Know the big mistakes in the downfall of the record industry and the historical significance of each one.
? Big Mistake Part I – CD Longbox
0 Decentralized record industry’s inability to move quickly
0 Innovativeness of the initial solution was not projected to scale
0 Illustrative of the record industry’s reliance on record retailers
? Big Mistake Part 2 – Independent Radio Promotion
0 Historically fraught with corruption and tended to attract the industry’s more unscrupulous characters
? Big Mistake Part 3 – Digital Audio Tape
0 Industry exercised its muscle to stop the development one form of consumer copy technology, only to lose in an even bigger was to the computer companies.
0 In the end, nothing was really solved, and the industry merely shifted the burden to another segment of the tech community.
0 Had the record industry worked more with the consumer tech community on DAT, perhaps there could have been established a set of “best practices” which could have laid better groundwork for later battles on digital media and consumer copying technology.
? Big Mistake Part 4 – Killing the Single
0 The industry had not built or sustained a commercial consumer interest in their singles products. As a result, they were completely undercut out this potential revenue stream (until iTunes made it hip again.)
? Big Mistake Part 5 – Pumping the Big Box Retailers
0 Serves to devalue music in the consumer’s perspective
0 Sent dedicated record stores like Tower Records and Musicland into bankruptcy
0 Consolidation retailing power into the hand of a few chains that could care less about music or what
0 Another example of chasing volume sales at the overall expense of the industry
? Big Mistake Part 6 – The Secure Digital Music Initiative (SDMI)
0 Instead of seeking a way to monetize this new market, the group sought technological solutions to place industrial age copy protections on an information age product
0 Though it was an overall failure, it resulted in some important cross-industry networking opportunities that helped to lay the foundation for companies like Apple to learn from their mistakes
? Big Mistake Part 7 – The RIAA Lawsuits
0 In the end, the lawsuit campaign had little impact on the amount of copyrighted music is illegally downloaded
0 Cost the Record Industry tens of millions of dollars with little direct return on investment
0 Martyred those that were prosecuted and further vilified the recording industry
0 Cast the industry as being out-of-touch with their customers
? Big Mistake Part 8 – Sony BMG’s Rootkit
0 Sony BMG – released 4.7 million CDs – containing rootkits between Jan and Nov 2005 – try to limit illegal copying and online piracy
0 Software – automatically installed on Windows desktop computers
0 Customers tried to play the CDs – software interferes with the normal plays CDs by installing a rootkit
0 Creates vulnerabilities for other malware (worms and viruses) to exploit
0 Only reinforced the Napster-era beliefs that the music industry was more interested in suing and punishing its customers than catering to them
0 Consumers became dramatically distrusting of copyright protection
What companies jointly developed the CD and is still paid a royalty for this?
? Sony and Phillips
When did the longbox retire?
? April 1993
More than 60% of radio today is controlled by which four companies?
? Clear Channel, CBS Radio, Citadel, Cumulus
What were the big changes in the Telecommunications Act of 1996
? Removed caps on station ownership, which resulted in MASSIVE industry consolidation
How many radio stations can an entity own in various size markets?
Local Radio Ownership. The rule imposes restrictions based on a sliding scale that varies by the size of the market:
? in a radio market with 45 or more stations, an entity may own up to eight radio stations, no more than five of which may be in the same service (AM or FM)
? In radio market with between 30 to 44 radio stations, an entity may own up to seven radio stations, no more than four of which may be in the same service
? In radio market hosting between 15 and 29 radio stations, an entity may own up to six radio stations, no more than four of which may be in the same service
? In a radio market with 14 or fewer radio, an entity may own up to five radio stations, no more than three of which may be on the same service, as long as the entity does not own more than 50% of all radio stations in that market.
“Payola” refers to what?
? Illegal practice of payment or inducement by the record companies for the broadcast of recordings on radio
What was excluded from the Digital Millennium Copyright Act of 1998?
? Professional audio recording and Computers
Who collects and pays out DART royalties?
? Copyright Office Quarterly
Who does the money go to?
? Sound Recording Fund (2/3 of royalties collected)
0 60% of the fund for the copyright owners of the sound recording
0 40% of the fund for the features recording artist – with small percentages form this going to AFM and AFTRA non-featured artists
? Musical Works Fund (? of royalties collected)
0 50% to publishers
0 50% to writers
When was the first CD released?
? 1982
Understand MAP pricing
? The practice of a manufacturer providing marketing funds to a retailer contingent on the retailer advertising an end customer price or above a specified level
? Any store that sold CDs above a certain price would receive a financial boost from the record labels in the form of newspaper and television advertising
Who was the founder of Napster?
? Shawn Fanning
How many users did Napster have in 2000 when they lost their court case?
? 20 million users
What was the main evidence helping to win the case against Napster?
? E-mail from Sean Parker to Shawn Fanning acknowledging that Napster users were “exchanging pirated music”
What was “Fair Play” encryption?
? Prevented users from playing the AAC music files on more than three different computers
When did the iTunes store launch?
? April 2003
What are the three tiered pricing launched by iTunes in 2009
? 69 Cents: catalog
? 99 cents: Current Sellers
? $1.29: top-selling
What is the most important asset to a performing group?
? Group Name
What can the group name protected by?
? Service Mark
0 Like a trademark but trademarks are used for goods and service marks are used for services
What’s the difference between a Personal Manager and a Business Manager?
? Personal Manager – manages the career (songs, image, bookings)
? Business Manager – manages the money and investments
Who is the first person an artist should sign for their personal team?
? Lawyer
What fees do Personal Managers charge?
? 15-20% of gross earnings (before expenses)
What does Power of Attorney mean?
? The power to act for you
? Right to sign your name to contracts, hire and fire you representatives, cash your checks, etc.
What kinds of functions does a Business Manager perform?
? Handles the money
? Collects it/ Keeps track of it
? Pays the bills, invests funds
? files tax returns
What fees are paid to Business Managers?
? 5% or Hourly, flat fee, monthly fee
What kind of fees do Lawyers charge artists?
? $150-$600 per hour
? Some charge a 5-10% fee
? Some charge a monthly retainer
? Some charge based on the deal
Who regulates Agents?
? Regulated by the unions
0 Actor’s Equity
What is the market share for the top three record companies?
? Universal 39%
? Sony 30%
? Warner 19%
What are the departments in a normal label?
? A & R
? Sales
? Marketing
? Promotion
? Product Management
? New Media
? Production
? Finance
? Business Affairs
? International
Who are the major record distributors?
? Universal
? Sony
What are the two types of Independent Labels?
? Type 1:
0 Major helps with distribution
? Type 2:
0 Financed by your own company
Who are some of the record retailers left today?
? Best Buy, Walmart, Target, Amoeba
What is the Artist Royalty based on for record sales?
? “statutory rate”
Are artist royalties paid on free goods?
? No
hat is the packaging deduction for CDs?
? 25%
What are unrecouped royalties called in an artist’s agreement?
? Deficit
Explain Cross Collateralization?
? Part of a Record Deal
? Advances from different records go in one pot
? Can apply to different agreements
A Gold Record means what level of sales?
? 500,000
What are normal artist royalties on records?
? Between 8% and 25%
What are producer royalty ranges?
? 3% to 4%
What if a mixer gets a royalty?
? They get 1%.
What does Pay or Play mean?
? Either they play your music or pay you off
What does Exclusivity mean in a record deal?
? Exclusive agreements/deal means an artist cannot make records for anyone else
What are normal royalty rates for sales of a USA artist’s record in Canada?
? $9 – 10 for CD
? $7 – 8.30 for digital
What about in other “major” territories such as the UK?
? 70%
What about for ROW?
? 50%
What are normal reserves for midlevel artists?
? 35 – 50%
What is the name of the service that tracks record sales?
? Nielsen SoundScan
A Platinum Record means what level of sales?
? One million
Understand the difference between non-interactive and interactive webcasting
? A non-interactive webcasting service is eligible for statutory licensing and must pay royalty fees to SoundExchange, an entity created by the Copyright Royalty Board that collects royalties from webcasters. The result is that a non-interactive digital music service need not negotiate directly with copyright holders but instead can be granted a license as of right to stream sound recordings after paying the statutory rate to SoundExchange.
? Interactive services are not only those that provide “on-demand” songs like a traditional jukebox, but can also include a variety of service depending on the user’s degree of choice.
0 For example, the user’s ability to move forward or backward between songs indicates that the service is interactive.
What are some examples of streaming on demand?
? Spotify, Rhapsody, Rdio
What is the largest satellite radio company?
? Sirius XM
For permanent downloads how much does the digital service provider usually keep?
? 30%
How much do record companies get on ringtones?
? 50% of retail price
On interactive streaming?
? 60% ad revenue/subscription fees
On full lockers?
? 58%
On bundled service?
? 58%
On video streaming?
? 70%
On apps?
? No standard on apps
? Most common model pays a percentage of the wholesale price after deducting the platform fee (goes to whoever is selling the app like Apple or Android)
What is coupling?
? Putting your performances on records with performances of other artists.
What are the royalties on mid-priced records?
? Usually from 66.66% to 75% of the U.S. basic rate
What are the royalties on budget records?
? Usually 50% of the top-line royalty rate
What are the royalties on record clubs?
? The lesser of:
0 half of your top-line royalty rate or
0 50% of your company’s net licensing receipts from the record club