The Business of Music
Hey! Your tape. lt´s good.
I know. We made it.Â
I  mean, it´s rough, but, unbelievably, it shows promise. I’ll put out your record. Any profits we split down the middle after I recoup expenses, okay?
Recoup expenses? Man, you´re gonna recoup a big, fat Mercedes is what you´re gonna do.We´re not there yet, Justin.I’m Vince.Whatever.
                                                     -High Fidelity
Â
The brave new world of the music business just gave us another interesting peek behind the curtain through this open letter from the band OK Go.
As anyone knows who has not been living under a rock, it’s getting more and more difficult to make money in the music business. That’s not just a problem for labels (who have been scrambling to reinvent themselves or dying a slow death for years) it’s a problem even for bands, not to mention all the other marketers, distributers, promoters and producers that used to get paid by the labels. Used to be that bands celebrated signing a deal with a major record label. That was how you knew your ship had come in.Â
 Of course, it didn’t always work out that way, but typically the record label was willing to pay advances to artists and pay for all the expenses of recording, producing, marketing and distributing the album and take the risk that they would get paid back, plus a nice profit, through the sales of the album. A lot of artists complained about the percentages that the labels made on album sales, but the percentages were high because the label was taking most or all of the financial  risk.
Well, many had pronounced that business plan practically dead. Interestingly though, it’s not completely gone. From their letter, it’s obvious that Ok Go (and presumably other bands) apparently still get many of their recording expenses paid up front by labels  like EMI. EMI, being EMI, can apparently still afford to front a lot of expenses, at least for proven bands, on the assumption that enough people are still paying for music from traditional sorts of outlets, like record stores (really?), Target, WallMart etc. and less traditional ones, like band websites, iTunes,  Amazon, etc., that they will be able to recoup expenses and make a profit.
There are a lot fewer labels that are able or willing to do that, however, and they’re asking for a lot more for it, like revenues from YouTube(?). It’s news to me that YouTube can actually generate revenue for a label, but apparently it does. However, (and here’s the tricky part) not when the video is embedded on other sites (Huh). What that means is that OK Go, because their video is (rightfully, let’s face it) owned by the label who paid for it, can’t let people embed their YouTube video on their blogs or facebook pages or other sites.Â
But how does the letter end? With an embed code for the video (see below)! Something tells me EMI (and their lawyers) haven’t got this brave new world all figured out just yet.
http://vimeo.com/moogaloop.swf?clip_id=8718627&server=vimeo.com&show_title=1&show_byline=1&show_portrait=0&color=&fullscreen=1OK Go - This Too Shall Pass from OK Go on Vimeo.
Is all of this good or bad for bands, consumers, and music in general?
Posted on January 20, 2010, in Music, Web/Tech and tagged music business, Ok Go, YouTube. Bookmark the permalink. 21 Comments.
Steve Evans
RJH
Scott B.
John C.
Susan M
Aaron Brown
ninemoons
John Harrison
kulturblogadmin
Kyle M
Brad
KulturBlogGuest
MCQ
Wm
Rebecca
Ivan
Geoff J
btdgreg
Clark Goble
Aaron R.
Tim J
Ben
Marcus
Brad Williams
gibsonbn
I like this video better than the song. (I felt the same way about Here We Go Again.) Gotta like this band’s attitude, though.
Everyone has understood this problem for at least 5 years now, but no one has come up with a good solution. Of course, if you’re Radiohead, you can just give your music away and ask your fans to pay whatever they want. But this only works for a small handful of already established artists.
Barenaked Ladies didn’t renew their label deal years ago and decided to sell their music themselves on their website. They sell less albums but make more money.
(They also started doing cruises where for a week or two they’d perform every night. I wish I could have gone on one of those cruises so bad. And the idea of floating on a boat for a week is not exactly my cup of tea.)
Another great open letter about the music industry is this one by Steve Albini:
http://www.ram.org/ramblings/philosophy/fmp/albini.html
Been around for a long time, not sure when it was written.
Greg, has the YouTube issue been around that long? I think it’s a pretty new thing that you can make revenue from YouTube at all, embedding be damned.
I understood that even Radiohead went back to the label after their experiment with internet marketing. True or false?
Susan, the fact that you can make a lot more money per album selling your music on your own is obvious, but that only matters if you are already in a position to sell a lot of albums. Problem is, most bands still need labels to get to that position.
Barenaked Ladies also was able to branch out. Do you think the label would have let them do a kids album? (Which is fantastic by the way)
One thing to keep in mind too is that the price of “studios” has really, really come down. Honestly, your typical PC can do 90% of what old studios used to do plus considerable more. That’s not to neglect the role of a good producer or good acoustic rooms or the like. But a lot of that stuff can be rented. So in some ways the cost of access is much less now than it used to be. Plus you can publish via MP3 or AAC on iTunes for very little.
What we’re seeing is large bands having more trouble because of the lack of marketing. The “superband” or “pop star” common in the 50′s through the 90′s is, with a few exceptions, largely gone – at least in Rock and Roll. Rap and perhaps some aspects of Pop still have it, but not to the same degree. If it is left, it’s on the country charts. But for the kind of music I suspect most of us like Rock and Roll has become indie and indie just has had everything about it made more professional. I’ve seriously listened to band produced CDs that honestly aren’t that much different from the studios doing it.
According to the wiki Radiohead doesn’t appear to. They are in the studio doing more work but also have said they are going to do EPs rather than LPs. (Does that even mean anything anymore?) I don’t know about York’s solo album (nor that new group he formed with Flea of Red Hot Chili Peppers)
Radiohead of course isn’t the only one to have done this. Nine Inch Nails famously did this as well. I suspect this will grow. Already lots of bands make their money through tours and memorabilia. (Of course money there helps if you have a big public image through large sales)
But, again, it’s established bands at the end of their contracts that are the ones able to do this.
Here’s another good similarly-themed article where the singer for the band Too Much Joy picks apart his Warner Brothers royalty statement:
http://www.toomuchjoy.com/?p=1397
That was really interesting, Brian.
MCQ: “Greg, has the YouTube issue been around that long?”
No, I was talking about the larger issue of how to make money from music in the internet age.
The YouTube thing does have a certain amount of logic to it. Presumably, YouTube will one day make most of its money from advertising (if it doesn’t already–thank you Adblock!). If you embed video, that means most of the time, YouTube doesn’t get any click-thrus and no one is looking at their ads.
Good point MCQ. I think to make the big bucks only bands that came out of the 90′s or those that do have label support will make it big. However I think smaller bands can make a respectable living. But I think the days of the big rock bands with the coliseums and so forth are long over.
Hip hop is the place where a remnant of that remains. Even there I think things are changing though.
Related article at Wired.
That’s a good article and really fleshes out the band’s attitude toward the new music biz and new media. I think it’s clear that even industry insiders like Ok Go really have no firm idea what will happen next. Predictions of the music business continuing to implode and at least one of the major labels going belly-up are not new, but they are scary.
I like how he characterizes the good side of this revolution as getting rid of the gatekeepers and the bottlenecks that were restricting public access to content, and artist’s access to the marketplace. That’s right and it’s mostly good, but the flipside of that is that with no gatekeepers making money off the flow of music to the public, you have no one giving startup money to new bands that could starve and give up without it.
That’s the big trade-off, and its not as clear as people think that the new world is getting more music made and disributed. We need something to replace what the labels were doing in developing new artists. Otherwise, we may not have many new artists.
Holy crap. What a fabulous video and song! Thanks for posting MCQ — I hadn’t seen it yet. I love everything about both. The concept of using a real marching band as the backup on the recording is genius.
Well they will at least make something from my purchase on iTunes…
Yeah, that hasn’t been done since Fleetwood Mac did it on Tusk.
I like the video too, these guys seem to have a particular genius for clever videos without indulging in a lot of technological gimcrackery.
I do hope, though, that they’re wrong about nerds being the new rock stars. If all rock stars are nerds, rock & roll will be poorer for it.
The best thing about the video (among many cool things) is the single take aspect.
Also, there will always be a market for testosterone-driven rock and roll even if nerd-rock has a market too.
Just in case you haven’t seen their earlier videos, Geoff, I’m gonna tell you to check them out. One of the band member’s sisters does the choreography, I’d be surprised if she didn’t do this marching band one, too.
Yeah I am a fan of OK Go and loved their early videos. (I think the whole web saw “Here It Goes Again”) This video is no exception — I just hadn’t seen it yet.
According to an email I got from the band today, OK Go has left EMI. Not a bad move as the label probably has very little to do with them selling their music these days.
Full email:
That’s cool. Hope it’s successful for them.
Interesting. I think that was pretty much inevitable given the position the band took on video revenues. The label has to make its money somehow and the band seemed committed to undermining the label’s plan for web revenues. Not a good basis for a continuing business relationship.
It will be interesting to see what this new entity does. Is it going to be a label or just the business arm of the band?