EVENT TRANSCRIPT ARCHIVE. UK MUSIC INDUSTRY BUSINESS.

Unsigned To Domestic Success In Rock Music

This is a pioneering new business development project for professionals involved in guitar-based and rock music genres. Participation is free but applicants must commit to attend the project in its entirety.

---

Rock Project Report: Day 1

Introduction

  • The aim of the project is not to create a set-in-stone formula for breaking guitar acts but to provide ideas and techniques for all stages of this process.
    · The project will also provide a better understanding of the roles of the different professionals within the business.

Suggested stages of a band’s development (to be reviewed/honed throughout project)

1) A talented artist
2) Appraisal stage – where artist meets professional
3) Artist development (before you encourage media attention, build fanbase, or begin to court third parties)
4) Marketing phase – develop audience, attract attention of 3rd party professionals, media
5) Build the full team – identify record company, publisher, booking agent, plugger, merchandiser, possibly sponsor, and set up contracts.
6) The plot – develop marketing and distribution strategy up to first album

2) Appraisal Stage

Witnesses: Ray Coffer, Marc Fox, Pat Carr

What should you look for in an artist:
· Artist vs. Musician

· It’s not simply talent, they need to be a real artist. This includes understanding the commitment required and being prepared for a 5 year run.

· There is something undefinable about some people, a presence, magnetism/tension in the air/feeling that this is the real thing.

  • Age is not an issue, citing Pulp and Mercury Rev, though others felt mid-twenties was a practical limit given the rigours of the job (touring for little money etc.)
  • Looks: It’s not looks but image that sells records. Image, along with music, is what a manager takes to the label

What takes place at initial meetings:
· Most managers would never have a meeting without first hearing a demo or seeing a band, and would most likely want to know everything about the artist, including sexual orientation
· Initial meetings should establish a modus operandi – how does the artist work, what they will and won’t do (tour, interviews etc.)
· It’s important to establish the artist’s responsibility/side of the bargain?.They must stick to this.

Taking on an artist:
· Artists can get signed bands on just one song
· Typically a manager would take take a 20% cut and generally insist on a 5 year contract – though they could leave after 18 months.
· As soon as a decision is made to work together, it is normal to introduce artist to a lawyer and an accountant, to give them serious advice on eg. IP (intellectual property). The services of a booking agent would also be sought.
· Very important to establish early on how the band felt about the songwriter, as bands tend to break up because of financials. Do they share the IP in the songs or is it 90% to the songwriter and 2.5% to each of the others?

Working with an artist:
· The contract is a personal service agreement with artist. One needs to be completely candid/honest throughout – you can’t lie to them. Once trust bewtween artist and manager has gone, it is almost impossible to regain, although the relationship can survive the odd tiff.
· A Manager should help them in any way possible to get them to perform
· It’s also important to confront any issues, rather than letting them fester

3) Artist Development Stage
(Before you encourage media attention, build fanbase, or begin to court third parties)

Production Deals:
· Production companies will record the music, which is then licensed to a record label what’s the exact businesss model here?
· Industry practice increasingly seeking a share of artist’s music/publishing/ IP, which is not endorsed by representative bodies.
· Perhaps labels should be into long term development rather than short term gain? This is countered by the fact that major record labels have ever shorter accounting periods (are they really now accounting monthly?) rather than annually..so want a quick return
· Others felt that the majors have been bitten too many times by investing into developing a band and seeing an unsatisfactory return from it, so they now wished to outsource this risk..by telling management to go away and come back with a finished product.

Keeping The Band Above Water At Artist Development And Marketing Stages:
· Band should aim to earn as much money as possible prior to these stages as they aren’t going to earn anything for a while.
· Why not sell CDs at gigs?

4) Marketing Stage
(Develop audience, attract attention of 3rd party professionals, media)

Creating a buzz:
· One of the challenges of the music industry is to find original ways of getting people to claim ownership of music
· There’s a communication thing with art. Once people believe in it, then they’re on crusades. You’ve got to get one person to believe in it, then there are two then 4, 8, 16?.if you could make the top guy at a label believe in them?. you’d be well away
· In the first year a band might do 50 gigs, write 40 songs (is this right?), get some press, get an agent, put out one or two key releases and build a bit of a fan base
· It might take 18 months – 2 years to generate 20k sales
· Cost of launching a rock act might be £10k for press and tour support for 3-4 months
· Nothing wrong with self-releasing one or two releases (singles only, or albums too?), these will help build up press interest, and won’t affect process of attracting a major label
· Nothing wrong with selling CDs at gigs to make money
· (some of the above could be moved to the plot)

PR:
· A lot of pr companies will take bands on before they’re signed in the hope of being retained after signing
· Best to take pr companies on on a project basis rather than on a time basis as this means you won’t end up paying extra for delays in other areas that end up delaying release

5) Build The Team Stage
(Identify record company, publisher, booking agent, plugger, merchandiser, possibly sponsor)

A&R
Getting A&R people to hear about the act:

  • Passion, desire and push is more important (at the beginning at least) than being a well-known manager
    · A&R’s do listen to music from managers they haven’t heard of. Some say though, there’s simply too much music to always do this, so they’ll tend to rely on people they know.

A&R Ticksheet:
A&R’s are looking for as many ticks as possible of their ticksheet. This includes:

  • The same electricity/magnetism that a prosepective manager looks for in an artist
    · Fanbase
    · Connections with professionals
    · Further ticksheet criteria to be addedSigning:
    Always be clear to the artist that you’re signing to the label rather than the individual A&Rs as personnel may change

Label Management:
A consultant label manager might charge a fee of £200 – £500 per month

Record Deals:
Some record companies used to only pay on 90% of income, though this is on its way out

6) The Plot
(Develop marketing and distribution strategy up to first album)

Creating a buzz 2
· Once the A&R has signed an act, it’s then a question of articulating this excitement and finding champions of the band in the building and the media
· A&R’s will have meetings to contrive how to get particular journalists along

Case Studies
· Smashing Pumkins signed to Virgin on the basis that they weren’t allowed to release the first record. Funds from Virgin were used to release the first album completely independently (building their fan base etc.) and then used Virgin after the first album.
· Lots of people tried this afterwards and got it wrong.
· Cooper Temple Clause underachieved with a number of singles. Only 1K -2K were pressed up on purpose?and these sold very quickly. Helped to create a buzz. Their manager spent the whole time simmering the band. They now have a very good fanbase and are playing Reading.

Alternative routes to market
Thinking laterally and going for things like synch licenses (adverts), computer games, film, extreme sports could help financially and also promotionally

  • Some companies take 10-20% for introducing you to relevant partners (eg. BBH, an ad agency)
    · You might just get £5k for record clearance and £5k for publishing clearance, but might also get publishing royalties.

Notes on professionals’ roles
(to be filled in throughout the project)

Artist/Band
· It takes time to develop music. Artists have 20yrs to make the first record, but 2yrs for the 2nd, 3rd, 4th etc?
· The best artists keep hold of their original fans throughout their career, eg. U2
· Staying together – bands can’t operate if there is internal strife. There has to be a generosity of spirit.

Manager’s job
· To turn artistic vision into commercial reality
· The manager should direct the career around the band, music, their knowledge, commitment, ability to play, and other parameters
· If the talent is there but the artist is limited in other ways, you simply work around this.
· Typically, a manager would manage 4/5 artists at the same time. Most make money when inspired to work with projects, not when they cynically try to make money. There are well-documented exceptions to this, however!

————————————————————————————————————
————————————————————————————————————

Think-tank 1 report

Topics covered:

  • From creation to consumption: so what’s new?
  • From remote recordings to real music on demand: an analysis of the real effect of digital technology on the traditional music industry value chain
  • Music publishing: the perfect virtual “product”
  • New business models – successes and failures so far: who’s still in business and why?
  • Intellectual property on the Internet: what the experts are saying.this year.
Speakers:
Panel Steve Mayall Co-founder, MusicAlly
Jeremy Silver CEO, Sibelius Software Ltd
Chairman Stuart Worthington MMF Target Training

Event Summary:

1. How Things Are

What’s happening in mobile telecoms & music?

Mobile technology as a platform to deliver music is currently the biggest hoped-for success in the mobile telcoms industry. Record labels likewise keenly anticipate such delivery.

· Monophonic mobile ring tones, were the first incarnation of mobile music. As a global market it’s worth an estimated $1bn. Collection societies around the world collected $70 million averaging 10% of retail price, equating to $700m. The grey market is a third, bringing up to $1bn. (source: Mobile Music report, publ. Informa Group).

  • Polyphonic ring tones were the second incarnation that enabled a way to further personalise mobile ‘phones.
  • The current expectation is that the next step would be to have real music as a ring tone, or delivered straight to you for consumption. People are prepared to pay a not inconsiderable fee for a 15 sec. ring tone – averaging £3, but up to £5 in some cases – to personalise their ring tones in this way. Although real music is more desirable than a ring tone, it would be wrong to assume there is more money to be made from real music – delivery costs will be higher (as the files are much bigger) and there are more rights holders involved (recording, composition and performance).
  • The consumer is expected to adopt this delivery mechanism because it’s direct, instantaneous, and in a convenient format for listening and the record industry is excited at the prospect of music delivered through a secure distribution channel which has a natural payment mechanism built into it, thus eliminating piracy.

However, the danger is that there is an over-inflated market expectation that people will be prepared to pay a premium to receive real music in this way.

Not surprisingly, many labels are excited at this prospect, and of the financial returns such a distribution mechanism would reap. Real music in a controlled distribution environment is the holy grail of the record companies – issues surrounding piracy wouldn’t exist because of the secure nature of delivery, and such a delivery mechanism affords labels greater connectivity to their subscriber base.

However, the advent of 3G (or similar) has once again opened up gateway problems, in that if you can access anything for free online from your mobile, why are you going to subscribe to, and pay for, the downloading of music? (Reference: low uptake of 3G to-date – whilst in it’s infancy, Wi-Fi set to become the new standard in portable technology?)

  1. Emerging Business Models

There are currently 4 areas of commercial potential for the mobile delivery of digital music.

  1. Dedications – sending ring tones as greetings to friends, colleagues, peers, etc.
    2. Karaoke opportunities – particularly in the Far East
    3. PR and Promotional opportunities for a fan base/community
    4. Music on demand

2 principal models that have emerged in the use of mobile telcoms for:

  • Marketing
    Record Labels using mobiles to drive marketing campaigns to customer base, via SMS. Specific targets, encouraging a preview of pre-released music.
  • Distribution/Consumption of Entertainment

Given the sensitive nature as to the success or otherwise of these models, data is very hard to come by, and the effectiveness of such practices relatively unquantifiable.

By way of example Vitiminic, moved into mobile music delivery, allowing the user to send a personalised greeting with a 30 second clip of music. €230’000.00 in one territory for one quarter were posted. Is this a success, given the scale and operational costs of such an organisation?

BonJourno, Italian Mobile Marketing company has now bought them, suggesting that confidence in their use as a mode of consumption is some way off.

The success and profitability of ring tones may well be an exception. It is a simple model involving one copyright (embedded in the composition), and shouldn’t necessarily be held up as an example of potential success in things to come. The delivery of music involves many more rights, which are complicated, costly and difficult to procure.

  1. The Way Forward

Nokia Flash Card, storing MP3 & CD recordings. Sony Ericsson, a partnership which controls both music content and delivery mechanisms – is this the way forward?

The Music Industry has been bleating about piracy, yet this same industry has always been behind the game. Rather than grasping the nettle, and exploit new distribution mechanisms, it has tried to kill it. Witness SDMI whose failure is in part due to the industry’s arrogance in challenging the public to crack what it though was an impenetrable code, which was subsequently cracked in 30 hours by a student…

A 4-Stage Cycle was identified, summarising the attitude and response by record companies, to the perceived threat inherent in the technical progress and development of digital music delivery by third parties. These are:

  1. Ignore any new developments and assume/hope they fail – Denial
    2. Sue the companies, to slow it down, or best of all, to close it down altogether – Conflict
    3. Companies decide to try and do own their own thing – Copy & Imitate
    4. Realisation creeps in that it’s harder than they thought – Sell your solution or Buy another’s, whose process actually works.

Example – Dataplay.
A novel format. EMI & Universal bought into it. But to make it work, they had to launch players, manufacture the storage medium, and then convince consumers they should buy into yet another music format and another hardware device. Additionally problems were experienced in manufacturing such a small unit, with resulting knock-on effects with launching to market.

20 year Cycle by which people will adopt new technology.
Compact Cassette – Phillips 1963
CD – Sony 1983

Laser discs failed, most certainly due to it’s launch being too soon after VHS in early 1980’s.
However, now, some 20 years later DVD is now making ground, and is set to make VHS redundant.

Consumer Electronics companies drive the format. Record companies are directionless.
Minidisc was launched at the same time as DCC. Companies were paid to release in these formats, in effect bribery. MD and DCC launched too close to CD. At the time of launch of Minidisc, CD penetration was only 30%, so what hope was there, for another new format?

  1. Is 2003 the year that the music industry finally embraces the digital
    music environment?

Two recent and ground-breaking events would tend to suggest that it is –

  • EMI makes catalogue available via 2 partners.
    · The successful launch of Apple I-tunes

EMI – 180’000 tracks, a substantial tranche of their catalogue made available as downloads.
I-Tunes made available, for 99c per track, the 5 major record labels’ catalogues, for downloading and burning. Only available in the US to Mac users.

This represents a sea change in the position of the record labels, who 5 years ago resisted any thoughts about digital music delivery mechanisms.

  1. Is the method of selling per track, threatening the artist?

The change could be potentially damaging to new artists as selling tracks individually is not as lucrative as selling albums, with single sales serving only to raise an artist’s profile.
Many artists are reluctant to give digital rights and labels were quick to use this as the main excuse not to pursue and develop secure, digital distribution – the reason being that they couldn’t get their artists to give digital rights on their music.

But hasn’t this gone full circle? Albums used to be a collection of singles. When artists had enough singles they would release an album. Currently, a certain type of consumer would appear to only want to buy individual tracks because of the lack of good songs on many albums, particularly in TV marketed acts.

In essence, it is argued this is an A’n’R problem – single sales are a great way to market a song, but a spectacularly bad way to build a band’s career.

Equally it can be attributed to being a perception problem. The fact that the internet is making single tracks available means that a generation of people think it’s not worth buying more than one song, ie an album.

  1. How can we access an artist’s music?
  • PressPlay (originally known as Duet by Sony & Universal), Duet also had a relationship with Microsoft.
    · MusicNet (BMG, EMI and Warners) in tandem with Real Networks.
    (Note: since the seminar, it appears that Real have jettisoned MusicNet and will now be launching an alternative service, RealOne Rhapsody in partnership with listen.com / Rhapsody.

Huge issues surrounding the control of the gateway to digital music, from what amounted to a duopoly controlled market, exacerbated by the tie-in with Microsoft.

iTunes Download Model
iTunes stole a march on these, and struck a deal with all 5 majors, making songs available for downloading and burning.

iTunes uses the download model, and has made it a success, albeit limited to the US Mac user only. With 1 million downloads in its 1st week and 2 million in the 2nd , Apple appear to have succeeded in making it easy, cheap and reliable.

However, Apple Mac users are more creative and music friendly, and have previously had less access to other PC-based providers, so it could be said that it’s not surprising itunes has met with such an uptake.

  1. Rights Management – a key developmental role?

Digital Rights Management company, ‘The Firm’, was cited as an example of a new breed of management, which might supplant the traditional management role, which aside from administering the recording right, in the main concerns itself with the monetary advance from the label, and the management of that money.

The efficient and informed management of digital rights, in addition to all other rights, is seen as a cornerstone in the evolution of new methods of music distribution. Taking piracy fears to extreme, it could be that digital music is available for free, with income streams derived from the exploitation of associated rights, e.g. merchandising, recording, online, etc.

The enforcement of individual digital rights has made this more successful in the US than in the EU, affording greater protection of intellectual property. The record labels, trade organisations and other bodies that have championed this have been criticised, as this has had an impact on the various business models seeking to deliver music via new delivery mechanisms.

Example : The Rolling Stones use this model really well. Legal music guru Michael Cole would slice up rights in all media, in each territory. i.e. media rights split to TV / video / DVD /radio / online / streaming / downloading / merchandising and so-on.

As a business model, there is a stronger case for carving up and exploiting these rights positively, rather than seeking only a confrontational route and prosecuting.

Compulsory Licensing. The US has decided that if you want protection by law of your rights, then you must be democratic about how you make your rights available and democratise your behaviour, i.e. set a standard rate to download, and this is why for example, I-Tunes has been so successful.

Publishing is a good business model for the online environment, marketing and distribution is still evolving, due to greater technical challenges in delivery of the product, and therefore involving greater costs and challenges.

  1. As an artist, what route would you take for new technology?

The traditional route – is signing to 3rd parties still the way forward?

From Creation to Distribution – some control needs to be imposed, and the record labels have traditionally done this. They have the expertise, distribution networks and the law to do this. No reason to see that it should change, but perhaps a change in psyche needed.

With few exceptions labels have never been good at engaging with the fan base/consumer. This needs to be addressed. Fans could have access to a secure site to vote on single releases, have an input on video content, do artwork and so-on. Greater interactivity could be the way forward, but there will always be a need for music heroes…

  1. Conclusions
  • Rather than a product, digital music distribution becomes a process and a service that you buy into.
  • Technology allows for greater opportunity for feedback from fan and consumer base to artist.
  • Technology will not supersede, but ideally co-exist with more traditional roles and requirements of the music industry.
  • The jury is still out as to whether paid-for digital music services (e.g. iTunes) are set to grow, or whether the industry will instead adapt to the prevalence of low cost / free digital music by concentrating on the exploitation of traditionally non-core income streams such as touring monies, merchandise etc.
  • Some believe the industry needs to develop the value of paid-for music, after all water is free, but millions buy bottled water every day.

————————————————————————————————————
————————————————————————————————————

Rock Project Report: Day 2

 

Participants’ preliminary discussion.

 

Development Level – Gigs on the Club Circuit.
The common experience at present is the low turnout at venues. Playing to fewer than 2-dozen people is depressingly familiar – the traditional club circuit does not seem to exist anymore. In the current climate, stand-alone, one-off gigs in isolation are the least likely method to successfully grow a fan base, and create a buzz.

With developing a fanbase still acknowledged as a crucial building block in the growth of an artist, how do emerging bands get the gigs and, more importantly, how can they grow their fanbase, at a time when it appears that it is only the Festivals that can draw the punters?

Where is the audience? Have venues become complacent? Has “the scene” (which has previously driven trends and genres, (e.g. Ska, 2-tone, new-romantics, etc.), all but disappeared? Are greater demands on leisure time from other forms of entertainment responsible?

Piggybacking in different regions on the back of locally popular bands is possibly the only way to grow a fan base. But this is very much relationship driven and relationship-dependent. Random gig-swaps are fraught with problems. The active support of the venue is crucial.

Branded events have proven to be a popular draw. The element of quality control in such events makes it popular with audiences who know what to expect; equally such nights are appealing to walk-up admissions. Example: Acoustic Anarchy is a branded night in Manchester. Different bands play under that brand every week, and it is well supported. The aim is to tour the brand.
Geoff Meall – Booking Agent, The Agency.

What is the reality of grass root development of a band? Why would he get involved with an act?

The overwhelming question he asks himself is: “Will this band go on to be successful?”

There are very few booking agents, in what is a very closed shop, therefore, they’re not really interested until a band is starting to get a reputation. Up until this point, it’s very hard to get representation by a booking agent.

It’s unusual for a booking agent to become involved prior to a record deal, unless there has been a referral through an acknowledged source, i.e. a personal recommendation from a trusted source, or an already represented act introducing a new act.

Opportunities to play live
He reinforced that playing live to build a fanbase is crucial. Adamant that a walk-up audience is still there, his view is that if you put in the legwork, you will get an audience; basically, the premise being if a band is good enough it will get noticed, although he did concede that this is not always true.

What has changed is the disappearance of the college circuit, except where, as in case of Manchester, the university owns the city’s major venues. In the UK people tend to go specifically to see a particular band, either previously known or recommended to them. Other cultures will go out to see a band, no matter who/what they are.

It was suggested from the participants, that the industry should be more proactive in thinking along cultural lines rather than purely profit and bottom-line driven.

What does the booking agent do?
Discuss with manager how they may best serve the band at that time, it may be to:
· Organise some gigs via support slots
· Organise a showcase for A & R

If an act doesn’t have an agent, what can they do themselves to make them a more attractive proposition for a booking agent to take on?
· Surround themselves with someone who will do booking themselves. Done effectively, it can lead to creating a buzz. Liverpool band, Bandits, do a monthly branded night. Likewise, Sponge, succeeded this way.

  • Foreign territories are too expensive to crack. Focus on domestic area first.
    · Support slots – if not got an agent, some named bands will choose support slots. Persistence pays off. Get to one of the headline bands’ team – promoter, agent, crew, band member, etc, etc. Be creative in who you approach, think “out of the box”.

In his opinion, what would he change at an earlier stage?

The use of technology is fundamental to a band’s success. Look to American bands’ use of the internet, to:
· Generate interest in band;
· Create a fanbase community;
· Interact with the fanbase, not merely inform it;
· Sell CD’s & Tickets – priority sales & booking, offer discounts/incentives;
· Give fans a sense of exclusivity;
Looking to the US:
· Raise the general level of performance;
· Bundle a free CD with a slightly enhanced ticket price – those who attend gigs aren’t necessarily the purchasers of albums;

Management Considerations
· Creative branding opportunities should be considered at an earlier stage. Getting a niche shop, (eg an extreme sports shop) to help fund a local band’s record, which musically may suit the image of the shop/brand, and which may then be sold exclusively by the shop online is a possibility, and has been done in the US. It will get a news story in the local press, and raise the bands profile.

In Conclusion
· Everyone wants a share in success, so there will be a movement of information upwards, about up and coming bands. If you can be on that gossip list, through canny marketing, you are greatly increasing your chances of recognition and success.

  • Accept with the fact that the UK media is a double-edged sword. More diverse and creative, quick to pick up on trends and scenes, however, infinitely more critical and far less tolerant than in other countries.
  • The cyclical nature of the industry means that it does ebb and flow. Currently a resurgence in rock music, as the club scene is waning, thus reversing the Club and DJ culture that has supplanted live music during the previous decade.
  • Contrary to the participants’ opinion, there are still enough venues available for live music.

Andy Allen – Merchandiser, BFI Merchandising
Expressed concern that record labels are beginning to control all income streams, including merchandising income.

At Development Level

In the US;
· Bands sell CD’s online from the outset, through such sites as cdbaby.com
· Bands have had to fund themselves prior to management or label interest. (How is this different to here?), therefore, business awareness within the band itself is far superior to those in UK. Bands & musicians are savvy, very switched on and financially aware. UK bands often not aware of potential income streams.

Most management companies do not think about merchandising until it’s too late. Can save a lot of money over the tour if this is pre-empted. For example, venues typically take a 25% concession fee on any merchandise sold. Try to negotiate the terms in a promoter’s contract before the tour/gig is booked. Anything agreed at this stage will override any standard venue agreements. Waiting until you’re at the venue is way too late.
The fewer rights you give away, the more you will make. If you organise the merchandising operation yourself, you have to be on top of it and fully understand the process. A touring merchandising operation must be professionally run.

Don’t let the merchandise operation overtake the general managing of band, e.g. managing the release of CD’s, tours, concerts etc. Merchandising is a follow-on, and usually dependent on image and success of the band. With few exceptions, the music has to sell the merchandise.

There will come a time when you have to transfer the merchandising operation over to a specialist. But that doesn’t mean you have to give them everything. You can break it down bit by bit, into sales at gigs, online, retail, etc.

In his opinion, what would he change at an earlier stage?

Should new artists consider merchandising at an earlier stage in a bands’ marketing strategy?

From the outset:
· Sell CD’s online
· Do make sure the matter of concession stand commission at gigs is addressed.
· Keep merchandise simple, and small scale, until there is a definite vibe going on, at which point consider choosing a wider range of merchandise. There are no limits to the range or quantity, just make sure it’s relevant. Is a metal act going to sell mugs?
· Decide in advance how you are to deal with the issue of freebies. Far better to supply at cost price to those who might otherwise expect to get receive a free T-shirt, for example, i.e. crew, tour support, venue staff, etc.
· Be informed about IP and © in artwork. This usually resides with graphic designer/merchandiser, who may charge a fee for you to use it elsewhere, or at worst, charge a royalty per item

————————————————————————————————

————————————————————————————————

Think-tank 2 report

Topics covered included:

  • Unsigned artist websites: threats, opportunities and different perspectives
  • Get out there or keep it under wraps?
  • Niche marketing & the undernet
  • DIY or third parties only? The reality of the “level playing field”
  • Webzines to street teams
  • Domestic or global activity?
Speakers:
Panel Anthony Cauchi Outside Line
Ian Spero Spero Communications Ltd
Chairman Stuart Worthington MMF Target Training

Event Summary:

1. What is the brand? Is it the label or the artist?
In most instances, it is the artist. Exceptions to rule would include Ministry of Sound, Mo Wax, Cream, – people would buy these releases because or the recognition of the label, but the artist is usually the brand, albums are usually sold with artist branding, after all. Eminem’s Shady Records says something about what the record is going to be.

  1. If you are pursing the DIY approach to launching a new artist or your own band, how much do you encourage people to start building the brand around a label which may only have one artist?
    Considerations: How much time & energy do you have? Some labels are based solely around 1 or 2 singles. Building a label in addition to an artist’s brand requires a lot of work, time & money. It also depends on your goals. Once a certain level of artist success is achieved, you could have your own branded label as a sub-brand of the label with whom you’ve signed. Fred Dirs, A & R Polydor in the US does this. He signs a band he likes to his own label and sells it onto the major.
  2. What opportunies are there for artists/labels/managers using the new internet aggregators, (e.g. Vitiminic, Get out There, Peoplesound, etc).
    The shake down in the businesses offering such services has benefited labels and artists. Originally, a disproportionate amount of money was spent advertising such services, which promised too much. Less was spent on implementation and delivery, and hence many floundered. The survivors didn’t promise too much, and delivered.

There is now more label support for those still in the market, Wippit, MP3.com and so-on, which helps the marketing of unknown labels or bands, by association with higher profile artists on the same system.

  1. What are the lessons learned from the use of online marketing & development?
    More likely to get picked up through services such as Amazon, who will recommend other artists you may be interested in having made an initial search or purchase.

Labels, managers, or artists should try to:
· find out from their fan base, what other artists their fans are listening to, and then market their product to this wider potential fan-base.
· Think about whom they themselves would align themselves with, and use this to position themselves in online marketing strategies.

Street Teams. Traditionally, a few fans would attend gigs and hand out flyers. Digital street teams have become a huge marketing tool during the last few years, especially in the US. At the initial stage, a band will get, say, 30 to 40 fans to spread the word electronically; e-mail DJ’s & texting, and hence build a community.

This is a far more effective means of grass roots marketing – using genuine, committed fans who are driven by the belief in the music/artist. In return give this core fan-base t-shirts, and make them feel part of the band and instrumental in their growth. This is far easier to do with pop acts than it is rock acts – a rock music fan’s attitude is typically more questioning, along the lines of, “why should we help to sell your records for you”, and are generally less compliant.

The traditional work of street teams can be difficult to measure, i.e. distributing fliers, etc. However, the use of technology makes tracking and logging street team activity far easier, and hence quantifiable and justifiable to record companies. Unsigned artists should consider this cost-effective form of grass roots marketing, before hiring press officers.

  1. What is affinity marketing?
    It takes a consumer-centric approach. Regardless of the client, the client is secondary to the public. Affinity marketing takes account as to what the individual is interested in. Brands are then aligned with a conduit that will enable them to develop a positive relationship with the consumer.

Guerilla and Street Teams are an example of affinity marketing. This involves finding an affinity with an audience, the common denominator being the artist, and effectively finding a way to leverage this relationship for mutual benefit. In an ideal world, affinity marketing creates a virtuous circle, so everyone benefits.

  1. Record companies have been traditionally lax in terms of research. How much is based on assumption, as to who the brands audience is?
    Demographics and pigeonholing is now recognised as being an outmoded form of targeting the market. The buyer/consumer is now far more savvy, more aware and discerning. They also know when they’re being marketed-to. Brand research tends to be specific and biased to the outcome – the brand is paying for it after all. Research is critical, not only for present day, but also for identifying trends and behaviour in the future.

Young adults today (11-24) have grown up in a technological age. Their expectations, source of reference and knowledge is so much greater than any previous generation. This gives rise to different thinking and behaviour.

Spero Communications have undertaken entirely independent research in collaboration with IBM. This looks at agents of change in young adults, from the perspective of lifestyle, purchasing decisions and so-on. The results of this study are available at www.sperocom.co.uk/agentsofchange.

  1. What might be typical data and information an artist/label might seek to collect about a fanbase?
    Core things are e-mail address, country and mobile. Gender, postcode, age, are often collected, depending on the requirements of a brand, and how general or niche a market they are targeting.
    Campaigns typically encourage people to re-register in order to maintain a current and reliable e-mail database, by offering incentives in order to achieve this.
  2. Free Music. Should this be made available in order to drive future sales/grow fanbase?
    If you want people to buy music over the internet, you need to change perception. In the case of cover-mount CD’s, it’s not a case of giving things away for free, which implies there is no worth to music, but enabling the consumer to sample music they might otherwise not even consider buying, as a means to broaden the consumer base. This is particularly true for a breaking artist.

Websites should have the option to listen before you buy, whether purchased online or bought in a shop. US market is different – it does not have a singles market, they also do a lot of retail deals, incl. streaming of albums prior to release. Radiohead serves as a prime example. Despite making their entire album available for streaming 2 months prior to release they still achieved very high record sales…

  1. Subscription Services. Do they have a future?
    Dotmusic.co.uk is an example of an excellent subscription service, but does this represent how people want to buy music in the future? As an example, Satellite TV subscription is now highly popular and profitable, yet was initially questioned at the outset as a means by which people would buy pay-to-view programming.
  2. Global or local niche marketing from the outset?
    Although depending on type of music, most artists have to start out locally, playing live and growing an audience. The opportunity should be taken to draw their attention to a website, and get them to register for more information. It’s almost impossible to get an international following from the outset. Even establishes artists struggle in different territories. Robbie Williams in the USA serves as an example.
  3. What might constitute a typical Online Marketing Campaign?
    It varies according to label – some are more new media aware and enthusiastic than others. Some are particularly encouraging and forward thinking, with regard to online marketing and development.

Generally, up to 3/4 years ago, there was no pre-existing online artist development prior to an artist being signed. There would be no fan base database, no domain name registration. Now, increasingly when an artist is signed, they already have a domain name, an online community and so-on.

  1. This has IP implications. What should the artist know and understand about the ownership and rights bound up in having a website designed for you?
    An artist should own the source code. This enables you to change and update the site. Without these, the sites cannot be changed or updated. An artist should aim to own, or at the very least be aware as to who owns the source code, the URL, the database and the actual design, and how this will impact on the maintenance of the online presence.
  2. What’s in the promotional mix of an online campaign?
    Mobile applications represent the biggest shift. More people own mobiles than CD players in Europe. Considerable income can be generated via licensing of music for ringtones. The gathering of mobile ‘phone numbers for marketing, via MMS and SMS is becoming a crucial part of an online, mobile campaign. The use of Shazam, (the mobile service which you can use to identify music heard in a restaurant by way of a text) is being analysed by labels and pluggers to identify what music people are interested in. An obvious development would be to be able to text back and buy the track.
  3. Where is the synergy between traditional and new media?
    An often-asked question is “what is more important, online or offline. Should one differentiate? The consumer is looking for a live brand experience. They do not see the divide between new or old media. If you give them an off-line option, give an incentive for an online experience, for example, buying tickets online.
  4. Are there any no-no’s to online campaigns?s
    Do not hassle the online community/the online consumer. Protect them, and their data. A consumer does not expect a brand to be selling to them. If a brand impacts on them in a clear and transparent way it can be beneficial. If there are any underhand or hidden motives or procedures, a consumer will switch-off, and you’ve lost them, most probably for good. Do give a near immediate response if you have requested something online of your database.
  5. Affordability of technology.
    The 4Play™ technology is too expensive for grass-roots users. DRM solutions in such applications involve extremely expensive processes. The independent sector should look to pool resources to develop and grow micro online communities as a way around this.
  6. How can things be done differently?
    There is a lack of a new media policy across the record industry, from small indies through to the majors, both in terms of content and delivery platforms.

————————————————————————————————
————————————————————————————————

Rock Project Report: Day 3

This Session will look at the role of PR, Distribution and a Press Agent prior to signing with an indie label.

Introduction
At a DIY level, how many aspects of marketing strategy can be done in-house/by the owner-manager, and what elements if any need to be brought in, or traded for?
Can the considered deployment of an e-street team cover all aspects at this stage?

Artist/owner-mangers at a grass roots level are faced with a dilemma – lack of funds necessitates that they have to do everything themselves. Consequently, time which should be spent honing the music and performance is spent hustling for gigs and promoting the band.

Is it realistic to try to get for example, free services from a PR or plugger in return for an agreed future return, either a fee or a %age? This can cause a potential problem – if an artist succeeds in a major signing, it is unlikely the label will want to use these 3rd party personnel, preferring instead, to use their own. Arguably, if a label wants you enough, this should not be a major issue. At worst, a label could always pay off such arrangements. The downside is that such a pay-off will merely be added to your advance.

Objectives of this session:
· To consolidate and build a core audience – a real fan base.
· To attract serious interest from 3rd parties who will have contracts worth having.

There are 4 ways to achieve these objectives:
1. Buy in expertise, pay for services
2. Complete DIY approach
3. Do deals with professionals on a points basis, (have a contingency if they have to be dropped)
4. Go in to business together – a PR or plugger taking a stake in the artist.

In PR terms, what are the measurables? How do you gauge whether a B listing on Radio 1 is better or worse than a front cover on NME? Which better connects with your market? Is it largely determined by your target market and based on a combination of instinct and your own research?

In terms of distribution, there’s no point chasing a deal until there is a following in place, through gigging, the deployment of street teams to sell the CD at gigs, and even the DIY approach of sending out copies to record stores on a sale or return basis. That said, what is the minimum deal likely to be offered by a distributor? What’s the key to successful distribution? Will distribution in its current form be in existence in 10 years time?


Owen Packard – PR, Hero PR

There’s a gapping hole in the way bands at a certain level get promoted.

Traditional model is to break a band and recoup and make money from the third album. But this approach is not possible if it takes too long to break the band.

In considering engaging the services of PR, it is important to set a level of expectation as to what can be achieved.

A 3-stage process
Level 1 working with an unsigned band and get them signed to an indie.
Level 2 the indie builds them up to a point that a major wishes to sign.
Level 3 first album and commercial success

Historically, a band would start gigging, build a profile, get some reviews and then get signed. Nowadays, majors will let an indie do all the legwork, and then sign a band when it poses minimal risk to them.

Unsigned to indie success. Is the DIY approach still viable?
You can use a DIY label release ethic even up to and incl. major label level, if it is carefully considered. Do you really need to hire separate pluggers for radio, press & TV for what may well be only 2 or 3 programmes for which the act is eligible. Even at the major stage, this can be done by one person, negating the need for 3, 4 or 5 people fixing this, each in their respective domain.

Small bands are always fighting against the image of being a small band. Many publications aren’t interesting in a band until they can see their competitors picking up on an act. Until then, they are largely indifferent. A major will also become wary if a band has been around for too long without a signing.

What level of sales/period of time for a DIY release is desirable, before the perception that it has “expired”?
Depends on the genre, on the level of press, or simply street “buzz”. A band can have a high profile in print media without having released an album, simply on the back of a reputation, image or vibe.

At Level 1, should you be concentrating on building a core fan base, or should you be trying to get the attention of 3rd parties? Will 3rd party interest follow as a matter of course?
If your press is ubiquitous, the 3rd party interest will most certainly follow as a matter of course.
The more you can raise your band’s profile into the indie’s consciousness, the more likely you are to get their attention. Rock music is enjoying a huge resurgence, but major labels will wait, and wait, and wait?

Media exposure. Where is it best to focus the energy to get the attention of A & R?
If looking to attract attention, it’s the combination of exposure in print, radio & TV that will really get results. The trick is to use recognised channels, and this is why many turn to professional PR’s. Exploiting contacts and relationships is of paramount importance.

What sells?
No formula – it’s very random and arbitrary. Successful touring bands don’t necessarily sell many albums. Likewise, a hit video doesn’t necessarily translate into album sales.

What Medium?
Forget video unless you have a lot of money. Radio is often down to luck. Check out the journalists in the magazines, send your material to those who favour music by bands similar to your own. Fanzines and E-zines are hugely influential. All A&R read these.

Business Models. How much, on what basis?
Some bands retain the services of PR on a retainer basis. Possibly a floor level of £500 per month upwards. Typical average is about £1000 per month. Important to establish whether this will be multi-platform. Can’t afford to hire separate PR’s for respective areas of press, TV, Radio, etc. Word of mouth recommendation is best. Most agencies have specialities.

Timescale – at what point in a release should an artist/manager instruct a PR?
6 weeks is typical, 8 weeks is best. Understand the tricks. If you’re unsigned with a demo, call it a single & give a release date. It’s far better to get a review under “Single Releases” than under gigs or demo sections of the press. Get in early to optimise chances of getting reviewed.

Do magazines prefer to see major distributor involvement, in order to consider press inclusion?
It depends on the publication. Some publications are more open to consideration than others.

Do PR’s get involved as a speculative business venture?
Possible conflict of interest – indie labels look to be compensated by a major label, but then if the PR is acting as management, they should be putting band’s interest before their own, and not just looking to sign for the biggest financial deal. For this reason, it is very unusual to come across such an arrangement. Equally, when you do the figures, there’s not much of an incentive to form business partnerships in this way.

As an example – A typical small label will find a band and get it signed to a major. In the average deal, an indie will typically have the debts accrued in bringing the band to the major paid off, perhaps £50 – £100K. You would need to ensure override points start from sale one, not after recouped, as the major will most likely ensure the Band, on paper at least, never recoup. Even with this proviso, with an average of 2 points, 10’000 sales @ £7 dealer price realises 15p per sale, for you, the business partner. That’s £1’500 for every 10’000 sales, £15’000 per 100’000 sales. This is a low return on your investment, and rest assured, the major label will make far, far more.

Cover mounts -Are they obtainable for unsigned Bands?
Some are (Rock Sound – no fee), others, (Kerrang/Metal Hammer) will charge. But you are reaching a large number of people, and can be a highly effective way of building a profile really quickly. Does it lead to sales? Yes, in theory, but the difficulty is getting an unsigned artist’s albums into the stores in the first place.

Co-op deal to get your record racked. Need your distributor to work really hard to get it into the stores, and scaled out (i.e. proportionate nos. of copies to each store) – this is the holy grail of distribution.

If you can tie it in with a video, it will boost your sales. This can be expensive, but it doesn’t have to be. Assume a minimum spend £4/5K. Best spending plan is to focus and do it all at once so for a brief period of time, you are omni-present.

There are licensing implications with magazines that are sold, as opposed to given away. Publishers get paid, but labels pay to get cover mounts. Does the profusion of them dilute value of music? Cover mounts must coincide with a retail campaign. Would punters go to website to buy?

Conclusion
In the case of Rock music, credibility with an audience is a huge issue. Despite millions of sales, bands can falter due to bad press or association.

On a small budget, what’s the most effective action? Fly posters/handouts and street teams do work if well organised.

CD sales at gigs are all well & good, but you’re not proving your worth through shop recorded sales.

Distribution is the stranglehold, and is very difficult at unsigned level. Distributors want to see the plot, press, sales, & demand.

Tony Sylvester – Shellshock Distribution
There is some overlap with certain functions of a label, indeed, Shellshock use Pinnacle to this end. Marketing liaison is available, and they are able to assist non-UK labels with placement. They are pro-active, and encourage the building of relationships.

How much do you encourage people to take DIY approach?
Distributors want to take on labels, not individual bands with one-off releases, which never make money. They are more inclined to take on a label with a steady flow of releases.
It is possible for individual bands to negotiate with local retailers, even with Virgin, HMV, who are more inclined to take on bands local to the stores.

Formats – which are the most viable?
Shelf life on CD singles is very low, perhaps 4 weeks, whereas a CD album is 6 months.
7″ vinyl is still a good seller, especially well-packaged limited editions, but these are genre specific with indie releases experiencing the biggest uptake, aside from collectors who are non-genre influenced. 12″ single and vinyl albums are still preferred medium for Dance.

A first release for a band has to be affordable. Mini-albums, 5 – 8 tracks, are a perfect medium. If well priced, (i.e. anywhere between £5.99 & £7.99), racked out in the stores next to the albums and have good visibility buyers will take a chance, and it will sell. In such instances, it is better to do a mini-album than a single release.

Split singles are basically compilations, and do not sell on grounds of price, as the market has changed – there are ultra-low budget compilation singles selling for £1.99. People are noew reluctant to pay more.

Small bands will sell perhaps ½ stock in shops, the rest will be sold on the road.

Cover mounts. Rock Sound is arguably the most useful & successful, but it must be timed with other media coverage, so at one time, you are present in a variety of media. It must also be backed up with live dates.

Selling at gigs is a necessity.

New Business Models
Most successful releases are from artists who were previously signed with majors. They can capitalise on the fanbase and marketing when with a major, and then release on an indie label when dropped, and make more money through sales, thus keeping more money, and probably more control – the Marillion tactic.

Encourage all bands to concentrate less on sales through distributors and more on sales at gigs, and through Amazon and similar online retail, whereon artists can make more per CD/file sale. Such sites can be seen as a one-stop-shop, due to reviews, and info about the artist

being present in addition to just the music. Linking your site to Amazon, (becoming an affiliate), will give you 5% of sales generated by clicking through.

The dilemma is that the support infrastructure for rock bands by way of independent record shops and live venues have both witnessed a great demise. This is at odds with the fact that rock music and its fans are traditional in the way it is bought, sold and seen, yet these traditional means of support and access to market are no longer available.

The urban music side is also undergoing similar scenario.

What are the routes to market in the face of the demise of retail and gigs?
Street Team marketing.

Tips to Bands – have one point of contact, and advise a distributor by way of weekly update as to gigs, press, reviews etc. be professional in your approach and dealing s with a distributor.
Warren Higgins – Press Agent, Infected PR
A specialist press agency. If they like it, they take it on, irrespective of a band’s ability to pay.

Do people under estimate college promotion?
Generally, college promotion is misunderstood and under-rated yet this presents a serious media opportunity. This should be the first place to go, along with fanzines and e-zines. College magazines, (averaging over 5’000 copies circulating per issue), and radio stations (often with a 6/7 mile reach), receive funding, and represent a trapped and captive audience. This can be from 1’000 to 50’000 students per campus. Hence the magazine or radio will be their guide to most things, but especially music.

Those who become involved in these outlets are die-hard music lovers and will be very disposed towards flagging up and giving space to new artists. They’re open to new music and interested in bands no one else has heard of. They’re well educated, informed, and will probably move on to work in mainstream press/radio/record company A & R, etc and they will quite possibly take an artist with them. Each Radio station will have its own play list.

Bands touring and gigging at college may get 4 or 5 student papers & magazines reviewing them. This is a great opportunity, not only for exposure but to sell CD’s & merchandise. This is how Coldplay built their following. The Stereophonics were likewise broken this way. Radio can also enable live broadcasts/sessions.

Channel Fly – example of vertical integration to incl. magazine, label, publishing and student broadcast network (SBN) rolled into one. They have a network of bars and promoters, Barfly circuit. The brand of The Fly has become very well known, if somewhat long in the tooth.

SBN will provide off-air nighttime programming. RSL licences are available for 2 months of the year, enabling an even bigger audience, beyond that of the campus, (also check Community Radio Association for further info.). Radio shows are also streaming on the web, with reciprocal streaming links to the US and vice-versa.

Fusion Radio, (Oxford), is a successful commercial spin-off, a result of the University and College stations getting together, and is now granted a full year round FM licence. This is a positive example as to how things can move on, and of the audience reach possible via a primed and willing partner – college radio.

The nature of it being staffed by unpaid students means it is difficult keeping up with personnel changes and continuity can suffer. But these people do go on to become heads of music, in charge of play lists or producers in commercial radio. Some also go on to become DJ’s or record company A & R. Find out early on as to whom is covering your style of music. Artists should develop a database of likely contacts in the stations, but as it is seasonal this can’t be begun until around November of each year.

Avoid sending product out from end of May – you are less likely to get attention, with some papers ceasing production altogether. Fresher’s week is prime time, an opportunity to review the summer in music, talking about the festivals and releases, etc.

Ironically, there is considerable apathy towards live gigs at University, unless as a band, you’re doing covers or cheese! Only the larger Universities will push for the live gigs.

Big Brand Marketeers – for mobiles/beverages etc. There are any number of touring college roadshows from big brands, such as Orange, carling, etc. Try to get an association.

Text/SMS marketing. Largely a waste of time – people are far more savvy, and know when they’re being marketed-to.

Street Teams. In terms of mass coverage, it works well, but shouldn’t have to pay for it at a grass roots level

Schools – could be approached, and offer some musician workshops as an enticement. Credibility issues arise, but it could be hugely influential.

Get out there & play. A label will want to see a fanbase. Exploit this situation and get a team set up around the band.

————————————————————————————————
————————————————————————————————

Think-tank 3 report

Topics covered:

  • Plugging to radio, TV and clubs.
  • Database marketing.
  • Record company and/or artist branding.
  • DAB & DTV.
  • Streaming & downloading – past, present & future.
  • Mobile telecoms: who’s paying whom?.
  • Record company and / or artist income streams.
  • Pressplay, MusicNet and Musicindie: updates on major and independent initiatives.
Speakers:
Panel Russel Coultart CEO & Founder, Recordstore.co.uk 
Simon Wheeler Head of New Media, Beggars Group
Steve Johnston Business Affairs Director, Musicindie
Jim Gottleib Director, AMP Online MArketing
Chairman Stuart Worthington MMF Target Training

 

Event Summary:

  1. Changing Marketing Strategies – How has digital media changed label marketing?
    In its former stages, it was a boon to marketing strategy, at a stroke slashing costs, and negating the need for the traditional, costly and time-consuming approach of direct mailing. E-marketing did deliver to its target audience who were initially responsive.

However, direct marketing via the web has exploded, and is to a large degree seemingly disregarded by many organisations as an effective form of marketing. Consumers are now less responsive, and even when passively opting-in to receive e-marketing material (often through default), fail to respond. There is a response rate considerably less than the 1-2% traditionally expected, and it is no longer deemed to be an efficient or reliable means of collecting data. Digital Media has thus far not changed record label marketing significantly.

Of paramount importance in instigating any e-marketing strategy, is the need for marketing managers to be online and experience how web communities work on a daily basis. Without such hands-on experience, it is very difficult to assess the value of any online activity or campaign. This may sound obvious, but it would appear that the larger the organisation, the less likely they are to understand or implement effective web-based marketing. It is correspondingly seen to be something with which they should engage, but the inception of e-marketing is often ill-conceived, often misunderstood and poorly managed.

  1. Theoretically, new technologies have allowed access to any and every territory as required. Is it leading to increased sales, more licensing and distribution deals, or simply giving rise to small orders from fans in territories not ordinarily targeted?
    Smaller independents, by necessity, think more creatively about using the web for e-marketing campaigns, realising as they do, the cost savings, efficiency and effectiveness of a carefully managed and targeted campaign. Warp and NinjaTune are 2 such labels whose online sales campaign is so effective that more units are sold through its website worldwide than from their entire UK retail distribution. In such cases a direct relationship exists between online activity and sales, but this is not something that can be made or guaranteed, serving to illustrate that niche markets are very fluid.

A typical major label’s artist website will be costly to set up, but rarely are data management systems in place to monitor their effectiveness, particularly with regard to sales. Regardless of this fact, the conclusion often drawn is that online sales and promotion are not justifiable expenses, and are perceived to have failed in their purpose. The marketing departments are expected to show a return on this type of investment by way of sales, despite the fact that there are no mechanisms in place to measure the effectiveness of traditional print media either, (for example posters advertising albums), yet their place in a traditional mixed media campaign is rarely questioned.

  1. A retail stranglehold.
    Majors neither embrace nor discourage online retail. The reason for this neutral position is due to the strength of the retailers, who collectively account for 95% of music sales. Some of the biggest retailers have a poor online presence – Virgin having pulled out of online distribution altogether in 2002. Coupled with a clear distain towards labels wishing to sell directly to the consumer via their own online stores, and in some cases retaliating by refusing to stock labels who chose online distribution, retailers have a stranglehold on the consumer market.

Additionally, the majors have spent many years building up manufacturing and distribution networks. Whilst realising the threat and opportunities of the internet, they are unable to make a swift and radical switch to accommodate new technologies.

  1. If typical e-marketing campaigns are failing, what other strategic web-based campaigns are there?
    There is no set formula – each campaign is artist/project specific, and a successful campaign for one artist can’t be adapted to fit another artist. The Atari arcade style game devised for the White Stripes was phenomenally successful, for example, but this would not work for another artist. Such campaigns thrive on their uniqueness. Once done, people tire quickly and are on to the next “thing”.
  2. Are majors shying away from internet or mail order sales?
    There is now less of a reason – internet sales on certain sites, (e.g. Amazon & Record Store), do now count as chart eligible sales. More than it being an instance of shying away from such sales, it is perhaps more a case that labels aren’t retailers. Most often, consumers’ awareness is of the artist, not the label. They will therefore not necessarily go to a label’s site specifically to make a purchase -to them, the label is irrelevant. The longstanding success of mail order services run by majors, (Britannia Music is owned by Universal/Polygram, Columbia House in the US is run by Sony), would further serve as evidence that they have embraced distance selling.

Major labels have perhaps not fully addressed the nature of their relationship between label, artist and fanbase. A major has no relationship with the consumer, its relationship is with artist and the artist has the relationship with the fans. Majors that think they can function as retailers are not in the position to be able to make it work. When the majors have attempted to embrace internet technologies to market and sell directly to their consumer base, they have experienced embarrassingly low levels of sales. Interestingly, Independents do enjoy a relationship with the consumer, however.

  1. Is it likely that online distributors might seek exclusive deals with labels?
    Whether online or offline, it is now recognised that selling through one outlet is not the way forward. Differentiation comes into play, whereby a label may sell a re-packaged, limited edition release for hardcore fans, but all labels seek to have their catalogues in as many retail outlets as possible, both online and offline.
  2. Should the major retail chains be more concerned than the labels? Major labels don’t want to upset the retailers, but shouldn’t retailers be concerned at not having exclusive access to content, in order to create more exciting promotions themselves?
    Retailers are exceptionally concerned with the way the market is currently heading. Some retail chains are intransigent towards change, refusing to allow ringtones to be eligible as a chart sale for instance. Equally, they are concerned at the onward march of supermarkets, who currently account for 7-8% of all music sales and can afford to sell CD’s as loss-leaders.
  3. Do most labels seek to control artist websites?
    How do labels utilise artist brands? Some indies seek to sign artists who already have their own brand and allow them to develop and control their own site. This is the exception rather than the rule, however. If label owns website, they own the database. Otherwise the database is the artists’ preserve.
  4. The demand for online delivery is such that labels are now rising to the challenge of online delivery. How do labels enable the licensing to online distributors/retailers?
    Individual approach – most labels will agree to licence deals for digital distribution. Apple iTunes has set a benchmark price.

Collective approach – need to ascertain how much of your catalogue and to which territories you wish to licence to. Most indies will not have all rights in all territories, because of the nature of most indie deals. Small indies find it very difficult to be taken on by Apple, AOL etc, as these aggregators are looking for the core 8% of market through 5 big deals (the majors). Tapping into a collective can get you more bargaining power.

As a small label, consideration needs to be given how you deliver your tracks. The majors have huge resources to enable music to be accessed in a digital form. The budgets for independents simply aren’t there. For the mobile market, assets (in addition to the music) for consideration include wallpaper, images & logos. These need to be pre-cleared for use, and taken to market for you, by a Telco-approved supplier.

  1. Will traditional retailers eventually become surplus to requirement?
    Expensive commissioned reports costing millions which project sales forecasts by internet distribution, by way of CD’s, streaming, MP3’s etc have been way off target, and have had to be drastically readjusted downwards. Three years ago it was projected that by 2003, 37% of music in the UK would be accessed and paid for online. It is actually nearer to 5%.

Online distribution companies are growing because more labels and artists are coming to them, not necessarily because more and more purchases are being made. It is quite likely that online sales may never account for more than 10-15% of sales. A parallel may be drawn with catalogue CD selling, (Britannia, etc), which, when first initiated years ago, was hailed as being the death of the retailer. That eventuality simply did not arise.

  1. How do you monitor downloads? How do you audit online sales?
    It is dependent on the sophistication of content management systems in place. Ultimately, all movements online are traceable, it is a matter of having systems in place which provides for effective monitoring, and that can become costly.
  2. Copyright and intellectual property – a matter for education.
    If the success of free P2P shareware is responsible for the slower uptake in legitimate download models, there needs to be a sea change in cultural attitude to intellectual property, a shift in opinion such that its no longer cool to get music for free. A massive educational challenge faces the industry. This has been grasped by the movie industry in the US. The MPAA has a massive, multi-million dollar educational campaign focussing on the value and worth of intellectual property, and of the consequences to employment and the future of creativity if people do not pay for it. This includes establishing http://www.respectcopyrights.com/, cinematic trailers and an active press campaign.

The real challenge lies in trying to persuade young consumers to pay for a commodity they’ve so far not had to pay for. Perhaps it could be done by developing software that needs to be as easy to use as Kazaa, and can be monetised. It could be argued that in paying to access the internet (i.e. subscriptions to the Telco’s and the ISP’s) consumers feel they have already paid for their music downloads. However, the owners of music are not receiving a share of this money.

  1. If broadband subscriptions indirectly represent a potential revenue stream from serious downloaders, could this be the way forward – that Telco’s become the new labels & distributors?
    Do Telco’s have the capital, the will or the knowledge to do this? The uptake of broadband & ADSL is still low (ADSL <15% globally), whereas wireless penetration is way above 80%. They are traditional blue chip companies – music is not a market in which they are comfortable. How would Telco’s relate to niche markets? Will more ISP’s and Telco’s merge? Many Telco’s are in debt, mainly due to the G3 licence auction, and it is difficult to predict whether or not they are an attractive proposition for ISP’s.14. If the artist is the brand and enjoy an interactive relationship with it’s fanbase – do artists need labels?
    If an already established, high profile artist linked up with a mobile operator, they most probably could do away with a label altogether. But with whom would an artist rather engage, a telecomms company or an organisation that is used to dealing with artists?

Marillion & Simply Red were cited as examples of this. In the case of Marillion, pre-selling an album, and with Simply Red, the setting up of their own record label, in order to retain a bigger percentage of CD and associated sales.

But these models worked, because both acts had a strong, established and very loyal fanbase. How can new artists and signings achieve success without a record company? How do they raise the money to make a record – a traditional record company role, after all? Perhaps through investors?

  1. What drives sales?
    There are more sponsorship deals by way of brands, adverts, TV and films, (synch deals), which can help break an artist. Such is the market for breaking artists through commercials and adverts, that some ad agencies are now acting as publishers for music used in commercials.

Very often the big synch deals are offered to artists who are already big-sellers, which is why artists may be inclined to deny synch rights – they can afford to take this position.

The Robbie Williams’ deal represented a major cultural shift on the part of a major record company. What made it different was that the deal recognised that everything to do with the artist counts. Traditionally, record companies would spent much money developing an artists income stream through sales of T-shirts, screensavers, ringtones and so-on, only to see none of the revenue. Now they do. The EMI deal includes a percentage cut of everything to do with the sales of Robbie Williams related products, for the label.

Artists are increasingly looking outside of album sales for revenue and looking to exploit all rights as a brand.

Perhaps the term record company is becoming outdated – “Music Company” is more relevant, dealing as it does with a bundle of rights. But the knowledge to exploit these is of paramount importance.

  1. Should the record industry become more customer-led?
    Labels have a responsibility to deliver music to whoever wants the music in a medium that is convenient to the consumer.The public is now in charge and demanding music – witness the Kazaa phenomena. The consumer has clearly shown that they will use any download method possible to obtain what they want a shift of power away from the labels in favour of the consumer.

Kazaa is infinite in what it offers, enabling people to access deleted music, back catalogue and 45’s which they can’t get anywhere else in addition to all swapping current releases.

Should the retailers facilitate legitimate digital downloads? Would this be the end of the high street store? Retailers know how to sell; record companies are not in the business of selling to the consumer. There is a place in the media mix for both traditional retailers, and online stores. Likewise, most labels are embracing DAB radio technology and looking at ways to drive sales to the consumer, who in the future will be able to opt to select music being listened-to during broadcast and purchase it in a form convenient to them.

In Conclusion
The public is now in control by demanding music in formats required. The challenge to the industry is to respond positively in such a way as to secure the future of music whilst satisfying customer demand and providing choice.

————————————————————————————————
————————————————————————————————

Think-tank 4 report

Topics covered:

  • Webcasting – past present and future
  • DAB & DTV
  • Record company activity
  • Ticket sales, promoters, agents, tour management – the effect of digital media
Speakers:
Panel Paul Hitchman Co-founder, PlayLouder
Philip Murphy Co-founder and Group Managing Director, Chanelfly
Barry Everitt Promoter, The Borderline
Chairman Stuart Worthington MMF Target Training

 

Event Summary:

1. Webcasting – what’s the market?
There are approximately 1 million UK subscribers to broadband, which is likely to double/triple over the next few years, (it is reasonable to assume that there will be approximately 3 million households signed up by 2006). How much of that audience are to consume webcasts is open to question, but it can only increase, as price and availability of technology falls.

2. Is the futur
e concerned with the downloading of streamed digital signals, (the PlayLouder type scenario), non-streamed delivery of digital signals, or of a programme format, perhaps an interactive magazine, which delivers visual and audio footage during the networks’ quieter periods, which may be delivered to 3G mobile, PC via broadband connection or other technological platforms?
Glastonbury 2003 had approximately 90’000 authenticated streams. Increasingly the share of this audience has been UK. In previous years there’s been a bigger uptake from other territories. Claims of multi-million numbers of subscribers to webcasts are unquestionably exaggerated; there simply isn’t the technology currently available to deliver streamed content on this scale. Typically, such inflated webcasts have been free, making it difficult to make projections based on such figures. The pay market is therefore as yet, unproven.

  1. Could it be that webcasting is seen as a form of promotion to sell records?
    Web casting and streaming can add value to other media sales – subscriptions to websites and downloads in addition to magazines, ticket sales and DVD’s. Large gigs and festivals will factor in sponsorship income, (Freeserve sponsored Playlouder’s Glastonbury web-streams), and DVD content, which will make a webcast financially viable.

In its current form, however, the potential for webcasting has been slowed not only by technological delivery and it’s uptake by the consumer, but also by mechanisms in which to collect micro payments, from which the broadcaster takes even smaller amounts of revenue. This makes a pay-per-stream download an unattractive proposition for both the consumer and content provider.

  1. Is there a future for live music venues to become more involved with web-based delivery?
    The web has positively impacted on gig promotion, enabling a quick and easy route to find out about and listen to new acts via streamed footage and audio.

In the case of the Borderline, whose own 4-hour internet radio style show has featured music of visiting acts, it has led to increased ticket sales for artists whose gigs might have otherwise gone largely unnoticed. It has also significantly increased general traffic to the venue’s site from around the world.

The bundling of discounted ticket sales through a venue’s website when opting for streamed content or access to interviews & live back-stage footage, was cited as a potential new business model for music venues.

The web has also enabled promoters to target geographical areas, thereby targeting an artist’s fanbase with regards ticket sales for national tours, for example.

  1. Rights Issues – who owns a web broadcast?
    An area that can range from simplicity to great complexity, the recording of an artist’s performance for streaming involves many rights. This isn’t difficult to resolve if the artist is unsigned in every respect, owns all the music and lyrics and is free to enter into a licensing deal.

Otherwise, the complexity of the deal depends on their contractual terms with respective recording and publishing agreements, the status of the artist, and the label/publishers stance on webcasting. Additionally the activity of webcasting itself is not always fully understood, sidestepping as it does traditional broadcast protocol. The nature of what it is means that a webcast is not necessarily timetabled. The fact that such content maybe available 24/7 makes some rights owners cautious.

Some labels embrace it, others see it as a potential for lost revenue from reduced CD, DVD & VHS sales, or an opportunity to have their artists work/image exploited illegally.

Separate negotiations are needed with the collection societies, (who have standard tariffs and agreements in place – PRS, MCPS, PPL, VPL), and the artists’ managers, (who require performers’ consents – MU/PAMRA).

There is also the issue of whether or not a live stream/webcast constitutes a recording or just a broadcast. Some record companies deem it to be a recording, over which they most usually have ultimate control.

Record companies who have taken the line that such broadcasts constitute a recording remain as yet unchallenged…

In the case of Channelfly, a typical deal would be a 50-50 split between them and the licensor – the people entitled to licence the content. Channelfly would then additionally have to pay monies as due to the relevant collection societies.

  1. What are record labels doing in relation to streaming business models?
    Clear Channel, AOL and MSN are all looking seriously at downloading and streaming festivals. Thus far, broadband as a means of selling music over the web has been a loss leader.
  2. How does this relate to digital TV? Is the future PC or Digital Broadcast?
    True convergence of technology and the ability to pay for and view/listen to content on any platform of the consumer’s choosing is still awaited in order to make for seamless integration.

The webcasting of a live gig is no substitute for the real thing. Whilst there is an audience who watch live music on TV, other than paying a license fee, it is currently free. Whether that same audience would be prepared to pay for it via a one-off payment or by subscription is doubtful. Current experience indicates that that it is quite possible that streaming may never make money.

Music is best experienced live, or by audio, as it doesn’t tie the listener down to a fixed location or activity, as it does when watched online or by TV – sitting at a computer to view a 2-hour concert holds little appeal to all but the most dedicated of fans.

  1. Streaming as part of a media bundled package?
    Streaming certainly adds value as part of an overall media package. AOL is shortly to feature UK bands performing special sessions, as part of a package.

Digital TV is the ultimate example of broadband webcast-style distribution in which music is just one segment of the product mix. However, whilst most of the content is free, the music channels included are few in number. To get the whole mix of music TV, the user has to pay for an upgrade. The viewer can further opt to take part in a box-office event, (e.g. Cliff Richard live in concert), in return for a one-off fee.

It might therefore come as no surprise that the demand for web-based streamed content is low, coupled with the fact that there is currently no user interface worthy of comment. Digital TV serves as the closest example, but there is no lean-back technology in place which allows the consumer to do whatever task they wish to execute by TV, PC, mobile, etc, via a good, easy to use and seamless interface over broadband. When this integration is in place, it may then be possible to make money from streaming over the internet.

Ultimately, webcasting is a limited form of viewing, demanded only by those people desperate to see a gig they otherwise cannot attend, see or hear.

  1. Radio
    (Channelfly)
    Satellite and DAB broadcasts by are re-broadcast via the student broadcast network, as a bedrock of SBN radio. Similarly, some gigs recorded at student venues are broadcast over SBN as part of the programming mix. SBN is broadcast over DAB – the future medium for radio. However, this is a costly form of broadcasting which student Radio Network can ill-afford. The only way for student radio to continue and to reach a digital audience is to take spare capacity on DAB stations, and import programming relevant to the student broadcasting mix.

(DAB)
DAB shouldn’t be seen as a rival to streaming, more a hint as to the kind of seamless integration of digital distribution technologies often spoken about and eagerly anticipated. As with traditional radio, DAB is perhaps best placed for music delivery – it doesn’t demand 100% of the consumer’s attention in the way that streamed internet footage/TV does. The mobility of the listener is not hampered, as it is with the internet via a conventional computer.

As a comparable distribution model to streaming, DAB contains features and advantages that serve as a practical benchmark:

  • ease of use;
    · technical simplicity;
    · enhanced functionality;

o DAB’s digital output provides for easy recording and later playback;

o New DAB sets will enable the digital archiving of programming onto CDR/MD via spare bandwidth.

o The ability to listen to something, and to then be able to buy it gives DAB an added advantage, satisfying the “instant gratification” experience sought by the consumer, satisfying the “I must have it now” culture.

The ability to record at will with minimal and uncomplicated effort demonstrates the flexibility and high quality listening experience DAB affords – listening in digital, opting to buy in digital and recording in digital.

Taking into account the cost and effort required to buy, set-up and install a PC, (which is then susceptible to virus’s, bugs and glitches), it could be that DAB wins over the internet as a means of consumption of music and live music performance.

DAB versus the internet also has one other key advantage in so far as the live streaming/broadcast of music is concerned – cost. Professional video production and encoding are still relatively high for broadcast quality streaming.

It is far cheaper and easier to record and broadcast digital audio, than it is to set up multi-crew camera teams, (complete with editing and encoding costs) to film an event – a big consideration for smaller artists unable to finance the filming and streaming of their performances.

In being risk adverse, webcasters could be said to be influencing music policy, as only headline acts and “dead certs” will be regarded as viable for streaming.

There are drawbacks with DAB, however.

· It is audio only, and therefore no replacement for web/TV
· DAB currently has a 6% uptake – low penetration by any standard. This will increase significantly over the coming year, however, with a greater number of affordable sets becoming available.

  1. How far are we from full integration and lean-back?
    Evidence shows people prefer listening to music via radio, than by streaming – certainly the visual element is not in demand to the same extent as the audio.
  2. Ownership of broadcast recordings
    The incentives for companies to stream are minor, particularly when they have no rights to own the recordings they make, denying them of future revenue streams through future exploitation. This is currently the singled biggest stranglehold on the future of streamed web delivery.

Streaming to cinemas has some potential, with an assembled audience replicating a gig atmosphere to a degree. It can also be tightly controlled, and accountable – the threat of piracy is greatly reduced.

12. The potential for interactivity

The web has community appeal. The online experience is about building events, information and groups around the events. The live experience of the event itself can’t be bettered or replicated via broadcast/internet technologies. An interesting proposition posed was that if the Grateful Dead were starting out now, would’ve they encouraged their fanbase to record and upload footage from gigs, (and their inclusion in P2P file sharing), tapping in as it does, to the serious potential for the interactive engagement of their fans?

Artists and venues alike eagerly anticipate the interactive element of venues broadcasting, say, last night’s performance – however, this activity is most usually absolutely disallowed by the record companies.

Labels and promoters should therefore be looking at ways of closer collaboration for mutual benefit.

  1. Technology to evade touts
    Mobile technology could allow for the purchase of a virtual ticket in the form of a unique booking number via SMS, removing the need for a physical ticket altogether. Genuine customers could then go online to obtain a printed ticket for posterity – many fans want the tangible thing, making the total eradication of a paper ticket altogether highly unlikely.

However the costs of full integration are prohibitive, and certainly not currently viable for small clubs.

  1. At what point does this activity become a media marketing activity, making money through advertising – what’s sold, the content or the advertising?
    Music policy can suffer, as music for mass consumption becomes the viable way to sell advertising and respective products. Music for mass consumption does not necessarily equate with good music…

Media partners, record companies and publishers all want a piece of the potential advertising revenue.

  1. Access TV, RSL’s and 2/3 yr licences. Will this grow?
    This could be a boon to gigs. Integrated with online webcastings and live link ups this is public access broadcasting at it’s best. It was suggested that the BBC excel in this area, and that they should perhaps be looking to increase such activity.
  2. Archive
    Is there a market? Rarity value, especially with artists and acts that become successful, will always be there. There is a growing market for value-added content for CD’s, CD-ROM’s and DVD’s.

————————————————————————————————
————————————————————————————————

Think-tank 6 report

Topics covered included:

  • Case Studies of current & potential business models
  • 3G & MMS – the implications of multimedia broadband access to mobiles – options and opportunities for catalogue owners
  • Access to media & access to retail – the future of independence in the context of recent merger activity, giving rise to new business models
Speakers:
Panel Paul Brindley MusicAlly
Philip Inghelbrecht Business Director, Shazam
Dominic McGonigal Director, Strategy & Business Development, PPL
Chairman Stuart Worthington MMF Target Training

Event Summary:

Introduction
This proved to be a timely title for this evening’s debate, the concluding session of the Digital Series, coming hot on the heels of the inception of the “Making Available Right”, and amidst the advent of sound recording catalogues becoming available in ways never previously possible coupled with announcements of merger activity between EMI/Time Warner and Sony/BMG, thus further consolidating major label activity.

2003 does indeed appear to be the year in which the music and record industry have embraced the digital environment.

7 years in the making, as of October 31 2003, the Making Available Right became enshrined in UK copyright law. Does it mean that for the first time we have an opportunity to stop usage of creators’, producers’ and performers’ material in way hitherto not previously possible, and therefore give rise to a host of new business models?

1) Making Available Right – what is it and what are its implications?
The Copyright Directive, lauded as the most lobbied piece of legislation in history to-date, came into UK legislation a year late. In some areas of this legislation, effectively there is no change – (the UK copyright laws already had fairly extensive rights) – what it does mean, however, is the harmonisation of rights within the EU. Every country in Europe now has the making available right enshrined within copyright law.

In the UK, it has greatly improved provision for Performers’ Rights, which hitherto had been vague in this regard. This Making Available Right is now an exclusive right in the same way that reproduction and distribution rights have been, and may be traded in a contract, amounting to two parts – a broadcast right and an on-demand right.

2) Does this mean there is now a mechanism to encourage “take-down” in a way not previously possible?
(Take-down – the removal of material and/or an entire website/ISP for which such rights have not been given. Previously, pulling down a website or offending ISP because it contains copyright material for which on-demand rights had not been granted or made available, was impossible due to the lack of legislation in this regard).

This was one of the most hotly debated parts of the new directive – the extent to which an ISP could be held liable for hosting and distributing copyright infringing material. Effectively an ISP may now be put on notice that they indirectly possess infringing material and that it has to be taken down. A parallel in the physical world would be a warehouse distributor who cannot possibly check every one of thousands of CD titles for offending material. However, if their attention is drawn to material in breach of the copyright, they have to remove it. The difficulty is that the internet and therefore the open distribution system it represents may be accessed globally, so initiatives such as the Making Available Right only work in territories which sign up to such agreements. Kazaa resides on a remote island in Australasia…

3) If the future isn’t now, when is it?
(A question posed in light of one panellist adamant the future isn’t now, but at least 7-10 years away).
The recent optimism evident with the unquestionable success of Apple iTunes proving that consumers are prepared for digital music confirms the willingness, desire and ability to pay for digital music, but it would be wrong to assume the future is all about buying tracks ‘a la carte’ as opposed to by subscription. Similarly, just because iTunes has been selling pretty well to a population that is quite different – Mac users until now – it is very much linked to the iPod. The margins are tight on the pay per track model. Steve Jobs at Apple has made no secret of the fact that the money is made from the sale of iPods and not the paid-for track downloads.

In the future it is more likely to be more a mix of subscription and per track models, with the UK and Germany most likely to be the biggest and earliest adopters of US models such as iPod and Rhapsody. The business model in the US owes its success to a far higher level of broadband penetration, coupled with a consumer base far more disposed towards online purchasing.

The recent launch of O2, enabling the delivery of music downloads to mobile ‘phones in the UK, whilst popular with a niche group of early adopters, does rely on the consumer paying a hefty price for a compatible mobile ‘phone plug-in, in order to access what are in reality, questionable standards in audio.

Until we have true convergence providing seamless integration between mobile, TV, car & home stereo, computer, radio and personal hi-fi, many of these business models may falter. The success of iTunes may have raised the expectancy of digital music solutions in the short-term.

4) Formats. Where are we with different compression formats?
AAC, ATRAC and all the others are still in the marketplace. MP3 has remained robust, is flexible and has an acceptable audio quality. Is there a need for another digital format requiring the consumer to buy into or upgrade another technology again? Probably not at present. The benefit of digital music and in particular players such as iPod is that it enables the consumer to better organise their music collections. Unlike the progression from vinyl to cassette to CD, MP3 doesn’t improve on audio quality, but that was never its intention.

Whether DVD audio or super audio CD formats can really take hold remains to be seen. Most people are happy with conventional CD’s/DVD’s; most players at home are not 5.1 enabled and consumers most likely do not to want to subject themselves or their wallets to yet another format upgrade. The singles market is more likely to move away from the CD format altogether, especially in light of the digital download chart expected to be running by the end of 2003. In combination with the main chart, the progress of the singles market towards digital delivery only will most likely accelerate.

5) Should the PPL be taking a similar line to that currently operating at MCPS/PRS alliance whose approach to publishing rights in the digital environment embraces all forms of digital delivery, (streamed, downloaded or webcast)? Either the licence is weighted in favour of PRS if the digital delivery of music is perceived to be public performance (i.e. streaming & webcast), or in favour of MCPS if the music is perceived to be a reproduction of public performance (i.e. a download). Theoretically, PPL could take a similar approach with catalogue owners, to cover all forms of digital delivery, however, currently the only form of digital delivery licensed as yet is simulcast.
PPL licences the same rights for record companies and performers that PRS/MCPS licences for publishers and authors, namely broadcast public performance rights and dubbing rights for broadcast public performance. A broadcaster has both a broadcast licence and a dubbing licence licensed by PPL.

In relation to online, the basic train of thought prior to the uptake of the Internet was that this was going to have a huge impact on the industry. A notion of substitution was brought in; the physical format of CD’s would ultimately be replaced at some point with some other form of digital distribution, whether now known or in the future. Undoubtedly physical sales have been affected. What the record companies wanted to do was to manage, as far as possible, the transition into other income streams. The purchase of an online file is seen very much as sales substitution, with ramifications for flexibility in pricing. A collective arrangement, subject to certain considerations, is effectively a “one size fits all” solution. (Commonly, retailers do not operate collective arrangements). Early PPL deals with mobile Telco’s centred on flexible deals, with attendant flexibility of negotiation, not collective ones.

Currently, simulcasting works well within the structure of collective licensing. PPL administers UK rights only for the whole catalogue of their membership. The IFPI simulcasting agreement to which the PPL is signatory has put together UK usage rights with those of Germany, Spain and so-on, in order to effect a collective licence agreement covering listeners in all those territories. Webcasting will likewise follow suite. (IFPI announced a new agreement early November 2003). PPL has also recently signed their first webcast deal with AOL, who will be launching a range of music services including Internet radio. The licensing model is based on a rate per track, similar to the US CARP rate, (currently 0.075cents per track).

The webcasting treaty is subject to EC approval, just as the simulcast agreement was. Regulatory authorities are putting quite severe restrictions on how the deals may be structured, as ease of use demanded by licensors who require a one-stop-shop to licence music is at odds with the licensing bodies, who, it might be argued, could abuse their monopolistic market position.

The simulcast agreement is deemed an anti-competitive agreement by the competition bodies that don’t like monopolies (e.g. PPL), (much less the notion of copyright enshrined in artists’ intellectual property – the idea that an artist can have an exclusive copyright is, in their view, anathema to competition principles).

Therefore, the simulcasting agreement took much protracted negotiations to pass, as it was seen as an anti-competitive agreement, creating, as it does, one enormous monopoly. The fact it represented a level playing field for all record companies large and small, for all users, takes 2nd place to other considerations.

The irony amidst all this is that there is an enormous pressure to provide pan-European licences for all repertoire, for any user, for any use, yet attempts to meet this are met with stringent anti-competitive regulation.

6) What happened with concepts such as Musicnet and PressPlay – both models that were meant to herald a new age in digital distribution for the major label catalogues?
(Musicnet comprised AOL, Time Warner, EMI & BMG. PressPlay paired Sony & Universal (& later EMI)
The major labels thought that the business model would be for them to control distribution. Now it is accepted that distribution can be far more effectively achieved through 3rd parties. Musicnet was always going to be branded by the distributor by AOL and Real networks. PressPlay has changed, and re-launched as a new Napster-style service, owned by Roxio – ironic given the original concept of Napster and the resulting implications for labels with the overwhelming uptake of Napster in its original form!

Napster will be struggling against the might of iTunes and similar models, in terms of individual sales. It remains to be seen what value a brand alone can bring – is the brand enough to convince the consumer that they should be having a relationship by paying for their digital music, or was it all simply about free music in the beginning?

7) For the uninitiated, what is Shazam?
A UK-based company, Shazam developed a music recognition system for mobile ‘phones. Dial 2580 on your mobile, point the ‘phone to the music source, and within 20 seconds you’ll have a text message naming the music, after which you may opt to download a ringtone, buy the album, buy the first 30 secs of the song as your personal greeting, or send the music as a musical greeting card. It employs a unique recognition system in order to be able offer a range of services to the end-user.

8) …and what licences are required from the owners of the recordings?
There are 2 issues. Those concerning the recognition of music, and those dealing with what is done with the music – e.g. sending music as a greeting. Music recognition requires fingerprint technology, and the music is not used as-is. Music recognition has been around for 20 years. There is no copyright issue in this regard. However, use of the music does have copyright implications. License fees vary according to the type of user experience the music is for, and the types of products developed, and are typically based around a percentage of net profit Shazam expect to make on any particular ringtone.

9) Who are the catalogue owners who develop ringtones and what licences are acquired from the 2 rights holders?
Shazam partners with 3rd party ringtone providers. In the case of ringtones, the licences are freely available from MCPS/PRS, to reproduce compositions. The ringtone company is responsible for the licensing administration, not Shazam. However, the 30-second sample that may be sent as a greeting involves a licence for which Shazam is responsible.

Music ringback tones involve giving the caller some music to listen to whilst the ‘phone is ringing, rather like music heard when a caller is placed ‘on-hold’. However, this is highly flexible, and can involve different music according to time of day, occasion and so-on. There is a huge market for this service, particularly in parts of the Far East. ‘Wider Than’, a Korean-based company cites £60 million dollar market in this respect. Rights for these have to be negotiated with all 5 majors, plus AIM.

Anticipated profits to be made from real tones, (true tones), which are licensed original master recordings, may not be realised in the way they have been for monophonic and polyphonic ringtones. An excerpt from an actual recording to be used as a ringtone will need to be carefully considered – a lyric might not be appropriate, a guitar solo in the middle eight might, for instance.

Re-recordings, in effect sound-a-likes, may well prove a lucrative business, if artists refuse to let their original recordings be used in this way. However, there is a credibility issue associated with third party re-recordings. True tones of exclusive or pre-release music are seen as a more likely scenario, thus retaining a relationship with the rights holders and owners.

10) In theory, finger printing technology makes all future usage of music capable of being identified, tracked and monitored by content creators, producers, publishers, record companies and performers. There are a host of propriety systems in place, (collection societies have ISRC’s & the potential for ISWC’s), but what about worldwide standardisation of identification systems?
There are technical and commercial angles to this. As a stand alone digital rights management issue it’s a case of trying to devise a DRM system that everyone would subscribe to: as yet all attempts to do this have failed, witness SDMI (as discussed in the first seminar, Digital Music: An Industry Update). This is the technical challenge, of which digital fingerprinting is but a small part.

The commercial issue is – what price are people prepared to pay for content in the future? Who would be best placed to deliver this, Microsoft? (!)

The processes are in place, SESAC, the global organisation that represents publisher and author societies, is very much involved in encouraging its member societies to use standards such as ISWC, and to work in tandem with label associations RIAA & IFPI. However, global standardisation, whilst a worthy aim, remains a theoretical one, and is very much a work in progress. The idea that collection societies will become redundant is unrealistic for many years to come.

DRM has 2 basic jobs, to track the usage all the way down the line and back, and to prevent others breaking into the transaction chain. Additional complications involve the burgeoning number of digital players within the typical household, any of which might be used to play a piece of DRM monitored music, and that assumes these devices talk to each other…

Industry formats always result in a compromise. It might be better for one company to develop and be monopolistic in this regard, and have their software everywhere – Microsoft Windows Media Player makes a good comparison.

11) Is the art of DRM about setting rules for usage?
It’s a series of applications, starting with the recording/content that allows people to use this content within a set of rules, and allows for and monitors payment. The second aspect is to stop others getting in to the transaction chain and using the content illegally; legitimate use, allowing the control and flow of information that allows that digital value chain to work, and stopping people getting in and “shoplifting”.

12) Is it not the case that to many, once the music has been purchased, it is theirs to do with what they will, and they see it as their right to give it away/share with others without money changing hands; without a transaction being necessary?
There is an educational need to make the consumer aware that music comes at a price and is not free; that people are buying the music, not the piece of plastic or the digital file.

13) With respect to the Issuing of licences under the new Making Available Right, from a Broadcasters point of view, in making productions available on-demand, how do you get licences? What licences are involved for on-demand sound archives?
Simulcast is licensed through PPL. On-demand services are licensed direct from record companies, which fall under the blanket licence agreements. The stipulation is that the licence covers a period of 7 days, from the day first broadcast.

14) Do 30-second samples of music count as “promotional”, thereby avoiding the need for a licence?
Currently these are licensed directly from the labels, but PPL is to start licensing on their behalf. In the US this was previously regarded as fair-use, i.e. promotional purchases and therefore was free. In the US you can get a licence from ASCAP, BMI, SESAC, and pay no money as long as you use less than 30 secs. of a piece of music and if the music is used to promote something else.

There is a balance to the issues surrounding exploitation of copyright. Closing off opportunities that exist in P2P networks, Kazaa for instance, has created more of a problem inside the industry.

Copyright law has to be balanced with the overall good of a population. Enshrined in copyright law is an implicit belief that the public at large has to be able to share in the knowledge of society – the library system. Things have moved on and become more complex, but the notion that you must pay an amount or you don’t get it has to be weighed against those who can’t afford to pay for it. Added to that, the law says you can’t share it with somebody, even if they cannot afford to buy it themselves.

Experience has shown that you can’t get an ISP to shut down a decentralised file-sharing network; the ultimate recourse is to go back to the person who makes the music available in the first place – i.e. the individual file sharer. What the media hasn’t explained at all well is that those whom the RIAA in the US have taken to court are those who’ve made the tracks available, not those who’ve downloaded them.

The new laws clarify what previous laws have said. There is no real example of a decentralised file-sharing network being declared illegal. To what extent can file sharing networks control the activities of their users, and be used only for legitimate purposes, so that those who want to make their music available, can do so?

15) A licensing model already exists in the US. The RIAA under DMCA grasped the issue with Internet radio broadcasts in the US, in which it encouraged all broadcasters of Internet radio to sign up in advance of a rate being set, with the proviso that once a rate is agreed, it would be applied retrospectively. Couldn’t the same be done with Kazaa and Morpheus?
What content owner would agree to this, not knowing how much they may make?

16) With regard to new business models, there’s a deal to be done with the media groups, (e.g. Clear Channel, Emap etc), the Telcos distributing that product, and the content owners whose work provides the body of the media broadcast. Unless content owners agree to a flat fee, pro rata, none of the deals can be done.
Internet radio clearly works with a flat fee, with the Telco providing usage figures, content details and so forth. There’s an important distinction between mobile and PC delivery however. Music to PC’s doesn’t make money; by and large people still don’t pay. Via a mobile, people pay through the billing system. People will pay for ringtones & true tones and in certain territories, providers are making handsome returns through the purchase of value added content – mobile screen savers, games and other content. This is, in effect, an online retail model, interacting with the music industry; mobile telcos becoming retailers.

17) iTunes as a flat fee works in the US, because publishers licence to the record companies directly for mechanical royalties as opposed to via collection society. The record companies take their share and pass on mechanicals to the publishers. What will happen in the UK? Can a flat fee model work here?
(The current US iTunes flat fee model, based on a 99c download fee is 60-70c going to labels of which publishers take 8%).
In the US, the record companies can license on behalf of publishers – something that doesn’t happen in the UK. MCPS/PRS alliance did originally talk about a fixed rate of 10 pence per download. However it was deemed to be too inflexible as business models continue to evolve, and decided to base it on percentage of revenue. They offer a joint online licence, irrespective as to whether a stream, a download or a webcast, they take a percentage of revenue.

Will there even be a distinction between a stream, download or webcast in the future? It may not matter to the distributor or the collection societies, however it matters most to the artist, who stand to loose the most; a stream is effectively treated as a broadcast, a download is effectively treated as a sale.

Sales go on the artist’s royalty statement, and are offset against the recoupable advance. Streaming/airplay does not go on the artist’s royalty statement and the artist receives 50% as opposed to 15% minus record company deductions.

As a business model, iPod is not a sustainable business model to anyone other than Apple, who make their money through the sale of iPods, not through the sale of music downloads. The iTunes model presents a serious challenge to the industry to come up with a comparable model. The problem is that payment systems aren’t currently in place for delivery to PC’s. Mobile delivery is potentially different, but not without its own hindrances, however. If you want to pay for a service on your mobile for a service delivered to the mobile, there is no problem. If you want to pay on your mobile for a service delivered elsewhere, the banking lobby is opposing such a service via the EU Money Directive, who oppose the notion that telcos can operate as e-money traders.

The Making Available Right will be traded as part of the artist’s contract. Whilst broadcast income via radio or a simulcast on the web, for example, earns a royalty through PPL of 50/50 directly, an online on-demand right will be traded and may well become part of sales that are subject to recoupment. The debate is whether artists should receive such royalties directly, or whether it is part and parcel of the income stream record companies increasingly seek to widen.

In administering the Making Available Right, is PPL to act for the record label, or the performer, or both? Is it to be a 50/50 split or to pay directly (to record labels)?

18) Why do we need PRS?
Without it, how are artists to monitor and track global usage and payments? It’s a monumental task to administer these rights and collect monies due.

19) Will DRM supplant the need for MCPS? With implementation of DRM and hence the ability to issue licences via DRM, (with each sale having a unique licence which the artist initiates and controls via DRM), if an artist has not assigned rights to collection societies, can they not monitor mechanicals themselves, and do away with MCPS altogether?
(A question from the floor)
This assumes that DRM and the copyright owner sets the rules, however, you as the copyright artist don’t. You can’t tell iTunes you want an amount per track, therefore as the copyright holder, that’s what I want in my DRM. The aggregator sets the rates and the rules, not the copyright holder. Therein lies the misnomer of the DRM – the rights holder can not dictate rates and licences, but merely facilitates tracking.

DRM systems have to be acceptable across territories, and you still need manpower to make sure it is controlled in any particular territory.

Aggregators can’t vet individuals, they want to deal with acknowledged and reliable proven spources – ASCAP, PRS, MCPS and so-on.

20) MMS/audio visual – mobiles enabling full video & MMS via 3G.
Music videos as downloads to mobiles will be the natural progression, from music downloads. Music downloads will be accompanied with images, perhaps an album cover or pictures of the artist/band.

It’s most likely that VPL will not negotiate a blanket agreement, but that it will be up to individual rights holders to negotiate.
Conclusion
As ever with these topics, as many questions are raised as answered. Previously unchallenged tenets surrounding intellectual property, copyright and ownership have never before been so widely debated, challenged and reinforced as they are today. Software and hardware technological resolutions call for far wider cross-industry development and standardisation, a notion that simultaneously threatens competitiveness and consumer choice. Bringing about an industry-wide, globally acceptable, workable and enforceable standard in DRM is some way off, and requires existing organisations to radically re-think processes and structures, which, although seeming to counter previous methodology will be for the greater good of the future of music.