Music Business

Independent artists can make more money than ever before. The walls of major label distribution have crumbled, and have been down for a decade. Social networks make promotion to fans easier and cheaper. Add in home recording, crowd-sourced artwork, and other cost cutting maneuvers and DIY musicians can be financially successful.

 

Or so goes the myth.

 

Reality is far murkier. Yes, it is possible to make money as a DIY artist and many are doing it. However, they are not making it from selling recorded music. That can certainly bring in money, but even modestly successful DIY artists generally gross $20,000 to $50,000 from sound recordings annually. These are artists who have many songs in their catalog with some momentum. After you take into account recording costs and splitting revenue amongst band members and the producer, there’s not a lot left. Even those with a big enough fan base to do deluxe packages get a decent gross, but profits can be elusive.

 

Yet, DIY artists living below stardom are consistently finding profitable careers. How are they achieving this if iTunes and Spotify revenues aren’t paying the bills? The ones who are making a profit mostly fall into one of these three buckets:

 

1) YouTube

 

Complain all you want about musicians making YouTube covers and goofy videos instead of being “serious”. The reality is many of them make a good living from this. Costs are minimal compared to professional studio time. Distribution costs are near zero. The casualness of the content also allows for more rapid creation than one might find for “official” recorded work.

 

Companies such as Maker Studios and Big Fra.me have grown to help these artists monetize their music with better-leveraged ad rates, production assistance, and channel cross-promotion. Once ramped up with a lot of content, successful artists in this area can clear mid-to-high five figures in revenue. Since they are often solo artists, they also don’t have to split it up much.

 

2) Live Touring

 

It’s a rough life trudging from city to city, especially with gas over $3 a gallon. Yet many artists have figured out a way to make this work. The rise of house concerts has allowed some to make thousands per night when a club in town might have previously paid them hundreds.

 

Social networking has made promotion in new cities cheaper and easier to find the dozen “super fans” that might bring friends to a show. Smart artists also tour in areas where they know a fan base exists from mailing list and social network data points.

 

Once at the show, with an audience primed to like the band (instead of grumpy locals), these artists sell more merchandise. Easier access to creative items like sunglasses, jewelry, and handbags also leads to increased sales. Add this up, and musicians who aggressively work these approaches take in mid-to-high five figures in profit. As tough as touring can be, artists focused on this are clearly leveraging it into a career.

 

3) Sync Placements

 

The proliferation of cable channels and niche online audiences has meant more content and advertising that needs to be created professionally. This has also led to more needs for music around the world. Creators also can’t settle for mediocre library music. They need professional, contemporary songs that fit the mood of the creative.

 

Artists who fit the sound requirements and have a certain buzz amongst music supervisors are often rewarded with multiple placement opportunities for their music. Rates can be as lower than $100 (on sites like Audiosocket, The Music Bed, andCuesongs), but they can also be upwards of $100,000 for a worldwide television spot. Even after paying a placement company, an artist can still end up with a mid-to-high five figures in profit. This is also before they may get lucky with the “magic sync” that results in larger sales and popularity.

 

Bucket List

 

There are multiple examples of DIY artists who could fit into each of these buckets, but there are very few that were actually succeeding in multiple buckets.

 

YouTube artists don’t get enough road experience to draw well and their music lacks the “cred” music supervisors want. Touring artists mostly have “road” content to post on YouTube (which doesn’t perform as well), and they are in the studio less often to make tracks for sync placements. Meanwhile, sync artists tend to avoid YouTube for fear of diminishing their brand with covers, and don’t get much name recognition for their sync placements to draw on the road.

 

While success in multiple categories is elusive for most, success comes to those who focus on one revenue stream. By putting their energy in growing that one element, a musician quickly learns what works for that bucket. Then they refine their trade to fit the medium and achieve greater success. Laser-sharp vision allows them the financial resources to make a living at what they love.

 

The disadvantage is that this singular focus makes it difficult to get the career momentum most artists desire. Those that want to be rich and famous in music need to be succeeding on radio, the Internet, press, TV, and touring. For the DIY musician, much of that is cost prohibitive anyway, so a focus on what you can achieve makes smart business sense. However, it also explains why most major labels continue to dominate the biggest selling artists. Even when the artist comes from an indie, they usually have a partnership with a major label to generate success.

 

If you are truly DIY and don’t have a team, focusing on one area to succeed is a wise business plan. If you achieve a lot of success in that bucket, then you can evaluate how to grow on your terms. The new music business may look different, but it’s clear that a focus allows a greater chance towards DIY success.

 

—

 

Jay Frank (@Repojay) is the owner and CEO of DigSin and the author of “Futurehit.DNA” and “Hack Your Hit.” He was formerly the Senior VP of Music Strategy for CMT.

 

This is an essay by Jay Frank (DigSin) from Divergent Streams, a collection of essays edited by Kyle Bylin (@sidewinderfm) and written by influential executives, startup founders, and thinkers in the music industry. Download a free copy of the e-book here.

 

Source: MusicThinkTank

 

Soundrop, a Spotify app that shares a big investor with Spotify, says it alone has the ability to scale listening rooms up so that thousands of people can listen to the same song together at the same time, using a secret sauce called Erlang — a hyper-efficient coding language developed by Ericsson for use on big telecom infrastructures (updated).

 

 

We have all heard the rumors in past weeks, but now the truth has reared its head. YouTube has decided to launch paid subscriptions for select channels. So far, only a handful of channels are available for a small price, but we will see what the future holds. How much does YouTube and its affiliate partners stand to make? Check out more below:

 

The move represents a significant departure from the free, ad-supported model that has thus far propelled YouTube’s phenomenal growth from a little known Silicon Valley startup in 2005 to an online video powerhouse with more than 1 billion active monthly viewers.

 

YouTube Subscription’s Split with Content Creators Likely to be Less than 30%

Thirty pilot channels taking the subscrption plunge include Sesame Street, UFC, Rap Battles, Jim Henson Family TV and others. Every channel will have a 14-day free trial, the company announced on its blog, and prices will range from as little as 99 cents a month with many channels offering deals for bundled channels or annual subscriptions. Channels are free to charge any amount above .99 cents a month, although many are averaging $2.99 a month. Subscribers will be able to pay via Google Wallet or credit cards.

While the model provides an additional revenue stream, it is not risk-free route for content creators. Chris Erwin, Director of Vertical Operations at BigFrame whose clients generate more than 3.2 billion YouTube views, wrote that a paywall could lower a channel’s audience size and eat into existing advertising revenue. In addition, smaller audiences can result in lower ad rates.

“Anything that costs money translates to slower user adoption, especially when there are creators willing to not charge subscribers for what they will brand as similar, premium content,” Erwin wrote.

Another potential difficulty is related to an important demographic for YouTube — viewers under 18.

“Our audience is primarily teens who will need to ask their moms for credit cards” to view subscription channels, Sarah Penna, co-founder of BigFrame said this week at the annual Music Biz conference in Los Angeles. “There are definitely logistical hurdles.”

At the same time, Penna said it’s important that YouTube and its channel partners learn how to make paid subscriptions work.

“To make a real living on YouTube is possible, but it’s the exception,” Penna said. “Having to rely on CPMs is frustrating. So this has to work. However, it will take some long-term thinking because it’s definitely a mental shift for people.”

The company, purchased by Google in 2006 for $1.65 billion in stock, has been focused on expanding the number of ways for content creators to make more money off of its platform.

YouTube executives have signaled for more than a year that it would pursue a subscription model, but the details of how it would work has not started to emerge until recent weeks. The company said it will begin offering the option to more channels in the coming weeks.

“This is just the beginning,” said Malik Ducard, Director of Content Partnerships in a call with reporter. “We will roll this out more broadly as a self-service feature for qualifying partners.”

Props to Billboard

 

While streaming services have been around for a little over a decade in the Music Industry, they have not gained any real traction drawing listenership until the past few years with the rise and growth of Pandora, Spotify, and Rdio. Like a lot of these newer and developing access points to listening to music, it starts a new process of figuring out how the payment plan breaks down and how artists get paid. These streaming services are still licensing the songs and artist catalogs, so they are due their fair share of the split. But, how does that split break down? Do artists make money purely off of advertising? Do they see a percentage of what monthly subscribers pay? Or is it all based off a “revenue-per-stream” basis? D.A. Wallach is the Artist-in-Residence for Spotify and is 1/2 of the outfit, Chester French. D.A. knows what it’s like for artists who are trying to make a living making music. It’s a tough road indeed, and certainly a tough business, but D.A. is here to tell you how to “Get the Money!” using a service like Spotify and how you can partner up with them to work on marketing your music!

Kobalt has added to its bet on greater transparency with the launch of a new interactive client portal where clients can view the usage data and royalties earned on YouTube user-generated videos. The music publisher expects this technology, and the deals it has in place with digital service providers, to “significantly” increase its clients’ royalties from streaming services.

 

The portal shows real-time sync information along with the resulting income and the videos that resulted in the royalties from user-generated videos on YouTube. Other features is a “real-time, customizable global activity feed and action center” that alerts clients of key events and items to address in their catalogs.

 

Kobalt represents over 300,000 copyrights and directly collects from 37 territories globally. Its roster includes such songwriters Dr. Luke, Benny Blanco, Max Martin, Ryan Tedder, Dave Grohl, Savan Kotecha, Kelly Clarkson, Gotye and Paul McCartney. It also has a label services division that is responsible for “Push the Sky Away” by Nick Cave & the Bad Seeds and upcoming albums by Pet Shop Boys and Travis.

 

The new portal is part of Kobalt’s effort to increase its clients’ visibility into the activity behind their royalties. It is preceded by a partnership with Swedish collection society STIM, announced  in January, that created a one-stop shop for Kobalt’s European rights for digital music services. The company hopes to monetize 1.5 billion consumers within two years compared to 300 million today.

 

“The vision is coming together for Kobalt since we started up,” Kobalt founder/CEO Willard Ahdritz tells Billboard. “It is very clear that the music industry today is a technology industry, too. As fast as we can take that on and understand that, we will get the industry to growth again.”

 

Kobalt expects its clients’ digital streaming revenue to grow “significantly” in the coming years because of its technology for tagging and matching data for royalty processing. “We estimate that in the coming year people should start to see 10% of their publishing income in the United States and Europe coming from the big streaming companies,” he says. “Today, people see 1% or 2%.”

 

Ahdritz believes people’s attitudes on YouTube will change. The service was long considered nothing more than a promotional outlet. Now the licensing deals and technologies are in place to capture the value created by YouTube’s immense scale and global popularity “When [publishers] start to see the money flowing and the data transparency they start to get excited and start to see this is part of the future.” [Billboard.biz]