Hard News by Russell Brown

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Hard News: Music's emerging digital market

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  • Matthew Poole,

    Two interesting points from the Press Release (don't blame you for not wanting to pay GBP100 for the NZ page!)

    First:

    Global performance rights revenues - generated from the use of music by third party businesses in broadcast and public performance - have shown considerable resilience in the face of tough economic conditions, growing by 7.6% in 2009 to US$0.8 billion. This reflects an unbroken trend of growth since 2003, with performance rights revenues now accounting for 4.6% of record companies' trade revenues.

    This isn't performers' revenues, but revenue from things like retail "radio broadcast" licensing, APRA licences for use of music in live theatre... I wonder how much impact stuff like the huge increase to Australian gyms for the use of music in workout sessions will have on this figure next year. Especially as it could equally-likely backfire, with gyms moving to using royalty-free music or music that's not covered by the licensing regime.

    Second:

    the value of music sales fell 7% globally last year
    ...
    Global digital download revenue increased 9.2% to $US4.31 billion. Digital now accounts for 25.3% of all music sales – and 43% of all U.S. music sales in 2009.

    As Simon G has said many, many times, per-unit value of digital is lower but units-sold is higher. The "Oh noes, t3h piratez are killing t3h music" folks love the former figure, but try and keep the latter bit of information quiet. "Revenues are down. CDs sold are down. It's the pirates, and we must be granted stricter, harsher laws that allow us to seize their souls, and their childrens' souls, and sell them on eBay. But don't look at the increase in the number of tracks sold for digital download. We all know that pirates won't pay for music online when they can get it for free, so there's nothing to see here. Move along, bough^Welected representative, and give us that legislation. Don't forget about the mortal souls."

    Auckland • Since Mar 2007 • 4097 posts Report Reply

  • Gary Hutchings,

    You can only survive in the CD/DVD retail market if you have stock and move plenty of it,

    When the Warehouse moved into CD/DVD retailing big time I bought a few things there, but their range has always been limited at best.

    I have not been into a Red Shed to buy anything since JB Hifi opened.

    Yes there is a whole lotta "Digital eating physical" cannibalisation going on, but on a street level JB are eating the Warehouse's (and any other remaining high street mass retailers ) lunch for them.

    wellington • Since Nov 2006 • 108 posts Report Reply

  • Grace Dalley,

    You'd think that online music sales would be more financially rewarding for artists than traditional music sales involving a physical product such as a CD, record or tape. Unfortunately, that's mostly not how it works. Information is Beautiful has statistics and a graph.

    I was interested to see Georg from Sigur Ros plugging Gogoyoko, a direct-to-fans music download store. I hope it's a big success, because most of us want artists to be properly rewarded for their work.

    Christchurch • Since Nov 2008 • 138 posts Report Reply

  • Christopher Dempsey,

    One sign of getting old is the fact that I don't understand how something gets to be number 1 these days.

    In my day we bought tapes or records. What happens today?

    Will this be covered in the Media 7 segment? If so I'll watch it online. :)

    Parnell / Tamaki-Auckland… • Since Sep 2008 • 659 posts Report Reply

  • Sacha,

    Information is Beautiful has statistics and a graph.

    I believe there was disagreement recently in another thread about those figures. Probly the one that degenerated.

    Ak • Since May 2008 • 19745 posts Report Reply

  • Amplifier Manager,

    In my day we bought tapes or records. What happens today?

    These days you buy downloads and you get played on the radio. http://www.rianz.org.nz/rianz/chart_facts.asp

    Information is Beautiful has statistics and a graph.

    Shame it doesn't have accurate statistics, though it does have some very pretty graphics. I've calculated some of it's claims based on local sales data and Information is Beautiful is only out by around 1962.8%.

    Auckland • Since May 2010 • 1 posts Report Reply

  • Russell Brown,

    Just crunching some numbers for the show:

    Although global music sales slumped seven per cent last year, there was also some light. Thirteen countries – including Australia – saw a rise in the dollar value of retail music sales.

    In New Zealand, the dollar value of CD sales fell 4.7% to $74 million in 2009.

    But digital download sales were up a quarter to $9.4m, limiting the overall market decline to 2.1%. This is what passes for good news in the industry these days.

    But digital sales still make up only 11% of the overall local market – compared to 43% in America – and 25% worldwide.

    So there's some headroom there ...

    Auckland • Since Nov 2006 • 22850 posts Report Reply

  • giovanni tiso,

    I've calculated some of it's claims based on local sales data and Information is Beautiful is only out by around 1962.8%.

    Still not nearly as wrong as Garth George then.

    Wellington • Since Jun 2007 • 7473 posts Report Reply

  • Rob Stowell,

    I've calculated some of it's claims based on local sales data and Information is Beautiful is only out by around 1962.8%.

    If you're going to make that claim, it'd be polite (and much more persuasive) if you showed us your calculations :)

    Whakaraupo • Since Nov 2006 • 2120 posts Report Reply

  • Simon Grigg,

    I'd recommend this recent interview from the owner of the world's most successful indie as a point of reference

    There is not a lot in there that others haven't been saying for a long time but Mills' position puts substance to much of it

    "You read the industry is 60 per cent of the size it was ten years ago. But that 40 per cent that has gone is almost entirely the cream at the top. Records that sold two million now sell 500,000 - that's where that's gone. At the same time it's easier to sell those slightly smaller levels.

    "What's called pejoratively 'the new middle class' is someone like, say, Calexico or Midlake, who can sell 100,000 plus records every time they put out a record; they can play to 3-4,000 people in 30 or 40 cities around the world. And they can make a pretty good living out of that, doing what they love doing, and can do it on their own terms, and that's fantastic. We've got a bunch of bands like that, they're not necessarily seeking stardom or riches. That's incredibly healthy."

    He's long since worked out that enemy of the recording industry is not just free music but that awful bloat that makes people like Warners and EMI so marginal on sales of a million copies of a record, but makes his Beggar's Group so, as he says, incredibly healthy, on sales of 100,000.

    And that the majors still haven't quite worked out the whys before they attacked the hows of piracy;

    Mills stresses that it's now up to the industry to get better at selling music, in all kinds of ways:

    I'm still astounded that you need a credit card for iTunes, something beyond the reach of most teenagers, while you can't buy music by text message, I said. Then the music industry wondered why 12-18s found it easier to download illegally.

    "The last ten years shows the record industry is not able to provide its own solutions - you need an iTunes to do it." He says the industry has to recognise the skills of retailers again. It's never been very good at introducing these things, "perhaps understandably, because it's not their business ... majors tend to be about control".

    But he thinks even though music is digital, independent music stores will come back again, as places to discover music again.

    It's unusual to hear an optimistic view of selling music, but Beggars and the leading British Independents point the way to a revival.

    Just another klong... • Since Nov 2006 • 3284 posts Report Reply

  • Grace Dalley,

    Giovanni, Sacha, which bits has Information is Beautiful got wrong? There are a lot of figures on that page. I would very much like to know the correct figures (and where you got them from). And I note that Information is Beautiful is a UK site using UK figures, which may well differ from ours.

    But I guess the important thing is the big picture. Which artists are getting a good deal from online music stores, and why?

    Christchurch • Since Nov 2008 • 138 posts Report Reply

  • Simon Grigg,

    If you're going to make that claim,

    It excludes two important bits of data for a start: publishing mechanicals (which is a positive to the act if they are writers); and an allowance for recoupment (which for may acts means the figures quoted as returns are about as relevant as flight data for the tooth fairy).

    Just another klong... • Since Nov 2006 • 3284 posts Report Reply

  • Grace Dalley,

    It excludes two important bits of data for a start: publishing mechanicals (which is a positive to the act if they are writers); and an allowance for recoupment (which for may acts means the figures quoted as returns are about as relevant as flight data for the tooth fairy).

    Sorry, I'm just a layperson, could you explain what these terms mean?

    Christchurch • Since Nov 2008 • 138 posts Report Reply

  • Russell Brown,

    But I guess the important thing is the big picture. Which artists are getting a good deal from online music stores, and why?

    In general, independent artists who own their own master recordings get a bigger chunk of the sale price of a download than artists signed to major labels.

    If you sell your CD via CDBaby, the site keeps a flat $4 from each sale -- you set your margin by naming your retail price -- or takes a 25% commission on download revenues.

    But your challenge then is getting noticed -- it's the marketing and presence that the majors use to justify their much larger cut (I think they can take as much as 85% of the retail price of downloads -- Simon?).

    CDBaby will also place your music with iTunes and other download services for a 9% commission.

    Here, Amplifier takes (I think) 20% from download sales -- a better deal than CDBaby -- and a commission on aggregating works for supply to iTunes etc.

    The best deal for artists at the moment -- comprehensively based on owning your recording and its digital distribution rights -- is Bandcamp, which does a great job for free -- for the time being. The only cost to artists on a sale is the PayPal transaction fee.

    Auckland • Since Nov 2006 • 22850 posts Report Reply

  • Samuel Scott,

    If that Info Is Beautiful graph had bandcamp on it, it would have been rated right at the very top, possibly better than self pressed CDs. But all of those figures are dependent on what sort of deal artists have with their labels, and ignoring publishing income from streaming sites is very misleading.

    It's also misleading to look at artist direct sales as being unconditionalyl better for the artist than record company sales, because that bypasses the notion of marketing spends, and then wether marketing is recoupable. On the % splits implied in that graph, I personally would expect those costs to be 100% absorbed by the record company. But that comes down to who your lawyer is. But within a distribution deal, where the artist is making much better % splits, it is generally up to the artists to pay for marketing, and they're not going to get as a good deal from advertisers as a major label.

    (oh in the time it has taking me to write this Simon has made very similar points, DAMN you slow brain!).

    That Martin Mills iv is great. He has been a hero of mine for years, mainly because he has always released great music.

    South Wellington • Since Feb 2008 • 315 posts Report Reply

  • Samuel Scott,

    But your challenge then is getting noticed -- it's the marketing and presence that the majors use to justify their much larger cut (I think they can take as much as 85% of the retail price of downloads -- Simon?).

    I have been thinking about this lately. I think it's great for artists to have more control/bigger cuts etc, but it seems narrow minded to look at the music industry as pure evil and an enemy of music. These people are actually working to get the public to listen to music. Which can sometimes be a very difficult task! And musicians generally hate trying to promote themselves (well openly at least)> We need third parties to talk us up.

    CDBaby will also place your music with iTunes and other download services for a 9% commission.

    I must check what the deal is with tunecore. I know that our manager Matt thinks that DRM/Amplifier are the bees knees.

    South Wellington • Since Feb 2008 • 315 posts Report Reply

  • Simon Grigg,

    Sorry, I'm just a layperson, could you explain what these terms mean?

    Sorry, I tend to ramble on like this from time to time and need a slap to force me to speak English.

    Publishing mechanicals are the (statutory) percentage of a music sale which is paid to the songwriters, and is independent of the royalty to the performers.

    Recoupment is the system whereby the cost of recording and parts of the cost of promoting a record are billed back to the recording artist by a record company. This is then extracted from the artist's royalty stream and they don't get paid royalties until it is recovered, which for most acts signed to majors is never.

    Just another klong... • Since Nov 2006 • 3284 posts Report Reply

  • Raffe Smith,

    So for example, if I was to buy Buffalo via the TPF Bandcamp site at $28.95 vs JB HiFi at $21, I assume the band gets a larger (and fairer) cut, as a proportion of the purchase price?

    Mount Albert. • Since Nov 2006 • 40 posts Report Reply

  • Russell Brown,

    ignoring publishing income from streaming sites is very misleading.

    Hells yeah.

    Check out the first graph here.

    It's only based on the revenues of one company, Tunecore, but streaming income is bigger than revenue from both single-track and album downloads combined.

    And I'm still struggling to believe the second graph on that page is correct. It uses RIAA figures that apparently show that in the US last year, digital download sales of albums was $76 million -- and from single downloads $1.138 billion. This is in a market where digital is 45% of total retail revenue. The future of the album looks bloody shaky.

    Auckland • Since Nov 2006 • 22850 posts Report Reply

  • Russell Brown,

    I must check what the deal is with tunecore. I know that our manager Matt thinks that DRM/Amplifier are the bees knees.

    Yes, and I think they deserve the benefits of the trust they've built up over the years.

    Auckland • Since Nov 2006 • 22850 posts Report Reply

  • Grace Dalley,

    Thanks, Russell, Samuel, Simon, that's all very interesting.

    Of course I understand there are overheads and marketing, it's just when I hear figures like iTunes taking an 85% cut, and recoupment

    is then extracted from the artist's royalty stream and they don't get paid royalties until it is recovered, which for most acts signed to majors is never.

    ...I wonder why most artists bother. And if it has to be this way? Obviously there are good options out there, like BandCamp and CDBaby and Amplifier. Could they ever get a dominant market share, I wonder.

    Christchurch • Since Nov 2008 • 138 posts Report Reply

  • Samuel Scott,

    So for example, if I was to buy Buffalo via the TPF Bandcamp site at $28.95 vs JB HiFi at $21, I assume the band gets a larger (and fairer) cut, as a proportion of the purchase price?

    Well its $18.95 on bandcamp for the digital. Or from our online store (managed by Big Cartel) $28.95 for a CD plus a digital download code (from bandcamp) that you get before the CD ships...but there is courier costs etc with that (You have been warned!).

    But yes, the cut is much much better. In all honesty though, bands don't mind where or how people buy their music as long as someone is buying it!

    JB Hifi is so cheap, they are making practically no profit on a sale at that price. It's obviously great for the consumer, but I'd rather spend more at my local Slowboat style shop. Just because it feels better, and because you get the joy of old school cynical record store service.

    South Wellington • Since Feb 2008 • 315 posts Report Reply

  • Raffe Smith,

    Just because it feels better, and because you get the joy of old school cynical record store service.

    Indeed. I asked as I also enjoy the perverse pleasure of putting the cd case in its alphabetical home on the shelf.

    Mount Albert. • Since Nov 2006 • 40 posts Report Reply

  • Simon Grigg,

    But your challenge then is getting noticed -- it's the marketing and presence that the majors use to justify their much larger cut (I think they can take as much as 85% of the retail price of downloads -- Simon?).

    It can be less than that. It really depends on the deal. Some have the label taking 85% of income received, not retail price, then there are packaging deductions and up to 50% reductions in base royalties if they stick the album on TV etc,

    But Samuel is right, for many acts the majors are the way to go. I can't imagine legacy acts like Dylan or Springsteen existing outside the system (although hats off to Paul McCartney who is doing just that) and many younger acts just want to make records. It's only later on they start to grumble. And the big labels do work very bloody hard, likely far harder now than they did a few years back, to get you to listen in a crowded environment where they are not only on the artistic but the technological and innovative backfoot much of the time.

    Just another klong... • Since Nov 2006 • 3284 posts Report Reply

  • Russell Brown,

    plus a digital download code (from bandcamp)

    A very cool feature of Bandcamp. Last Christmas, Epsilon Blue sent people on his mailing list individualised download codes for his Bandcamp page as a gift -- and then it was up to us to tell others about the compilations he'd gifted to us, so they might buy them, which I was delighted to do.

    Auckland • Since Nov 2006 • 22850 posts Report Reply

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