Streaming, Royalties, and Collection: A second glance...

     In the last post we discussed Pandora, and their fight for a lower rate of royalty owed for the music they stream. I am still of the opinion that what most probably needs adjusted is Pandora's business plan, not royalty structure; however, after receiving a few messages regarding the matter, we will discuss some of the other forces involved. Pandora is only one of many that have joined forces to form the Internet Radio Fairness Coalition, who's mission it is "to bring the royalty system for Internet radio into the 21st century.”

     From what I have seen so far, members of this "coalition" like to throw around trite, lobbyist style language we as industry professionals have seen and heard many times before when a group or company works to see changes in congressional systems or structures that not only have worked for a very long time, but arguably, still work just fine, and would benefit those groups most in the long haul.

     So let's take a look at both, the members of this coalition, and what some of them are saying. In an article on Hypebot, Hisham Dahud lists members of the coalition as Pandora, Clear Channel Media and Entertainment, the Digital Media Association, AccuRadio, CCIA, Salem Communications, and others. For a complete list, see the article here. Right. Now, let's take a look at what some of them were quoted as saying in the article regarding current royalty structures, as well as why they would like to see these rates lowered.

     To start, the coalition states they "will create a sustainable business model for the music industry, giving consumers more choices and more products for listening to the music they live; enable artists to earn more money as Internet radio grows; create a marketplace that will attract entrepreneurs to invest in new, innovative ways to deliver music to the public; and drive higher revenues for record labels."

     Okay one thing at a time. First of all labels are already being paid more than, or in one known case an equal share of, what songwriters and publishers receive. Second, consumers and industry professionals are already at times dizzy from the number of choices available for media consumption and distribution; artists, as in the case of the labels, are currently being paid more than songwriters and publishers; and considering the number of apps, platforms, mobile technologies, etc, which are seemingly produced exponentially, I'd say the current state of innovation "for ways to deliver music to the public" is well under way without a congressional bailout for Internet radio in the form of reduction of the royalties paid to the songwriters, publishers, artists, and labels they seem so interested in helping.              

     Please consider that one way to foster innovation in the actual art that makes their business plans possible is to allow our artists to eat for a change. I know, I know, there I go being reasonable again. Moving on…

     "Our piecemeal legislation covering music royalty rates was enacted decades ago before we had the Internet or current technology," says Ed Black of the CIAA. Bob Pittman of Clear Channel had this to say, "We believe market-based solutions are the way to go… This will enable artists to earn more and connect more with their fans, consumers to have more choices, and entrepreneurs to invent and invest in new services.” 

     Last, from Ed Knife, Digital Media Association, "This is a clear case of an outdated framework that stifles technology and consumer options… This bi-partisan solution will drive more innovation in the legal digital distribution of music.” 

     Okay, so does anyone else feel they are being fed a sales pitch that utilizes a stale formula of focusing on what THEY will do for YOU while avoiding what THEY really WANT, which is to pay out LESS to US? Anyone else notice the same timeworn PR talking points? I'm not sold, what do you think?

Streaming, Royalties, and Collection: Here we go again

We have seen many, many complaints, arguments, and commentary on the royalties paid out from streaming and distribution services, iTunes and Spotify being good examples. However, Pandora is the one who is currently pushing the envelope by trying to get regular people together to fight royalty rates they don't feel they should have to pay. I read a fantastic article on this exact topic just a couple of days ago on Billboard. The editorial by Justin Kalifowitz, president of Downtown Publishing, as well as co-founder and CEO of Songtrust "presents a perspective from the publishing and songwriting communities.”

Mr. Kalifowitz makes great points and backs them up with analytical data. For example, it is Pandora's choice and the basic fabric of their business plan to allow very little advertising and "protect their listeners." But while Pandora is trying to get the rates on royalties they have to pay down, as these add heavily to their costs with no advertising dollars for cushion, they are already "paying the lowest ratio of artist and songwriter royalties than any other income type in the music business." In the same article they show that according to the National Music Publisher's Association, for every dollar Pandora pays to labels and artists they pay just 8 cents to songwriters and music publishers.There is some perspective offered in this article as well. 

Remember I mentioned iTunes and Spotify caused a lot of commentary? Well this article shows that compared to that 8-cent payment from Pandora, iTunes and Spotify pay out 15 and 17.6 cents, respectively, to songwriters and publishers for every dollar paid to artists and labels. Further, and more impressive, YouTube shows a ratio of 42 cents and satellite radio at 50 cents to the dollar. One opinion of Mr. Kalifowitz is that the problem is simply leverage, and I tend to agree with him. 

I also agree that if Pandora insists on sticking to the existing business plan and not making alterations for Fair Play, then "music publisher's and songwriters should demand a more equitable split…" They certainly don't deserve any kind of "bailout" in the form of royalty rate reduction from congress. 

A Look Back On the Importance Of A Business Plan

To touch back quickly on the experts mentioned in my last post, and their respective views regarding business plans, I would like to discuss a couple of the things that stuck out to me most while reading their respective articles and opinions. I actually agree with Mr. Blakeman's views that a business plan can be dangerous for a company that tries to stick to it too closely over long periods of time without understanding it is meant to be a work in progress, which needs adjusting as the company goes along.

Forecasting more than a couple of years in advance and attempting to stick to the plan at all costs could be disastrous for a startup. Beyond this however, I must admit that my view is that not having a business plan at all is the most dangerous of approaches. A properly written and maintained plan is absolutely imperative for keeping costs and goals in line, not to mention securing investment capital for those who require it.

Andrea Cockerton provided a bit more detail on important key aspects of a business plan from her experience working with investors to raise capital and I agree with much she had to say. For example, I completely agree that showing the strength and experience, education, etc, of the team behind the plan is absolutely crucial to secure funding. I'm positive this would be the most important part of my own business plan should I ever have the need for capital and plan to keep this part of my written plan updated and as strong as possible.

This is not just important for investors; even if one has no interest or need to seek investment, having a written description of a business and the team behind it can go a long way toward showing professionalism with, and securing, clients. I tend to disagree however that a startup must show that their product or service is "groundbreaking" and I think that she was more on target pointing out that a startup must show that somewhere a market exists that truly has a need for the new company's offerings.

At the end of the day, there are a lot of investors who just want to know that there is space in the market for a product, there are teams that can make it happen, and there is research provided showing a profit can be made. 

Expert Views On The Importance Of A Business Plan

Andrea Cockerton  

According to this post on a BP Expert Views Blog Andrea "is an independent pitch expert and advisor in the United Kingdom. She has her own business Brick Handbag and has worked for Microsoft in the past. Why have a business plan? 

What to look for in a plan?

During a talk in 2008 Andrea says that some of the most important things to show in a business plan are that the company is going into a market that is growing and "has a need for your product or service." She also says that the plan must show that the team behind it all has the experience and talent to make it happen, and last, but not least, the plan must show that the "product or service is groundbreaking."

Why these are key

Andrea says, "These specifics are necessary to increase the strength of the pitch for financial backing." An investor will be asking themselves why the business should be started and if it will be successful enough against competitors to be profitable.

And now, for something completely different…

Chuck Blakeman

The same expert blog lists Chuck as a "serial entrepreneur and business success mentor" who believes that business plans actually do more harm than good. He says that forming a business plan to look into the future takes time away from the changes that could be implemented now to change the future as the company goes. Essentially, take care of today, and tomorrow will take care of it’s self.

Why to avoid a plan

Writing business plans wastes time and can make things worse by allowing a company to follow the wrong trends, could make the company miss opportunities, fill a niche, or become a leader.

Why this is key

Chuck offers these statistics as evidence of his points. I encourage all readers to vista Mr. Blakeman's article and take a look at it entirely and then leave a comment below and let us know where you stand on the topic!

“A Harvard researcher found that 97% of all businesses leave their prime objective in order to be objective. The world’s greatest past and present businesses (Apple, Google, Facebook, HP, 37signals, etc.) all started out to do something other than what they ended up doing. And none of them did much pre-planning, if any.”

Chuck Blakeman’s Company

A Business Consultant Should Have Experience

     For the content here on my blog I have tried to focus on the questions and topics I deal with most in my daily work as an Entertainment Business Consultant. Within the last two weeks the question of what is most required, or what one should consider imperative, to be a business consultant in any sector of a given industry has arisen in conversation several times. I have taken this as a fateful hint to quickly cover this question as a topic in my post this week. In my humble opinion, the most important attribute one must possess in order to be qualified to work as a business consultant in any sector of a given industry is experience, and lots of it. The best possible scenario is for one to have a good deal of experience in many sectors of a given industry in order to be most effective as a business consultant.

     Education is also extremely important, but this is secondary. Some of the most sought after business consultants have indeed risen from years of experience before they decided to get an education. Some of the best in the entertainment industry, such as Gerry Barad, head of Global Touring for Live Nation, have risen to such positions through years of experience and learning in the trenches alone. While it is surely important for one to have a solid education under their belt, years of experience, contacts, and "been there done that know-how" just cannot be matched by classroom education when it comes to being an effective business consultant. Here is a quote taken from Business Consulting ABC's website," Having an MBA from a good business school isn't enough. The Business Consultant must have solid real world experience with many types of companies in order to be an effective consultant." This statement could not be truer when one is speaking about the entertainment industry.

     An experienced Entertainment Business Consultant will have been in the trenches and have been involved in many different dealings across many sectors of the industry. He or she will know exactly what is needed to get a project back on track without having to do hours of research or call in a team of outside experts costing a client more time and money. When choosing an Entertainment Business Consultant one must choose someone who fits the bill and must not pay attention to the individual's education, this is a bonus. Finally advice for anyone who wishes to get into the field… Jump into the industry with both feet, get involved in everything you can, and if in ten years you are the one everyone is calling for advice, you have arrived at your destination.

Profitable Markets For Foreign Distribution

     In the last couple of posts on this blog I have spoken about budgeting for media distribution as well as a bit of the change that has occurred in laws governing the content that is being distributed. In addition to the posts regarding law and technical changes of the overall entertainment business landscape, there have been more specific entries regarding information for foreign distribution and licensing for ancillary revenue sources. Topics for entertainment business consultants, publishers, and independent artists, labels, and managers are the purpose of this blog, and specific information is often not repeated unless it is asked by the audience to possibly provide some additional resources on a topic in general, as most of the posts here reflect questions I am asked weekly in my work.

     So, this week for my independent audience, as well as my entertainment business audience of consultants, producers, publishers, etc, I will provide a few resources that will build on my previous post, found here, regarding global music sales, territory specific sales information, and global charting history for researching genres, songs, and artists, that have found success in foreign markets. I know you will find the information valuable, and after a bit of research you will undoubtedly begin to "get in where you fit in."

1. The Digital Global Music Report 2012

This report from the IFPI will help anyone looking for specific information as it relates to separate platforms, territories, and more.

2. Historical Global Charting Information

Here one can search charts and successful artists, genres, and songs across different time periods in just about any country in the world.

3. This chart is an indicator of global music sales separated by country and can give one a starting point when thinking about where to begin their research, or campaign.

Sink or Swim

     Over the last two years I have met with or consulted nearly five hundred artists, associated managers, and a dozen or so independent labels. Beyond issues related to touring, shopping for specific licensing, and building strong fan bases in foreign territories, the question and concern most often asked and addressed is what type of return in revenue can one expect in terms of sales versus marketing dollars. Some truly believe they can make it by passing out CDs and doing a few shows. While historically we have always seen one hit wonders, and the occasioned artist or group that literally explodes over night without much help, the true answer is that your sales level (given a quality commercial product) will definitely depend on the size of your budget, as well as the connections you have in the industry to properly make use of that budget. If you have no budget, you have no chance. 

     People have been really excited about digital distribution, the wide array of providers in this sector, and the ease of which they function, and they should be, at least you have bought a chance. But this is the same as the lottery without an effective plan ready to be put in place and a proper budget with which to make it all happen. As stated by Thomas Jefferson and many others, "The lottery is a tax on the ignorant…" and this is also true in the example of distributing widely around the world with no budget to market to anyone outside of your email list, local bars, and Facebook. I found a quick list of free and cheap for those on a small budget here.

     The explosion of thousands of niche sub-genres had a ripple effect on the music business as well, this took each sub-genre that found any success and quickly pumped out thousands of acts for each, each trying to fill the top three spots with almost identical feel if not material. To be an artist today could be compared to the mass explosion of female doo-wop groups in the fifties and sixties that exploded so fast with so many artists that not even the companies knew who to pay for what song. When this is taken into account, even the most singular and individualized, well branded, and unbelievably talented artist will have to spend a good deal of money and resource to cut through the clutter of those merely taking up empty space just to be noticed and remove themselves from the lottery and enter an honest selection of taste.