Friday, February 08, 2008

Notes on the Music Business

The Future of Music

Hey guys, check out this video HERE. It's an interesting view of the future of the music business.

I agree with much of what they say. The goal for me isn't to sell 2 million's to sell enough records to make a healthy living as an artist and ultimately that comes from more than CD sales.

It's kind of many of these things they talk about are things that I've talked about on this blog. That's right! I actually know what the freak I'm talking about. Sometimes.

And here's what I talked about originally....

The Music Business

Over the last few weeks, I've been doing a lot of reading and research and seeking counsel. I thought coming out of American Idol and having labels after me that it would be easy to choose a major label and make a record. However, as I have moved through the process and had time to process a lot of this STUFF I have come to a place of really wondering if a major label deal is what I want or what I need.

Here's a little bit of how major labels work today. Chris Jones is an up and coming artist who writes great songs...sure they need some work, but he writes great songs. So, Major Label signs him to a deal. As a part of this deal, Chris agrees to get 12 "points" per record sold. Each point is worth 8 cents, so Chris will get 96 cents per album sold. Not a lot of money, right? (This is a pretty normal deal for educational purposes...the deals I'm looking at are more like 15-20 points, but I digress). Well, Chris signs his deal and gets a $100,000 advance. He also receives a $250,000 recording budget. This will go towards producers, studios, studio musicians, production coordinator, mixing engineer, mastering engineer, etc. If Chris doesn't spend $250,000, he can keep the rest as a personal advance.

Now, each song is worth a point. Usually a record budget has a budget for 10-12 points for publishing. However publishing is split in half between the writer(s) and publisher(s). So, if Chris writes half of every song on the record and there are 10 songs, he will make an additional 20 cents per record sold (the other writers gets 20 cents, and 40 cents goes towards publishing. Now, the nice thing about publishing is that publishing in most deals is NOT recoupable. So, Chris will get paid his 20 cents for every album sold from the beginning.

Chris makes a record and it releases, shipping 50,000 copies off the bat because he is a new artist and no one knows who he is. He owes the record company $350,000 (advance plus recording budget) that he must pay back through record sales before he makes another penny. Now, remember he makes 20 cents per copy of the album sold no matter what, so he's making a bit of money but not a lot. Making 96 cents a copy, he will have to sell 364,583 albums to make another penny on top of his advances. Now, just to put it into perspective, Elliot Yamin is up to 399,000, Bucky is up to 274,000, Katherine McPhee has actually scanned like 330,000 (though she shipped gold). These are American Idol alumni...think of being a new artist no one has heard of...selling 364,000 copies is no easy feat. Granted if he sold 364,000 records, he will have made $72,800...but that is hardly crazy money.

Right now, I have deal on the table from an indie label that is a 50-50 deal. I'm also looking into starting my own label with major distribution where my cut would obviously be even higher. I also have deals from major labels that are in the works...the question is what's the best option. So, let's talk about where a lot of people think music is going.

One thing I'm really passionate about is being at the front of whatever is the next "trend" in music. Right now (and for the last 30 years or so) the major label way of doing things was the best way, if not the only way to do things. However, because of digital downloading, cheaper recording costs, the internet, myspace, etc., the major label way is on its way out. A lot of insiders think that wihin the next 5 years the music business will have completely changed. Honestly, it's a scary time to be a music artist right now. 2 weeks ago was the lowest record-selling week in Soundscan history. There are things that will change, I think, to help record sales...for instance, when consumers download an individual song, it does not go towards album sales at this point. A lot of people think that eventually 10 single sales will be worth an album's sale. For instance, the Afters only sold 100,000 records but they sold 1.5 million downloads of "Beautiful Love"...if they were given 1 album for every 10 downloads, they'd have sold a respectable 250,000 records. Anyway, I digress.

A lot industry insiders believe that within the next 10 years, albums will simply be used as promotion for their tours. There will be no need for a label...distribution will be all that is needed. Very soon online will be close to the only way to buy music. Right now, for 90% of artists, the main source of income is touring. Many people think that when the industry finally goes belly up, touring will be the main source of income for everyone.

So, within the next 5, maybe 10 (if they're lucky) the major label system will be done. Most record deals are what is called 1 record plus 4...this basically means you are guaranteed 1 record with the label's option for 4 more (notice it's the label's option, not the artist's option). If I sign a deal, it will be for 5 records, if I'm successful (here's hoping). That's 8-10 years. I sign a deal now and I'm stuck in an old school way of doing things while the success and money is coming from the new school of thought.

So, to my STUFF.

I have the labels still interested. I have indie labels interested. But I might have the possibility to do things a little differently. We're looking at possibly doing a direct deal with a retail chain that would be exclusive for a short amount of time (3-6 months). The albums would have a very low price point (like $6.99), so I would make similar money to a label deal, but it would help move units. We would do a large amount of albums non-returnable (this is important) to the retail chain and really push to that chain (playing the album in the store, doing in-store appearances, albums by the registers, etc.) At the end of the exclusivity period we would take the album to every retail chain, via major distribution, a la Elliot Yamin. We will have already sold a large amount of albums (the numbers we're looking at now are between 1-200,000) with the exclusive deal. This whole time, we would be working to radio, since ultimately singles will sell the record. However, as we go to distribution, we would still keep the price point low (maybe $7.99).

The goal through this is not necessarily to sell records (thought that is how the endgame happens)'s to put music in people's hands to push them to buy concert tickets. The focus would be touring. I am a touring musician. I hope to play 200-250 shows a year over the next few years. Radio is important to moving records. But I think that touring is what will allow me to have a career.

So, here are the questions

If I go out and give a consistently low price point, does it cheapen the music, or is selling albums selling albums?

Is it radio (i.e., hits) that cause you to buy albums or is it the artist? Do you check out myspace, iTunes, etc. instead of relying on radio?

What causes you as a consumer to buy concert tickets? Is it the fact that you like a certain song or because you think it'd be interesting to see them or is do you have to like the whole records.

Okay, discuss.


morganl1702 said...

Elliott has sold 491,000 albums.

ChrisSligh said...


this post was written several months ago.


Josh Byers said...

Hey Chris,

I know this was posted several months ago but I must have missed it. It came up new in my feed reader today.

Anyway, it was very interesting. One of the great things about you is that you have a real connection with your fans. You've never been shy to share your thoughts or information on how things work and I think that's really cool.

I've become a huge fan of yours and I can't wait till your solo album drops.

If you ever need any help with graphic design or website work please look me up - I would be thrilled to help out.

Keep up the good work.

Business Guy said...

Just came across your blog.Very interesting post.Not sure if you've made your decision yet but here are a couple of thoughts...

When trying to define strategy, we advise clients to review or if they have not already, develop these three things: 1. What is your vision (what do you want to be, what do you aspire to as an artist/company? Example: I want to be my generation's Quincy Jones)

2. what are your core values ( what are your bedrock principals that you live your life/operate your company by)

3. What goals do you need to set for yourself/company,the pursuit of which will move you towards realizing your vision.
Not rocket science but certainly helpful in getting you to focus on whats most important in defining strategy. Pick the path in line with your vision, values and goals.

Careers and longevity are built on authentic connection with fans. Consider the option that allows you to reach the most fans.
2nd: The money in this business is tied to ownership/control of your content. Generally, the less work you are willing to do, the more someone else is going to demand of your copyrights/time/content for taking on the risk. If you have the right people and resources on your team, and you are personally willing to put in the time and manage the headaches (a lot of time & headaches!!!), I like the idea of running your own label. 2nd choice would be 50/50 with experienced indie with deep resources and marketing skill. Also challenge your potential partners to show you why you should work with them. Get them to pitch to you their marketing strategy, amount of resources they are willing to commit, etc. Best of luck. Let me know if we can be of assistance!

Larry & Brooke said...

I'm looking forward to hearing some of your original music when your new album is complete! I really enjoyed your performances on American Idol (esp. the DC Talk cover), and your sense of humor was great.

I know I'm coming late to the party, but I thought I would offer my $.02 about buying albums and concert tickets.

Once upon a time as a naive young lad, I would sometimes purchase a CD (or cassette tape, yes I'm that old) knowing only one song. Occasionally that worked out ok, but then one day I bought a Billy Vera and the Beaters album for one song, "At This Moment". As I listened painfully to the rest of the cassette (again, old) I was subjected to a song called "Peanut Butter". And this was a "best of" collection no less. Someone released a major label album with a song called "Peanut Butter" on it. And lest you feel he is owed the benefit of the doubt, that this was some kind of soul-searching, lovelorn, metaphorical peanut butter...I can tell you it was not. It was a song about peanut butter.

That's when I knew I'd been had.

These days, I'm more apt to buy albums with _no_ hit songs, than with one hit song. I love buying "best of"s from bands that have had great careers, but I also will buy CDs from artists that just have a great sound. Rusted Root, Jars of Clay (before anyone heard of them), Rich Mullins, Burlap to Cashmere, The Corrs and the Gypsy Kings were all bands I just happened to be exposed to somehow, and I loved their sound so I purchased their music (often multiple albums).

I'm also much more inclined to buy concert tickets to these kinds of artists, as opposed to ones that just had a hit or two on the radio. I can't count the number of times I've been to a concert and I knew one song by the opening act...and it was their only good song. They didn't have a sound, they just had a hit.

From the relatively small sample I've seen of your musical ability, I think you have a great sound, a great vocal style, so I would be inclined to buy your "CD" (I'm not so old that I still purchase physical copies of music -- I will be downloading it).

Speaking of performing...I live in northern Alabama and every September we have an outdoor music festival called the Big Spring Jam. You should totally come play here! There's five different stages, so you can pick one you feel most comfortable with, and the crowds are huge! Four years ago, Switchfoot played the Jam right as Beautiful Letdown was blowing up...they had 40 thousand people at that stage - it was fantastic. I don't think the money is great, but you'll have a good time.

Switching gears...I've really enjoyed your insights into how the recording industry works. I completely agree that the Gilded Age of the major labels is coming to a close. I would definitely eschew the major label route and pursue one of the more creative distribution strategies.

Finally, thanks for taking time to connect with your fans...we wish you all the best!