War In The Music Industry

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There's a war going on in the music business and rights holders are afraid they're going to lose.

The public is clueless, it barely sees the battles while it steals music. But the future is subscription, which doesn't involve only music, but products ancillary thereto, maybe even completely virtual.

If you've been following the Amazon/Macmillan story you know that the whole e-book pricing system has been affected by the iPad. There's a shift to the agency model, wherein Apple gets 30% and renders the remaining 70% to publishers. Unlike Amazon, Apple doesn't really care what price books are sold for, they're in the hardware business. In other words, they want to sell iPads. Whereas Amazon wanted to sell e-books below cost to increase the company's market share, hopefully into a dominant position.

That game's up.

But the fascinating conclusion is that the winner is Apple. You need an iPad to read that book. You're not going to buy a Kindle, certainly if the books cost the same, the Kindle just isn't a good deal. As long as e-books are not priced exorbitantly, Apple wins. And the publishers, smiling triumphantly, don't even know what hit them.

What hit them? Well, a writer can make the same 30/70 deal directly with Amazon, the online merchant already announced that. And with publishers signing fewer authors, conceding the landscape to upstarts, it appears to be just like the music business, wherein the major labels lost control.

The labels feel they've lost control to Apple. And they don't want that to happen again. So they're fighting Spotify, not even knowing what this platform and other similar companies are selling. They're not selling music, that's just the come on, they're selling the accoutrements, not only concert tickets but social networking, they're creating an ecosystem, that will rain down dollars.

There's a fascinating story in today's "Los Angeles Times" entitled "Free Online Games Moving Up A Level" (entitled "Digital Sales Poised As Game Changer" online): http://www.latimes.com/business/la-fi-ct-games9-2010feb09,0,5565866.story

Two video game publishers are contrasted. One that sells discs and another that gives the games away for free. The seller of physical media went out of business. The virtual goods company is thriving.

Don't think about this as giving away music for free. Think bigger. If you can get someone hooked, what else can you sell them?

Start with a subscription. To an online video game service. Maybe $15 a month for World Of Warcraft. That's just like your ten dollar a month subscription to Spotify. Or your five dollar a month subscription to MOG.

But let's start with Spotify. In every market the company has launched, the service is free. But if you want it on your mobile device, you've got to pay. Not everybody wants this portability, but you'd be surprised how many do. And will in the future. Because by paying the monthly fee, you don't only get the ability to tote your tracks around, but knowledge of what your friends are listening to, access to the band, a first crack at concert tickets, maybe even virtual concerts.

You start with free. That's the come on. Just like with video games. Then you sell bits and pieces, not music, but items ancillary to music, the ability to go to a party, maybe even virtual. What works is unknown, but the first step is getting people hooked. If you saw how much money is made in virtual items online, clothes for avatars, ability to unlock doors for exclusive access, you'd be stunned. This barely exists for music, because rights holders are afraid. They believe in selling physical music, an album at a time. And they're so busy protecting that model, they're going out of business. Hell, just ask EMI. Instead of realizing it starts with the music, and instead of focusing on people stealing it, the question is how can you entice them to pay for it?

Certainly not by castigating them for theft, by threatening them with prosecution for copyright infringement. Instead, you entice people, giving them a free taste, just like a drug dealer, and then sell them everything surrounding the music. You can't steal an experience. And if we make your life easier...

That's Apple's plan. To get you to overpay for what you didn't even know you wanted. In the future, it won't be about owning music, it will be about being a member of the club, of the tribe. With evidence of how long you've been a fan, what shows you've gone to, the number of times you've spun each and every track. People will PAY to play in this arena, to publish evidence of their devotion, to compare and bond with others.

This is the future.

But the rights holders abhor the future.

Techies, people of the age the labels have fired or never hired, know all this. But they won't get involved in music because they just can't get the rights.

The future of music will look nothing like it does today. It won't be about ownership, it will be about belonging. You can play the video game at home, alone, or you can go online, where you're a member of the club, connecting with millions. You've got to pay for this experience. Which gamers do gladly.

The future is imminent. But only if the rights holders get out of the way. Only if innovation is unlocked. Copyright shouldn't be abandoned, but it's blocking the future. Just like rap blew up by stealing old tracks, new music platforms will be built on sampling the wares of rights holders. And like the owner of those old sampled records, the key is to say YES, to get on the bandwagon, to collect some of that new money. Instead of arguing with Activision over Guitar Hero license rates as the franchise fades away and doesn't radiate. Stay two steps ahead. Or face extinction.

CAN I SEE YOUR LICENSE - MUSIC PUB SERIES

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When you finally get a call from a company wanting to use one of your sopngs, you'd better have your license forms ready to do business. Prepare all the license forms you expect you might need ahead of time, leaving particulars such as signatory names, song titles, dates, royalties and fees blank. They'll be fiolled in following negotiations.

A mechanical license is used to authorize phonorecords of a song to be recorded and distributed. You'll want to prepare a separate mechanical license for authorizing digital phono record delivery, also known as Internet Download.

You'll need two different forms of streaming licenses to authorize streaming songs on the Internet: one for fee-based streaming on demand, and the other fro promotional streaming such as that used by recording artists on MySpace. A master-use license permits all or some of a demo's recorded track to be used in a new recording or placed in a film or on TV. You'll also need to prepare separate synchronization licenses (permitting the song to be synchronized to picture) for placements in film, TV, and commercial advertisements. Additional licenses include those for use of your songs in video games and ring tones.

You could have a music-business attorney draw up these documents, but it'll likely cost you thousands of dollars, especially if license terms need to be tweaked during negotiations. A good entertainment lawyer typically charges between $150-$750 per hour. Anyone can learn to understand and write the legalese required to fashion their own licenses, by studying the right books. Remember in our last session "A Good Education" is my recommendation on required reading.

Once one of your songs is recorded, you'll need to register it with your PRO. If you don't they won't know who to pay performance royalties to when the song title appears in their sample surveys of radio broadcasts and the like. Go to the PRO's web site to download the proper registration form.

More on Monday....

THE DIRECT APPROACH

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Industry directories are a must-have for music publishers. While they do not guarantee successful relationships with important industry decision makers, they do provide you with the information you need to make that first contact. The following list provides the name of each directory, its publisher's web site, and, where applicable, notes of interest.

A & R Registry, the Music Business Review (www.musicregistry.com). A comprehensive international directory of A &R staff and company executives for major and independent record labels. It also includes a useful list of music conferences and conventions.


Music Attorney, Legal & Business Affairs Registry, the Music Business Registry. A comprehensive international directory for contacts working in entertainment law.

Film & Television Music Guide, the Music Business Registry. An international directory of record labels, music publishers, film and television music departments and trailer houses, music supervisors, music placement and video game companies, composers, composer agents, orchestras, music editors, score mixers, music clearance departments, and more.

In Charge, Music Row (www.musicrow.com). This is the most comprehensive and up-to-date directory for the country music industry I've seen. Subscribers to the company's excellent Row Fax tip sheet also gain access to Music Row's expanded online directory.

Pitch This Music Directory,Pitch This Music (www.pitchthismusic.com). While this is a very limited directory for the Nashville area, it contains some exclusive, invaluable listings I've not seen elsewhere.

Producer & Engineer Directory, The Music Business Registry. Contains thousands of domestic and foreign listings for producers, engineers, and their agents.

Music Publishers Registry, the Music Business Registry. Do-it-yourself music publishers will find this international directory helpful in locating publishers for sub publishing and administrative deals. An administrative publishing deal is essentially one where a larger company handles royalty collections and disbursements, and sometimes licensing and promotion, for a smaller company such as your own.

Signing off for the weekend. More on Monday....