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Is turnover the barometer of “Worth”?

21/10/2010

I started writing a reply to Tim London’s big and very interesting comment (go have a read… it’s good stuff that comment) on my post EMI and Sony are not “The Music Industry” last week. Tim, likewise I love the passion, and I think that this all comes down to a matter of perception really. Tim says:

“While I appreciate your passion there are a couple of questions you need to ask yourself before seeking representation in the media: What is the turnover of the ‘non-trad’ music industry exactly? And how does one come to the figure? You state ‘thousands’ and I would go along with that, at a guess. But is it millions? How many?”

Firstly, I may have phrased that wrong – there are millions of bands in the world, according to Myspace alone, as of October 2009 they had 8 million active band and artist pages. (N.B. this page no longer contains the info it did when I first started linking to it though Sean Adams of Drowned in Sound recently quoted myspace as having 16 million band/artist pages). It’s not a definitive figure of the total number of artists in the world by any means, but it goes to show that there is a great number of bands and artists globally. If only myspace registered bands (and I don’t want for a second for Myspace profile ownership to be the definition of “Band”) were included, and each artist has made say only £100 in any given year from shows, record/CD/mp3 sales or whatever, then yes, it’s most definitely millions. Hell, if they’ve only traded £1 each however then yes, it does run to millions. That Myspace figure ignores many solo-musicians paid for shows, sessioners and a vast array of un-quantifiable and un-trackable instaces of music and of musicians. Critically for me though, I think it’s a huge oversight to assume that cash is the measure on which to judge music. It was never that way in art. Composers, painters, artists of all kinds have famously struggled for years. That Van Gogh was a penniless artists does not diminish the greatness of his work. Not for me anyhow.

If we use money as the barometer of worth, then we’re missing a hugely important function of music, that music is culture.

Back to the Numbers

Let’s take the UK for example, in fact, let’s look at one city alone, Leeds. I live in Leeds and work with a number of artists, and am a fan of a number of Leeds based artists. There are thousands of musical artists in Leeds (there are hundreds at the College of Music alone and there are many hundreds more who are not. Leeds is not unusual in this. Leeds may actually be considered relatively small compared to say Manchester or London and this pattern is repeated regionally, nationally and globally. The Business of Music is everywhere and is totally unrepresented by the majors I mention in the preceding article. As I say, the Trad Music Biz represents only a tiny proportion of music makers. Less than 1% of the number of Myspace artists alone have a traditional record deal with the majors or large indies. If we believe that the monetary side of things is important (and I’m not saying it should be ignored), then equally it’s important that artists get remuneration for their art yeah? Well, not if you’re signed to a a Trad Music Biz contract.

The reality of a major label deal

Less than 10% of signed artists recoup. Take Maximo Park for example. They have by their own admission never made a penny from record sales and make their money from DJ sets in the main. An example I have first hand knowledge of, Embrace, have sold millions of albums, they were a genuinely massive band; they performed from Glastonbury main-stage to Top Of The Pops and everywhere in-between. When they split from Virgin, they owed their label three quarters of a million pounds. I guess my point is that if we promote the Trad Music Biz’s model as “The model” then the message we’d be sending is:

  • less than one percent of musical artists are part of the music business
  • only a tenth of those will recoup and make money from their record sales, and that’s good
  • an artist should be saddled with debt, the rate at which they pay that back is equivalent to a credit card with a 900% interest rate

I can’t promote that, I can’t encourage it, and it’s not representative of the vast swathe of music makers interests to do so.

Am I typical?

To move on to the question, “Does your experience selling music to people who are prepared to pay even though they can get it free representative of all artists’? Are your fans typical?”… Well as per your comments Tim, this is also going to be somewhat anecdotal. Hope and Social fans in the main buy our records around the £7 mark. Some pay less (we once accepted a free coffee on a Starbucks card as payment), some pay more – much more, because they value what we do. I’m happy to accept £50 for an album, or have people pay well over the odds for our box-set if they want to. Why do they do this, because they are fans.

A Single Monetary Transaction is Not How to Measure Value

I once took a 5p coin as payment for a CD. This one off transaction is a loss of £1.39 on cost of manufacture alone. The girl in question explained to me that her Grandad had died that day, and that she’d been dragged out to a show by her friends to distract her from thinking about it. She had only 5p, but said that our set, and the lyrics to some of our songs had helped her make sense of a lot of things she’d thought about that day. She’s since paid in to many a show, bought everything we’ve ever made, dragged friends along who’ve also bought from us and exposed us to numerous new fans. Perhaps our fans are not typical people, but I believe they are typical music fans

.

Why PWYW

Hope and Social believe in and benefit from Pay What You Want. We go on about this here, but also… As musicians, we all have the ability to take advantage of the same channels that H&S have:

  • dramatically reduced costs of recording
  • a zero cost of distribution (should we choose to make mp3s available on the internet then there’s no cost to us. This is miles away from the Trad model where the cost of recording and manufacture made it nigh on impossible to record and release independently)
  • reduced cost of promotion (CD’s don’t need to be sent to reviewers, press etc at the cost of a quid per CD, and half again on postage)
  • and by building relationships with people, they become our PRs, our evangelists (to coin another religious term, man I’ve got to stop doing that)

Also, there is a value in making your music available for free. If someone downloads an album of ours and shares it with a friend, copies the CD, plays it at a party, then that’s how we share and have our music heard by more people. This results in:

  • higher gig attendances
  • better paid shows
  • more sales of our music
  • more sales on other merchandise and art that we, and our fans make.

Education not Litigation

I also see my part in this as more than just a musician. I work with young people (11-18) in music as a mentor for bands, in songwriting workshops, in rock-schools and other outreach. I work in environments from residential care homes to middle class schools and also with adults at music colleges, universities and so on. I often ask the question…

“Who here would like to go on to have a career in music?”

There’s usually a pretty large portion of those attending who say yes or raise a hand. I’ll then ask:

“and how much money do you spend on the music you most love”

As I’d expect, there’s a few who champion music and spend much of their cash on it, many don’t. Those who don’t spend, I encourage them to find new music that they love and to engage them in promoting, sharing and purchasing music they adore. I’ll also encourage them to find the best way of getting the money to the artist in question – buying direct from the artist is the best for me, and if I find that I can give more money to a band by purchasing a T-shirt at a gig, I’ll do that. Whether this is typical or not, the fact remains that we can engage people in our music and if we give them an opportunity to buy from us, then Pay What You Want yields the greatest number of sales, and a greater revenue than from fixed pricing. It’s a value proposition, and people appreciate our aforementioned offer http://www.hopeandsocial.com/music/why-pay-what-you-want/. What the majors I mentioned in my previous post have done is attempt to seek out people who’ve shared files and prosecute them. They’ve also tried to force ISPs to reveal their customers’ identities so as to prosecute. Have you ever tried to buy a product from someone who’s taken you to court? Not many people do. These actions push people away from music, and alienate potential music fans. If you engage with people and give them reasons to buy such as:

  • by buying music from the artist you support their future ability to keep making music.
  • if you want a career in music, you’ll need music buyers. Lead by example.
  • Music’s precious. Show someone you care.
  • we offer this to you to try, if you love it, come back and show us some love

… then we open the door to creating a relationship between that person and your music. Try it. Download something from music.hopeandsocial.com and read the “Dear Music Listener” file that comes with it. Our inboxes are scattered with emails saying “I downloaded your music for free/for £1 and I’ve re-bought it for a tenner”. Yes it works for us, and I believe it can work for many… if you make the decision, make the leap and take decisions to make it so, you can reap the benefits.

Who’s coining it?

As for “the music industry as represented by the majors is still coining it and the music industry as rep’d by you is getting by, struggling, working part time or making music as a hobby.” Well, I make my living from music in a way that I never could have when putting music out through the traditional music biz’s channels. The band make more money now than ever we did when using traditional methods. Indeed labels may still be making money for them selves but as stated above, it’s not for the bands and artists who release through them. If Lily Allen can sell 2,600,000 of “Alright, Still” and simultaneously claim that “The days of me making money from recording music has been and gone” (more on this here) then it’s clear that the Trad model is broken. Also Tim, I don’t see this new generation of those who expect it free and that’s it… on the contrary I see (taking the community of the fantastic ELFM for example, a community radio station for East Leeds, with whom I am involved) a growing number of young people who are learning to become an audience, and spreading the importance of being a good (and purchansing) audience. They’re championing new music and spreading the idea that to support music, we should all promote, buy and share music that’s worth owning, going to see and being a part of. I do see Tim’s arguments that “the music industry as represented by the majors is still coining it” and “there’s a generation being formed who don’t agree and who will expect their recorded music to be free unless they are forced to pay” as somewhat incongruous. Either it’s working or it’s not.

15% of nothing is still nothing

Tim finishes: “And when the major companies are gone, so will the paltry 15% they used to give the artists. In its place will be… goodwill?” NO the replacement is the 100% of the selling price of the CD/download/artefact. The break-even point on a £50,000 advance is around the 100,000 album mark. DIY reduces this to a fraction. Sell 1,000 albums at £7 on something you’ve made yourself and with manufacturing costs of £1.44 (that’s H&S base-rate for the most eco-friendly we can be… all recycled packaging, all paper) and you can see that the maths stacks up in favour of the route of independence. I guess it comes down to two viewpoints. There are those who think it’s all *&$%ed and that music will die because people want everything free – or there’s others who see the new opportunities afforded to us all by new technology as something to engage with and profit (personally and/or financially) from. I fall into the latter and have no personal need for fame or the trappings of having a record deal. It’s personally, musically and economically better to engage directly with people who are in the market for the music I make. And it’s more fun… now there’s a currency I understand.

Further Reading:

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13 Comments leave one →
  1. 22/10/2010 9:29 am

    Cheers Rich, this is a hugely encouraging and comprehensive overview of stuff I already knew but needed reminding of. You know how sometimes you just need a reality check to remind yourself why you do what you do. Well you’ve just given me that, so thanks!

  2. 22/10/2010 10:46 am

    Great post Rich. I think as a model what you do is refreshing and inspiring. Obviously it takes a looooong time for some people to convert their thinking away from traditional methods.
    It is possible that in 50 years that the H&S method will be considered the traditional method!

    I personally think that the closer relationships you allow through your method allow fans to be much more invested, that they could ever be through a major label, because it is much more personal and a more direct relationship between fan and artist.

    I consume (not just financially but also in time, emotion and in the endless gushing I do) H&S much more than any other artist because the channels are there that allow me to do so.
    I believe many others are similar to myself, which in turn has created a community of people that I see regularly at shows and events. This community is so impassioned that they join forces and support the band on a number of levels. I feel this is for a number of reasons…..
    1. Because they want to
    2. Because they feel part of something
    3. Because it is something different (and interesting) to do
    4. Because the band genuinely appreciate it and give something in return.
    5. Because the event/activity is fairly exclusive and hardly any (if any at all) similar opportunities exist.

    I could go on.

    The model is very inpsiring and I shall be aiming to follow in the footsteps with my band, and will try and find some avenues that H&S haven’t though of yet! (although that could be tricky, due to the fact they’ve done so much aceness).

    I just can’t feel so passionate about other artists on major labels because they just aren’t as interesting. The music and songs may be great, but I obviously require more than that.

    There maybe something to relate to the recent popularity of small festivals, due to the fans wanting to access something smaller and more personal. Maybe that should be investigated in a future post Rich.

    Finally, Rich actually delivers some of the educational activity he mentioned for me, and the reason I ask him is that he advocates enterprise and creating something yourself (amongst many other things). I simply couldn’t book somebody who promoted the idea of going for a deal with a major record company who you will ultimately owe money to. The most inspiring music industry stories out there generally don’t come from the like of EMI and Sony!
    And when it comes to music and/or young people Inspiration is massively important.
    Rich is one of the most earbendingly inspirational people I’ve ever met.

    Sorry for the ramble! :-)
    Matt

  3. Joe Taylor permalink
    22/10/2010 12:11 pm

    Would you prefer it if record labels didn’t pay advances? Then nearly all artists would “recoup”.

    Are you aware that advances are always non-returnable on the traditional major label deal, as are other costs that go against the artist’s royalty such as recording costs and half the video budget?

    i.e. if Embrace or Maximo Park owe their label a million pounds, this is bad news for their label as it suggests they’ve invested massively without seeing major returns. But it has no serious consequences for Embrace or Maximo Park who can merrily make money out of publishing, gigging and selling merch thanks to the huge investment their label made in them. And they will still get an advance for each additional album their label asks them to make.

    • 22/10/2010 2:26 pm

      Matt, thank you. As ever.

      I think you’ve hit on something by saying “I just can’t feel so passionate about other artists on major labels because they just aren’t as interesting. The music and songs may be great, but I obviously require more than that.”

      Engagement or dialogue is becoming a vital commodity.

      Joe, thanks for getting involved. Just to clarify, in a major deal Everything is recoupable: album costs, the videos, the car that picks you up to got to the MTV awards, it’s all added to the bill you pay back at your tiny percentage of the dealer price. The Label however picks up the lions share, so for the sake of easy maths.
      Band racks up bill of £200,000 on album/videos etc.
      Band sells 100,000 records at dealer price (the price to the retailer) of £4 (it’s likely less than this these days, but for the sake of fairness to label deals).
      Band recoups a (very high) 20% of the £400,000 of income to the label against their costs = £80,000.
      Band owes label £120,000 – to be added to their recoupable on their next
      Label has spent £200,000, label has banked £400,000 = £200,000 profit.
      Label renegotiates bands 20% down on next album as “You didn’t recoup, we need to work a better deal out for the label”.

      The advance is to live off and to record the records. That’s part of the £200,000 above.

      Yes there are other income streams, and absolutely they should reap those rewards. To suggest it’s the best or only way is limiting to say the least. As for the financials of it all, find me an artist who thinks their record deal is fair.

      BUT…

      The point of the above article is that music is so much more than the money generated and swallowed up by the machine.

      Go do something great and fight for music as part of culture. It shouldn’t exist within the walls of “The Record Biz”. Engage with people and help show people that there’s a way other than the “We choose Yooooou” X-Factor/Lottery wide-eyed mega-stardom. It’s the entertainment biz at it’s worst and is not representative of the huge and everywhereness that is the business of music.

      • Joe Taylor permalink
        22/10/2010 2:53 pm

        Matt, in a traditional major label deal half the cost of a video is recoupable, not the whole cost. TV advertising can also be part recoupable and can affect the royalty paid. All other marketing costs are non-recoupable. Major label advances are more likely to be exclusive of recording costs than inclusive.

        So a more likely scenario is band gets advance of £100,000.

        Label spends a further £100,000 on recoupable costs including recording and the band’s half of the cost of the videos.

        Band sells 100,000 records at dealer price of £4 at 20% = £80,000.

        Label spends £300,000 on non-recoupable costs including marketing and their half of the videos.

        You might think the label is at break even but think about tax, manufacturing and distribution costs for the physical CD and all those promo copies, and the costs of all those staff and offices…

        The band has received £500,000 of investment here remember.

  4. 22/10/2010 7:07 pm

    Hey Joe [sings "Hey Joe" to himself],

    Yep, they’re different figures but even they don’t look great to me. From conversations with managers and even with label heads of A&R, it’s not my experience. A major most often has control over the studio. Take EMI and Abbey Road for example. Cost for studio 2 for a day, £2,000. Cost to EMI, nowhere near that. It’s EMI who own Abbey Road so the money goes from EMI, to EMI. The same can be said for in house for PRs, Radio Pluggers, TV Pluggers and marketing departments. The money tends to get recycled. The £500,000 investment is at a cost of a fraction of that to the label.

    From going through with bands I’ve worked with who’ve been signed to these deals, everything is recoupable (this may not be blanket, but it’s certainly practiced). Even down to taxi fares whilst on tour. The problem is, a £10 taxi fare costs the band not £10 in sales, not even £10 in revenue back to the label, but at the point where the label has netted £50.

    Anyhoo, figures aside, my point remains that even if labels fail to grasp the opportunities afforded us by technologies that help us to connect with people, and are free… even if labels did fall by the wayside (which I don’t think they will imminently), even if there was no such thing as a record deal…

    great music will still be made, shared, bought, consumed and aired.

    Still, to date, I’ve yet to find an artist truly happy with their record deal. If only 10% of bands recoup then it’s gotta be broken.

    I’m not saying that there aren’t labels who do great things for and with their artists. I know Sky Larkin stand with their label as regards how their deal works. Wichita is their label. I support them wholly.

    Joe I’m sure you and I could continue a well rounded discussion of the opposing sides of this argument for many paragraphs, or over many beers. We could tussle over what the right numbers are and how it’s better to be famous and indebted or sustainable and independent. The point is, you don’t have to bemoan the supposed demise of the record biz. You can make other choices if you don’t want to engage in that world. There are many and varied and for me much more rewarding options available.

    As the title of the blog questions “Is turnover the barometer of “Worth””. I don;t think it is, and I don’t think it should be. We need to ditch the idea of it all being about the cash, and focus on what’s important. Music. Make art, Have Fun (if that’s your thing), and if you like what I like, do it with your mates.

    Incidentally, my name is Rich.
    ;)
    xR

  5. Nile permalink
    22/10/2010 7:38 pm

    I suspect that the millionaire rockstar is a thing of the past; but making enough money out of music for your hobby to break even – pay for the van, hire an amp for the gig, a middling hotel and beer money – just got a hell of a lot easier with PWYW.

    It remains to be seen whether there’s a living to be had in it, for people who want a life in music. Is there a natural progression through friends an word-of-mouth and local gigs in small venues, up to bigger shows, increasing sales, the cash for better instruments, studio time and a producer, all the way up to MTV and film scores and a stadium tour?

    Is there a comfortable middle-class life in it for someone who’s put in as much study time and practice as a doctor, a solicitor, or an accountant? I wonder whether these ‘professional professionals’ will enjoy a better life in music with the ‘music business’ gone… Actually, I doubt that their economically-precarious lives could possibly be worse-off than they are in the distorted market that we see today.

    It does seem that ‘the music business’ had become an obstacle to musicians, rather than the facilitators that they claim to be. None of the places where the likes of EMI extract value from music for the shareholders are places where an economist can see them adding value; rather, they are extracting an ‘economic rent’ – in plain language, demanding a toll for passing a barrier.

  6. Tim London permalink
    26/10/2010 1:46 pm

    Rich, thanks for the detailed reply.

    Instead of turn-over, look at profit, or even breaking even. Your millions of musicians around the world will be blowing all the money they’ve made on one guitar, let alone transport and general expenses. They are not making a living, even if they are having fun.

    Your own experiences are very specific to age and genre, they do not travel, especially when you look at artists who appeal to younger audiences, but I think you understand that. There’s a goldrush and you’re one of the lucky prospectors…

    Joe (above) clearly describes the situation with majors – you don’t want to hear it! Signing a major record deal was one of the few ways, bar winning the lottery, that a working class kid could hope to have enough money to make a deposit on a mortgage. For the lucky few artists it was and occasionally still is a fantastic opportunity. As well as my personal experience I know other artists who have signed major deals and the money has has worked in their favour. Because you don’t have to pay it back. To repeat: you don’t have to pay it back! Yes, the points are terrible, but if you engineer the situation so you are dropped, if your A&R moves company, if you have an argument with the MD, if they just don’t like you – you can leave and you don’t have to pay it back.

    In the rush to see the end of the trad biz music ‘start ups’ like yours (and mine, actually) might be doing more harm than good. There is already the much mentioned ‘you don’t get signed til you are selling 10,000 downloads’ syndrome – so you have to prove yourself as a small business person as well as a songwriter and performer. If we all accept that then the majors will be very happy – and the disorganised dreamers and wasters who would sometimes be swept up by the A&R net and catapulted into our lives will fall by the wayside. Who’s going to pay Pete Docherty’s bar bills? Who’s going to pick up the bill for the Clash’s smashed up Rainbow concert? Who’s going to believe in an Angel Dust snorting visionary like Sly Stone?

    I haven’t got the money… have you?

    What’s music worth? – in a socialist world there might be some other barometer, but… (In my world, which is as socialist as I can get it, it’s the amount of joy I receive.) In the world in which I’m forced to try to survive, it’s fame and money and fun hand in hand in hand.

    Pop music is the loopiest of the arts, the hardest to quantify AS art.

    This is a useful conversation and it will rage on for years yet, I’m sure. Cheers.

  7. Tim London permalink
    26/10/2010 4:35 pm

    Oh, and…

    Facts is facts: this is not a simple black and white situation – the record industry is still very rich, even while massive file-sharing continues to grow. There’s still enough of that over-a-billion pound income after the decreases in over-all sales for the industry to dominate. Again, the file-sharing is genre-led and age-led. The ancillary and additional benefits the industry create are also huge (it will be interesting to see how much tourism is generated by UK pop music in the report commissioned by UK Music next year, for instance).

    It’s a beast! And these are the reasons why the big companies are considered the ‘music industry’.

    Presumably you self-publish, too? If so, there’s another huge advance that might be sailing by (the terms are better, as well, with, normally, 70% to the artist, again, you don’t have to pay it back if you get dropped…) Of course, if you are sure of publishing profit equalling, possibly, £60,000 in a year, you won’t need to sign with one of the big companies (who, when they get really excited, have been known to pay out more than £100,000 for a first term signing of a relatively unknown writer).

    We must all be sure, when advising younger musicians to tell the whole story. Why limit the possibilities as they still exist? You wouldn’t tell a talented young footballer not to bother trying out for Man U because it’s more fun to have a kick about in the back yard, and, anyway, everyone will be playing with Wiis in 20 year’s time, would you?

  8. 07/11/2010 4:38 pm

    A really smart post, Rich. I’ll certainly be pointing more people to this blog in the future.

    Your band is exactly the kind of forward-thinking one we’re proud to have on Dizzyjam.

    http://hopeandsocial.dizzyjam.com/

    Our whole aim is to provide a free revenue stream through quality merchandise for bands, labels, producers and events, and we’re constantly looking for ways to make ourselves better and more useful.

    It wasn’t that long ago that it very much felt like “getting a deal” was the main aim, the very point of making music. Now the autonomy is coming back into the industry, and being smart about how you generate money is absolutely key.

    I’m actually kind of jealous I’m no longer making music and am no longer involved in this exciting time that encourages coming up with smart strategies to promote, and sell, music.

    Keep up the good work!

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