Songwriters Guild of America
Audio Engineering Society
American Federation of Musicians
Screen Actors Guild/American Federation of Television and Recording Arts
American Guild of Musical Artist
Known as ‘Equity’
Actors Equity Union
American Guild of Variety Artists
Why union membership and bargaining power has decreased over recent years?
Dif?culty in attracting many of the new, young professionals
State and national laws restricting certain kinds of collective bargaining agreements
Continuing displacement of live performances with recorded music
Increasing displacement of live musicians by electronic instruments
Importation of music recorded abroad
Increasing prevalence of nonunion performances, live and recorded
Typical contractual reductions to artist royalties?
Pre-2006: things calculated on suggested retail price
packaging- relates to physical packaging, takes 25% of retail
deduction was justified that artist should only get royalties off record, not the package
Free goods- labels would deduct 10-15% off unit shipped to cover cost of incentives and discounts (giving free records to distributors) if its given away, artist can’t get any royalties
Labels would raise wholesale price and break even to distributor- now calculate on wholesale
Breakage- up to 10% off royalty bearing sales for breakage during shipment- most people negotiate it out of contract
New technology- attempt to discount 15-25% to cover costs of investment in new technology- charged artist to help pay for new factories, ability to embrace new technology
Marketing split 50/50
Video cost- 100% from video royalties, 50% from audio
How a 360-deal differs from a traditional artist recording agreement?
Instead of just getting compensation off of record sales, record labels have now developed a system in which they take a cut from every major revenue source besides
Label handles many non-recording duties with a 360 deal
Sony Music Entertainment subsidiaries?
Epic/Columbia/RCA Records
Warner Music Group subsidiaries?
Electra/Atlantic/Rhino/Warner Bros
Universal Music Group subsidiaries?
Island Def Jam/Interscope/Motown/The Verve Music Group/Universal Music Enterprises
EMI subsidiaries?
Blue Note/Capitol/EMI Records/Virgin Record/Parlophone
The competitive advantages of an artist working with a major and independent record label?
In-house distribution
Deep Pockets
Connections- resources
Larger advances

More individual attention
Larger promotional time period
Creative control
Involved in what’s new and popular
Own more of your music

Components of an effective record marketing plan?
4 P’s – Product- what is your product? How does it satisfy demand?
price- Pricing strategy
place- distribution, and to where?
Promotion- who are you promoting to?
Define your goals- make sure they are realistic goals, attainable
Define who you are going to market to, also who your market is- find a unique selling position- Don’t try to be everything to everyone
made around an album release
artist/album description- taken from artist bio, what is the record about, is there a theme to the record
press component- album reviews, interviews,
ad component
online/video- involves artist website, social media
distribution/retail portion of marketing plan, where is product located
tour component- primary driver of record sales, primary promotion, help marketers know when an artist is available
promotional merch- swag- free stuff
any additional opportunities- cross promotion, events, AMA’s, charity event
Types of record promotion commonly utilized in the record industry?
Publicity and Advertisement
The four (4) major record label distributors that provide physical distribution service for the majority of independent record labels?
UMG- Fontana
EMI- Caroline
Sony- Red Music
Warner- ADA alternative distribution alliance
Different distribution fee models used in Digital Music Aggregation?
10/15% of sale
Subscriptions- flat fee for subscription
example companies- cd baby- physical and digital
tunecore, reverb nation, the orchard
Differing methodologies utilized in music market research?
Point of Sale Research
Focus Group Research
survey of radio and TV, digitally listens to broadcasts
Media Guide
music identifier used by ASCAP
Landmark Digital Services
owned by BMI, digitally listens to music
serves radio, TV, cable (Neilson bought Arbitron)
Multimedia World
measures growth and popularity of brands across social media, radio, websites
Big Champagne
POS, internet broadcast, streaming services, file sharing, used by PRO’s
The four (4) broad categories of Internet-based tools available to independent musicians as described in Chapter 26 of the class textbook?
Sales/Promotion- helps artist decide how to connect with fans and potential fans
Financing- self financing or ‘crowdfunding’
Live Touring- tools to help promote live performance online
Alternate Revenue Source- synch licensing
Discuss how developments in digital recording and digital distribution have affected the RECORDING industry. How has this affected the traditional record label sales model?
Physical cd’s have largely gone away
Sales have shifted to digital
Labels are forced to earn money in ways other than just record sales (360 deals)
Shifted into pull marketing where consumers decide what they want, and the labels no longer used the retailers and radio as primary buyers
Labels were forced to get to know their buyers (the masses)
Mistake 1 –
The CD Longbox
Cd’s were packaged in a long cardboard thing
In order to fit cases where records were kept
6” x 12”
Sony and Phillips were pushing to switch from LP to CD production
Retired in 1993
Split packaging cost savings
Symbolic of a decentralized music industry
This was stupid, didn’t make sense for long term, one industry being stupid and didn’t want to change
Mistake 2 –
Independent Radio Promotion (1990s-2000s)
Telecommunication act of 1996 allows corporations to own more then one radio station in the same market
Like a drug for major record label
Promoters used gifts, tickets to events, swag, gift bags, copies of records. Payola
Radio stations make deal that if artist do services for them that they’ll get more consideration for their record
2005 becomes an issue. Elliot Spitzer brought a law suit against Sony/BMG said they knew about Payloa threw 3rd party
another payola blush at a time that it didn’t need it
reminded a poor image for labels
forget you im going to steal your music
Mistake 3 –
Digital Audio Tape (1980s-1992)
Developed in the mid 1980’s by SONY
Another configuration along side CD
Not a replacement
Record labels insisted that DAT players come out with copy
protection hardware
Didn’t work
Serial copy management system
AHRA created exception between computer manufactures and CD roms
Nothing was solved, one burdened went to another place and they lost much more due to it
Mistake 4 –
Killing the Single (1980s-1990s)
Built largely on album sale
Singles were used for promotion
Sent to radio stations for them sample and see if they want to buy the whole album
80-90’s phase singles out of the market
Industry has not built consumer interest of a model
Mistake 5 –
Pumping up the Big Box Retailers (1990s)
Walmart, Target, Best Buy
Sold CD’s in their store to supplement their stereo equipment
Began selling CD’s as a loss leader to stimulate the sales of something else
1996 best buy and walmart had 25% of cd sellers
schemes to have labels pay them to sell cds in their store
MAP, minimum advertised price
2000 Declared it was price fixing and it is ILLEGAL
1996-99 consumers paid 480 Mil more then they had to
served to devalue music in the customer perspective
sent dedicated record stores like tower records into bankruptcy
another example of the industry chasing short term profits at the overall long term expense of the industry
killed the record store
Mistake 6 –
The Rise and Fall of Napster (1998-2001)
a place to trade pirated music = no monetization; listeners felt entitled to music after spending $20 on albums. By 2000, there were over 20 million users. Napster lost trial in court based on 1 e-mail admitting users were trading pirated music. Labels bogged down on file sharing services and many deals they already had didn’t include online distribution. by 2002, Napster went bankrupt
Mistake 7 –
Rise of iTunes (2002-2003)
Apple had integrated systems that worked and were easy to use, encryption that prevented music from being played on more than 3 computers. Steve jobs pledged $30 mil of marketing per quarter. 2003 – store launched with 200k songs @ $0.99 each. Apple really made their money by selling iPods. iTunes encouraged selling singles over albums. 2007 – employed 3 tiered pricing – $1.29, $0.99, $0.69
Mistake 8 –
The RIAA Lawsuits (2003-2008)
Targeted 18,000 users. Everyone who got sued settled outside of court for a few thousand dollars rather than paying copyright infringement fees. This didn’t produce a huge return on margin, it just vilified the industry and martyred those who were targeted
Due to a number of contractual provisions within an artist-recording contract, an artist’s overall royalty account may remain in an unrecouped position even with a successful selling album. Explain how this can happen. Be specific.
Labels see it similar to joint venture
Production and overhead costs are paid by partners (artist +label)
Justified because from record label perspective, they put up financial risk
Indentured servitude (artists opinion)
we only make money off record sales, while artist has other revenue streams (labels opinion)
When royalties come in from record sales, pays off advance
Royalty reserve account- all records sold on consignment basis- all records are 100% returnable
Not sure if sold to wholesaler-sold to retailer- records might come back, and distributor needs money back
Label holds royalties to see if albums come back
Hold 35-50% of royalties in a reserve account for up to two years
Label earns interest on your money being held
No reserves on digital sales- no returns
Acts as a buffer for the label against large financial loss
As the recording industry continues to invest in digital distribution models, what are the current challenges faced by both the industry and the consumer with the widespread adoption of this distribution method?
Cannibalization of record sales- causes decrease in record sales
Too many choices in who to invest in
Startups want discounted rates from major record labels, in turn, labels want equity in company- creates issue when company goes public, copyright owners don’t get paid, label does
Growing limitations on bandwidth
Discuss the rise of market research and analytics within the record industry. How has this trend changed record industry marketing practices since the 1990s?
Created a precise way to measure sales data.
Prior it was what the charts said. Usually measured by airplay, spins (Was Old system).
Shipped, Sold, Returned was old system. POS transactions- what is actually sold
Tracked by barcodes
Surveys, interviews, focus groups
Record labels/marketing firms/artists use data to make more efficient business decisions/promoters/booking agents
What are the pros and cons of using the “freemium” pricing model? Discuss the long-term implications of this pricing strategy on the recording industry.
Artists literally give away their music for free, or allow consumers to decide how much they want to pay
Decided that 60% of consumers paid for album at 6$ an album average
Created large amount of consumer awareness that promoted the album for sales through other venues and proved that album prices could be dynamic
Consumes are willing to pay for recorded content if they feel they are getting a good value for their money
Could see majority of artists switching to this form of pricing and really cutting the majors out of the picture in terms of what is needed from them
Generates interest in your brand
Keep all the money
Good way to gain fans
A lot of people don’t pay
You don’t know what people think is fair in relation to picking what price to charge- you could sell yourself short
Might not have a large enough fan base to be successful
Might only work for large artists