Future of Music Summit 2013: A Feisty In-Depth Preview

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I am beyond pumped to be headed down to Washington, DC next week for the Future of Music Summit.

The Summit is 2-day conference for music industry professionals and musicians, and is organized by the Future of Music Coalition. The FMC is a non-profit that advocates for musicians’ rights, and helps educate musicians on issues that are important to them, even though they may not realize it. Besides giving musicians a voice in Washington, they may be best known for their Artist Revenue Streams research project that gives incredible insight into the details of how musicians make money in the digital age. The Summit will begin with the latest analysis on that treasure trove of data.

I’m also looking forward to the rest of Monday morning, where conference attendees will be serenaded by government leaders in intellectual property, followed by a counterpoint on copyright from musicians and music businesspeople.

I’d like to ask the copyright panels how they would reform copyright to balance the needs of the individual and the culture versus the need to profit from corporations who have all the legal and lobbying resources to shape the law. Shouldn’t we decriminalize song sharing by adopting some of the ideas successfully employed by Creative Commons? Don’t we have enough studies showing that “piracy” actually increases fan engagement and spending?

I would also question whether virtually infinite copyright terms perpetuated by corporate lobbying have anything to do with the original intent of copyright. I would ask the musicians if copyright exploitation is perhaps a less ethical business model than direct fan patronage, and now that technology has enabled the latter, we should focus on what technology now enables rather than stifling innovation to protect anachronistic models.

Finally, I would posit that free access to music is a net benefit for promoting all of the underlying tenets of copyright: the right of the individual to be compensated for their labor, the right to own and control one’s personal expression, the right of society to benefit from creative works, and the right of a culture to use those works to perpetuate itself. Has anyone noticed how our copyright system works against these ideals by hoarding wealth at the top, appropriating our personas, creating a large deadweight loss in music consumption and denying cultural re-use of creative works, in a culture increasingly based on re-use?

All that will probably have to wait for the cocktail party. Maybe I can get the person who curates the copyright panels drunk and you’ll see me and Larry Lessig up there next year wrestling some lawyers from the Copyright Alliance and the Center for Copyright Information. The gauntlet has been thrown.

The lunch breakout session is the “Band as a Business” workshop, which is funny, because that’s almost the same name as my free “Band as Business” video course on Udemy. I reached out to workshop facilitator Paul Rapp when I realized he was 2 hours north of me in Albany. I asked him why crowdfunding wasn’t covered, considering it’s the next big thing in how musicians can make money. I also dropped the whole copyright spiel on him, so maybe I shouldn’t be surprised I didn’t hear back. Looking forward to taking the workshop nonetheless, as there’s always something new to learn, especially for those who teach.

The rest of Monday is dedicated to the “Future” part of the Summit, where we’ll be discussing the cutting edge of music markets and marketing. I expect artist discovery and fan engagement to take center stage here. Over the last few years, we’ve really seen the music industry embrace the kinds of marketing best practices that were developed by natively digital companies. In particular, the idea of a “fan lifecyle” (analogous to a “user lifecycle”) is central to any modern musician’s business strategy. Success comes from identifying target fan markets, coming up with strategies to engage those fans, and then creating a system by which those fans drawn into an integrated marketing funnel, generating more revenue the deeper they go. Digital tools and services can go a long way to facilitate marketing and conversion, and I’ll be curious to see which names from that industry are dropped.

The last panel of the day is the one I’m looking most forward to — a discussion of streaming, crowdfunding, and the future business models of music. Most people are confused when it comes to this topic, and I understand why. But I’ve been a digital native all my life, and I’ve dedicated my life to music, technology and the intersection in between. The “future” of music business is, without a doubt, many different streams. The days of one dominant stream from copyright exploitation are leaving us. When we talk about the “old” business model dying, we’re not just talking about selling CDs or MP3s, we’re talking about paid vs. free access to recorded music, and things are moving inexorably toward free. It’s a net benefit for fans and musicians, and more music is being made and listened to than ever before. It’s awkward and sometimes devastating to professional musicians who are having trouble adapting, or who put their heads in the sand and blame their own fans for their career woes.

At the same time, the “new” business models like crowdfunding are revolutionizing the band as small business… and it’s all just the tip of the iceberg. We have seen but a fraction of the potential for new music markets and models. Perhaps if the market wasn’t mostly controlled by a handful of enormous corporations, it would be agile enough to shift. But no matter, individuals will flip the paradigm and enable new categories of paid musician that defy the dominant “professional” title. Indies will continue to innovate. The majors will hulk along collecting back catalog royalties until music is a utility like electricity or water… and we’ll be there sooner than you think.

We’ll need a drink after that one. Lucky for me, Mailchimp‘s buying.

The second and final day of the conference features a potpourri of unexpected topics.

A history and analysis of the crossfader “as a tool for re-thinking music as a form of social action” seems to jive nicely with my piece on how copyright law undermines the power of music to effect social change. With no de minimis standard for digital sampling, the crossfader seems to be regarded more as a nuclear weapon than a tool for social change by the record industry.

I’m also looking forward to the panel on music and social change. MC5’s Wayne Kramer (who makes an appearance in my Band as Business course) chairs a particularly interesting pursuit involving instrument donation to incarcerated people. I’m a huge fan of music charities, and music’s ability to provide meaning, healing, joy, comfort or entertainment to people who are aimless, suffering, unhappy, uncomfortable or just bored. It’s the reason we have music! Too often we lose sight of music’s true purpose in pursuit of profit. As such, the following panel on “Nonprofit Models for Supporting Independent Music” shares similar potential for being an awesome eye-opener.

Before lunch, the Director of External Affairs from the U.S. Department of Health and Human Services will run out on stage and scream, “Musicians can afford health care now!” and then disappear in a flurry of pyrotechnics. Or not. But either way, I can’t think of a better place to tout the Affordable Care Act than a conference for musicians, even if I can build a better website myself, for hundreds of millions of dollars less.

The breakout session I’m headed to after lunch is all about how we can provide a better career education to musicians. That’s my mission too! I just launched the Songhack website to do just that — educate musicians on how they can “hack” the music business and make their own careers. My work with John Snyder at Artists House Music (we did the Band as Business course) has given me a unique look into the realm of institutionalized music career education, and the huge challenges it faces. I look forward to gaining more insight from the panelists of this talk… because despite the best efforts of the FMC, most musicians don’t have any idea how musicians make money!

Tuesday wraps up with a more philosophical take on the issues from our distinguished hosts and a group of accomplished musicians. Diving deep on the cultural value of music with the Producer of Blue Oyster Cult sounds like a pretty sweet ending to me.

I’ll be missing the conference-closing NPR All Songs Considered Listening Party. Gotta hightail it back to New York to keep the entrepreneurial machine running. But while I’m there, I’ll be tweeting up a storm and posting daily updates, both here at Mediapocalypse and over at the Songhack blog. Please join me!

Are you headed to the FMC Summit? Do you want to tell me how wrong I am about free access to music and throw a drink in my face? (I know there are some of you out there!) Or have you seen the same bright future for music that I have, and want to join forces to spread the good vibes? Leave me a comment or drop me a line on Twitter and we’ll hang.

See you in DC!

As Music Production Costs Fall, Shouldn’t Price Fall Too?

Your new favorite song could come from here. (CC-BY Matt Gibson)
Your new favorite song could come from here. (CC-BY Matt Gibson)

The cost to produce music is at an all-time low.

The price of music is… well… schizophrenic. A single track can be simultaneously obtained for free on BitTorrent, or purchased on the iTunes store for $1.29. Or you can stream it for next-to-nothing on Spotify, or for a fraction of next-to-nothing on YouTube. And you can still buy the CD for $14.95 to get that one song you like, if you’re a masochist or retired.

The free music debate is often framed as an epic battle to save music itself. Proponents of stricter copyright enforcement claim that keeping these price points high is necessary to keep the quality of music high. Without the proper funding, musicians will make less music, or if not less, at least worse.

I think we can all agree that while the price of music is effectively (with streaming) or literally (with torrenting) free, the cost of producing music is anything but. There is real labor, real expense involved in producing an album.

On the one end of the spectrum, you have major labels paying over $1MM for a single. On the other, you have Nirvana’s Bleach, a multi-Platinum-selling album made for $606.17 in 1989.

What does it cost to produce music? Whatever you want to spend, or can afford. That’s the problem with putting the pricing debate in perspective — the costs to produce vary as wildly as the results. There have been plenty of multi-million dollar flops and home-recorded hits, so how can one ever put a definitive cost on music production? We can only assign a range of possibilities, but doing so does help illuminate the debate.

Before we talk production costs, there is something important to be said for the fact that costs vary wildly. It would suggest that pricing of music ought to vary wildly, at least somewhat in line with the cost to produce it. And yet, the basement DIY record and the multi-million dollar Rhianna album both retail for $1.29/track on iTunes. This is because the price of music is fixed by the big 3 record companies that control around three quarters of the global music industry. And yes, those same three major labels were the ones who negotiated how much artists get paid on streaming services — an amount that as we have seen is so paltry as to only be sustainable on a large, major-label market scale.

Point is, music should cost whatever the artist and their business team wants. This idea is often invoked by detractors of free access to music. “You can make your music available for free, that’s fine,” they say, “but I have the right to charge for mine.” Which is true, and copyright makes it so — artists enjoy a monopoly over the right to distribute copies of their music at the moment they record or write down a song. The intent of copyright is to create value around this right, so that production costs (both in labor and materials) can be covered, and the production of music can flourish. So it would stand to reason that the value created by copyright would not remain fixed as production costs fall.

Nope. The major labels have consistently fixed the value of music copyright by litigating and legislating against any force that threatens to devalue music access fees. They have extended copyright terms to draconian lengths. Any technology that is outside of their price-fixing controls is sued out of existence, and the law is changed if it does not suit their litigious needs. Forget free access to music, the powers that be don’t even want variably-priced music!

Major labels have enjoyed an effective monopoly over the monopoly that copyright grants artists. This happened because the value of copyright was not intrinsic, rather it was hitched to the ability of a business to exploit it. In the past, it was incredibly difficult for the artist to exploit their own copyright to create value — they had to sign their rights over to a label to be exploited. They didn’t have access to the apparatus of production, marketing and distribution like they do today. Thus, the value of music copyright was in the value of being exploited.

Over the last decade, we’ve seen a major shift in the value of copyright, due in no small part to the falling costs of production. The cost of recording technology dropped to a fraction of what it once was. You can still spend a few million dollars building a state-of-the-art studio, but more and more are recording for less and less. Modern recording technology also speeds up the recording process considerably, so there are fewer labor costs.

Music listening is becoming a more participatory process, and more music is being made (via remixes, covers and mashups) just for fun or expression, without commercial intent. You can still spend a year writing an album, but plenty of musicians are vastly reducing the labor involved in composing an album by using technology to demo as they write, with feedback and collaboration happening at a faster pace.

Marketing costs are at an all-time low thanks to social networks and the ability of bands to connect directly with fans. You can still spend millions on a national marketing campaign (or get a consumer electronics company to underwrite it), but it’s now possible to market an album guerilla-style, and catch on virally without spending a dime.

And don’t get me started on distribution. Since the Napster days, the cost to distribute digital music has been effectively free. The real expense that these streaming sites have is not server bandwidth (a point that would be largely mooted by peer-to-peer technology). The exorbitant expense is in the labor required to seek out rights holders, get them to sign a digital service license agreement, and the accounting behind tabulating and paying out their share of the streaming pie. And when you’re talking about having to negotiate with the big three majors, you better believe the expense is going to be as exorbitant as the top entertainment lawyers can manage.

Digital distribution is what truly democratized the music industry, and the genie is never going back in the bottle no matter how much the RIAA continues quixotically to cram it in. I can distribute my music worldwide via any number of retail aggregators (CDBaby, OneRPM, TuneCore, DistroKid, etc.) for the cost of a magazine subscription. I can certainly distribute it worldwide absolutely free as well. The cost of digital distribution is near zero, and has been for quite some time.

So, there we have it. The labor involved in songwriting (to the extent you can call it ‘labor’) has been slightly decreased by technology. The time and cost of recording has been drastically reduced. Successful marketing can be achieved at a fraction of former costs. Distribution is nearly free.

The cost to produce music is much lower than it was just a decade ago. Shouldn’t the price of music adjust accordingly? Isn’t the pricing of streaming much closer to what’s fair for consumers? Doesn’t the declining cost of music production dictate that we charge less — even nothing — for access music? When you factor in new opportunities in direct fan patronage, a growing live music market and greater demand for licensed music, shouldn’t we continue to develop the intrinsic value of music as a service, and relax monopoly distribution rights on the music product in order to do so? This would be disadvantageous for the big three record labels, but a boon to most musicians and their fans, because a chance to be heard is a chance to be supported.

Crowdfunding is Not an Experiment: Why Pledge Music Matters

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“We are Ben Folds Five… When we started in Chapel Hill, NC in 1994 it was the heyday of grunge music. It was all guitars and no harmonies. Many said we didn’t know what we were doing. They were right. And in 2012, we still don’t. But we’re not alone now. Because in 2012, nobody knows what they’re doing. Except for Steve Jobs and Amanda Palmer.”

This is how Ben Folds Five opened their crowdfunding campaign video on Pledge Music.

Besides being incredibly funny to anyone who follows musician crowdfunding, it’s also illuminating. Crowdfunding for musicians — particularly those who have had success releasing albums in the “traditional” way — is often thought of as an “experiment”.

But what’s really more experimental: taking a loan from a record label where 9 out of 10 artists fail to turn a profit, or asking 100 or 1,000 or 10,000 or 100,000 of your biggest fans to finance the record with hardly any risk?

Even though Kickstarter raises more money for artists than the National Endowment for the Arts, crowdfunding is still an experiment?

Crowdfunding is no longer an experiment. It’s a proven formula. We’re still figuring out some of the details, but the theory is correct: fans want to support artists directly in exchange for exclusive access to the band and their creative output. If anything, it’s this musician perception of crowdfunding as “experiment” that’s slowing adoption — the fans are screaming at the top of their lungs asking for it like a back catalog request at a live show.

Musicians: the future is bright and under your control. Put on your shades and deal with it.

Of course, musicians themselves aren’t solely responsible for failing to adapt. The market itself has been slow to respond to the specific needs that surround crowdfunding an album.

There are relatively few companies that understand crowdfunding is going to be the dominant way albums will be made in the future. Certainly, you have the meteoric rise of Kickstarter and Indiegogo, but they have broader missions to change the dynamic of funding creativity in general.

There are only two companies right now that are seriously and directly competing for album-specific crowdfunding. They are Sellaband and Pledge Music. It’s unfortunate that their potential is to some degree being drowned out by the juggernauts of crowdfunding (Kickstarter and Indiegogo) because what musicians truly need is a crowdfunding platform created just for them.

There certainly aren’t only two companies competing for a share of the direct-to-fan artist revenue stream. Topspin, Bandcamp, Soundcloud, Reverbnation, Bandzoogle… the list goes on. The definition of “crowdfunding” could be made broad enough to include them. Here, I’m talking specifically about platforms that actually have people on staff to work with artists and their managers to produce album-specific financing campaigns.

I’m going to focus on Pledge Music because they share many basic features with Sellaband, but also have several major differentiators that I consider genius. Sellaband is the more established of the two platforms and I’m not trying to diss them, I’m just really excited about the potential behind Pledge Music’s particular approach.

Pledge Music is a managed music crowdfunding and retail marketing platform. The “managed” part? Pledge Music staff will actually set up and run your crowdfunding campaign, so it’s “white glove” service for musicians and their managers. They’re experts that will consult with your management and coordinate all efforts to minimize risk and ensure your fans are engaged and get exactly what they pay for. They’ve run the “experiment” of album crowdfunding enough to have established solid best practices for success, and have built the tools to facilitate that success.

You’ll pay a standard and reasonable 15% cut that includes all payment processing fees. With respect to its crowdfunding component, it’s analogous to what you know and love about Kickstarter or Indiegogo except for a few truly genius moves:

  • Crowdfunding campaigns don’t end until the album is funded.
  • The dollar (or euro) amount being raised is hidden from public. They only see what percentage of the album is funded so far.
  • 99% of musicians on the platform opt to give a small portion of the funds raised to the charity of their choice.
  • Musicians are encouraged to market to their fans through the platform with exclusive content as part of the value offering.
  • When the crowdfunding campaign ends, a pre-sale window begins.

That last move is critical. When you think about it, there’s a blurry line between crowdfunding and a pre-sale. Most of the difference seems to be whether or not you have financing on the outset. So it makes perfect sense to start a pre-sale immediately after receiving financing. It’s one of those “why didin’t I think of that” strokes of genius that I see as the beating heart of Pledge Music’s common sense approach.

It’s the kind of sense that makes dollars. According to Pledge Music CEO Benji Rogers, my band left $1,661 on the table with when we recently raised $4,356 on Kickstarter.

That’s because Rogers has research showing 37% of the money raised by Pledge Music album campaigns comes in after the crowdfunding period ended. Ouch. That could have gone a long way.

See, on Kickstarter or Indiegogo, you build tons of buzz in the closing moments of your campaign to push toward and beyond your goal. Our goal was $3,666, which we hit about ten days before our campaign ended. We were able to push another $700 past that by pulling out all the promotional stops.

A few weeks later, we put the album up for pre-sale. We figured we wouldn’t get much interest because most of the fans that wanted it already got it through Kickstarter. But every day our inbox would pop up with new Bandcamp messages saying someone had pre-ordered the album. We saw the names and realized these weren’t old fans, these were new fans we’d attracted while doing all the crowdfunding promotion.

The secret to Kickstarter and Indiegogo is that they capitalize on one simple fact: true fans want more. They want the full brunt of your creative force. That’s why they’re patronizing your work. They want your creativity maximized, they want to have a hand in exposing others to what they love about your work. They don’t just want your music, they want your original lyric sheets, the shirt you wore on tour, and the bucket you puked in when you got off stage. Exclusivity is the new scarcity now that access to music is ubiquitous.

The average fan on Kickstarter contributed $39 to our campaign, as opposed to $5 for our pay-what-you-want pre-order on Bandcamp. If we turn out to have at least 42 people pre-order our album, as we’re on track to do, that actually works out to $1,661 we theoretically left on the table, because those people would have potentially purchased a reward package at a higher dollar amount had they taken part in the crowdfunding campaign.

There’s another, less obvious but very important reason to go with Pledge Music, and this applies to both small acts like mine, and the more widely known acts that seem to be Pledge’s bread and butter. It has to do with a very smart decision they made: The amount of money you’re trying to raise is never displayed in dollar amount. Users see what percentage of the goal was reached so far.

There’s this sort of inherent fear in setting your Kickstarter goal because the penalty of not reaching it is total failure. Since you also have to be 100% transparent on the amount, you’re compelled to set as low a number as you can get away with so your fan’s don’t think you’re overreaching. For example, we set our goal lower than we wanted to be safe and ended up unable to afford to hire a PR agent as we had originally planned. And there were still cost overruns in many of the rewards, some of which we’d planned for, some of which we hadn’t. On a larger scale this could have been disaster and is a fairly common complaint with Kickstarter. (Indiegogo is even more prone to this, because it rewards projects that fail to reach their goal, but takes a higher cut.)

Not only does Pledge Music have the expertise to help you avoid these problems, but their attitude is much more conducive to success: “Set the budget you need to do what you need to do, and you will get there eventually, just keep at it”. On Pledge, our band would have set our original budgeted goal of $6,000. We cut it down to $3,666 because that was our educated guess on how much we could realistically raise in 60 days, and we weren’t too far off. But it felt like the final round in the Price is Right.

Would it have taken longer than 60 days? Yes. Was there something about the deadline and the consequences that drove us and our fans to reach our goal? Yes. Obviously, it’s a big reason Kickstarter chooses to take its approach.

But here’s what it really boils down to: Behind every successful album on any platform — be it digital crowdfunding or just selling CDs out of the back of a car — is a successful manager. Kickstarter works because its platform that has features that enable the average artist to self-manage, whereas Pledge Music is built more as a tool that their campaign managers, along with the artist’s management, can use to engage the fans of the artist they represent.

You can read the case study on how our crowdfunding campaign succeeded, but basically, it was proper management and passionate promotion. I’m sure Pledge Music’s campaign managers can corroborate the amount of time and effort it takes to keep fans engaged is not to be underestimated. If I were scaling the crowdfunding campaign into five or six figures like most artists on Pledge Music, outsourcing management would quickly become mandatory.

The big lesson we’ve learned from watching projects fail on Kickstarter is that over-promising and under-delivering is a major risk. I’m reminded of many stories of indie bands that unexpectedly sold out of records or CDs and didn’t have the liquidity or production resources to keep the supply of recordings moving to fans. This is just a 21st century version of that problem.

So how to we convince musicians to embrace crowdfunding as the status quo for making albums? Education is a big part of it. With this blog and my online course, I’ve been doing everything I can to spread the word.

Ultimately, musicians will have to run the “experiment” themselves to see that it’s the most equitable financing solution for both musician and fan, potentially more lucrative than any record real if managed correctly, and much more rewarding from a basic human and artistic standpoint.

It will take companies like Pledge Music to convince musicians and their managers that crowdfunding is where music is headed. They’re going to need to better differentiate themselves from the Kickstarters and Indiegogos that dominate the market, while offering a user experience that is engaging for both fans and musicians. These are the areas that Pledge Music is weakest in. It’s not really standing out from the crowd in a marketing sense, and much of that has to do with a user experience that fails to be as innovating as the ideas behind it. Competing with Kickstarter is no small task, but I think Pledge Music has the potential to carve its own lucrative niche in the direct-to-fan artist revenue stream with the right leadership.

Sweden Blows U.S. Away with its National Music Scene

ABBA-Album-Covers-1-750x758I was reading about a new IFPI report on digital music and how 1 in 5 U.S. music consumers now subscribes to a music streaming service. Man, we are really slow to get this whole future of music thing.

The article says “Of course the number is off the charts in Sweden,” and sure enough, a whopping 48% of Swedes are using some sort of music subscription service. But I couldn’t understand why the article said “of course”, as if it was supposed to be self-evident to me that Sweden would lead the world in streaming music.

As your typical xenophobic US citizen, I revered Sweden as a clean, pacifist, rich and equal society full of well-cultured, well-educated citizens. But I wondered, why are their music fans so evolved?

My first stop was the Swedish popular music Wikipedia page. With a population of around 9.5 million (just a million over New York City), its hits-per-capita has been through the roof since the 70s. ABBA, Europe, Roxette, Neneh Cherry, Rednex (OK, could have done without that one), Robyn, Basshunter, Nina Persson, The Cardigans, Ace of Base, The Soundtrack of Our Lives, Avicii, Meshuggah, In Flames, Opeth… the quantity is matched by diversity. This isn’t even to mention Swedish producers like Denniz Pop and Max Martin who have written some of the biggest hits for U.S. artists in the past couple decades.

Is it something in the cool, crisp, refreshing Swedish mountain spring water?

Well, it was time to hit the offical Sweden Wikipedia page. I quickly found some more clues:

  • About 85% of the population live in urban areas.
  • Sweden has the world’s eighth highest per capita income.
  • The country is ranked as the second most competitive in the world by the World Economic Forum.
  • Sweden is one of the world’s most equal countries in terms of income.

Money and urban living certainly add up to heavy music consumption, but let’s dig deeper into the Music subhead:

  • Sweden has a prominent choral music tradition, deriving in part from the cultural importance of Swedish folk songs. In fact, out of a population of 9.5 million, it is estimated that five to size hundred thousand people sing in choirs.

Wow, so 15% of Sweden’s population sings in a choir. What do 15% of American citizens do?

OK, well, that’s depressing. Looks like the so-called “cultural leaders” of the world’s IP economy could learn a thing or two about music culture from the Swedes.

I Googled a little deeper and came across a 2010 Pitchfork.com article asking “What’s the Matter with Sweden? Wait, there’s something wrong? It starts:

“The first time the Knife got money from the Swedish Arts Council was in 2001… The electro-pop duo received 45,000 Swedish kronor (SEK), or about $6,327 — ‘pretty standard for albums back then'”

Wait, what? The Swedish government gave an eletro-pop band $6K to record an album? Can you imagine what Southern Republicans would say if the Bush administration gave Gwar $6K?

Reading down the article, one quickly realizes Pitchfork was just pulling a hipster fake out on you, and there really isn’t anything wrong with Sweden. Everything looks right.

Sure, it takes a tax rate around 50% of GDP (it’s closer to 28% in the US), but it adds up to tens of millions of dollars in arts and music funding. We’ve got the National Endowment for the Arts, but try getting a grant out of them for your electro-pop band.

Could it be that simple? Could Sweden’s secret be public funding of the arts?