Music Business and Trend-Mongering

I feel like I owe an apology for the lack of activity on my blog lately. While I’ve been better about keeping up with Twitter, I’ve definitely let the posts slip here. A resolution of mine for 2010 is to get back on the horse and get the posting schedule back on track. Not that it is any excuse, but I’ve been particularly busy with creating content in a couple of other ways. Here’s what I have been up to over the past few months.

I’ve written two new marketing courses that are enrolling now for Berkleemusic’s next term, starting January 11th. As I have mentioned on this blog before, Online Music Marketing with Topspin (co-authored by Topspin’s Shamal Ranasinghe) will teach you how to use Topspin’s unique marketing, management, and content distribution platform to help you market and retail direct to your fans. In the course, students will develop the in-depth marketing expertise necessary to properly execute a successful sales and marketing campaign using Topspin. You can watch some videos of Topspin’s CEO Ian Rogers and myself talking about online marketing and the course here.

I also just finished a second online music marketing course called Online Music Marketing: Campaign Strategies, Social Media, and Digital Distribution. This course covers some key areas that all marketers need to focus on, such as social media marketing, effective use of data to direct you campaigns, what partners you should be aware of, and much more. By the end you’ll have a fully timed, integrated, and optimized online marketing plan that you can use to generate interest in your music, acquire new fans, and sell your music online. It’s a great companion course to Music Marketing: Press, Promotion, Distribution, and Retail, with a greater focus on the online side of marketing.

Finally, the companion book to Music Marketing: Press, Promotion, Distribution, and Retail is done and available. The book contains additional interviews and content which complements the online course of the same name. I’m giving away a free chapter and selling the book on a discount here if you’d like to check it out.

That’s all from me. I wish you the best in 2010!

Here’s a video of me talking about the new Online Music Marketing: Campaign Strategies, Social Media, and Digital Distribution course:

Don Passman is an entertainment lawyer who has represented some musical titans, including R.E.M.,Tom Waits, Tina Turner, Quincy Jones, Green Day, Bonnie Raitt and many more. He’s also an author who has written one of the most thorough and practical guides to understanding the music industry. All You Need To Know About The Music Business is now in its 7th edition, and I had the good fortune of connecting with Don to discuss his thoughts on 360 deals, direct to fan options, file sharing, and the current state of the music business.

Congratulations on your revised and updated book! What do you see as being the most significant changes in the record business since the book first came out twenty years ago?

Well, there’s no more vinyl…[laughs]. In the record biz the changes have been profound. The record companies have gone from being incredibly powerful players to still powerful, but not nearly as much as they were. The biggest change is of course piracy, which devastated record company revenue. The record business has gone through such a hard period because it is difficult to compete with free. The record companies have been blamed for being asleep at the switch. They could have probably done more than they really did–although there wasn’t much anybody could do even with a rear view in the mirror.

Speaking of revenue, the 360 deals are certainly a way for labels to engage in other revenue streams, but are 360 deals a good option for artists? Is that something that an artist should be interested in if they are going to be signing to a label?

Whether they are interested in it or not, if they’re going to sign with a major or even an independent, they will have to make one of these deals as none of these companies will sign them without it. The labels are essentially trying to position themselves as branding companies, and are saying that they are not just a record company; i.e. we’re people that are investing in your career, we’re going to help you build your brand, and when you get benefits from that brand we should share in them.

This seems like a contradiction to me. The majors have downsized over the past few years, they have fewer resources, yet they are promising more with the 360 deals. Can they deliver?

No. In fact, they quit making promises a while ago. They started out by saying they would give you more attention, that they would give you a better record deal if you gave them 360 rights. They wanted the 360 rights to hedge their bet. That’s all gone. Now it’s just a record deal that looks pretty much like a stand-alone.

Are you saying that if you provide a label with the rights to merchandising, touring, or publishing there is no guarantee they will provide any marketing support to help increase these sources of revenue?

Correct. There are two kinds of 360 rights, active and passive. Some of the labels are actually taking the merchandising rights to manufacture and exploit, some the publishing rights, and others are just taking a part of income–meaning that you make your own deals for a piece of the pie. In the situations where they have a merchandising company, they are of course going to give you those services. They’ll do the manufacturing, the distribution, and the marketing. If they have a passive interest, however, they’re not really going to do anything.

That sounds like a pretty tough deal for artists. In the past, the only possible option was to work with a major label to get worldwide distribution, marketing support, tour support and more. Do you think that now is a good time for artists to be working with independent labels, which might be less constrained by the concept of multiple rights deals?

Well, the independent labels have gotten just as aggressive as the majors in terms of 360 rights. So you don’t actually get much comfort by going to an indie label. You may make a better deal, but they are still going to want the 360 rights as well.

Do you think it would make sense for a developing artist to switch their focus away from labels and instead try to market and sell themselves with the help of partners like an indie PR firm, a low-cost online distributor, or another artist service-based company?

It depends on what kind of artist you are. Nobody that is mainstream and wants to sell a multi- million release has done it yet without a label behind. That may change. But that is where we are today, Nov. 2nd. If you are an indie artist that has a niche market and a cult following, and you are content to stay there, then you can do just fine without a label. You can sell directly to your fans, you will know who they are, and you will have control of your marketing database. Anywhere in between, the answer is a little bit trickier. You’re better off economically on a per unit basis doing it yourself, because you can make so much more if you keep the 360 rights. But the question is: Will you sell enough going through a label to make up the difference? This is of course unknowable. It is easy to sign up on MySpace, use Tunecore, or have someone distribute your music digitally (or even do physical distribution). The problem is everyone can do that too. There’s no barrier to entry, and there are four million bands in MySpace. How do you break through the noise? That is essentially what record companies help you do.

France is adopting the so-called ‘three-strikes’ law, where Internet users could face a suspension of their services for sharing files. Britain might go the same way. Do you think that this is an effective way to fight file sharing?

It is certainly better than what we have right now. Presently, there is no consequence to infringers, really—there have been consequences for a few people here and there, but for the most part file sharing is rampant. So, I’m in favor of anything that makes piracy more difficult. But I also think it has to be coupled with something that people actually want, which we haven’t done a good job of providing yet. And by the way, that is not completely the industry’s fault. A lot of it is technological. There are limits to what [the record companies] can deliver today.

Do you think that technology will develop to the point where piracy might stop being an issue? I am thinking of the new Spotify model, where the idea is for premium users to pay a subscription to effectively have “anytime, anywhere” music with the inclusion of a smartphone app. It seems to me that offering a legal and more convenient option for fans to get music might be a better route than cutting off their Internet service.

Yes, if we offer something people really want. In that case, I think we can ‘conscript’ the pirates. There will always be piracy. Every business, from grocery stores to anybody else has some kind of theft. But it is minimal. In music, it is rampant. If we come up with something that is easy to use and readily accessible and cross-platform, I think we’ll have something that people will really want and should be able to monetize. It could be very good for new bands, because people who would never buy at a record store may now be willing to pay for music.

As traditional CD sales drop, are new income sources—such as video streaming services and the like—showing promise as alternatives to recorded music sales?

Well, none of that means much now. The revenues from videos are relatively modest when spread out, at least on an ad-supported model, because videos haven’t worked very well. It is hard to tie advertisers to a specific video and the advertisers are not willing to pay much for it anyway. This may change, but at the moment such revenue has not amounted to much. The same applies to cell phones. In the future, more things will be possible, but as yet there are relatively few options.

After years of contention, rights holders and commercial webcasters have agreed on pricing terms for online music streams; the prices will stay in place until at least 2014. In the updated edition of your book, you refer to the Copyright Royalty Board and this recent agreement. How does this change the playing field for consumers and artists?

It doesn’t change anything for consumers and artists. It really has to do with an alternative break in the statutory rate for webcasters, who were complaining that it was so expensive they couldn’t do it. So they came up with a private settlement, affordable to most, that makes the cost a bit less. So I think it would help consumers in the sense that there would hopefully be more services available that would cheaper. But otherwise, it’s not a direct impact.

In the new edition of your book, you also talk about P&D and ‘upstream’ deals. Could you discuss some of the options independent labels have if they chose to join forces with major distributors and labels?

A P&D deal works fine except that it is very risky and you are taking the risk of the manufacturing and the returns coming back. It can be expensive, but when it works you make far more per record. The upstream deals are deals that kick-in after a certain critical mass [of sales] is reached. Then, you no longer have a P&D deal, but a profit sharing deal. You are not taking any financial risk, and the major label takes over the cost of marketing, promotion, and so forth. Again, you make less, but presumably they take it to another level. Some of these deals have worked pretty well, but a lot of them haven’t, so it is not clear where the advantage lies. You may be better off or not. Just keep the P&D deal, and if it really works then your label will have more leverage to go out and make a better arrangement with the distributor.

At what point should an independent label think about a P&D deal? What should they have going before they even consider a P&D?

Product… [laughs]. You can make a P&D deal at any time. You just need to know that you are taking a pretty big risk with it. Maybe that’s all you can get, because nobody will give you any money, so they’ll only press and distribute the records. But that’s probably the deal you will end up having to make to get things going at the beginning, when you have no kind of track record or buzz.

If you’ve been following my blog, you might be aware that I am a fan of artists and managers A) starting off by doing what they can themselves to help market and sell their own music, and B) seeking out partnerships with companies that can help them to do more than they are able to do themselves, for a fair price, and C) building up, communicating, and monetizing their own list in a meaningful way, using best practices with direct-to-fan marketing. I think direct-to-fan not only has the potential of generating more margin for artists now, but if done properly, DTF (direct-to-fan) can also help to ensure that artists are building a passionate base for the future. It’s not the only marketing segment that matters, but it is a segment that all musicians and managers should be paying close attention to, and integrating into their other traditional marketing and sales campaigns.

I’ve been working with Shamal, Gary, Ian, Adam and others at Topspin for the past 8 months or so creating a course dedicated to outlining the best practices that folks should be aware of in terms of online DTF (and traditional) marketing, and how Topspin’s software can be used to help facilitate these best practices. I’ve had the good fortune of not only taking a look inside Topspin’s platform to analyze their key features – a content management system that hosts your media assets, a fan management system that collects, organizes, and analyzes fan data, detailed reporting features, e-mail management system, widget creation and viral tracking, and more – but also to see the best practices and real data that Topspin has generated from the 150+ campaigns they have run over the past couple of years. While every marketing and sales campaign is different, this course presents folks with a unique opportunity to “look behind the curtain” to see exactly what has worked for some bands, how they set up their offers, the income they generated from these offers, and how they went about acquiring new fans. I think it’s helpful information.

I sat down with Ian here at Berklee in August to do a quick overview of the course, which turned into a bit of an online marketing clinic. Below is one of the clips from our conversation. To see them all, click here.

Online Music Marketing with Topspin is enrolling now, and begins on January 11th. If you are interested in learning more about the course, feel free to connect with one of our Admissions Advisors at 1.866.BERKLEE (US) or 617.747.2146 (International).

Tom Friedman, author and foreign-affairs columnist for the New York Times, doesn’t write much about music. But his piece “The New Untouchables” is a column well worth reading for those looking for a way forward in the music business. It may sound obvious, but the truth is that many of the fundamental techniques used for success in the “non-music” business world are the same techniques that can be applied to folks looking for success in the “music” business world.

Check this out, from Friedman’s piece:

A Washington lawyer friend recently told me about layoffs at his firm. I asked him who was getting axed. He said it was interesting: lawyers who were used to just showing up and having work handed to them were the first to go because with the bursting of the credit bubble, that flow of work just isn’t there. But those who have the ability to imagine new services, new opportunities and new ways to recruit work were being retained. They are the new untouchables.

Those who are waiting for this recession to end so someone can again hand them work could have a long wait. Those with the imagination to make themselves untouchables — to invent smarter ways to do old jobs, energy-saving ways to provide new services, new ways to attract old customers or new ways to combine existing technologies — will thrive.

It’s not hard to see the connection between lawyers and musicians, here, is it? Imagining new opportunities, new ways to recruit work, and inventing smarter ways to do old jobs is a great plan off attack for business folks AND musicians.

Bruce Houghton from Hypebot initiated a great discussion on his blog a few weeks back about his ideas that “there have always been skills beyond just making music that, if not required, certainly made success more likely.” It’s an opinion that I share, too.

I definitely would not frame any musician in the “untouchable” camp (brands are only as good as the trust their fans have in them), but generating leverage by doing as much as you can yourself (with the help of a good team, if possible), analyzing data to do it smarter, and figuring out ways to creatively attract new fans is great advice for any musician interested in building a more sustainable career.

Clay Shirky is the former vice-president of the New York chapter of the Electronic Frontier Foundation, and an expert on the social and economic effects of Internet technologies. This TED presentation on the Social Web is a much watch for anyone involved in media or marketing.

“The choice is not if this is the media environment we want to operate in. The question is now ‘how can we make the best use of this media?’ – even though it means changing the way we have always done it.”

Via Dave Allen @pampelmoose

Great post from Amanda Palmer of the Dresdon Dolls on using online media to connecting directly with fans and make $$$. Love the creativity here…

=====

From: Amanda Palmer
Subject: twitter power, or “how an indie musician can make $19,000 in 10 hours using twitter”

this story has just been blowing people’s minds so i figures i should write it down.

1.
FRIDAY NIGHT LOSERS T-SHIRT, $11,000

about a month ago, i was at home on a friday night (loser that i often am when i’m not touring, i almost never go out) and was, of course, on my mac, shifting between emails, links and occasionally doing some dishes and packing for a trip the next day. just a usual friday-night-rock-star-multi-tasking extravaganza.

i twitter whenever i’m online, i love the way it gives me a direct line of communication with my fans and friends.

i had already seen the power of twitter while touring…using twitter i’d gathered crowds of sometimes 200 fans with a DAY’S notice to come out and meet me in public spaces (parks, mostly) where i would play ukulele, sign, hug, take pictures, eat cake, and generally hang out and connect. this was especially helpful in the cities where we’d been unable to book all-ages gigs and there were crushed teenagers who were really grateful to have a shot at connecting with me & the community of amanda/dolls fans.

i’d also been using twitter to organize ACTUAL last-minute gigs…i twittered a secret gig in LA one morning and about 350 folks showed up 5 hours later at a warehouse space….i played piano, filmed by current.tv, and then (different camera crew) did an interview with afterellen.com.
the important thing to undertsand here is that the fans were never part of the plan..,i basically just INVITED my fans to a press day, the press didnt’ plan it…i did.
i was going to be playing in an empty room and doing q&a with afterellen on a coach with only the camera watching.
it was like….why not tell people and do this in a warehouse instead of a hotel lobby or a blank studio? so i did.

it cost me almost nothing. the fans were psyched.

but back to the bigger, cooler story….

so there i am, alone on friday night and i make a joke on twitter (which goes out to whichever of my 30,000 followers are online):

“i hereby call THE LOSERS OF FRIDAY NIGHT ON THEIR COMPUTERS to ORDER, motherfucker.”
9:15 PM May 15th from web

one thing led to another, and the next thing you know there were thousands of us and we’d become the #1 topic trend on twitter.
zoe keating described it as a “virtual flash mob”.

the way twitter works (if you don’t have it) is that certain topics can include a hashtag (#) and if a gazillion people start making posts that include that hashtag, the topic will zoom up the charts of what people are currently discussing. it’s a cool feature.

so anyway, there we were, virtually hanging out on twitter on a friday night. very pleased with ourselves for being such a large group, and cracking jokes.

how do you “hang out” on the internet? well, we collectively came up with a list of things that the government should do for us (free government-issued sweatpants, pizza and ponies, no tax on coffee), AND created a t-shirt.
thank god my web guy sean was awake and being a loser with me on friday night because he throw up the webpage WHILE we were having our twitter party and people started ordering the shirts – that i designed in SHARPIE in realtime) and a slogan that someone suggested: “DON’T STAND UP FOR WHAT’S RIGHT, STAY IN FOR WHAT’S WRONG”. neil gaiman and wil wheaton joined our party. the fdnas felt super-special.

by the end of the night, we’d sold 200 shirts off the quickie site (paypal only) that sean had set up.
i blogged the whole story the next day and in total, in the matter of a few days, we sold over 400 shirts, for $25/ea.

we ended up grossing OVER $11,000 on the shirts.
my assistant beth had the shirts printed up ASAP and mailed them from her apartment.

total made on twitter in two hours = $11,000.
total made from my huge-ass ben-folds produced-major-label solo album this year = $0

2.
WEBCAST AUCTION, $6000

a few nights after that, i blogged and twittered, announcing a “webcast auction” from my apartment.
it went from 6 pm – 9 pm, my assitant beth sat at my side and kept her eyes on incoming bids and twitter feed.
while we hocked weird goods, i sang songs and answered questions from fans. we wore kimonos and drank wine. it was a blast.

people on twitter who were tuned in re-tweeted to other fans. the word spread that it was a fun place to be and watch.
we had, at peak, about 2000 people watching the webcast.

at the suggestion of a fan early in the webcastm anyone could, on demand, send us $20 via paypal and we would chew,
sign and mail them a postcard. we sold about 70, and we read all those names at the end of the webcast and thanked those
people for supporting us. here’s how the sales broke down:

all the items were signed by moi and hand-packed by beth and kayla._ the items and highest bidders were as follows:_ hilary, ukulele used on the european tour: $640 _jake, “guitar hero” plastic guitar controller used in album promo shoot: $250_ lary b, copy neo2 magazine, plus two post-war trade slap-bracelets & a crime-photo set: $230_ devi, glass dildo, with subtley-sordid backstory: $560 _liz b., “hipsters ruin everything” t-shirt, made by blake (get your very own here!!!!): $155.55_shannon m., my bill bryson book, a short history of neary everything: $280_ nikki, huge metal “the establishment” sign, used at rothbury festival for the circus tent i curated: $450 _j.r., purple velvet “A” dress used in the dresden dolls coin-operated boy video shoot: $400_ jessie & alan: who killed amanda palmer vinyl: $100_ nikki: wine bottle, auctioned BY REQUEST!!! $320 _shannon w., torn-to-shit vintage stockings used in the who killed amanda palmer/ michael pope video series: $200 _jodi,
school-note-book break-up letter, written to amanda from jonas woolverton in 7th grade (i still haven’t emailed him about that….): $250_ daryl, ANOTHER wine bottle, by request, that we had LYING AROUND: $320
and…………..
reto emailed, having barely missed the wine bottle, and asked us to send him “something funny” for $129.99. we sent a heath ledger statuette.

total made on twitter in 3 hours, including the postcards, was over $6000.
again, total made on my major-label solo album this year: $0

3.
TWITTER DONATION-ONLY GIG, $1800

a few days later, i twittered a guest-list only event in a recording studio in boston, to take place a week later.
the gig lasted about 5 hours, all told, with soundcheck and signing. i took mostly requests and we had a grand old time.
first come, first served. the first 200 people to ask got in, for free. i asked for donations and made about $2200 in cash.
i gave $400 back to the studio for the space and the help. we sold some weird merch. i think we should call it an even 2k.

total made at last-minute secret twitter gig, in about 5 hours = $2000
major-label record blah blah blah = $0

…..and for fun, and to thank my fans for being awesome, i’ve been doing some twitter perfomance art, including answering their questions by magic-markering my body until it’s covered, and displaying time-lapse make-up application advice….but that’s another story.

TOTAL MADE THIS MONTH USING TWITTER = $19,000
TOTAL MADE FROM 30,000 RECORD SALES = ABSOLUTELY NOTHING.

turn on, tune in, get dropped!!!!!

love,
amanda fucking palmer
http://www.amandapalmer.net
http://www.dresdendolls.com

p.s.
if you want to read the full blogs and see the pictures from the #LOFNOTC events, i blogged here:

1. the friday night that started it all:
http://blog.amandapalmer.net/post/111667948/twitter-the-beautiful-losers-lofnotc

2. the webcast and magic-marker/make-up mayhem:
http://blog.amandapalmer.net/post/127401792/wasnt-this-supposed-to-be-my-fucking-week-off

Dear Steven Van Zandt,

I just read your interview in CNN, and I wanted to offer an alternative view to your thoughts, particularly related to this quote: “The reason nobody wants to talk about it is because it mostly sucks! Who are we kidding here? Nobody’s buying records? Because they suck!”

You also suggest that if bands learned more cover songs and listened to more “great records” (i.e. classic records) the record industry would be saved, which I think it is a slightly myopic view of what is happening in the business. I think you are missing two key points:

1. THERE IS AN AMAZING AMOUNT OF GREAT MUSIC OUT THERE, but I think you are looking in the wrong places for it. I suggest you take a look at eMusic – the largest online retailer for independent music. Find an artist you like, look at recommendations by eMusic and other consumers, and you can easily fall down the rabbit hole for hours experimenting with new, and in many cases, amazing music you have never heard before. Like Psych Rock? Check out Wooden Shjips. Sign up for newsletters from forward thinking physical retailers like Other Music, a store run by music geniuses who can connect the music dots between Grizzly Bear and Erlend Øye in three steps or less. And of course there are dozens of music blogs, from aggregators like the Hype Machine, live music session and editorial blogs like Daytrotter, old school outlets like Pitchforkmedia, and a million in between. Not to mention the myriad of online radio stations that are not hamstrung by the tight-playlists the consolidated commercial radio business has given us over the past 10 years. Widen your net, Steven, and you’ll find tons of music that will knock your socks off.

2. THE OLD MODEL OF A PHYSICAL RECORD-BASED MUSIC ECONOMY IS DEAD. It is not coming back. Dead. Dead. Dead. You can have a million bands covering “Working on a Dream” for a million years and you will not bring traditional physical record sales anywhere close to where they were at their height in 2000. The infrastructure has shifted forever. Some details you should consider:

Less Outlets for Traditional Music: Tower Records shut down their U.S. operation in 2006; Circuit City (9th largest music retailer in 2008) ceased operations in 2009; Virgin Megastore announced in 2009 that they will close all of their U.S. stores; Borders (the 6th largest retailer of music) has cut back their in-store floor space by 30% to 7% of their total floor space; and Transworld closed 101 stores in 2008, after losing $69 million dollars, including a 24% drop in total sales during the nine weeks leading up to the end of the year – traditionally the best music retail time of year. Taken together, there are simply less outlets and less floor space available to the labels to merchandise and sell their music. It is not a matter of buyers not taking in records because “they suck.” The space that had existed for music is now filled with DVDs and other media, or is gone.

Consolidated Commercial Radio is Ineffective: The number of artists that terrestrial radio “breaks,” in terms of converting radio play to mechanical royalty sales is smaller with each passing year. Although radio is still the primary method that folks hear about new music (49% of consumers list radio as the #1 way they find new music, according to a 2008 Edison Media Research survey), radio is quickly losing ground to the Internet, with 25% of consumers hearing about new music online.

The Replacement Cycle: Technological innovations have been shaping how, where, and when folks listen to (and purchase) music for years, beginning with improved production processes with vinyl, and then moving onto 8-track, cassette, CD, and finally digital music. Along the way, major labels have been able to monetize these technological innovations through a process called the replacement cycle – basically a repackaging of existing content in the newest format.

With consumers being able to convert files to digital themselves from existing CDs (not to mention sharing digital files for free online), the labels have been unable to find a way to monetize this format shift effectively. The end of the replacement cycle, coupled with the complete decentralization of the industry brought on by the Internet and the change in consumer habits, makes for a very tough time for the record business.

I know it’s a tough to find new music, particularly when you are on tour. Perhaps you don’t have regular access to the Internet. But I assure you; the issue is not that that music sucks. Spend some time doing your research on finding new bands, find some tastemakers you can depend on to turn you onto new music. The old industry that you grew up with is gone; but the phoenix is rising from the ashes with new models and new revenue streams. Whatever you do, please don’t blame what is happening on a lack of good music – it really makes you sound out of touch.

Mike

“Talking gross numbers that come directly to the band, we have made more money already than we have on the last record in four years,” said Mathieu Drouin, the band’s co-manager.

Great piece in the L.A. Times today on Metric. The band is forgoing a traditional record deal and focusing on alternative income sources and direct to fan sales and marketing techniques for their most recent release “Fantasties.” Direct to fan has been a proven model for megastars like Radiohead and Trent Reznor, and it’s encouraging to see a “middle class” musician (Metric’s 2005 release “Live It Out,” sold 45,000 copies) having success using a similar template.

Some takeaways from the effort:

1) Without the distribution fee and record royalties that a major label and distributor would charge, Metric is able to net $.77 per iTunes track as opposed to something closer to the $.22 per track a label would pay (this figure includes international downloads, which could pay the artist more than the US standard of $.70 per track by going direct)
2) As distribution follows marketing, Metric has hooked up with Topspin to handle the online direct to fan marketing and sales efforts. Take a look at their Website, here. Fantastic way to leverage “free” to acquire names for the mailing list, they have an active blog area, and most importantly, they are engaging in variable product and pricing which everyone from the hard core fan to the curious potential fan can engage in. Again, because the band is selling direct, their profit margin is much higher. Metric sold out of an initial allotment of 500 deluxe packages in 48 hours, said Drouin, who estimated a profit of $13 to $15 per unit. “We can never offer a fan that much value at that price if we had to go through a record company, distributor and a retailer. We cut out three rungs.”
3) The band made the entire record available for free as a stream a month before release, creating widgets that could be embedded in fans Websites (provided by Topspin). Folks were able to become familiar with the new record, they liked what they heard, and they paid for the record when it was released commercially. This is the “emotional connection” theory in action.
4) The band worked with independent distributor Redeye for the physical CD. Because Metric has a track record and had analytics that proved people were into the record, Redeye had an easier time shipping the record to physical independent record stores.
5) Canada supports the arts. The Foundation to Assist Canadian Talent on Recordings provided the band with $50,000 to cover recording costs, as well as a smaller federal grant.

Major labels are traditionally known for A) financing, B) marketing, C) distribution. I think Metric is a great example of a band that not only accomplishing all of these things outside of the traditional model, but is making more money because of it. Check out a cool Elliott Smith cover by the band:

It’s not all that surprising to read that some folks are making a killing from building apps for the iPhone. As of January ’09, over 500 million apps have been downloaded, and seeing that Apple takes a 30% cut on all apps (same as their fee for sales of music on iTunes), developers are taking in 70% of the revenue of these 500 million downloads. What IS interesting to me is the marketing behind these apps, and in particular, the way that some developers are using the concept of free to generate interest in their product.

The New York Times ran an article last week on Ethan Nicholas, the guy who built iShoot, an app that has generated $800,000 in sales in five months. Take a look at how his sales progressed:

“After the project was finished, Mr. Nicholas sent it to Apple for approval, quickly granted, and iShoot was released into the online Apple store on Oct. 19.

In January, he released a free version of the game with fewer features, hoping to spark sales of the paid version. It worked: iShoot Lite has been downloaded more than 2 million times, and many people have upgraded to the paid version, which now costs $2.99. On its peak day — Jan. 11 — iShoot sold nearly 17,000 copies, which meant a $35,000 day’s take for Mr. Nicholas.”

Obviously, this is an extreme example of what can happen financially for app developers, but I do think that some comparisons can be made to musicians looking to generate interest in their music online. My friend John Snyder, who runs Artists House Music, once told me “the curse of the developing artist is anonymity, not piracy.” I do believe that some form of “free” makes sense for most artists; be it a download card distributed at live shows, select music available for free on your site (perhaps in exchange for an email address), live shows for download, etc.

Traditional one-size-fits-all physical retailers are failing – Virgin, Transworld, and Borders have all either closed up shop in the US, drastically cut back on music floor space, or are taking massive financial hits. I think a large part of the future of sales in the music business is online direct to fan relationships (with supporting offline components), where artists cultivate more extensive relationships with their fans, and in the process more effectively monetize traditional and non-traditional sales options. I think some part of “free” works to engage your existing fanbase, as well as turn casual fans into hard-core supporters.

Andrew Dubber has some good thoughts on the topic of free as well. Take a look at his post on “Why Give Away Music For Free.”

It’s been widely reported that Touch and Go, a seminal independent record label (as well as a distributor of other fantastic indie labels), is cutting back its label operations and discontinuing its manufacturing and distribution operations completely. Here’s the message from Touch and Go’s Corey Rusk:

It is with great sadness that we are reporting some major changes here at Touch and Go Records. Many of you may not be aware, but for nearly 2 decades, Touch and Go has provided manufacturing and distribution services for a select yet diverse group of other important independent record labels. Titles from these other labels populate the shelves of our warehouse alongside the titles on our own two labels, Touch and Go Records, and Quarterstick Records.

Touch and Go will be returning to its roots and focusing solely on being an independent record label. We’ll be busy for a few months working closely with the departing labels and scaling our company to an appropriate smaller size after their departure. It is the end of a grand chapter in Touch and Go’s history, but we also know that good things can come from new beginnings.

It’s sad to see a label so artist friendly (the handshake deals that Touch and Go does with bands pays them 50 percent of the net profit on their records–about four times the industry’s standard royalty rate) in this situation. Physical distribution is a tough business (as is physical retail), and as Rusk mentions in the last sentence of his note, good things can come from new beginnings. Innovative thinkers (like Terry McBride from Nettwerk) are forging a new direction with music companies that are based less on the reliance of income generated from distribution and sales of physical product. I hope Corey Rusk can do the same with Touch and Go.