Indie Music on the Launch Pad #2

New news that hints that the RIAA may seek performance royalties from terrestrial radio stations has my brain thinking. I'm usually dangerous when I think, and often times talk out of my posterior, so we'll see how this goes. A big question that has been frolicking about my brain stem lately is:

What IS the RIAA up to anyway?

What is "hurting" the music industry right now?

There has been a lot of moving and shaking going on in the music industry over the last few years. Music sales have dropped off dramatically among the major labels. Most major label artists now make more money on tour than from CD sales. In the past, a tour was simply a mechanism to sell more music. This has organizations like the RIAA struggling to keep the revenue stream going. The major labels would now rather develop their own sexy, homogenized artists that they can promote extensively. Instead of seeking out good talent, they are going for the "sure thing" to help them make some money.

However, music sales are up as a whole (and continue to grow) with the advent of online music sales (such as Apple iTunes) and MP3 players. So if sales are up, why are the labels struggling? They claim that piracy is destroying their business. Does piracy exist? Absolutely. Unfortunately, there is a growing population that believes that music, television, movies, and all forms of media should be FREE. While piracy is out there, I don't believe that piracy is making as big of an impact as they would believe. It becomes a convenient scapegoat for what is really happening to the industry, independent music.

The independent music scene is becoming a major driving force in the industry. Online music sites, MySpace, podcasting, and the like are dramatically leveling the playing field of music promotion. No longer do musicians need to pay the radio conglomerates for the CHANCE to have their music promoted. Musicians can now do this themselves on the internet through all forms of new media. Suddenly, the major labels have lost their virtual monopoly on music promotion, and independent music is making severe dents in the pockets of the major labels.


Internet radio waves

The biggest controversy in the music world right now centers around the dramatic rise in licensing rates that the RIAA wants to charge internet radio stations. The price increase is retroactive to 2006 and has the very real potential to put many internet radio stations out of business. Everyone is screaming about the new rates and how it will kill off hurt internet radio. While the retroactive rates alone could put many out of business, those that emerge from that chaos will need to adapt to the new rates. In a post I made a few months back, I saw this as a huge plus for independent music. To compensate for increased royalties, internet radio will look much more seriously at independent music. Can't pay the RIAA? How about low cost independent and small label music?

Unfortunately, very few saw through the smoke-screen that the new royalty rates created. A part of this bill included the ability for SoundExchange (a part of the RIAA) to collect compulsory royalties on all music played over the internet. What this essentially means is that the RIAA will now have the right to collect royalties from independent music, even if they are not a part of the RIAA. What's more, SoundExchange does not need to contact the artists that they collected money on their behalf, and musicians can't even GET the money unless they become a member of the RIAA. If the money goes unclaimed for 3 years, SoundExchange gets to keep it. So what we have here are the major labels (who make up the RIAA) getting some of that pie back that independent music took away. Suddenly, the idea of internet radio stations switching to indie music to get around the royalty increase is now voided.

While it remains to be seen just how far SoundExchange will take their new royalty template, I'm deeply concerned that one of the mechanisms that will fall under this new license umbrella is podcasting (which is becoming a huge launch pad for many independent artists). The license set forth by the Podsafe Music Network, IODA Promonet, and others would seem to cover podcasters from these royalties. Unfortunately, the wording suggests otherwise. This "exception clause" may need to be filed on a per-artist or even per-song basis directly with SoundExchange. The wording is so vague, these compulsory licenses could be taken to nearly ANY site the streams music over the internet, including sites like MySpace or places that sell music. Suddenly, faced with new license fees, independent music starts to loose it's primary promotion mechanism, the internet. Independent musicians will need to make a concerted effort to file an exception to SoundExchange if they want to maintain their promotion through the internet medium.


More moves by the RIAA

News today, relayed by Steve from the Wicked Good Podcast, suggests that the RIAA may be looking to take those same performance royalty rates to terrestrial radio. While I don't know of any specific legislation that is pending, the idea of identical pricing and compulsory royalties being shoved through terrestrial radio is very real. I believe that the battle at the internet radio level was just precedence-setting for their push to get more money out of terrestrial radio (where the real performance royalty money is). Much larger audiences with very poor ways to measure actual listeners. Maintaining the compulsory royalty clause in this case will simply cut back the tendency for stations to step into the independent music scene, or at least slow its progress.

Only time will tell what is going to happen to the music industry as a whole in the next few years. The music industry is changing, and will likely look very different 5-10 years from now. I'm just thankful that I have discovered the wealth of independent music out there, and I'm thankful that I can promote some incredible music and musicians. I'm not sure what the future holds, but I'm still going to do my best to promote what's out there. I guess to be truthful... I'd gladly pay royalties to people like Matthew Ebel, Kevin Reeves, Geoff Smith and others because I believe in their music. I just wish I had the finances to do more...

Independent Music on the Launch Pad

Bum Rush the Charts and the recent internet radio licensing changes point to big things for indie artists.

It’s now the eve of Bum Rush the Charts. An initiative within the podcasting and new media spaces to send a podsafe artist to the top of the iTunes music charts. The organizers are using the initiative as a proof of concept to tell major media and the major labels that podcasting and new media is a social movement, and one to take seriously. Thanks to the press that BRTC is getting within news organizations such as the BBC, I think there WILL be some sort of statement or at least an acknowledgment of the event.

While I believe that someone at the labels will at least know about the event, I don’t think it sends quite the message that many of the organizers are hoping for. Traditional media and the music labels are well aware of the power of social media. Places like MySpace and YouTube make headlines almost daily. To think that these organizations are clueless to the power of social networking is probably short sighted. My thought is that the labels and major media outlets will think of this not as a proof of concept, but a flash event. Black Lab tops the charts for a day or so, then their watered-down, manufactured, underpaid artists will be back up top a few days later. To those the organizers are trying to reach, I believe that the statement will not be as strong as we would like it to be.

Black Lab was chosen for this initiative because they were actually dropped by two major labels (Geffen and Sony/Epic). Through each of these, the band had to fight to win back the rights to their OWN music. The labels said that one of their latest albums, “See The Sun” had no more than one decent song. Since the band won the rights to their music back and released it to the world of podcasting, they have found great success with many of the songs on the album. At least half of the songs on the album have reached the top 10 list of podcasting on the Pod Music Countdown over the last year. They have sold countless CDs and song tracks through iTunes relying on the power of new media and podcasting. When it comes to sending a “you lost out” message to the labels that dropped them, Black Lab couldn’t have been a better choice.

Bum Rush the Charts is a great proof of concept. It will be an event we can point to that will open many eyes to new media and podcasting. However, those eyes are not necessarily those of the major labels, but the eyes of other bands, fed up by their money grabbing contracts with the major labels to the power of “going independent.” Black Lab was able to win back the rights to their own music. Others may be able to so as well. It will open the eyes of those current independent artists that are hesitant to make their music available to podcasters. BRTC has the potential to start a brand new wave of artists that are eager to get a piece of the new media bandwagon. Until more artists start to do things on their own and show the world that they are successful in doing so, we won’t see any significant change in the major labels. Hopefully, initiatives like this will help expose how the major labels are robbing artists.

Let’s do some of the math for a traditional iTunes purchase.

On a 99 cent iTunes music purchase of an RIAA artist:
- 19 cents go to Apple
- 75 cents go to the label
- 5 cents go to the artist

On a 99 cent iTunes music purchase from an independent artist:
- 19 cents go to Apple
- 80 cents go to the band

(numbers courtesy of Bum Rush the Charts)

If a RIAA artist was able to sell 100,000 tracks from iTunes, their cut would be a whopping $5000. Meanwhile, the label has made $75,000 off of music they did not write or perform. An independent artist would only need to sell 6,250 tracks to make that same $5000. 100,000 tracks would net an independent artist $80,000! By some estimations, the 5% artists are making through iTunes is very generous compared to revenue brought in from CD sales and radio airplay (saying nothing about all those RIAA settlements).
It’s a sad, sad world when a third party can come in, grab ownership of your own work, and make 15 times as much as you do off your own creation.

New Licensing rates for Internet Radio

A few weeks ago, the Copyright Royalty Board (CRB) revised their fee schedule for internet radio. The retroactive rates (back to 2006) will also rapidly increase for the next 3 years.

$0.0008 in 2006
$0.0011 in 2007
$0.0014 in 2008
$0.0018 in 2009

(numbers courtsey of Save-Internet-Radio.com)

These rates are per performance. A performance equates to one person listening to one song. Multiply these number times 1000 listeners for one song, and they’re paying $1.10 per song in 2007. Multiply that by the number of songs played per day, and you get a total licensing fee of over $150,000. The cost to play the music for some will exceeded the total revenue coming into the station. The rates are so outrageous that many internet radio stations and companies are screaming that it will END internet radio. For a great many of stations, it will… especially those running on a small budget and find themselves bankrupt having to pay retroactive fees there weren’t ready for.

I’m of a slightly different viewpoint on all of this. Yes, I agree that the new licensing structure is absolutely horrible. Over-the-air radio stations do not need to pay per-performance; rather they pay a much more reasonable flat-rate license. There WILL be internet radio stations that will go bankrupt paying retroactive fees, and a significant number of them at that. Those that DO survive will either be owned by media giants such as Clear Channel, or the rare internet radio stations that can limp past the retroactive fees and restructure their programming. INSERT INDEPENDENT ARTISTS.

How to streaming internet radio stations survive in a money grabbing, license fee bogged down world? They play a considerably larger percentage of independent music. License fees for indie and small label artists are cheep or non-existent. They don’t follow the obscene license structure set forth by the CRB and the RIAA. If internet radio is going to survive this onslaught brought on by the CRB, it NEEDS to turn to independent and small label artists. There is virtually no other way around it. Suddenly, independent artists have another segment of the music listening audience that will be able to hear their music while the major labels shoot themselves in the foot.

Indie music will always be indie music. The percentages of those that do well are slim right now, and despite the resurgence of independent music in the last few years, those numbers will remain fairly small. Even so, there is a growing potential for independent and small label musicians to do well both financially and in social reward. Most importantly though is the opportunity to make a lasting impact on the music industry as a whole. That’s what I’m really excited about!