BPM927: Business of Music I - MIDTERM

Week 1: Introduction, Copyright, Music Formats

• Copyright ©

• Exclusive right for originator/assignee to do whatever they want with it + authorize people to do the same – moment it is tangible, the moment you OWN it 

• CREATOR’S ROLE: Assign, license, give rights to another person (ex: to a… record company, publisher, TV show, film, another artist, estate upon death, investor)

• TERM: 70 yrs.

  • How to register? - CIPO

Week 1: Introduction, Copyright, Music Formats

• Trademark®

• For slogans, company names

  • EX: BlueJays mascot - trademarked BUT also copyrighted as an art

Week 1: Introduction, Copyright, Music Formats

• Patent (p)

• For new/useful inventions, must be unique

  • Becomes a trade secret when you don’t register it, but instead share its technological components with another person (but they can just register a patent and you can’t do anything about it)

Week 1: Introduction, Copyright, Music Formats

• Copyright © Conventions

• An agreement between states/countries for the regulation of matters affecting all of them

1. BERNE CONVENTION (1881)

2. UNIVERSAL COPYRIGHT CONVENTION (1952)

3. ROME CONVENTION (1961)

Week 1: Introduction, Copyright, Music Formats

• Copyright © Conventions

(1) BERNE CONVENTION (1881)

When the copyright process began

PRINCIPLES: 

• Protects artistic creation

• Unconditional protection

• Follows copyright length unless Public Domain in original country

RIGHTS: 

• Translate, adaptation/arrangements, performances, reciting literary works, communication, broadcast, reproduction

SIGNED BY: 181 countries

Week 1: Introduction, Copyright, Music Formats

• Copyright © Conventions

(2) UNIVERSAL COPYRIGHT CONVENTION (1952)

PRINCIPLES: 

1. Copyright is a human right

• Helps countries navigate copyright in various legal systems & cultures

Week 1: Introduction, Copyright, Music Formats

• Copyright © Conventions

(3) ROME CONVENTION (1961)

Beginning of neighbouring + performing rights

PRINCIPLES: 

• Protection of performers, phonograms, broadcasting organizations

1. Performers on recordings

2. Owners of recordings (not applicable to producers)

3. Broadcasters

SIGNED BY: NOT U.S.

Week 1: Introduction, Copyright, Music Formats

• Recordings + Copyright

• (1) Musical composition (lyrics + notes) + sound recording = recording

Week 1: Introduction, Copyright, Music Formats

• Live Performance Copyrights

• MORAL RIGHTS - (1) Integrity, (2) Ownership/Autonomy, (3) Attribution → ex: goose case study in toronto

Week 1: Introduction, Copyright, Music Formats

• Royalties

1. SONGWRITER

1. Print/sheet music

2. Lyric reprint

3. Radio airplay

4. TV as feature performer/background music/theme music

5. Live performances

6. Elevator music/exercise class

7. Retail background music

Week 1: Introduction, Copyright, Music Formats

• Royalties

2. PERFORMER

1. Radio airplay

2. TV as feature performer/background music/theme music

3. Live performances

4. Elevator music/exercise class

5. Retail background music

Week 1: Introduction, Copyright, Music Formats

• Royalties

• Songwriters/Publishers vs. Record/Masters/Artist/Performer

Songwriters/Publishers	Record/Masters/Artist/Performer
Mechanical royalties → (composition/melody) Synch License → (TV shows, etc.) P.R.O. (Performance Rights Organizaztion) → (Royalities for songwriters when songs are played) - Raidos, TV	Artist royalty → (for recordings/streaming platforms) Synch License Neighbouring Rights → (Radios give to performers/singers)

Week 1: Introduction, Copyright, Music Formats

• Music Formats

• Changed drastically since then, affecting music copyrights (phonographts to spotify) 

  • Phonographs, Vinyls, Tapes, CDs, Streaming Devices

Week 1: Introduction, Copyright, Music Formats

• Music Formats

  • EX: Metallica VS. Napster CASE

• Napster → changed the music industry by allowing people to download music

• Metallica’s song for Mission: Impossible 2 soundtrack was leaked on Napster 

  • Prof Cream’s Opinion: At the time, it made the most sense for Metallica to fight back, but the music industry has to embrace the rise of tech with music. If this were a smaller artist vs. a major tech company, it wouldn’t pan out for the artist’s side (most likely)

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Changes in Records

• Number of record label departments are shifting because of the transition to streaming has caused traditional jobs to morph into new ones + merge (which means people are really playing around with the future of a record company)

  • What used to be the sales department (buying physical products) and the marketing department (getting consumers into stores has gotten fuzzy because of the digital world

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Jobs NOT related to music delivery

  1. A&R

People with “ears” 

• Find and nurture new talent, work creatively with artists

• Work with the company’s data who look for music trending online

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Jobs NOT related to music delivery

  2. Promotion

Folks pushing songs on radio

• Radio is less important now but it still helps build an artist’s visibility

• Streaming companies are more likely to feature music if the artist is “happening” on the radio, which also works vice versa (radio stations picking up on trending songs online)

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Jobs NOT related to music delivery

  3. Finance

Royalty Payers

• Also keep track of company’s income + expenses

• Deal with audits

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Jobs NOT related to music delivery

  4. Business Affairs/Legal

Company Contractors

• Alongside company executives, deal with contracts between artists & digital service providers, foreign licenses, video producers, sample clearances, etc.

• Used to be divided into business affairs people vs. legal department, but now they’re the same people because of industry cutbacks (due to piracy)

• Now it’s easier to have the same people because of efficiency + cheaper

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Jobs NOT related to music delivery

  5. International

The Global Word of Mouth

• The ones who coordinate the release of records around the world + oversees it in foreign territories (no separate marketing department because it’s already global)

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Jobs NOT related to music delivery

  6. Catalog

The Other Marketing Team

• Deal with older products = “catalog products,” as they’re no longer being promoted as a new release

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Jobs NOT related to music delivery

  7. Film/TV

Sync Department

• Hounds people to use company’s recordings in movies, TV shows, commercials, video games 

• Find opportunities for artists beyond existing recordings (ex: creating a song for a movie, or a brand, or an add campaign)

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Music Departments

• The ORIGINAL departments (Sales, Marketing, Production, Product Management, Production worked nicely when dealing with physical products but now physical products are a minor part of the business (CDs are important in some places but they’re shriviling, while Vinyls are surging - since people see it as merch)

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Music Departments

  1. SALES

Sell + ship records to store, make sure product is displayed

• Reached out to record stores, now being digital service providers (DSPs) - ex: Spotify, Apple Music, etc.

• Works similarly to its past - coordinate with the Production Department handle technical functions around digital files (deliver digital files to DSPs and encode metadata on the recordings - the information of song’s title, artist, album, who to pay)

• Try to get you on playlists (DSPs dump the least listened to songs on their made playlists) - their goal is get consumers to lean back: they drill your music deep enough into a subscriber’s brain that it ends up on their personal playlist

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Music Departments

  2. MARKETING

Publicity, album cover artwork, ad campaigns, promos

• Divided amongst the sales, they focus on dealing with the consumers 

• Usually called “Digital Marketing” or “Digital” - create campaigns around new releases, make sure the world knows about your record (through websites, social media, etc.)

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Music Departments

  3. PRODUCTION

Manufacturing, printing covers

• Plan releases (organize edits of music, credits, delivery to the DSPs)

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Music Departments

  4. PRODUCT MANAGERS & PUBLICITY MANAGEMENT

Making sure other departments do their jobs for your record

• Handle the logistics of things like TV appearances/Facebook/Spotify promotions

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Music Departments

  5. STRATEGIC MARKETING DEPARTMENT

(Some companies have this)

• Finds endorsement and sponsorship opportunities for artists (taking % of those deals)

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Music Departments

  6. DISTRIBUTION

Major record companies are distributed by major distributors

• Coordinate digital distribution, move physical records

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Independents

• Record companies not owned by a major

  • Come in two flavours

    (1) TRUE INDEPENDENT

    (2) MAJOR-DISTRIBUTED INDEPENDENT

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Independents

  (1) TRUE INDEPENDENT

Not owned by a major label and fully functions on its own → ex: XL, Merge, Epitaph, Victory

• Distribute records through independent distributors (who are set up to deal with the specialized needs of independent companies)

• The big independent distributors are owned by the same companies that own major labels (ex: Orchard, AWAL owned by Sony, Virgin Music Label owned by Universal)

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Independents

  (2) MAJOR-DISTRIBUTED INDEPENDENT

Independent entity that has little or no staff

• Signs artists + makes deal with a major label to perform the functions beyond recording the records

• Can be partly/entirely independent 

• Role is to find talent and make sure their records get promoted 

• Sometimes the public may never know the independent company exists (when products released are done through the distributing company’s label)

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Retailers Today

• Brick-and-mortar record retailers are “endangered” - pure record stores are virtually extinct because not enough CD + vinyl businesses support them (a few stay afloat by selling merch) → Urban Outfitters sell vinyl, cassettes, clothes, hats, etc. 

• As CD sales shrink, businesses like Walmart and Target (who have the biggest chunk) cut down on the number of CDs they’re carrying - most of them only carry the top-selling titles

• Streaming will become a dominant medium in the future - big percentage of sales, consumers

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Record Industry Association of America (RIAA)

• Industry formed by the record companies

• Needed for licensing all services (but TuneCore, DistroKid, CD Baby can very well do that)

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Label Service Companies

• Most started by talented people who left record company jobs when the industry melted down 

• Do anything from sales to marketing, promotion, etc. under a deal that lets you keep complete ownership + control 

• Also let you do a deal for one record at a time

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• What’s a “Record”?

• Both audio-only and audiovisual recordings (music videos), any kind of delivery of your performance - on contracts there will be language like this use to ensure the company has rights to mobile, Internet, etc.

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Masters/Recordings

“Recordings” have TWO meanings

1. Original Recording made in studio

• Are multitrack - each instrument + voice on a separate track, they are then edited (EQ’d - adjusted to right level) and mixed

• Stems = individual track recordings, needed also for performances with a track

• Remix = requires stems, new mix of recording

2. Finished Two-Track

• A recording of one particular song (“an album has 10 recordings on it”)

• Called “Tracks” / “Cuts” - comes from the processes of cutting grooves into vinyl for each song

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Royalty Computation

• Story: Jules is a breeder, sells bulldogs, asks his friend Corky to take care of the puppies, they each get half the sales price (ex: $200 split evenly amongst them)

Like RECORD ROYALTY:

• The artist (Jules) turns the recordings (being his prego bulldog, Rosie) over to the record company (Corky), who monetizes the finished product (puppies)

• For each record (puppy) sold, artist (Jules) gets a piece of the money, and the company (Corky) keeps the rest to cover its costs + make a profit

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Basic Royalty Computations

  (1) STREAMING

Artist gets a percentage of what the record company receives for streaming your recordings - if the company gets $100 from your recordings, you have a 10% royalty, so you get $10

STREAMING ECONOMICS (as seen in Spotify):

1. Each month, streaming services count their total streams

   • Say they found a million total streams

2. Look at how much those streams were your record company’s recordings

   • If your company had 300,000 streams that month, it would be 30% of the total streams

3. Spotify then looks at total revenue (subscription + ads), deducting a negotiated price, paying the rest to the record companies

   • Record company gets 30% of streams, so they get $300,000

4. Record company then looks at number of streams for each artist

   • If you had 60,000 of those streams, you’d be 20& of the record company’s streams for that month, so Spotify would be allocated to $60,00 of your recordings

   • Record company applies royalty rate, so if you had 10% royalty rate, you’d get 10% of $60,000 = $6,000

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Basic Royalty Computations

  (2) DOWNLOADS/PHYSICAL PRODUCTS

• Artist royalty is a percentage of the wholesale price (also known as the published price to dealers - PPD, the base price to dealers - BPD)

  • If the PPD for an album download is $7, and you have a 10% royalty, you get 70 cents for each album sold

  • Each royalty percentage is known as a point, 10% = 10 points

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Physical Peculiarities

  1. Free Goods

(“Special Campaign Free Goods)

• When some companies give away albums to retailers for free, which started when companies wanted to push out large numbers of an artist’s alnim, giving away 10% or more of records shipped

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Physical Peculiarities

  2. Free Goods

(“Promo, Promotional”)

• Records given away for promotion (also free goods & don’t bear royalties), don’t go to retailers and are marked as “not for sale,” which is disappearing because everything is now digital

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Physical Peculiarities

  3. Return Privilege

• Physical records are sold with a 100% return privilege, if they don’t sell they are returned

Week 1: Introduction, Copyright, Music Formats

All You Need to Know About the Music Business

• Physical Peculiarities

  4. Reserves

• Used by record companies work exactly the same way as return privilege, companies keep a portion until they know if the sales to the retailer are final 

  • If a company ships 10,000 CDs of an artist, they may only pay the artist on 6,500 of these and wait to see if the other 3,500 are returned

  • In the future (usually after 2 years), pay-through for artist happens, liquidating the reserve → if the records are returned, the reserves are never paid to the artist because the sales are canceled, and the royalty is never earned

Week 2: Canadian Music Structure

• Copyright Overview → Basic Premise

• Songwriter / Artist share copyright, which the songwriter may be signed to a publisher and the artist can be owned by a record company → they all share the copyright

Week 2: Canadian Music Structure

• INDUSTRY ROLE BREAKDOWN

1. The musician is the CEO

2. Manager (vital component to the musician)

3. Lawyer, accountant respond to the manager (a buffer between the musician & the business, their role is to be “bad”/stern on decisions)

4. Publisher and Record Company overlook… → but the record company specifically goes to the manager for requests 

5. The publicist, radio tracker, merch, agent/promoter, distributor, social media, marketing, road manager

Week 2: Canadian Music Structure

• THE MUSIC ECOSYSTEM

• Divided by each role’s focus, musicians prioritize the production of their art & the distribution

Week 2: Canadian Music Structure

• Flow of Music from Artist to Consumer

ARTIST - creates music

RECORD COMPANY Marketing & Promotion of Music

DISTRIBUTOR  Gets music to retailers

RETAIL  Sells music to fans

CONSUMER Buys the music

Week 2: Canadian Music Structure

• KEY ROLES

1. ARTIST/MUSICIAN - Plays, sings 

2. MANAGER - Guides all aspects of an artist’s career and is the main person the industry contacts to do business with the artist

3. RECORD COMPANY - Owns/licenses recording + is responsible for overseeing creation of recording, marketing, promotion, & distribution

4. DISTRIBUTOR -  Distributes music from artist to label - either independent (ex: DistroKid) or a record company

5. RETAILER - Place where the consumer can stream or buy the physical product 

6. PUBLICIST - Secures interviews, profiles, reviews of artist’s products in public media (radio outlets, mainstream news, TV)

7. RADIO PROMOTER - Promotes single to radio station to try to secure airplay and then increase on-air play of it

8. PUBLISHER - Company that controls and/or administers the songwriting copyright and pitches songs it records other singers to record (ex: Warner Chappell Publishing)

9.  BOOKING AGENT - Secures live performances (ex: The Feldman Agency)

10. PROMOTER - Hires artist to perform a live show and oversees all aspect of organizing shows (marketing, selling tickets, security, necessary equipment) (ex: Live Nation)

11. ROAD MANAGER/TOUR MANAGER - Responsible to get artist & crew from point A to point B during a tour, on time + on budget

12. CREW - Technicians who support artist on tour (for guitar, sound, lighting)

13. MERCH - Responsible to manufacture artist merch (t-shirts, sell them out at shows + retailers)

14. VENUE - Places where artist performs a live concert - Can be separate from artist (ex: Scotiabank Arena) or also the promoter (ex: Horseshoe)

Week 2: Canadian Music Structure

• Record Label Support

1. A&R:

• Signs artist to record label - provides creative + commercial expertise (financial support)

2. MARKETING & DIGITAL:

• Facilitate multimedia campaigns that grow the artist’s presence online + offline

3. CREATIVE TEAMS:

• Help artist develop their visual identity & collaborate on things (for album artwork + music videos)

4. SYNC & PARTNERSHIP:

• Work with artist to agree partnerships with like-minded brands that reflect their image & connect with fans

5. PRESS & PUBLICITY:

• Secure media coverage, radio & TV appearances

6. GLOBAL DISTRIBUTION:

• Deliver, manage + track the distribution of artist’s music (both physical + digital)

7. GLOBAL REACH:

• International teams that help accelerate artist’s profile by bringing the artist’s music to new territories (purpose is to grow their global fanbase)

Week 2: Canadian Music Structure

• MAJOR VS. INDIE: MAJOR

• UNIVERSAL, SONY, EMI

  • Has a label, publisher, distributor division → provides different sources of support for artists (due to the increase of resource, you can mix-and-match who is on your team)

  • Can be signed to all divisions or just 1

  • Can be signed to multiple majors for different areas

Week 2: Canadian Music Structure

• MAJOR VS. INDIE: INDIE

• Any label, distributor, publishers that isn’t “major” like Universal, etc.

  • Publicists might fall under major labels, so they’re not truly independent BUT major-distributed

Week 2: Canadian Music Structure

• Music Sales Certification

• RUN BY MUSIC CANADA } applies to Albums & Singles, based on single sales, audio + video streams, ad-supported on-demand & video streams

  • Gold → 40,000

  • Platinum → 80,000

  • Diamond → 800,000 

    • WHICH varies according to each part of Canada (QUEBEC vs. ONTARIO)

Week 2: Canadian Music Structure

• CANCON

• Canadian Government requires radio play 35% CANCON

CRITERIA: 2 of the 4 must be met

1. Music: Music composed entirely by a Canadian

2. Artist: Music/lyrics performed principally by a Canadian

3. Performance: Musical selection consists of a live performance recorded wholly in Canada, performed wholly in Canada + broadcast live in Canada

4. Lyrics: Written entirely by a Canadian

Week 2: Canadian Music Structure

• Radio…

• VITAL to breaking artists, promoting artists/music, & generating revenue for artists

  • TYPES: (1) Commercial (2) Non-commercial

  • RADIO FORMATS: Classical Jazz, CHR, AC, Hot Rock, Active Rock, Alternative Rock, Urban, Campus, CBC/Radio Canada, Talk Radio

Week 2: Canadian Music Structure

• Music Associations

• Vital to specific sectors of the music industry

• Experts in field

• Advocate for members

• Provide education + opportunities

• Work together to support same causes (ex: copyright reform)

• International ones can impact/influence Canadian version

Week 2: Canadian Music Structure

• Music Associations → TYPES

1. Copyright Collectives & Copyright Licensing

2. Support Type of Companies + For Specific Music Workers

3. Provincial Organizations

4. Support Genres

5. Awards

6. Grant Organizations

Week 2: Canadian Music Structure

• Music Associations → TYPES

(1) COPYRIGHT COLLECTIVES & COPYRIGHT LICENSINGS

• Advocate for copyright reform

• Often administer copyright royalties

EX: SOCAN, CMRRA, ACTRA/RACS, Connect Music, AVLA, Artisti, Re:Sound, CPCC

Week 2: Canadian Music Structure

• Music Associations → TYPES

(2) SUPPORT TYPE OF COMPANIES  + FOR SPECIFIC MUSIC WORKERS

• Major labels, independent labels (small & large), publishers, music supervisors, music managers, Live Music industry, Radio, Campus Radio, Campus live shows, songwriters

Week 2: Canadian Music Structure

• Music Associations → TYPES

(3) PROVINCIAL ORGANIZATIONS

• Offer education, advocacy, networking, and Canadian + International showcase opportunities for members of the music community of that province

EX:  Music Ontario, etc.

Week 2: Canadian Music Structure

• Music Associations → TYPES

(4) SUPPORT GENRES

• Blues, Country, Folk…etc.

Week 2: Canadian Music Structure

• Music Associations → TYPES

(5) AWARDS

• Members vote for most awards, some are chosen

  • NATIONAL → Junos, Canadian Country Music Association, Folk Music Awards, Polaris Prize

  • PROVINCIAL/REGIONAL → Oshawa Music Awards, Ottawa Music Awards

  • INDUSTRY SECTOR →  Music managers, Live music, supervisors, women in music, radio broadcasters, video creators, prism awards

Week 2: Canadian Music Structure

• Music Associations → TYPES

(6) GRANT ORGANIZATIONS

• Gives grants to musicians, music companies, & music organizations based on certain criteria

• Administer government funds

EX:  FACTOR, RadioStar Maker, Canada Council of the Artis, Music BC, Conseil lettres du Quebec

Week 3: DIY Artists & Labels

• GUEST SPEAKER: Tennyson King

His start

• Attended 8-week certification for independent artists

• Plays guitar, piano, sings

  • Got his start playing in bands he sees in Toronto

  • Did internships: Indiepool, volunteered at any music/entertainment film festival 

  • Taught music, production part-time

  • Started touring in Australia

Week 3: DIY Artists & Labels

• GUEST SPEAKER: Tennyson King

How to Network

• Music conferences - like music festivals, but every artist booked gets to showcase their talent, bringing music professionals from all around their world → Ex: FolkCanada (have to pay/apply for a conference pass, etc.), you can always volunteer 

• Relationships build success, allows you to meet individuals that can help you

• Meeting other musicians → have more experience

  • Met Lindi Ortega through her attending at one of his shows

Week 3: DIY Artists & Labels

• GUEST SPEAKER: Tennyson King

Tasks he has to complete as an Independent Musician

• EX: Tour Cycle (planning to put out a record in May, would start in December, January, beginning to book tours a year before)

  • Find publicists (for pre-album PR) - lots of emails

  • Distribution (had to figure out if he could use either a small one like DistroKid or find his own)

  • Social Media (has to plan promotion of releases)

  • Has to also practice a minimum of an hour a day, usually three → three months before has to prep the set - sending songs to band members, setlist, performance components

    • Time management IS IMPORTANT, trying to outsource to help with tasks as well

    • Treat time valuably - you don’t have to say yes to everything

    • TOURS → have to look at booking venue agents, lean on communities

Week 3: DIY Artists & Labels

• GUEST SPEAKER: Tennyson King

Money Splits…

• Venue - 10%-20%

• Openers - $200-$300

• Rest of money - yours / each band player ($200-300)

• Co-headlining tours - must be negotiated, depending on each other’s role (booking - extra 5%?)

• Preventing money loss - deciding where to tour (where is best to put on a show?)

  • The Cameron House

Week 3: DIY Artists & Labels

• GUEST SPEAKER: Tennyson King

How to Handle Disappointment

• There are 7 billion people in the world, someone will find your craft interesting - you’re not doing this for them, but yourself

Week 3: DIY Artists & Labels

• GUEST SPEAKER: Tennyson King

What do you love/hate about your job?

• LOVE: Performing, creating a community with his music

• NOT LOVE: Social media (having to market yourself among thousands of people)

Week 3: DIY Artists & Labels

• Indie Labels/Record Companies

USA MARKET SHARE (2022)

Week 3: DIY Artists & Labels

• History of Major Labels

Week 3: DIY Artists & Labels

• Major Labels & Their “Subsidaries”

Week 3: DIY Artists & Labels

• Organization of a Major Record Label

• 1. Record Company President → 

  • Legal Department

  • Business Affairs

• 2. Executive Vice President →

  • A&R (Artist Development)

  • Promotion → Promotion Representatives

  • Marketing → Sales & B2C, Art Department

  • Publicity Department

  • New Media

  • Distributed Labels

  • Catalogue Marketing

  • Human Resources

INDIE LABELS HAVE TO DO ALL OF THIS THEMSELVES

Week 3: DIY Artists & Labels

• Hierarchy of a Record Label

1. VP

2. Director

3. Manager

4. Representative

5. Coordinator 

6. Intern

Week 3: DIY Artists & Labels

• Owners of An Indie Label

• Usually includes TWO PEOPLE: 1. The Creative Person 2. The Business Person

Week 3: DIY Artists & Labels

• Owning An Indie Label

SKILLS NEEDED…

• An ear for talent

• Patience

• Adaptability

• Persistence

• Passion

• Hard work

• Open to learning

Week 3: DIY Artists & Labels

• Owning An Indie Label

BENEFITS

• Promoting things you believe in, being able to collaborate with artists on an intimate level

Week 3: DIY Artists & Labels

• Owning An Indie Label

CHALLENGES

• Money issues  → you have to separate yourself from the thousands of labels, how will you stand out?

• Cash flow: balance between expenses & revenues (funding) → Each month, calculating the Expenses/Revenue (how will you pay for those expenses before the revenue comes in?)

• Clout: person’s influence/power over others - social media posts every single day as a smaller artist can deter professionals away (quality over quantity)

• Contacts - networking, gaining them with no credibility at first (need to know where to go, get your questions answered, and make things happen)

• Small team - having to be stretched out to take on multiple tasks

Week 3: DIY Artists & Labels

• Music Exec: Jeffery Remedios 

ARTS & CRAFT MUSIC LABEL

• Co-founded by Jeff Remedios & Kevin DreW

• Broken Social Scene played a central role in establishing A&C

• Differentiated themselves among other indie labels by doing handshake deals & building a community/family model’

• Expanded beyond a label to include: publishing, artist management, design, merchandise

CHAPTER 8: Advances and Recoupment

• Record Company Advance

• When a company pays a sum of money to the artist and then keeps the artist’s royalties until it gets the money back

EX: So if a company gives an artist $10,000 to sign a record deal, it keeps the first $10,000 of royalties that would otherwise be payable to the artist

CHAPTER 8: Advances and Recoupment

• Risk of loss in Advances

• If someone fails to deliver product/seriously breaches their contract, advances are nonreturnable → so, the record company is aware of this risk, they never get back their advances

  • Means that advances are taxable income when you get them!

CHAPTER 8: Advances and Recoupment

• Recoupment

• The process of keeping the money to recover an advance

An advance is recoupable from royalties

CHAPTER 8: Advances and Recoupment

• Recoupable Costs

• Include everything you can think of (usually a page-long list in your record deal: studio time, video production, publicity/promotion, travel, instrument transportation)

• Also includes union scale → the minimum amount a union requires everyone to pay its members

Always remember that companies can’t recoup amounts that are “customarily nonrecoupable in the industry”

CHAPTER 8: Advances and Recoupment

• Unrecouped Balance (Deficit)

• Amount of unrecouped monies → have to pay before you get paid

  • Also known as “red position” - from the accounting use of red ink to signify a business loss

EX: If you get $100,000 advance and earn $75,000 in royalties, you have recouped $75,000 of the advance, and your unrecouped balance (deficit) is $25,000 – $25,000 in the “red” or “unrecouped”

CHAPTER 8: Advances and Recoupment

• Unrecouped Balance (Deficit)

WATER TANKS EXAMPLE

• Water represents your royalties

• The ditch is your deficit account 

  • If you got a $1,000 advance from the record company, your account is $1,000 unrecouped

  • Until you earn $1,000 of royalties (having enough water to fill the well), you don’t get anything

  • The record company needs to keep the first $1,000 of royalties before getting any money

CHAPTER 8: Advances and Recoupment

• “In the black”

• Once you recoup the money you owe, you’re said to be in the black

CHAPTER 8: Advances and Recoupment

• Cross-Collaterization

• A concept tied to recoupment

CHAPTER 8: Advances and Recoupment

• Cross-Collaterization

WATER TANKS EXAMPLE

• Say one water tank contains exactly 1,000 gallons, so that well is full and usable 

• But, the other tank only has 500 gallons, so you can’t even reach the water 

• If we dug a hole underground to connect those wells to try to reach the water in both of them, it would distribute the water into the holes to 750 gallons each

• But… this would mean we can’t reach either of them

CHAPTER 8: Advances and Recoupment

• Cross-Collaterization

Applying to record deals…

• You get $100,000 advance for Album #1 + another $100,000 for Album #2

  • Album #1 earns royalties of $10,000

  • Album #2 earns royalties of $120,000

• If the albums were not cross-collateralized (albums were not connected), you would get nothing from Album #1, but you’d be paid $20,000 for Album #2

• BUT luckily, in the real world, two albums are always cross-collateralized → meaning at the beginning, you are $200,000 in deficit, but after release, you are recouped from the $130,000 earnings

• Now, your account is $70,000 recouped ($200,000 - $130,000 = $70,000)

• This deficit is then carried onto the next album (which, if you get higher sales, can recoup)

CHAPTER 8: Advances and Recoupment

• Cross-Collaterization of DEALS

Simultaneous & Sequential

• In both cases, advances under either agreement can be recouped from royalties under both → which is NOT GOOD

CHAPTER 8: Advances and Recoupment

• Cross-Collaterization of DEALS

(1) Simultaneous Agreements

EX: Artist signing a recording and publishing agreement with the same company 

• Companies will automatically cross-collateralize the deal with all other deals, major record labels don’t try to do that with a record deal + publishing deal, but small labels may

CHAPTER 8: Advances and Recoupment

• Cross-Collaterization of DEALS

(2) Sequential Agreements

EX: Artist at the end of a record agreement, signs a new deal with the same company 

• Every label tries to cross-collateralize sequentially…

• Advances under your current recording deal are cross-collateralized with royalties under past and future record deals

Will say on a contract: Advances and costs can be recouped from royalties payable, and royalties can be used to recoup advances and costs paid, “under this or any other agreement”

CHAPTER 8: Advances and Recoupment

• Avoiding the Cross-Collaterization of Sequential Deal

• Argue that the issue should be discussed later, if and when there is a second contract

• Allowing the company to use your old royalties to recoup a new advance will pump up the number because you’re lessening the company’s risk that they can get back their money

  • WHICH should be done at the time of a new deal, NOT as part of your current deal

CHAPTER 9: Real-Life Numbers

• Album Sales Equivalents (TEAS, SEAS, STEAS)

• Industry still translates today’s streaming numbers and single-track downloads into album sales equivalents

  • EX: U.S. industry uses album equivalents to determine whether an album is gold (500,000 units) or platinum (1 million units)

1. Track Equivalent Album (TEA): 10 single-song downloands = sale of 1 album

2. Streaming Equivalent (SEA): 1,500 streams = sale of 1 album

• Also known as “STEAs”

CHAPTER 9: Real-Life Numbers

• Clout

• Today, if you’re a new artist, it’s all about having “online heat” 

• Now, it’s based on what the company thinks of your “streaming potential”

• Your genre of music is also important (hip-hop / pop being most popular, rock bands are “struggling”)

• The more record companies that are chasing you, the better deal you’re gonna get

CHAPTER 9: Real-Life Numbers

• Looking for “Heat” + Royalties

• Before, new artists never got a profit share, but now it’s more common for artists with heat to get 50% of the label’s profits

• Sometimes, instead of profits, you get a distribution deal (much less of an advance)

CHAPTER 9: Real-Life Numbers

• LEVELS OF HEAT + RANGE OF ROYALTIES

1. MINOR HEAT: New artist with some social media activity (1-2 labels interested) (15% to 18%)

2. MODERATE HEAT: Good social media presence, good TikTok / SoundCloud numbers, moderate numbers of streaming (2 or more labels chasing) (18% to 21%)

3. HEAVY HEAT: Current product has strong streaming and social media numbers, massive fan engagement, current product is available for the record label to distribute because you did it on your own (Every label frothing) → TikTok numbers are massive driver of deal mania (Blow up there = expect to hear from record companies) (18% to 21%)

4. SUPERSTAR: Streams & social media in stratosphere, consistent performance over time, growing numbers (22%+ Sometimes higher depending on streaming/share of company’s profits)

CHAPTER 9: Real-Life Numbers

• Economics of Streaming

WORTH OF A STREAM

Depends on…

1. TYPE OF SERVICE:

• SUBCRIPTION-ONLY: If its streamed on a subscription only service (Apple Music) → Will get more per stream than on Spotify - advertising generates much less per subscriber than subscription does

• ADVERTISER-ONLY: Spotify, Youtube, clips on Tiktok → much less per stream

2. LOCATION: If its Outside the United States → Amount will vary from terriotry to territory

CHAPTER 9: Real-Life Numbers

• Economics of Streaming

“At Source”

• An issue for artists calculating streaming income

• Multinational company’s foreign affiliates take a % of the streaming income before it comes back to the U.S. → artist isn’t paid 100% of what the streaming service pays

  • EX: Apple Music pays $100 to your company’s affiliate in France, and that French company takes 25% of the money, sending back $75 to U.S. → so instead of getting $100, you get $75

• Companies argue this deduction is to cover the profit margin of their affiliate (marketing, promotion)

ALWAYS CHECK CONTRACTS IF YOUR LABEL WILL PAY STREAMING “AT SOURCE”

CHAPTER 9: Real-Life Numbers

• Economics of Downloads/CDs

• To figure out how much money you get from downloads/CDs:

  • Wholesale Price varies according to packaging & quality

(PDD - wholesale price) x (royalty rate) = royalty for artist (which can be reduced by 10% or more for special campaign free goods - some companies pay based on their gross revenue