Indie Labels Suffering Too

When it comes to CDs, the entire industry is hurting, not only the major labels. Indie labels, who've always had a real struggle even in the best of times, find it more and more difficult to keep the doors open these days as not only sales decrease but margins as well.

Indies still rely principally on CD sales for the bulk of their income, but thanks to the music retail sector drying up, there are fewer and fewer stores to sell their product. Now those last existing stores have become increasingly reluctant to accept indie product, some even requiring a 5,000 unit guarantee, a level that's unreachable for just about any indie record. In better times this amount wasn't a problem for a hot act, but given the fact that a major label number #1 record might only sell 50k in a given week, this figure is tougher to hit all the time.

There's as much music consumed as ever but the margins are now so razor thin that few labels are able to exist. There used to be a few buck margin in a CD, but with an iTunes download leaving only 65 cents which still has to be split with the artist and writer, the business model has been turned on its head.

Record labels large or small cannot exist with the music industry as it is today. Look for something new to come along soon to take the labels place, or the labels to completely change their business model. There's no other way to survive.

E-Release for Decemberists

The darlings of this year's South by Southwest conference, the Decemberists, recently released their 5th album "The Hazards of Love." This is nothing earth-shaking by itself except for the fact that it landed at #14 on the album charts and was not even released on a CD!

Yes, it's true. In what looks like an acceleration of the death of the CD, the band didn't even consider it worthwhile to release it on the king of music delivery formats for the last 25 years, yet did release it as a vinyl record. In it's first week of release, The Hazards of Love sold 18,000 digital downloads and 1000 units of vinyl.

This ties in with the research I've been doing for a book that I'm writing called "Music 3.0: A Survival Guide To Making Music In The Internet Age." Just about every industry expert that I've interviewed has predicted that the CD is going away as a release format on a retail level, mostly because it looks like retail music stores will die. Most experts also predict that CDs will still be pressed as souvenirs that the artist will sell at gigs, so that's how the CD should be treated.

It's too early to say that the Decemberist's release is the beginning of the end of the CD. After all, their number of digital downloads for this release aren't that large so far. But it's a trend worth watching since it appears that day might come soon. Or will it?

Variable Priced Concert Tickets

The thing that everyone hates about concert ticketing these days is the ever elevating prices that gouge music fans everywhere. On the other hand, if these fans are still willing to pay the price, it's hard to complain about the hole in their wallets.

One proposal to stabilize prices a bit is to create a demand-based, variable priced ticketing market similar to airline pricing systems.

On premium shows, the cheap seats (similar to the coach seats on a plane) get more expensive, and the best house seats (equivalent to business and first class) go to the highest bidders. The prices also increase ahead of the start time as supplies shrink. As you get closer to departure, the price is going to be a lot higher than if you bought a ticket a couple of weeks ago.

While I doubt this scheme will ever be adopted, something has to be done about the current pricing policies. We've all been burned too many times.

Of course, Ticketmaster could probably eliminate the secondary market entirely by taking hint from No Doubt, Trent Reznor and Bruce Springsteen. No Doubt wrestled control of roughly 10 percent of tickets on its current North American tour and implemented its own sales terms. Reznor and Springsteen's plan includes direct sales to their Tour Club members, and prints buyer names directly on the tickets to prevent subsequent resale.

Ticket prices are just like Wall Street in that greed abounds. Ticketmaster, the promoters, agents and now even the act are all responsible for wanting more and more. Just like Wall Street, they're going to find that there's a limit to greed before it backfires on you.

The 4 Kinds Of Free

There's a lot of discussion these days about the "economies of free," which is basically the theory that if you give something away for free then it will incentivize the receiver of the free product to come back and purchase something else.

The economies of free is a central premise in the new music business economy (especially for a young artist), but Wired Magazine's Chris Anderson takes the theory yet another step with the following video description of "The 4 Kinds Of Free."

The Generation Y Vs. Boomer Survey

Accenture, a management consulting firm, recently conducted a survey among 3,000 consumers across the United States to create its annual report on consumer electronics products and services usage. The survey's results offer a host of surprising discoveries.

• Baby boomers (defined in Accenture's survey as those 45 years old or older) are embracing popular consumer technology applications nearly 20 times faster than younger generations. Who'd a thunk it?

• Compared to a year ago, Gen Y (consumers between the ages of 18 and 24) are decelerating their use of consumer electronics and related services (social networking, blogging, listening to podcasts, watching and posting video on the Internet). Perhaps their fingers are getting tired from all that texting?

• The "connected home" isn't happening. Survey respondents picked game consoles, television and portable music players as three consumer electronics products whose ability to connect to the Internet either directly or through a home network is "unimportant" to them. They're probably right about the "connected home", but I'm not so sure about the television. Let's see what the survey says next year.

• 91 percent of survey respondents said they spend "zero hours per week" in a virtual world such as "Second Life." That means that the 9% that do play spend all their waking hours there.

• The survey showed a 67 percent increase among baby boomers reading blogs or listening to podcasts. In contrast, Gen Y's usage of such applications was flat, declining by less than one percentage point. Today, 45 percent of Gen Y are engaged in reading blogs or listening to podcasts, while 26 percent of baby boomers have begun to do so. Still have a way to go to catch up with those "Y'ers."

• Similarly, baby boomers connected on social networking sites jumped by 59 percent. Meanwhile, the usage and activities among Gen Y on social networking sites have also plateaued, showing only a two percent increase. After all those divorces, boomers must be dating again.

• Gen Y consumers watching and posting videos on the Internet declined by 2 percent over the last 12 months, while similar use among baby boomers increased by 35 percent. How long can you watch crappy videos before you get a life? Wait - how long can you make crappy videos before you get a life?

I think what this survey shows is, despite what we've been told, every generation has adopted all the latest technologies. Some get there later, but they get there eventually.

New iTunes Tiers on April 7?

It looks like the new iTunes variable pricing plan will finally hit the streets on April 7th.

If you've not heard, instead of every song in the iTunes catalog available for a flat 99 cents, a 3 tier variable pricing structure will be introduced - 69 cents for catalog, 99 cents for recent releases, and $1.29 for current hits. The $1.29 tier will have higher bandwidth and no DRM.

iTunes has over 10 million songs now available at 99 cents. According to the NPD Group, the average spend per consumer is $41 a year.

In this economic climate, raising the price on anything seems like market suicide, but the labels have fought for this for a long time. I guess we'll know on April 8th just how smart of a decision it really is.

Blast From The Past: Frank Zappa At AES

After my post regarding Frank Zappa last Friday, I've had a lot of requests to post another story. Here it is.

Sometime during the 80's when the AES (Audio Engineering Society) conference was still being held at the Waldorf Hotel in New York city, I happened to meet Frank in the one of the hallways between hotel rooms (a lot of the manufacturers showed their gear in hotel rooms rather than in the relatively small banquet hall). He asked me to tag along with him up to the Synclavier room (Frank was a power user) and of course I did.

As we were about to enter the hotel room, a teenaged kid comes up to Frank and asks him to come over into the corridor and listen to him play. Frank, being ever so polite as he always was with anyone he did not consider a fool, told him he would be back to listen to him in a few minutes after he finished his business with Synclavier.

Of course it was never just a few minutes with Frank, since everyone there (probably about a hundred people) wanted a chance to talk with him. So after about an hour, the kid comes in the room and taps Frank on the shoulder. Frank sees the kid and says, "I promise I'll be out in a few minutes."

About 45 more minutes go by and the kid comes back again, taps Frank on the shoulder again, and looks at him with these big doe eyes and says, "Frank, pleeese?" It's hard for anyone to resist a kid pleading like that, so Frank says his goodbyes and heads out into the hallway with the kid, who takes him to a quiet corner near the elevators.

The kid had a little battery powered Pignose amp and a Travis Bean guitar (the one with the aluminum neck and long out of business), and begins to play for Frank. To everyone's amazement, he's not playing with a pick or anything like the usual guitar style that millions of players use - he's cradling the guitar so it's perpendicular to his body and tapping on the frets with both hands.

The kid is scared though, and pretty much fumbles through the song. Frank senses this, and at the end of the song says, "Hey, that was great! Can you play me something else?"

The kids confidence instantly rose through the ceiling and he proceeded to rip off a song with his unique style that bordered on virtuosity. We were all amazed. Frank gave him his card and told him to call him if he ever got to LA (don't know if he ever did).

The kids name? Stanley Jordan, who eventually went on to a pretty nice career as a jazz guitarist using his unique style.

Frank could be totally brutal with players (or anyone for that matter) with an attitude, and was especially good at cutting them down to size (some good stories there too). But he was also sensitive to players who valued heart above technique and was always open to people showing him what they could do. I'm not sure how much Frank helped Stanley in his career, but at least for one moment on a cold Saturday afternoon in New York, he lifted him towards the sun.

Frank Zappa and Downloadable Sheet Music

Musicnotes, Inc., the market leader in downloadable sheet music, announced that it recently sold its five-millionth download since the site first launched (1999). The five-millionth download was a Guitar Guru Session of Don McClean’s “Vincent (Starry, Starry Night),” and was sold to a customer in Germany. Musicnotes will also pass another milestone in early 2009, when royalties paid to publishers and songwriters will pass the $10 million mark.

I'm pleased that Musicnotes are doing well, but this really doesn't seem like a lot of sales, considering they've been around since 1999. What's striking to me is that this was something that Frank Zappa envisioned in 1981, and almost even raised venture capitol for it.

Frank connected my then partner Steve DeFuria and I with the same venture firm, Rothschild Capital (yes, that one) and spoke highly on our behalf. We actually met Baron Von Rothschild in the penthouse of 1 Rockefeller Plaze in New York as a result.

Frank gave us the use of his studio to make our initial pitch to two Rothschild bankers, which happened to be at 9AM, one of the few times that he slept (every day he had two 8 hour shifts in the studio and some private writing after that). About 15 minutes into our pitch, Frank burst into the meeting with coffee cup in hand, torn t-shirt, sweat pants with a hole in the knee, and severely matted hair, obviously right out of bed. Steve and I groaned a little inside, wondering how his appearance was going to go down with the 3 piece-suited straight-laced New York VCs, but Frank launched into an absolutely captivating hour and a half pitch on our behalf, holding everyone in the room in the palm of his hand. That was Frank. Everyone who ever came in contact has a story (usually a lot more than one).

Our project (called the MicroScorer, basically a computerized music scorewriter that's pretty much in every DAW these days) and Frank's were never funded, mostly because the oil crisis that year made energy investments the better bet, but it was an interesting little ride at the time.

Sheet music over the Internet was a dream of Frank's and he'd be proud that it eventually happened. Wish he were still here to see it.

Perhaps Manny's Music Isn't Closing

While we keep hearing that the venerable Manny's Music will close on May 15th, now comes this from the MI industry magazine Music Trades:

Contrary to previous website reports, the legendary Manny's Music of New York City is not closing any time soon. Sammy Ash, vice-president of Sam Ash Music, the parent of Manny's, reports that his family-owned company is currently in lease negotiations for the Manny's location on 48th Street as well as several nearby Sam Ash stores. Given the current New York City real estate market, he adds, "We are confident that we will be able to secure favorable lease terms."

The widely reported problems in the finance industry have fallen particularly hard on New York City, where office vacancies currently are at an 18-year high. Ash states, "It really is a buyer's market right now."

That being said, a friend personally confirmed the closing from a Manny's employee after reading the story here. The employee said the Manny's staff had a meeting where they were told that GE bought the property and the lease wouldn't be renewed.

Perhaps GE has decided that the time isn't right for expanding Rockefeller Center, and renewing the lease for another term would be prudent. We'll know for sure on May 15th.

File Sharing Tastes In Canada Mirrors US

Here are some details from a recent survey by Angus Reid Strategies regarding Canadian digital music tastes. The survey was presented during the recent Canadian Music Week:

• 45% say people who use peer-to-peer file sharing services to download music and movies are regular Internet users doing what people should be able to do on the Internet

• A majority of Canadian Internet users see no major problems with peer-to-peer file sharing, and most react negatively to the notion of a levy on ISPs that would help to compensate musicians for the music they create.

• An additional 27 per cent admit these people are “doing something they shouldn’t be doing” but say “it’s not a big deal.”

• In contrast, only three per cent agree with what has often been the music industry’s position that file sharers “are criminals who should be punished by law.” As for an appropriate remedy, one quarter of Canadians (25 per cent) feel that “technology should be developed to stop this.”

• The survey also indicates that an attempt to recoup lost revenues by imposing a levy on ISPs would meet stiff resistance. Nearly three-quarters (73 per cent) of online Canadians believe such a levy would represent “an inappropriate and/or unnecessary levy that would be passed down to consumers.”

• Among Canadian Internet users, 23 per cent say they have downloaded free digital music files from peer-to-peer file sharing sites in the past 30 days, while just 12 per cent have paid a fee to download digital music files from an online music store such as iTunes.

• A significant proportion of online Canadians have not bought into the idea of paying for online music. Proponents of file sharing have long held that the music industry is doing itself a disservice by attacking its own fan base, noting that these consumers are often the most voracious music enthusiasts.

• Those who downloaded an MP3 file from a free file-sharing service are significantly more likely to say they will buy a CD in the next month (41 per cent vs. 34 per cent for non-file sharers), and are more likely to have gone to a concert in the past year (65 per cent vs. 52 per cent for non-file sharers).

Everywhere you go, people seem to feel the same way about music these days and Canada is no different. Too many people feel that music should be free. Perhaps they're right, but musicians, songwriters and record labels the world over would beg to differ. The economic model of Music 3.0 will change our perceptions about music forever.

PlayAnywhere

Merlin, WMG and Universal have all finalized deals with PlayAnywhere, the new service that puts personal music and video collections onto the “cloud” and enables subscribers access and play across multiple devices including mobile, PC and in-car regardless of DRM and formats. The "cloud" means online storage so it doesn't live on your computer.

What's interesting is that PlayAnywhere is a subscription based service, but they don't sell directly to consumers. They "supply their service to device manufacturers, telecoms companies and ISPs who can then offer it to their user base either as part of their package or as an extra".

But according to a spokesperson:

" It will keep a log of what you play, whether you are on or offline and then when it can it will send that information back to catch who use it to determine how to divvy up the money received in the form of subscription fees and distribute that to the rights holders."

The labels like this because it's another income stream, but especially because they believe that the future of music distribution is via subscription. While subscription might be sales nirvana to the labels, artists get paid less as do the publishers, so unless a way is discovered to divvy up the pie differently, subscription might take a while before it's adopted.

Latest R&R Hall of Fame

I never believed that there should be a Rock & Roll hall of fame. This just seems like an honor that isn't needed, since it hinges more on sales than on musical influence.

That being said, the show is frequently enjoyable, and I must admit that I'd like to see one in person sometime (missed my chance when the Ventures were inducted).

The induction will take place in Cleveland on April 4 and be televised live by Fuse. Here's who we'll see:

• Jimmy Page will induct his Yardbird mate Jeff Beck
• Red Hot Chili Pepper Flea will do the honors for Metallica
• Rolling Stone Ronnie Wood will introduce singer Bobby Womack
• Eminem will induct rappers Run-D.M.C
• Smokey Robinson will introduce Little Anthony and the Imperials.

In the sideman category, E Street Band members Garry Tallent and Max Weinberg will induct their opposite numbers for Elvis Presley, drummer DJ Fontana and the late bassist Bill Black, while Paul Shaffer will intro legendary session keyboard player Spooner Oldham.