The Seeds of Apple’s Cloud [Apple]
All the Cool New Stuff From Apple [Apple]
Apple iPod and Music Meta-Liveblog Tomorrow, With Live Video Stream [Liveblog]
What Will Apple Announce at Their Music-Centric September 1 Event? [Apple]
In Defense of Audiophilia [Audiophilia]
How Harmonix Is Tricking Lazy Gamers Into Learning Real Instruments [Editorial]
Record Labels: Change or Die [Music]
It's a lousy time to be a record label. Profits are tanking, bands are angry—OK Go just ditched EMI—and YouTube and BitTorrent changed the game. Still, some labels are transforming themselves to help musicians in the digital age.
"Change or Die" may sound like hyperbole, or an idle threat, but for the music business, the two alternatives have never been more real. EMI may very well go extinct in the coming months, and all of the major labels are fighting losing battles. But all is not lost.
The traditional role of a record label, in the broadest sense, is to bankroll a band until they start making lots of money, at which point the label gets to keep most of it. They own the master recordings a band makes, and by taking on this ownership they put all of their resources behind selling said recordings.
This setup makes sense when bands lacked the wherewithal to produce and record their own albums and when manufacturing and distributing physical copies of albums and marketing said albums costs hundreds of thousands of dollars. It also makes sense when a popular album will sell millions of copies at $15 a pop.
But that's definitely not the case now. Record stores are dying at an alarming rate, and fewer and fewer people are buying CDs every day. It's safe to say that the current generation of teenagers has never perused record stores as a normal activity; it's all downhill from here for physical music sales. And FM radio isn't doing too hot either. In short, everything that the music industry has known to be true for the last few decades is quickly turning to dust. Big labels can still bank on country, R&B and pop acts, but the bottom has already fallen out on alternative groups and other internet-friendly genres. And that's just the beginning.
The Old, Dead Way of Doing Business
The way bands operate has changed so much in the last decade that what a label can provide and what bands require of a label has changed drastically, faster than labels have been able to adapt.
Manufacturing and distribution used to be the cornerstone of a label's business; every major label owned its own plants to make the albums and also dealt with shipping the albums worldwide. Today, only Sony still owns plants that manufacture CDs, with the other three big labels outsourcing manufacturing to them. But they all still have reps who have to go out to record stores and make sure that their albums are getting proper shelf space. They have to deal with defects and returns. There are lots of resources required to deal with the manufacture and distribution of a physical product, but that physical product is quickly headed towards irrelevancy.
The biggest music stores are now virtual, so there's no need for someone to go gladhand every Sam Goody manager so they give you endcap space for Use Your Illusion II. The iTunes Music Store sells 25% of the music sold in America as of last August, and that number is definitely going up, not down.
According to the IFPI, physical sales of music dropped 15.4% globally between 2007 and 2008. But in that same year, digital sales rose 24.1%. And Nielsen SoundScan numbers show that the number of units sold between 2006 and 2009 rose from 1 billion per year to 1.7 billion per year, with a unit referring to either an album or a song sold. It's a significant increase, but when someone buying three songs counts the same as someone buying three CDs, you can see why the labels are losing money despite the positive-sounding stat.
But for unsigned bands, companies such as TuneCore and CD Baby act as middlemen between them and digital storefronts like iTunes for very small amounts of money; getting your album up on major stores such as iTunes, Amazon and eMusic will set you back about $47 through TuneCore. And you retain all ownership of your music and keep all royalties, unlike working with a record label.
And TuneCore's internal numbers show that online sales are growing even faster for independent acts than those already well established. TuneCore CEO Jeff Price told me that between 2007 and 2009, TuneCore artists have gone from earning $7-8 million a year to $31 million, with $60 million in earnings projected for 2010. That's insane growth, to be sure, but it's got a long way to go before it represents a sizable proportion of global music sales. To put things in perspective, the IFPI recorded $4.9 billion in sales for 2008.
Furthermore, these days it's easier than ever for musicians to record music without an expensive studio. Software such as Reason, Pro Tools and Logic can be bought for $300 or less, and run on a mid-range laptop. Cheap mics and gear can be found all over eBay and Craigslist. Tie everything together with a $200 to $500 mic preamp analog-to-digital/digital-to-analog box, and you have a mini-studio in your bedroom.
And music blogs have turned the way artists are discovered on its head. It used to be that high-paid A&R executives would scour clubs to find underground bands to sign, acting as the filter between the millions of mediocre bands and the discriminating public. Today, obsessive music fans scour clubs and the web for free, discovering new acts and writing about them on blogs. Labels then discover bands from these blogs. The A&R system is no longer as relevant.
Marketing and promotion, another cornerstone service that labels provide, has also been transformed by the web. You no longer need radio play and ads in Rolling Stone to get your band noticed. When a band makes a music video, there's less of a need for a major label with contacts at MTV to push it through official channels to get it noticed. These days, you can just throw it up on YouTube and get it noticed by some music—or gadget—blogs. The fact that it's a simple click or two from video appreciation to buying actual music is worth more than any paper ad in any dying magazine.
As Voyno from the musicians-as-entrepreneurs blog New Rockstar Philosophy told me, it's very possible for a band to use the internet to replace much of what a label provides:
There are artists on YouTube who use creative on-the-cheap strategies to garner millions of views that direct traffic to their main site, iTunes pages, Facebook page and bandcamp.com profile. They then build an e-mail/text subscription from their new fans, which allows them to offer new merchandise, tickets for shows and other related info directly to fans. The web traffic analytics from all their sites can help them plan successful tours, target Facebook ads, and make better decisions on how to move forward.
These changes have shaken the foundation of the industry, and the biggest labels have borne the brunt of the losses that these changes wrought.
Tough Times for Major Labels
EMI is bleeding money. Earlier this month, it reported a whopping $2.4 billion loss, which, when added to its prior debts, puts it $4.5 billion in debt to CitiGroup. It owes Citi $160 million this month, and it's facing a restructuring plan that'll require an additional investment from its parent company.
EMI is owned by Terra Firma Capital Partners, a British private equity firm that also owns waste management companies, gas stations, residential home builders and movie theaters. To them, the art EMI is releasing is about as important as the trash that Waste Recycling Group collects. If it doesn't make them money, it isn't worth keeping around, 80 years of history or not.
Billboard's Senior Editorial Analyst Glenn Peoples told me that it's not for lack of trying that EMI finds itself in this position. "Labels have cut as many costs as they possibly can, they've taken fewer risks, they've signed fewer artists and tried to make safer bets," he says. "They're doing what they can, but the revenue might not be there to support the way they do business. So it's very possible that the recorded music division of EMI will be sold off and will go elsewhere. An acquisition by Warner Music Group is a possibility, and that would take it down to three majors in recorded music, and that'd be pretty drastic and a lot of concentration between three companies."
An EMI Music spokesperson told me, "EMI Music is doing well. We've reported revenue growth, despite a declining market, and strong operating profit and margin improvement, both in the last financial year and in the current year." But if they can't convince Terra Firma that they have a way out of the quagmire they're in, the possibility of the number of major labels to dropping to three is very real.
And if that happens, what of those remaining three? Universal Music Group is owned by French media conglomerate Vivendi, a company with stakes in the Universal and Canal movie studios and the video game publisher Activision Blizzard amongst other holdings. Sony Music Entertainment is obviously a division of Sony, and we all know Sony has had problems of its own lately. Warner Music Group is the only major without a parent company to answer to, as it spun off from Time Warner in 2004, and its revenue dropped about $3.5 billion last year.
The Upside of Signing on the Dotted Line
But all is not lost, and the death of the record label at a business is not a foregone conclusion. Labels from EMI down to the smallest indie labels are racing to change the way they do business. And they still have quite a bit to offer.
Ra Ra Riot is a band from Syracuse, NY who's currently prepping their second album from indie label Barsuk Records. Barsuk is a true indie based out of Seattle, featuring bands such as Death Cab for Cutie, Mates of State, Nada Surf and They Might Be Giants in addition to Ra Ra Riot.
I talked to Josh Roth, Ra Ra Riot's manager, about the reasons bands still have for signing with a label. One big positive that signing to a label provides a band, he told me, is giving them legitimacy. "I think right now with the internet, there are just so many bands out there that it's easy to go unnoticed," he told me. "There's still is a certain charm to having a label saying 'We like this band and we're going to sign them and you should take a listen.' With the amount of bands that are out there, it's hard to filter what is actually good now."
Furthermore, as outlets such as radio and MTV have become less relevant, new venues for being heard and getting paid have opened up. "Commercials are becoming much more relevant," Ra Ra Riot guitarist Milo Bonacci told me.
"That's how a lot of bands get paid or get their music out there. That's how a lot of people hear a song for the first time. I feel like commercials are taking the place of commercial radio." And to get on a commercial, it sure helps to be signed to a label with a nice licensing department.
Of course, there are different types of record labels. A major label, such as EMI, has a lot more money to throw around and can make more promises, but contracts with majors can end up with artists further in the hole due to these deep pockets. As Bonacci told me, "There's more risk. There's more fuel to propel you forward up front, but that's no guarantee." That same fuel could blow up in your face. We've seen how bands who don't hit it big can end up "owing" their major label hundreds of thousands of dollars, after all.
Indie labels (true indie labels, not boutiques under the umbrella of a major) have less resources and therefore will give bands less to recoup. Indies also will often offer the artist a chance to interact with top brass, something that is almost never done at a major. Indies are presumably owned by passionate music fans rather than gigantic multinational holding companies, which is important when a band needs to know that a label is 100% behind them, according to RRR's Bonacci.
And signing to an indie instantly connects you to that labels fans, Bonacci says. "Nobody really cares about Sony records or Universal. You don't seek out stuff that's being released on Universal as a fan. Independent labels, be it Domino or SubPop or whatever, those labels have fans."
Indie labels seem to have a better chance of adapting and surviving in tumultuous times. Since for the most part they're private companies with few employees, they're able to make drastic changes in their business models much more quickly than major labels. But that doesn't mean they'll all survive; famed indie label Touch and Go closed down last year, and in addition to repping bands such as TV on the Radio, Ted Leo and the Pharmacists, !!! and Blonde Redhead, they also handled distribution for other venerable indies such as Drag City, Kill Rock Stars, Jade Tree and Merge. It was a huge blow to the indie label scene.
Getting a Cut of Everything
The way labels are moving to stay alive is by becoming involved in the places that bands still make money, such as touring and merchandising. Traditionally, labels only made money off records sold, while any profits made from t-shirts or posters sold on the road went to the band. After all, if the label just owns the master recordings, it can only make money off the sale of said recordings, not any ancillary profits that come from things like touring.
But now some labels are pushing what are called 360 deals, which involve them in virtually everything an artist does. One of the most famous 360 deals was EMI's 2002 deal with Robbie Williams, which was worth a whopping £80 million, giving EMI a piece of basically everything that Williams touched. That didn't go so well, with Williams threatening to withhold albums from the label and trying to get out of his contract. But last week, according to UK trade paper Music Week, Williams' manager Tim Clark publicly came out in support of the embattled label, saying, "My own view is Citigroup would be mad at this stage not to keep EMI on as a going concern. It just would be bonkers."
In any case, 360 deals and general diversification are what big labels such as EMI are looking to move into, according to Billboard's Glenn Peoples. "They're definitely diversifying and they're actually getting into agencies, artist management, concert promotion. There's really no area that the four majors are not pursuing right now."
These deals make the most sense for huge acts with lots of opportunities for branding and licensing. You've seen it in action here on Giz, in fact, with Dr. Dre's Beats headphones and Lady Gaga's new Creative Director "job" at Polaroid. Both those acts are signed to Interscope, a sub-label of Universal that's clearly pushing artists towards these new revenue streams. But many smaller acts are still reluctant to give a label a slice of the entire pie with such a wide-reaching deal.
The fact of the matter is that bands do still need someone working for them, 360 deal or not. For some bands, just having a small team of a dedicated manager, publicist and lawyer who can handle the nitty-gritty of online sales, tour organization, merchandising and marketing will be enough for them. But many can still benefit from the huge networks that labels have with their contacts in every facet of the industry. Sure, you can print your own t-shirts, but a label with contacts with clothing manufacturers, stores and distributors can make that process a lot easier. And just how much of this work do you want to do yourself?
360 deals don't make sense for all bands; Ra Ra Riot manager Roth isn't sold on them. "A lot of labels are also now branching into management because the manager is involved with everything going on with a band. Labels will try to be like a full-service company to a band, but I don't think it'll be very popular." He worries that bands will be setting themselves up to be taken advantage of even more by labels if they give up merchandising and touring profits to them. Having an independent team working for a band and playing middleman between them in the label makes sure there's someone deeply involved in "business stuff" that still has their best interests at heart.
And it makes sense that a manager would be wary of labels moving into their territory, but there's still a distinction between label and manager with these deals. "For example, a new artist signed to a multi-rights deal may use the major label's merchandise company and e-commerce division in addition to its publishing and recorded music companies," Peoples says. "In the past, a manager could pick and choose which merch, e-commerce, publishing and record companies it wanted to work with. Now they're more likely to be under the same umbrella."
Sometimes, a band's management team can replace what a label does entirely. Just yesterday, OK Go announced it was splitting with EMI, whom they didn't have the greatest relationship with, to strike out on their own with a new company called Paracadute. Paracadute is basically OK Go's own team to handle management, promotion and distribution of their records. "The things that a major has to offer above and beyond anybody else are the things that OK Go really didn't need so much," Peoples says. "And that's radio promotion and access to brick and mortar retail. If you're going to create nearly all of your consumer awareness through cheaply made YouTube videos, you don't need this big promotional and distribution system behind you."
But not all bands can do what OK Go has done. The digital world looks a lot more accessible when only viewed through the lens of rock acts. "If you're an R&B act, if you're a straight up pop act, a country act, you're going to need radio and you're going to need brick and mortar retail, and that's not going to change anytime soon. Things are changing definitely for alternative rock, rock and indie, but some genres sell a lot better in digital than other genres."
But clearly, the money that's to be made in music is no longer just in album sales. And bands seem to be presented with a choice: they can either allow labels to become more involved in everything that they do, and give up money that used to go exclusively to them in the process, or strike out on their own. Either way, they'll entering a landscape where getting their song on Gossip Girl for 40 seconds is more important than any amount of FM radio play, where getting a music video posted to Stereogum is more important than getting it on MTV and where you make more money touring behind an album than selling that same album.
And in order to prove to artists that signing with a label is a better idea than going out on your own, they'll need to make big changes; bigger than they've made so far. "It might be how an addict ends up turning his life around," Peoples says. "He's gotta hit rock bottom. And I dunno if the record industry has hit rock bottom yet, but maybe that's what'll need to happen for there to be really big change."
But at the end of the day, the saving grace of record labels might be a lot more basic than who gets what percentage of merchandise or who deals with distribution. The big question is this: do bands really want to try to make it completely on their own? As Bonacci says, "I don't necessarily want to have all that nitty-gritty stuff to worry about. I'd rather just worry about making music. I don't want to worry about numbers or distribution or marketing or publicity or anything like that. That sounds like a desk job. I used to have a desk job, that's why I'm playing music. Now look at me. I sleep on couches."
Q&A: OK Go’s Lead Singer Tells Us Secrets of the Band’s Geeky Videos [Interviews]
With over six million views in six days, OK Go's video for "This Too Shall Pass" is the latest in their unprecedented string of runaway YouTube hits. Lead singer Damian Kulash shared OK Go's video philosophy—and history—with Gizmodo.
Q: At this point, OK Go may have the best track record of anyone at creating these incredible viral music videos. Why are yours able to stand out?
A: I think it has become increasingly clear to us, as we have chased our most exciting ideas, that there's been a dissolution of the distribution system for music. That seems really depressing when you see that records aren't selling, there's no way to make any money, the system's falling apart. But if the system itself is falling apart, then so are the rules wrought by it. Videos evolved in this very restrictive environment of MTV. There were only maybe 100 that would play at any time, and labels weren't willing to invest in them. So now that the system is falling apart, there's also no reason to stick within the confines of the definitions that were built up during that system. This sounds heady and pretentious, but it means for us the ability to chase our most compelling ideas. We don't have to think so much into the box of "Will this song work on this radio format?" There's an infinite world of possible audiences out there for whatever you're making now.
It's not like we sat down one day and the brain trust came up with idea for "This Too Shall Pass." Tim [Nordwind, the bass player] and I have known each other since we were 12, and it's always been the animating passion of our lives to make fun projects together. Everything from making home videos to recording songs. So the fact that the band got signed and gets to make records is all well and good, but that's all just a part of our creative relationship. Now that we have an outlet for these other things, all the better. The video for "A Million Ways" [below] was originally just a practice run for a live show. When that catches fire… We're now in a position where we don't see restrictions on what we can do at all.
Q: So "A Million Ways" wasn't even supposed to be a video at first? How'd you stumble onto that dance?
A: Before we were even signed, we were all living in Chicago and there was this incredible public access show called Chic-a-GoGo. It's like a lo-fi Soul Train. You bring a five year old in and an art student with a gorilla neck and everybody has a dance party. We only had one song at that point. We got a chance to perform there, which was great, but it was so low budget that they couldn't record our audio. We decided if we're going to lip sync let's swing for the fences, and we came up with this totally ludicrous dance routine to the only song we'd at that point recorded ["C-C-C-Cinnamon Lips"].
Tim worked at NPR at the time, and Ira Glass was a fan. He took us on tour as his opening act for "This American Life," and we kept the dance routine.
Rock shows are such a known quantity. The band does this, the audience does that, and there's a particular range of emotions people go through. But when you bring something people don't expect, it really shakes it up and is very different and weird and fun.
As for the dance for "A Million Ways," we'd come out with our second record and we didn't want to do the same dance that we'd done for our first. My sister choreographed a new one for us, and we worked on it in our backyard. The video was a practice tape, but there was something so funny and awkward and weird about it that we just sent it around to friends. Then it suddenly had 500,000 hits, which was more records than we'd ever sold.
I truly and honestly did not believe that numbers close to that video's were achievable again. A lot of it was dependent on YouTube being brand new at the time, and people discovering the service when the video came out.
Q: Do you feel pressure now for every video to go viral? Especially one that took as much time and effort as "This Too Shall Pass"?
If "This Too Shall Pass" could have a broader footprint than "A Million Ways" or "Here It Goes Again" did, that's great. But that's definitely not our intention. From our perspective, the upshot of these things being successful is the ability to do a lot more of them in the future. We've done a lot of videos in the last few years. I'm definitely happy with the video of "WTF?" and this latest one, but when these videos do well it makes it so much easier to get the other ideas we've conceived done. Saying "I'd love to do this thing [in a video] with six cars" is tough, but now it's more likely that someone will actually give us six cars. It's less that they're designed for viralness and more that the operating principle of our creative life is chasing down those ideas.
Q: Where did "This Too Shall Pass" come from? Do you consider it a continuation of your previous efforts or a jump forward?
A: "This Too Shall Pass" is a combination of a bunch of things. Making the treadmill video ["Here It Goes Again"] and the wallpaper one ["Do What You Want"] after that, I just got really obsessed with these contingent systems. Looking at choreography not as dance or movement but as a performance or a system that requires lots of disparate elements to work in perfect synchrony, or sometimes imperfect semi-synchrony. I was thinking a lot about loosely choreographed pieces. What sort of systems can you do that aren't specifically dance, but you get the effect that the whole is greater than the sum of its parts, because everything works just where it should. Rube Goldberg machines are also, I think, universally magical.
Our label, bless their moronic hearts, was given our record nine months ago. It kept getting pushed back. We basically wound up with several months of our lives to just get in trouble. If we'd had to go into promo land and get on tour we wouldn't have time to do this kind of stuff. Basically I got home when the record was done and wrote down my dream list of videos. This whole project started with a two-paragraph description that I put down online as a job post, essentially. I asked for two creative engineers, because I figured that's about what it would take. Two engineers, and a couple of months. It ended up being more like 60 engineers, and five months of work.
Q: The set looks like a walking death trap. Did anyone get hurt, or were there any close calls?
The camera man was actually hit by the giant blue barrel that falls from the ceiling. You see the camera takes jolt at the end, right around the time the airplanes take off. That's the big blue barrel running into him. Otherwise, there were a few bumps and scrapes and bruises. Brett got hit by the bowling ball when it didn't stay on the ramp once. But none of the super dangerous things every hurt anyone, that I know of.
In terms of putting ourselves in harm's way, what makes these things exciting is the experience quality of it. The essential element of this would be lost if we made a film that depicted all these components but didn't actually have them. I can think of other music videos that show Rube Goldberg machines, but they're all carefully edited things. It loses the idea of being there for the people doing it or the people watching it. I pushed the design team to make the ways the machine treats us stranger, rougher. I was hoping the part where I get rocketed across the room would be a catapult. The professional circus riggers who set that up said we couldn't do that. I was pretty insistent, but they were very clear that no, making you airborne is going to hurt you. And I was like, don't people do this all the time? And they said sure, there are stunt men who train for years and/or do this with a lot of CG. I wanted to do it, but apparently this is as dangerous as it gets.
Q: Wait… you had circus riggers on-set? What other professionals came together to help build this thing?
A: It was such an incredible group of people. The doors that fall at the end were designed by a rigger/builder guy who everyone called "The Pirate." His mains source of income is working on longships, so he's actually literally a seaman. The person who painted them is the guy who designed the most recent Coke bottle. It was a crazy group of people. The reason we got that spread is we didn't walk into USC and ask for their brightest engineers. We posted this stuff on the MindShare Labs list. I think they're called Syyn Labs now. They're basically a community of nerdy, creative folks in Los Angeles. Anybody who was wont to go to a lecture series as a drinking venue had access to this. Basically anybody who sees the smart/fun/creative side of engineering.
Q: Why such emphasis on "old-school physics" and practical effects instead of CG?
A: On the basic level, this whole project is only exciting because it is real. It's not a labor of love for anyone to go make a commercial. This is an art project for all these people. If it ain't the real thing, it's not worth it. They're not there to make a video that promotes a band. They're there to make this awesome project. Any time someone suggested a way to do something easier, I gently pushed them away from it. What makes Rube Goldberg machines so universal is very hard to describe and very easy to lose. If you make it failproof, the thing completely loses its magic.
Q: Would you say that's how you've historically approached your videos?
A: Across our videos in general, it's not really a requirement but it's something that attracts me. I once wrote out a list of 20 things that make a good video. One of them is that it's something that anyone watching could, with enough time, have done themselves. Treadmills and choreography and all the things in "This Too Shall Pass," none of those are specialized access. A broken piano costs like 70 bucks. It's not like you have to be an engineer to get that.
Look, we were working with engineers from NASA. Three people who worked on the Mars Rover worked on this machine. And it was wonderful getting people to stop using the specialized part of their skill and get them to use the inspired part. A lot of times I had to explain what "magic" was and what they weren't allowed to do. You want to use optical gates? Okay, but it has to be followable for the audience. What about lasers? You can't use something from your lab you worked in, but you can use a laser pointer from a gas station. What if you dissected a Blu-ray player? Fine, but only as long as people can tell it's from a Blu-ray player. You'd be surprised how much communication it takes.
Q: Any parts in particular stand out where you could've been spared a lot of trouble given a CG or manual assist?
A: Almost every point in there could have been cheated. There's no way to cheat the table I'm sitting on in the beginning. I suppose you could maybe put together that machine and then animate the balls but that would've been incredibly difficult. Almost everything else would have been a lot easier with a manual cheat or CG cheat. The timing on everything was critical.
Take for instance the sunrise contraption, the umbrella that comes up as the sun. The timing delay between the sun coming, the flowers coming up, and the birds coming down—we could have just triggered all that stuff electronically or manually. The way it was actually done is changing the fulcrum of the 2x4s that those things were spinning on, so the weights on the end would spin around more slowly. A hammer gets hit on the fulcrum on the back, and by changing where that hammer was, you change the delay until the release of the flowers. That kind of stuff, there's no reason we couldn't have cheated all this, but the 60 people who built this thing wouldn't have had the challenge and the satisfaction of the finished product.
Q: So what's next? Do you feel pressure to keep topping yourselves?
Mostly I'm just excited because I think this makes it more likely that we'll be able to do more in the future. Finding people who will help us pay for some of these things should be a lot easier right now. And finding collaborators. As wonderful as the team was, there's no way that those people—no matter how compelling an internet posting I'd put up—there's no way they would've signed up to do this if we hadn't already done the treadmills. The success of any particular project is that rather than lifting the bar and creating pressure to come up with new ideas, it opens you up to more and more of them. Now it's more likely that when we call to find an anti-gravity chamber in NASA, it'll happen.
Q: Ha. Is that something we can expect to see at some point?
A: Oh, man. Weightlessness would be the final frontier, I think.
