What is it exactly that we are selling anyways?

[audiowkstation]

Hi Bear,

Simply math. Just like Bob pointed out, it has to do with all the mouths being fed and the hands ran out.

The below figures are for comparison purposes and not to be taken verbatum.

Major label:

Signing to artist. $1,000,000

Out of this you have artist salary
Recording studio
Producers salary
Distribution Money
Promo
Pressing
Payola (yes..it is a federal crime, seems to go unnoticed)
Travel
Equipment
Concert promotion
Legal
Agent
Management
A/R
Shipping
Clerical
Insurance
More Pressing
Artwork/Posters/Press
TAXES!
.....And many other expenses not listed

500,000 CD are sold, the Artist are lucky to see 40 cents per unit...The million must be repaid.


Indie:

Paid for studio time, accounts payable is complete. (let's put this figure at 10 grand for practical purposes)


Pressing. Paid for. 50,000 pieces, $40K

Promotion...etc... Gigs are paying for it. Lot of sweat.

Distrubution...runs around 30 to 35% of your CD.

Ok roughly on 50,000 CD's at 15 bux a pop you make 6 dollars per unit vs 35 cents.

50K X 6= $300,000.00 Covers your expenses quite nicely. You may have after taxes and expenses as much as $100,000.00 free and clear to split between band members.

Label 500,000X 35 cents 175,000.00. Well now you have enough to cover about 10% of the million after taxes...you have 90% to go!!!

As soon as you think you are in the black, the label hits you with more charges. You may never get paid by riding their train. Nothing is free.

Indie is the only way to go IMHO.

[Bear's Gone Fission]

Hell, if you can parlay indie success into multi-platinum sales, you're probably making a profit on the jump. I think the interesting economic point, though, is that with lesser sales, the artist and label are making better money per CD sold. The blaring question is: How can this be?

Economies of scale should be working for the majors. Thing is, they don't seem to find a way to push enough product to run a profit for themselves and the artist on the majority of their releases, with a few enormous sellers making the bulk of their money. I think maybe Bob has their dirty little secret pegged, that there isn't really a mass market as they claim there is. All the push towards mass market music consumption (ClearChannel radio, chain record stores/Best Buy/Walmart, and consolidation of venue ownership) should in theory make it easier to sell mainstream records to a mainstream audience, except something isn't working with the equation. They spend phenomenal amounts of money to get sales figures that, in their economies, don't justify the expense.

So how do the indies make more money per unit? (Or, to use a favorite media exemplar of a few years past, how does Ani Difranco do this?) Funny thing is the new thing in advertising is what they call viral advertising, what used to be called word of mouth. The corporate viral model now has people payed to endorse a product in a public or social setting without revealing they are a payed endorser (probably just as legal as payola . . .) in an attempt to win over those who don't trust advertisement. Thing is, those really into music have been championing their favorite bands and artists for no compensation for years, and I've always gotten better tips from reliable sources word of mouth than from any music mag. This sort of spread of audience, from one enthusiast to another, along with a busy touring schedule, is what built the SST records bands, what gave Ani Difranco such a big and loyal following, and what led to the grunge explosion that record execs still don't understand.

I'd have to figure that blockbuster indie sales figures are about the average cap for fans of the artist who can be counted on to support a career. Listen to an 80's channel on the radio and it's not hard to see too many of those bands had their quick hits with novelty songs and gimmicks, and didn't put forth the substance to sustain a career. Some bands break the mold and sell multiplatinum for a career, but if most can afford the house and make a middleclass living, I think enough who are really dedicated would stay with music, and we're better without the megalomaniacs we'd sift through.

So the question is, are the majors ever going to change their business model, or do we have to stick to our guns and rebuild the indie network that was, only broader, better, and more diverse? (That is to say not just punk influenced.) I'm guessing the later, and we're probably the better off for it. Cool, I've wanted to start my own indie for a while.

Bear

[Bob Olhsson]

At Motown we outsold all but two of the majors in the singles market for several years. The majors fought us and won by offering artists contracts that appeared to be so generous that we couldn't hope to match them and remain profitable. Of course this was because most of us didn't understand Hollywood royalty math where 20 percent of wholesale could actually turn out to mean less income than the four percent of retail our artists got paid. This was compounded by advances that made signing with a major extremely profitable for artists' managers and lawyers. Ultimately these guys took over the management of majors and then sold them at an enormous profit to their current owners.

The advantage that majors still offer is leverage with radio and retail. They can exchange favors in access to their biggest stars for favors in exposure to their younger artists. Provided the artist can capitalize on such exposure, they can earn a lot more TOTAL income behind major label exposure even though they may earn a lot less directly from record sales. This is the big "if" and many artists have discovered that it cost them more to be "number one" than they could earn from being "number one." I think the smartest thing an artist can do is to stick with indis until it is obvious that they could do a lot better overall on a major label. If they are running their business sensiblly, they should expect to turn down a number of major label offers before the right situation materializes.

[audiowkstation]

Exactly.

Having attended several Gavin conventions and dinners, (most recently in New Orleans '95) this is the truth. Everyone I had closed door conversation with thought the same way.

[Bob Olhsson]

I've been amazed by how little has changed in the music industry over the years, especially the things many people insist must be completely different.

The one revolution we do have is right here under our fingers as we type. We have the unprecedented oppertunity to TEACH each other what we know about our industry and how it works around the world.

[waitgoiter]

We're really in some heavy territory with this thread. I'm almost scared enough to run back to Harvey's place and find out what's the best kick mic for under $200. But instead I'll let you know what I think about Bob's original question: "What is it exactly that we are selling anyways?"

Of course Bob's idea is right -- the commodity for sale is the experience between artist and fan. Like every other product on the market, that experience is branded by the artist's deliberate and accidental publicity. For most bands, the branding experience seems to end at divining some obscure genre niche and locating some outfits.

All the really successful artists that I know are people who have figured out exactly what kind of a relationship they are going to have with their audience, thus how they will build their brand, and thus what sort of experience they're providing. This knowledge informs performance, songwriting, and everything else. So the question, "what are we really selling?" is one that every artist has to ask for themselves if they're interested in selling anything at all.

[Bob Olhsson]

I think the huge difference between entertainment and most other businesses is the necessity of branding and the necessity of control over availability and peoples' experiences to ensure the experience to the fan will be extraordinary.

The most precious thing EACH of us owns is our leisure time and as we grow older it becomes geometrically more precious. This is why branding is critical. Nobody is interested in taking a chance on entertainment unless it's free and there's nothing better to do.

We each have a wide variety of leisure activities to choose from and our choice is frequently made based on how extraordinary EACH opportunity is. We will often go see somebody from out of town over seeing somebody "local" every time EVEN when we consider the local act to be better than the act from out of town.

So let me add on that what we are selling is an EXTRAORDINARY experience between an artist and their fans. We can sell generic music to advertisers, elevator manufacturers and film producers but fans will ONLY buy brand-name music.

[waitgoiter]

You are right!

The idea of a branded product got off the ground around a hundred years ago as a tool for consumer confidence. People could be sure that they could eat "Brand X Potted Meat" without dying of food poisoning, rather than taking their chances with the local generic. That idea took a while to evolve into "Backstreet Boys never fail to get the girls screaming!", as it first required the total commodification of artistic production.

[Ang1970]

Everyone interested in this topic, Bill Roberts and I will be meeting tomorrow (Sunday, Sep. 16) at 5pm EST in the IRC DALnet chat channel - #recording.org

If you are using a pc, you can get your free chat client from Mirc.
If someone has a good recommendation for mac IRC chat clients, please post it here.

Anyone who needs help setting up or connecting with Mirc can email me at angcin@optonline.net .

Thanks, looking forward to seeing you there!

[Bob Olhsson]

I disagree with a couple points.

First, WE PREDATE the "branding" of products, they are copying US. We need to look to our own experience and not that of other industries. WE are the experts and must never lose sight of that fact.

Second, production has ONLY become generic because it is cheaper. These recordings are not selling by word of mouth because they aren't good enough to. There is a huge opportunity for originality here, a huge one. The challenge is moving past "me-too" recordings while fulfilling what the audience needs from the music.