Digital Audio Insider -- the economics of music and other digital content

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Digital Audio Insider is David Harrell's blog about the economics of music and other digital content. I write from the perspective of a musican who has self-released four albums with the indie rock band the Layaways.

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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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