed per-song payout, eMusic shares 60% of its subscriber revenue, minus certain deductions, with the labels in its catalog. That shared revenue then translates into a per-track amount, based on total subscriber download activity for the quarter. In theory, reducing the number of downloads available to subscribers should increase the payout rate, but that rate is also directly affected by whether or not subscribers use all of their allotted downloads.)

For the fourth quarter of 2009, however, the per-song eMusic payout rate increased more than 10%, from 34.2 to 39 cents for single song downloads. This amount is the largest payout rate we've received in the five+ years that we've been in the eMusic catalog. For comparison, here are the eMusic per-song payout rates for the past four quarters:

Q1 2009 30.5 cents
Q2 2009 33.4 cents
Q3 2009 34.2 cents
Q4 2009 39 cents

While the eMusic rate is significantly less than the payout for 99-cent iTunes downloads, it has increased steadily over the past year and is now 56% of the standard iTunes payout of 70 cents. Given that new eMusic subscribers pay more for their downloads than older subscribers (while eMusic adjusted the plans for all subscribers last year, most existing subscribers were given plans that were more generous than those available to new subscribers), it's likely that the payout rate will continue to rise somewhat as eMusic adds new subscribers and/or loses older ones. Given that per-download eMusic prices are lower than those in the iTunes store, the subsequent label payout rates will, of course, always be less.

related: eMusic's Per-Song Payout for Q3 2009, eMusic's Per-Song Payout for Q2 2009, Sony and eMusic: Why the Per-Track Label Payout Might Not Change

tags: digital music eMusic eMusic royalty iTunes

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February 24, 2010

Buddy, Can You Spare A Hundred Dollars?
by David Harrell

Given that I've written positively about fan-funded recordings, I'm not sure why Camper Van Beethoven's plan to raise money from fans to pay for its trip to SXSW (you can sponsor a song at one of the band's SXSW shows for $100) rubbed me the wrong way.

My first thought was that the members of this relatively well-known act could surely foot the bill themselves, but there's no telling what their personal financial situations are. Yet even if the band is capable of funding the trip, it'd be no different than sports teams asking for municipal support for stadiums, even when the teams are capable of paying for the projects. It doesn't hurt to ask, and -- unlike sports teams that claim they'll relocate if they don't get municipal funding -- Camper Van Beethoven is just asking for donations, not making a threat. My guess is that the band will go to SXSW even if the fund-raising effort is a bust.

I suppose the idea of fan-funded albums doesn't bother me because the result is something tangible, a recording, as opposed to an ephemeral live performance. But that's just my personal preference -- perhaps some CVB fans would rather sponsor a song at a concert appearance than help the band pay for its next album. (And part of me wonders "why stop there?" A band could just as easily ask for fans to finance the purchase of a new tour van, a bass amp, or a new set of cymbals for the drummer...)

The real question here is will these new ways to raise cash from fans expand the total amount of money they're willing to spend, or do they just cause fans to re-allocate the money they usually spend on recorded music and concerts? In the short term, there's probably a novelty effect, and I bet it increases the total amount of money an individual fan spends in a year. Longer term, as more acts try these approaches and the novelty factor fades, I'm guessing it won't.

UPDATE: A follow-up post is here.

UPDATE 2: My interview with Jonathan Segel of Camper Van Beethoven.

tags: digital music Camper Van Beethoven sxsw fan patronage

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February 19, 2010

Why eMusic is Like Costco
by David Harrell

I've written frequently about the health club component to eMusic's business model. For subscribers, there's the "use it or lose it" aspect--you pay for your downloads each month or quarter, whether or not you actually use them. For labels and artists, subscriber activity directly affects the per-download payout amount they receive. Because eMusic shares a set percentage of its subscriber revenue with labels, subscribers who don't use all of their allotted downloads help boost the subsequent per-track payout amount.

But there's another club comparison that seems appropriate: For music consumers, eMusic is also something of a warehouse club. That is, in exchange for buying in bulk, eMusic offers individual tracks at a per-unit cost that is less than the standard prices at iTunes and Amazon MP3, which range from 79 cents to $1.29 a track. And though the eMusic catalog has expanded in the past year to include content from Sony and the Warner Music Group, as with the warehouse clubs, the total selection is less than that available from standard retailers.

In addition, while the average track price at eMusic is less than the single-track prices at iTunes and Amazon MP3, you can often find better album prices at those digital stores, just as the sale prices at your local supermarket might undercut the warehouse club price. (I missed out on Amazon MP3's one-day special price of $3.99 for the new Spoon release and paid a higher price for it when I used 11 of my eMusic downloads for the album.) There's also the occasional release where eMusic doesn't offer "album pricing" and the required number of downloads results in an eMusic price that exceeds the iTunes or Amazon MP3 price, as well as the cost of the physical version. As is the case with Paul McCartney's Good Evening New York City album, as one eMusic subscriber observes:

2 CD set + DVD costs 13.99 on Amazon, or just downloading the MP3 costs 9.49. My emusic plan is 35 downloads for 15.89...so it costs more to download the tracks here than to buy the actual discs, rip them myself, keep the cd as backup and in addition have the DVD?

This warehouse club comparison is probably something to keep in mind when considering how eMusic competes with iTunes and other digital music stores. Few -- if any -- consumers shop exclusively at warehouse clubs. Though the discount pricing is nice, you'll still need to go other retailers to find specific items. And while an eMusic subscription is a relatively small expenditure, it's also more than some music consumers are willing to spend month in and month out. But for those who regularly purchase digital music, it can make sense to buy some of it in bulk. Rather than convincing these consumers to reject iTunes and the other stores, eMusic needs to make the case for joining the club to receive bulk-rate prices, albeit for a more-limited selection.

related: Sony and eMusic: Why the Per-Track Label Payout Might Not Change, Why Music Subscriptions Are Like Health Clubs, Welcome to the Club

tags: digital music eMusic iTunes Amazon MP3

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February 11, 2010

Follow-Up on the Dead as Business Gurus
by David Harrell

A reader (who seems to know far about the Grateful Dead than I do) wrote to say that while the band was ultimately successful, it wasn't exactly prescient:

...to hear the Dead tell the story, it's true that they did all of those things, but they really had no idea what they were doing when they started doing all that; that "the musicians who constituted the Dead were anything but naive about their business" is a stretch. They blew gobs of the money they earned on all kinds of crap early on, including playing the goddamn pyramids in Egypt, starting a record label (I think), and the "R and D" of putting their "wall of sound" stage audio together. In fact, if I remember right, they HAD to tour for a couple of years in the early seventies or they were going to go broke. They didn't become enormously profitable until the 1990s.

tags: digital music The Grateful Dead

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February 10, 2010

Wednesday Odds and Ends
by David Harrell

Will Warner Music pull the plug on its streaming content at Last.fm, Spotify, Lala.com, etc? In other Warner news, Edgar Bronfman Jr. blames the iTunes price increase for at least some of the slowdown in the growth of digital sales, but still considers the price change a "net positive." Too bad one of the major label groups didn't forgo the $1.29 pricing -- that would have allowed us to quantify how much of the slowdown was due to the poor economy and how much was because of the higher track price. UPDATE: here's the transcript of the WMG earnings call.

I'm not a fan of their music, but this Atlantic article makes the case for the Grateful Dead as music biz gurus:

As Barnes and other scholars note, the musicians who constituted the Dead were anything but naive about their business. They incorporated early on, and established a board of directors (with a rotating CEO position) consisting of the band, road crew, and other members of the Dead organization. They founded a profitable merchandising division and, peace and love notwithstanding, did not hesitate to sue those who violated their copyrights. But they weren’t greedy, and they adapted well. They famously permitted fans to tape their shows, ceding a major revenue source in potential record sales. According to Barnes, the decision was not entirely selfless: it reflected a shrewd assessment that tape sharing would widen their audience, a ban would be unenforceable, and anyone inclined to tape a show would probably spend money elsewhere, such as on merchandise or tickets. The Dead became one of the most profitable bands of all time.

And if you're reading this in Northern California, a friend is hosting a Tom Freund house concert on Friday evening in Davis, CA. Shoot me an e-mail if you'd like the details.

tags: digital music Warner Music Group iTunes the Grateful Dead Tom Freund

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February 08, 2010

Monday Odds and Ends
by David Harrell

Amazon.com and Macmillan officially make up.

From the L.A. Times technology blog:

One could argue that publishers aren't affected by Amazon's pricing. They continue to receive 50% of the cover price for each digital copy Amazon sells, the same as physical books sold at a local bookshop. (Astute observers will correctly point out that Amazon is actually losing money on bestsellers under this arrangement.)

What irks publishers is a concern that Amazon is conditioning readers to believe that digital books are worth less, about 60% less, than the physical copy. Such a steep price cut could have a dramatic impact on the book business in the future, when digital sales become a bigger portion of overall industry revenue. (They currently account for less than 5% of retail book sales.)

While I'm on my e-book tangent, I'd just add that there's a factor that has been ignored in the digital vs. physical pricing debate for books: Loss of resale value. As I noted a couple of years ago, even if you don't plan to sell your CDs, the option to do so has real economic value. And the loss of that value is something that deserves consideration in the pricing of digital goods.

Finally, it's off topic, but definitely worth a listen: I enjoyed Terry Teachout's "Pops: A Life of Louis Armstrong." Christopher Lydon of NPR had an hour-long discussion with Teachout about the book -- click hear for the mp3.

tags: digital music digital books Amazon.com AMZN

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THE LAYAWAYS

Out Now -- "Maybe Next Year" -- The New Holiday Album:

O Christmas Tree - free mp3
Away In A Manger - free mp3

Download from eMusic, iTunes, Amazon MP3, Napster, Rhapsody, Lala.com, Amie Street, or Bandcamp. Listen to free streams at Last.fm.

"...about as melodic and hooky as indie pop can get." -- Absolute Powerpop

"Their laid-back, '60s era sounds are absolutely delightening." -- 3hive

"...melodic, garage-influenced shoegaze." -- RCRD LBL

Keep It to Yourself - free mp3
All Around the World - free mp3
Come Back Home - free mp3

Download from eMusic, iTunes, Amazon MP3, or CD Baby, listen to free streams at Last.fm, Lala.com, and Napster.

"The Layaways make fine indie pop. Hushed vocals interweave with understated buzzing guitars. The whole LP is a revelation from the start." -- Lost Music

"A wonderfully crafted recording built around tasteful songwriting and musicianship..." -- PopMatters

Silence - free mp3
The Long Night - free mp3

Download from eMusic, Amazon MP3, or iTunes, listen to free streams at Last.fm, Napster, or Rhapsody.

"These are songs that you want to take home with you, curl up with, hold them close -- and pray that they are still with you when you wake up." -- The Big Takeover

Let Me In - free mp3
Ocean Blue - free mp3

Download from eMusic, Amazon MP3, or iTunes, listen to free streams at Last.fm, Napster, or Rhapsody.