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Music Business JournalVolume 8, Issue 3 www.thembj.org March
2013
Berklee College of Music
Inside This Issue
Mission Statement
The Music Business Journal, published at Berklee College of
Music, is a student publication that serves as a forum for
intel-lectual discussion and research into the var-ious aspects of
the music business. The goal is to inform and educate aspiring
music pro-fessionals, connect them with the industry, and raise the
academic level and interest in-side and outside the Berklee
Community.
(Continued on Page 3)
Peter Gotcher is Executive Chairman of Dolby Laboratories and
Chairman of Top-spin Media, Inc. He founded Digidesign Inc. in 1984
and served as its President, CEO and Chairman. He won a Grammy
(2000) and an Oscar (2004): both were for Technical Achieve-ment
and honored Digidesign’s contributions to the recording and film
industries. In the late 1990s, Gotcher became a founding partner at
Redpoint Ventures of Menlo Park, California, a leading Silicon
Valley technology venture capi-tal firm. He has served on the board
of directors of fifteen public and private companies, includ-ing
Line6, Avnera, Dash Navigation, Zing Sys-tems, and Pandora. Peter
has a BA degree from the University of California at Berkeley and
is member of the Board of Trustees at the Berklee College of Music.
The interview starts by looking back at Gotcher’s earlier
achievements but quickly turns to the current juncture and his
direct in-volvement with Pandora and Topsin. Gotcher also touches
on Daisy, a new streaming service that will launch later this year
and which we write about at more length later in this issue.
MBJ: How did ProTools become the stan-dard for recording and
music production?
Peter Gotcher: I started Digidesign with Evan Brooks in 1983 and
we were not into record-ing systems. Our products were digitized
drum and percussion sounds on chips that could be put into drum
computers to make them sound better. When digital sampling
keyboards and the Macintosh came along, things took off. The Mac
was the first personal computer that could display a waveform, and
our sound editing ca-pabilities evolved dramatically. Today,
ProTo-ols has many components: the main applica-tion, different
audio interfaces, and a universe of third party plugins. But it all
goes back to having a visual waveform that you can edit and a
traditional mixer element; to this day most of the work in ProTools
happens there. There doesn’t seem to be a new paradigm to rethink
how we record, edit, and process audio yet. Still, much innova-tion
is happening in the world of virtual instru-ments and plugins.
MBJ: How do you remember the transition into Wall Street?
PG: Digidesign went public in 1993. I was in my early thirties
and pretty terrified because I was the youngest CEO of a public
company at the time we went public. I would argue that there was a
short transitional period of time where I kind of dropped the ball.
Go-ing public really limited the amount of time I could stay
focused on the product side of the company. I was in effect its
Senior Product Manager, although I didn’t necessarily write code or
design the hardware. Now there were many new activities to spend
time on, and investor relations needed work early on. The IPO
roadshow itself was about fifty meet-ings and fifty presentations
over a couple of weeks. Fortunately, I had mentors among my board
members; one of them was a CEO of a publicly traded company and
there were sev-eral with deep business experience.
MBJ: You are also known as the founder of Topspin, a
software-marketing company, especially for new artists.
PG: I was on the board of a company named MusicMatch whose
software was bundled with the iPod for Windows before Apple came
out with a Windows version of iTunes. The company had about twenty
million users but its search engine tended to recommend
A Streaming Giant? Page 4
Musicians’ ToysPage 6
Snapshots 2012Page 8
Roger Faxon & EMI’s SalePage 12
Irving Azoff & Live NationPages 14
Music Industry Insights From the Top:A Conversation with Peter
Gotcher
By Emilie Bogrand
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Table of Contents
Business ArticlesStartup Master: Peter
Gotcher.................1Daisy.......................................................4The
Products Industry.............................6Spotify and
Orange.................................7Year in
Review........................................8MIDEM
2013..........................................9Music
Salaries.......................................10Roger Faxon
Interview..........................12Azoff
Resigns........................................14
Music and SocietyMusic and
Football...............................13
MBJ EditorialMission
Statement...................................1Editor’s
Note...........................................2Upcoming
Topics...................................16
SponsorshipBerklee Media.......................................
15
Editor’s Note
Volume 8, Issue 3 Music Business Journal
In this issue we examine the achievements of three very
important men, each of whom has played an integral role in shaping
today’s music business. We begin with insights from Peter Gotcher,
who co-founded Digidesign and has served on the boards of Pandora,
Dolby Laboratories, Topspin and many other influential media
companies. Also a venture capitalist, Gotcher points to
direct-to-fan as an emerging model within the music business. Roger
Faxon was the CEO of EMI Music Group and recently steered the
lynchpin company through its sale to Universal Music Group and
Sony/ATV Publishing. Before then, Faxon led a distin-guished roster
of businesses including Columbia Pictures, Sotheby’s Europe,
LucasFilm and Mount Company. We also explore Irving Azoff’s
departure from Live Nation, his feats over the years, and his
rea-sons for leaving. In 2004, he founded one of the most powerful
artist management firms in the world, Front Line Management. He
later became CEO of Ticketmaster and eventually executive chairman
of Live Nation Entertainment. Next, we follow the ongoing
innovations by Beats By Dre. The audio products company is
pre-paring to roll out a new music streaming service, currently
called Project Daisy. By integrating Topspin into the service and
enlisting the latter’s Ian Rogers as CEO, artists stand to forge
stronger relationships with fans and tap into revenue from
merchandise sales and touring. We check in with two recent music
conferences. Through an analysis of the NAMM Show, we study the
growing significance of the products industry. As other music
income sources decline, music products account for a larger piece
of the revenue pie. We also report on the prominent themes from
this year’s MIDEM including brand partnerships and new models for
fan engagement. One brand partnership in particular caught our
attention. Spotify’s recent bundling deal with mo-bile provider,
Orange-Switzerland is part of the movement towards creative
monetization solutions for music streaming services. The “Orange
Young” campaign bundles a one-year Spotify Premium subscription
into a non-binding mobile plan for consumers under the age of 28.
This year’s Super Bowl was a timely event that also reinforced the
importance of brand partner-ships. Many musicians cashed in from
being featured in multi-million dollar commercials. We docu-ment
the effects that these advertising placements can have on an
artist’s career and reveal the spikes in music sales that
surrounded the game. Finally, we present a portion of Berklee’s
detailed report on music industry salaries and focus on
business-related jobs within the publishing, recording, touring,
products and communications indus-tries. By examining findings like
these and analyzing the key trends of the past year, we take time
to look back upon 2012 in order to get a better perspective for the
future.
From all of us at the MBJ, we hope you enjoy this issue.
Emilie Bogrand, Editor-in-Chief Chelsea Ira, Content Editor
Contributors Editor’s
Note....................................................................................................................................................................
Emilie Bogrand Business
Articles......................................................................................
Kyle Billings, Emilie Bogrand, Troy Church, John Ioannidis Chelsea
Ira, Jessica Prouty, Annette Atieno Oduor Music and
Society..............................................................................................................................................................
Megan Graney
Staff................................................................................................................
Haven Belke, Kyle Billings, Perrine Virgile, Dylan Wolff
2 www.thembj.org March 2013
Management
Editor-in-Chief...............................................................................................................................................................
Emilie Bogrand Content
Editor.......................................................................................................................................................................
Chelsea Ira
Webmaster............................................................................................................................................
Haven Belke, Itay Shahar Rahat Faculty Advisor and
Finance.....................................................................................................................................
Dr. Peter Alhadeff Layout
Editor......................................................................................................................................................................
Haven Belke
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innovation from other streaming radio ser-vices.
MBJ: Please compare Pandora and Spo-tify for us. Are Pandora’s
programming methods more reliant on the human touch?
PG: Well it’s a mix. There’s the Music Genome Project, which is
made of trained music analysts who listen to the music and capture
all kinds of “genes” as we call them, i.e. the traits of the music.
That’s the start-ing point. Then, we also have so many us-ers that
we have billions of these “thumbs up” and “thumbs down” events. So
we use that as well. And Pandora’s primary focus is “let’s build
the best possible playlists for you.” That’s where a lot of our
R&D goes. The user interface of Pandora hasn’t really changed
all that much. We want to keep it simple. But a lot of the
innovation is happen-ing under the hood – trying to make the
play-lists better and better. That seems to trump everything else
in terms of driving user en-gagement and satisfaction. Besides, the
services are different. Spotify is an on-demand service. Pandora
can’t do on-demand under the terms of its statutory license. When
you look at music-listening habits, about 80% of music listen-ing
is passive meaning it’s radio and you’re not picking every track.
In the case of Spo-tify, you can do that. And there are a lot of
passionate music fans that want to have a completely active
experience and pick every track they hear. But that’s really only
about 20% of listening. A lot of people have asked, “well why don’t
you just have a subscription ad-on that is a track-on-demand
product?” And we just feel like that’s been done fair-ly well and
that we really do access a large enough market.
MBJ: Pandora is offered in the U.S., New Zealand, and Australia.
Why does it seem to be running into problems elsewhere?
PG: Almost none of the countries outside the U.S. have statutory
licenses for Internet radio, although Canada may get there soon.
From day #1, Pandora could play any art-ist. We just had to pay the
statutory royal-ties to SoundExchange. Like terrestrial ra-dio, no
artist can tell us that we can’t play their songs. The royalties
are fixed. We tried very hard, for example, to launch in the U.K.
and we had to do direct deals with every la-bel and every
publisher; they are incredibly
March 2013 www.thembj.org 3
Business Articles
Volume 8, Issue 3 Music Business Journal
from the All Music Guide or one of those oth-er data sources.
Many of the postings are old. A better alternative is to let
artists claim their space on the service by uploading pictures and
videos, making comments, and placing their own Topspin offers as
well.
MBJ: Daisy will be a streaming service. Are you bullish about
the medium?
PG: Yes. I’m a believer that streaming is the way of the future
and that downloads are prob-ably just a transitional format, and
probably won’t last a full thirty-year cycle like others have.
Streaming is where the big audiences are; think about terrestrial
radio: its audience went out to the record stores and bought CDs
and even with a fairly low conversion rate it made a difference.
The economics of streaming are, of course, challenging. Look at
Pandora be-ing basically break-even and Spotify losing many tens of
millions of dollars; artists, on the other hand, complain about the
size of their payouts from such services. But also, expecta-tions
of how much, when and if you pay for music have just really changed
dramatically. The root of all this is the unbundling of the al-bum
and the establishment of the single song economy. In my view,
fighting piracy is like trying to get toothpaste back in the tube.
The challenge for artists and ser-vices like Daisy is what to do
with these very large audiences they will be creating. I think of
Pandora: we had over 10,000 artists that were played for more than
250,000 uniques last year. Radio never had that kind of reach. The
problem now is closing that loop. We should let artists get
head-to-head with that listening activity, make offers to acquire
more fans, and exchange a free track for an email address. All of
that classic direct to fan stuff works much better when you have
large-scale exposure. With that many impressions, fan acquisition
is easy and you don’t need to con-vert many to generate
transactions. (Editor’s note: Gotcher is a Round B investor in
Pan-dora.)
MBJ: Do you think there is room for both Pandora and Daisy?
PG: Yes, I think they are fairly complemen-tary services. It
will be interesting to see what Daisy does in terms of a ‘radio
offer-ing’. When Spotify came out people thought it would
cannibalize Pandora and that hasn’t happened at all. Pandora’s
market share of U.S. Internet radio is about 72% now. Ironi-cally,
the high royalties stifle competition and
artists that were already popular. I was wres-tling with a
question: how does a new artist get traction with a search engine
and get rec-ommended sooner rather than later? I had spent time and
brainstormed this topic with Shamal Ranasinghe, so I hired him.
MusicMatch went with it, and we spun an early version of Topspin
there. But Ya-hoo later acquired MusicMatch and did not follow
through. At the time, the concept was based around targeted
marketing for new art-ists, including the identification of strong
cor-relations with symbiotic artists for purposes of reaching more
fans. But we were now free from Yahoo and could get behind a
broader mission, and this became “let’s just let artists go direct
to fans and offer an alternative to the traditional label
structure.” Shamal really deserves credit for keeping the idea
going and restarting the new Topsin. I provided some seed funding
with him as a co-founder. After that, we hired a small team of
about five or six people. We ended up raising several rounds of
venture capital and the company is doing well.
MBJ: Can you tell us a little bit about Top-spin since CEO Ian
Roger’s departure?
PG: Ian is going to run a project called Daisy, which is a new
on demand music service. He’s staying involved with Topspin and has
become the chairman of the board. He’s ac-tually taking my place in
that role. He has been a fantastic evangelist for the company and
we feel that in his role at Daisy he is go-ing to have so much
artist interaction – and Topspin will be integrated into Daisy -
that it will probably continue to promote Topspin’s interests as
well. I would defer to Ian to give you the full story, but what
they are trying to do dif-ferently with Daisy is to both allow
artists to manage their presence and profile pages, and to make
offers directly within the service. To-day, if you are on another
music service and you click on the artist’s bio, you typically get
some pretty stale info that they’ve licensed
A View From the Top (cont.)(From Page 1)
(Continued on Page 5)
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Volume 8, Issue 3 Music Business Journal
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4 www.thembj.org March 2013
The Promise of Daisy
Project Daisy, a developing music streaming service, has been
dubbed by its cre-ators as the new standard for the future. But,
until recently, much of the details regarding the differentiating
features have been withheld. Built on the MOG platform and founded
under the Beats Electronics umbrella, the venture is headed by CEO
Ian Rogers and Chief Creative Officer Trent Reznor. By partnering
with Top-spin, Project Daisy plans to integrate music discovery and
artist connection into a stream-ing service, allowing fans to
simultaneously discover music and connect with and support talent.
This feature alone stands to bring direct-to-fan marketing to a
whole new level. With the mass appeal Beats can bring to the table,
the new service could grant musicians access to a huge consumer
base. Following the major success of its headphone line, Beats
Electronics recently broke into the streaming industry with its
pur-chase of MOG, for which it paid $10 million.1 After the
acquisition, Jimmy Iovine, CEO of Beats Electronics, announced
plans to create a service that could compete, among others, with
Spotify. “Right now, these [companies] are all utilities,” Iovine
claims, “It’s give me your credit card, here’s 12 million songs,
good luck.”2 The creators of Project Daisy empha-size four main
selling points: sound quality, mu-sic discovery, direct-to-fan
integrations, and the ability to “take music subscription services
to the mainstream.”3
Sound Quality
Although no formal details have been released regarding sound
quality, Iovine et al stress its importance. Considering Beats
Electronics has built an empire on head-phones, it makes sense to
integrate superior audio quality into their service. “We have an
entire generation that was brought up on sound being inferior,”
says Iovine, “so we will have the best possible quality and it will
have glob-al scale.”4 Beats succeeded in bringing high-quality,
high-priced headphones to the main-stream music listener. “We had
to get young people into the sound,”5 says Iovine, wishing for
evangelists of better audio. This might be difficult. Streaming
appears to be the way of the future but some music lovers argue
that sound quality is being compromised. With 320-kbsp for premium
listeners, Spotify is at the top end. However, most other services
are nowhere near. Xbox Music Pass offers 192-kbps streaming.
Pan-dora subscribers also receive 192-kbsp, but the ad-based
streaming model offers only 64-kbps.6 Therefore, the real question
is whether the average consumer, fed on a staple diet of sub-par
audio resolution, will care enough to take Iovine, and Daisy,
seriously.
Music discovery
As a music service, Daisy will func-tion similarly to others in
that it will provide listeners with on-demand music and make
recommendations. In addition to algorithmic suggestions, Daisy
plans to use input from music connoisseurs to create a platform “in
which the machine and the human would [sic] collide more
intimately.”7 Creative Officer, Trent Reznor, claims that purely
algorithmic recommendations have “begun to feel syn-thetic,”8 and
compares Daisy’s more intimate approach to that of a local record
store owner. Iovine claims that digital music is missing “cultural
context.”9 In short, by combining a more personal approach to music
recommen-dations, and adding direct-to-fan capabilities, Daisy
hopes to re-awaken the music culture.
Direct to fan integration
Ian Rogers was the CEO of Topspin until he became the CEO of
Daisy in early January. Meanwhile, Beats has invested in Topspin
and plans to integrate GoDirect into their streaming service.10
Rogers still acts as the Executive Chairman at Topspin and says
that the plan is “to set the gold standard for how artists can
be integrated into consumer music services.”11 Topspin artists will
be able to display products, merchandise, news, and tour dates to
the people who are listen-ing to their music. In addition,
listeners will be provided with easy access to the artist’s
Twitter, most likely either through a display on the site or a
direct link. Considering the minimal returns and royalties artists
are receiving from streaming services, other forms of revenue,
including touring and merchandise, have be-come more important.
Daisy’s Topspin in-tegration could potentially enable artists to
increase the reach of their marketing efforts relating to products
and tours. Listeners may be more inclined to purchase a shirt or
attend a show if the information is right in front of them. “There
shouldn’t be a walled gar-den where the streaming service is just a
util-ity that delivers the sound,”12 says Bob Moc-zydlowsky, Senior
Vice President of Product/Marketing at Topspin. With the emergence
of social media, fans are increasingly seek-ing a more intimate
connection with their fa-vorite bands. By integrating a
communica-tion tool like Twitter into a streaming service and
allowing artists to make offers directly, Daisy may help to
accelerate the process of converting casual listeners to true,
dedicated fans. Of course, these features will most likely only
benefit artists using Topspin, which is a strategic play on
Topspin’s part. If the service is successful in providing a better
artist-fan connection, they will most likely see a new influx of
users. On the other hand, if there are not enough Daisy artists
using Topspin to provide value to the con-sumer, Daisy could lose
its key differentia-tor, making it no different to other streaming
services.
Bringing it to the mainstream
Daisy’s model questions the true nature of streaming services.
In order to re-ceive the full benefit from Daisy’s service, users
will have to be involved with the site while listening. They will
need to be reading a musician’s Twitter posts and looking at the
tour dates and merchandise sales, as opposed to simply using the
service for background music while on Facebook, doing home-work, or
commuting to work. The major-ity of music consumption is passive
so,
By Chelsea Ira
(Continued on Page 16)
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Volume 8, Issue 3 Music Business Journal
Business Articles
March 2013 www.thembj.org 5
(From Page 3)
Peter Gotcher (cont.)
fragmented. It really is very challenging to pull off something
like Pandora unless you can operate under a statutory license.
We’re hoping that the way we do business in the U.S will be the
logical evolutionary path for these other countries because it
makes sense, but it’s an element that we don’t control.
MBJ: If licensing costs continue to be as high as they are, is
Pandora’s business model viable?
PG: Well, increases are kicking in. We had one in January and we
will have another one next year. At the end of the day, Pandora
will survive if we do a really great job of selling advertising –
primarily mobile - and we con-tinue to make our subscription
offerings bet-ter. I don’t think we’re waving the flag that
“Pandora’s going out of business if we don’t get lower royalties”.
We did that three or four years ago because royalties then would
have put us out of business in pretty short order. Fortunately,
that changed, but the revi-sions are still tough for us to take.
Pandora’s survival is not at risk. We’re a much less valuable
business with high royalties but that’s not the end of the world. I
believe that the high royalty rates are stifling innovation and
preventing Pan-dora’s competitors from being funded.
MBJ: Could you please elaborate?
PG: Most V.C.s that understand the online space look at
Pandora’s cost of content and say, “we can’t build a business at
that level.” You can’t do subscription-only radio and get more than
a few hundred thousand subscrib-ers. That’s been tried. I think the
reality of it is that radio, as it has been for many de-cades,
needs to be free and ad-supported. Or at least have free and
ad-supported compo-nents. And these royalty rates and the
chal-lenges of scaling an ad-sales organization make it an
un-investable area. David Pakman, the former CEO of eMusic, is a
person who has a ton of do-main expertise, experience and
knowledge. Pakman was pretty articulately at the arbitra-tion
hearings. He knows the music-licensing world very well and went on
to become a V.C. He made a very clear case about why new Internet
radio companies are un-invest-able. I suppose you could look
through one lens and say, “maybe that’s good for Pan-dora – keeping
competition out of the mar-ket,” but I think it’s just bad for
fans, artists,
and innovation. More participants make a healthier market. Now
if the rates actually went up in 2015, that could be catastrophic
but I don’t think anybody is predicting that.
MBJ: How do you see the market for new music business startups?
What are you looking for as an investor?
PG: The truth is that the category is becom-ing overcrowded and
generally less attrac-tive from a financial investment standpoint.
There’s no shortage of entrepreneurial cre-ativity. People are
coming up with a lot of interesting ideas. But, there are all the
con-tent licensing issues, whether it is statutory royalties or the
realities of having to do con-tent deals directly with the labels.
That’s a tremendous risk factor in starting a new digi-tal music
service. Now in the case of Daisy, they are very well funded by a
very successful busi-ness, Beats. They are going to try to take a
different tack. And they are going to have all the benefits of the
celebrity marketing muscle that Beats can bring to the game. They
are not funded by traditional V.C.s. My advice is, if you want to
do a fundable music startup, the key is to stay away from
requir-ing direct content licenses from labels. The whole
transition of this industry to direct-to-fan is happening more
slowly than any of us would like but I’m still a firm believer that
it will happen. There will be continuing op-portunities for
companies that facilitate that transition. There are some new music
start-ups that I consider particularly interesting. For instance,
Chromatik is a music educa-tion network and system for music
teachers to interact with their students remotely. But what I’m
most excited about in the online space is the stuff we’re doing at
Berklee Mu-sic and the Coursera courses. (Editor’s note: Gotcher is
also a Berklee Trustee). Berklee obviously has some credible
faculty and cur-ricula being developed all over the world. At
Coursera, we’re able to give that away for free. I think there are
125,000 people signed up right now for those classes. And that’s
good business, because it will be a driver for both the online and
the brick and mortar school.
MBJ: What about music and the venture capital market?PG: There’s
sort of a climate of “haves” and have-nots” in a lot of
venture-funded compa-
nies today. V.C.s and angels are doing more seed investing, with
many companies get-ting some level of early stage funding. But
there’s always been a high mortality rate of companies going from
seed funding to doing a real series A financing. And it seems that
today, especially, there will not be enough series A rounds for
most of them. But at the other end of the spec-trum, you see a
company like Spotify, which has obviously generated a fair amount
of market traction while losing a substantial amount of money –
they reputably raised another $100 million dollars at a $3 billion
valuation. It’s almost as if there a few hot companies that get
very high valuations but it’s a struggle for everybody else. Series
B and series C financing rounds are not as buoyant as they have
been in the past.
MBJ: You recently joined the board at Trion. Why did you choose
to invest in a video game company?
PG: Yes, that one was a little bit off the beat-en path for me.
I’ll tell you why: I have four sons and they range in ages from
seventeen to twenty-two; they all played video games to a greater
or lesser degree--including some shooting games which made me think
that “I’m definitely going to limit the amount of time you spend
doing this.” But as I look back over the last few years, a couple
of my boys have become interested in massive multi-player strategy
games. In these games an ad-hoc team is formed with people from all
over the world. They collaborate to solve pretty complicated
problems. So a light went off in my mind. I think I also heard a
TED talk on the topic. I now believe this collaborative game
dynam-ic is going to be ingrained in the behavior and culture of
their generation, and inform problem solving moving forward. When
the V.C. investors at Trion approached me and asked me to join
their board, my first reaction was “well, I don’t know anything
about the gaming industry, I’m not a gamer, you don’t want me.”
Their response was “well, we have a lot of gaming experts and you
have had success in other entertainment and media related
businesses, and we think we could benefit from those perspectives.”
We talked about it for a long time and I finally joined. I’m
learning a ton about this industry. It’s living up to my
ex-pectations that it’s going to be a fascinating area to
watch.
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Business Articles
Volume 8, Issue 3 Music Business Journal
6 www.thembj.org March 2013
to an educational experience, jumpstart a ca-reer, or even start
an endorsement deal.
Education and Development
Music education is a major em-phasis. During the show, this
correspondent spoke to a member of NAMM’s board of directors,
Menzie Pittman. Pittman is an educator and owner of The
Contemporary Music Center chain store in Virginia. She links
education with the advancement of the products industry; without
it, and the nec-essary follow up, Pitman believes interest in
playing an instrument could abate: “it’s not simply my job is to
sell you a guitar, or a keyboard; we’d like to teach you how it
works, how to play it, we’ll put you in groups, and we’ll prepare
you for a summer performance”. This is passionate advocacy for
learning, and is hardly found in any other branch of the music
trade. During the convention, NAMM members can also partake in
professional development sessions at NAMM Univer-sity, Generation
Next, H.O.T. Zone, and the NAMM Idea Center to help build their
busi-ness and network with the industry.NAMM also has several
public service pro-grams including, “Wanna Play?” for people of all
ages, from toddlers to seniors. “School Jam USA” invites high
school musicians to perform and raise additional funding for their
school music programs. College stu-dents have the opportunity to
attend the win-ter NAMM show through NAMM’s “Gen-eration Next”
program.
Forward
As baby-boomers get older, well-ness is having a bigger emphasis
in senior citizens’ lives, with music being a huge part of it:
learning an instrument at old age will become common. At the other
end of the spectrum, early childhood learning is be-coming critical
and a matter of public pol-icy. Both factors bode well for the
products’ industry and should expand music educa-tion and
instrument purchases. Finally, it is good to encourage college
majors in music business and education into a products’ ca-reer.
The trade might not have the glamor of rock-and-roll, but no one
attending NAMM can walk out without being amazed at the sheer
variety of occupations and business dreams built around music.
accurate portrayal of the future of the industry. As we look
forward to what’s to come in music gear, NAMM is the pointer.
Business Economics
Though more stable than the recorded music market--because,
after all, NAMM repre-sents the business of musicians’ accessories
–- it is not immune to general trends in the economy. Trouble in
the housing market after 2008, for example, has affected piano
sales, and the 2011 tsunami in Japan affected electronic musical
in-strument sales. Besides, governments, both at the state and
federal level, make decisions about education and impact music
manufacturers and retailers that sell to schools. New products and
innovations by the leading computer companies also play a role.
Music product trends also parallel mu-sic tastes. In 2011, DJ
products rose 9.1% cor-responding to the rise of electronic dance
music in the United States. Acoustic guitars accounted for 52.5% of
the total guitar market in 2011 as trends in popular music shifted
from contem-porary rock to a more acoustic-focused country style.
The NAMM show hosts a diverse net-work of companies ranging from
large to small, domestic and international. Larger exhibitors, such
as Gibson, Yamaha and Roland, have en-tire rooms to showcase
products. Four halls in the convention center are dedicated to
larger and mid-size companies while hall E consists of many
international companies and smaller ex-hibitors. There are also
other levels where edu-cational/professional development panels
take place. Products include fretted and brass in-struments, audio
pro gear, general accessories, pianos and organs, print music
publishing, per-cussion, and school music. Connections within this
network are important because they can lead
The Importance of Being in ProductsBy Jessica Prouty
Overview
The music products market is the un-sung hero of the music
industry. It is made up of manufacturers of instruments and
instrument accessories, audio pro gear, recording software, trade
magazines, and educational materials for musicians and K-12 music
learners. As re-corded music drops in value, sales in this sector
stay resilient. Moreover, because there are so many small
businesses and manufactures, and the typical producer cycle at NAMM
goes from industrial design to production, marketing, and
distribution, the sector employs the largest labor force in the
music industry by far—more than live music, and much more than
recorded music and publishing. Over time, its significance has
grown relative to the other sectors of the music busi-ness. In the
early nineties, the U.S. music prod-ucts industry was valued at
$4.6 billion. Then, it was overshadowed by recorded music sales
worth at least twice as much; instead, by 2011 recorded music sales
were worth only $7.1 bil-lion compared to the ever-rising $7.6
billion of music products. In short, the music products industry
has pulled ahead: although it may be premature to say it is the new
cash cow of the business, like recorded music once was, ana-lysts
should take notice.
The NAMM Show
Its most important annual event is for trade-only attendees. The
general public is not allowed in. As usual, NAMM, for National
As-sociation of Music Merchants, happens at the Anaheim Convention
Center in California ev-ery January. There is a summer version in
Nash-ville, but it is the winter show that sets standards every
year. The 93,000 attendees and 1,700 ex-hibitor companies make NAMM
the second largest music products show in the world; Musikmesse in
Frankfurt, Germany, is larger only because it accommodates the
general pub-lic. You have to be an insider to attend NAMM, and, in
the products trade, NAMM is still the number one event of its kind.
The NAMM show revolves around the interaction between exhibitors
and buyers (such as distributors, retailers, and the music
education trade). Exhibitors present new prod-ucts in booths along
the show floor, while the buyers have the opportunity to see the
products firsthand and negotiate price and delivery. Ne-gotiations
made on the floor establish the sales flow and revenue for the next
year, providing an
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Volume 8, Issue 3 Music Business Journal
Business Articles
March 2013 www.thembj.org 7
(even though Swedish singer Jonathan Johans-son recently broke
through Spotify’s stream-ing’s limitations and made $20K in the
first week of his album release).4 Bundling would help the carriers
too. In recent years, the U.S. mobile market has experienced a loss
in customer loyalty, ac-cording to David Goldman of CNN Money.5 It
may be a sign of a healthy and competitive marketplace, but it also
forces mobile carriers to reinvent their very best offers. This
some-times means subsidizing new products. But the verdict is still
mixed: Spotify’s deal with Deutsche Telecom in Germany helped
up-sell smart phones but did little for customer reten-tion.6
Deezer, a French music streaming service and competitor to Spotify,
is also in-volved with Orange. Orange is an investor in Deezer and
has partnered with it for other bun-dling deals around the world.
However, while Deezer may outdo Spotify in sheer numbers countries,
i.e. 215 vs 17, Spotify is still win-ning in terms of key
locations, and, notably, in the United States, the largest music
market in the world. Spotify is integrated there with Facebook, a
huge obstacle to any rival. Inevitably, the question arises as to
why Spotify’s bundling strategy is not yet workable in the United
States--although a precedent exists: mobile service provider Sprint
teamed with Boku, a mobile payment company, to offer Spotify
subscriptions bill-able to Sprint’s monthly bills; Boku also has
partnerships with other service providers in-cluding AT&T,
Verizon and T-Mobile.7 The reasons might be technical. Na-tionally,
there is a bottleneck of bandwidth ac-cess. As the Federal Trade
Commission puts it, “despite significant investment in networks and
advances in wireless efficiency, demand for mobile broadband
service is likely to out-strip spectrum capacity in the near-term;
with-out action to address this spectrum crunch, service quality is
likely to suffer and prices are likely to rise.”8 Reactions to the
so-called “spectrum crunch” are mixed among carriers and analysts.
Many major service providers in the U.S. ap-pear to be satisfied
with the amount of spec-trum available to them.9 Cisco,
nevertheless, predicts that mobile Internet data traffic will grow
by a factor of eighteen in three years,10 which would of course
exacerbate any current problems. On the other hand, a 2012 study
by
the mobile intelligence company Validas im-plies that throttling
data usage, or charging in tiers for data allowances, has no effect
on data usage by mobile users.11 Still, like the U.S., the U.K.
seems to be facing much of the same issues: its govern-ment
recently announced a plan to invest £11.6 million in 5G
technology12; the U.S. on the other hand, has not even seen 4G-LTE
become ubiquitous among mobile service providers. None of this
seems to deter the tele-coms or the online music providers. Orange,
for instance, is expanding into the U.S. with three Android phone
models: Orange San Francisco, Orange San Francisco 2, and the
newest Orange San Diego came onto the mar-ket starting in 2012 as a
low-cost smartphone option.13 If Orange is positioning Deezer here,
it should have the advantage of lower transac-tions costs than
Spotify over licensing issues. After all, Spotify provided the
model’s proof of concept among recorded music sellers.
Endnotes1. Fingas, Jon. “Spotify Signs Deal with Orange
Switzerland to Bundle Music with Youth Plans.” Engadget. AOL Inc.,
21 Jan. 2013. Web. 20 Feb. 2013.2. Little, Mark. “Music feels the
benefit of bundling as Ovum predicts subscriptions to drive 15%
growth in digital.” Ovum. Ovum, 27 Aug. 2012.3. Ifpi. Digital Music
Report 2012.4. Sydell, Laura. “How Musicians Make Money (By The
Fraction Of A Cent) On Spotify.” NPR. NPR, 26 Sept. 2012. Web. 20
Feb. 2013.5. Goldman, David. “Cell Phone Customers No Longer Loy-al
to Their Carriers.” CNNMoney. Cable News Network, 26 Mar. 2012.
Web. 20 Feb. 2013.6. Andrews, Robert. “Spotify Gets a Leg-up in
Germany from Deutsche Telekom Bundling.” PaidContent. GigaOM, 31
Aug. 2012. Web. 20 Feb. 2013.7. Rao, Leena. “Mobile Payments
Startup Boku Launches Billing Partnership With Sprint.” TechCrunch
RSS. AOL Inc., 3 May 2012. Web. 20 Feb. 2013.8. Federal
Communications Commision. “Spectrum Crunch: The Cell Phone Industry
Hits Its Limits.” Spectrum Crunch. Federal Communications
Commision, 3 Mar. 2011. Web. 20 Feb. 2013.9. Goldstein, Phil. “What
Happened to the ‘spectrum Crunch?’” FierceWireless. FierceMarkets,
28 Sept. 2012. Web. 20 Feb. 2013.10. ”Cisco Visual Networking
Index: Global Mobile Data Traffic Forecast Update, 2012–2017.”
Cisco. Cisco, 6 Feb. 2013. Web. 20 Feb. 2013.11. Chen, Brian X. “Is
Throttling Smartphones Pointless? Study Suggests So.” Bits. The New
York Times Company, 23 Feb. 2012. Web. 20 Feb. 2013.12. HM
Treasury. Department for Business Innovation & Skills.
Government Investment Secures £1 Billion for Univer-sity and
Private Research. HM Treasury. Government of the United Kingdom, 8
Oct. 2012. Web. 20 Feb. 201313. McCann, John. “Orange San Diego
Review.” TechRadar. Future US, Inc., 18 Oct. 2012. Web. 20 Feb.
2013.
Spotify recently signed a bundling deal with
Orange-Switzerland’s “Orange Young” line of cell phones offered to
customers under the age of twenty-eight. The Swiss deal is
important be-cause it could be a harbinger of things to come. It
also reveals that Spotify is banking on bundling services with
telephone carriers to build a mo-mentum that it may not yet have on
its own. The “Orange Young” campaign offers three-tiered
non-binding mobile plans equivalent to U.S. $32, $72, and $87.
Bundled into them is a twelve-month, unlimited subscription to
Spo-tify Premium.1 While this deal targets the mobile market,
customers will also have access to the Spotify premium service on
their desktop and get some exemptions in monthly data usage. If
Spotify Premium normally costs about $14, arguably the new plan is
being sub-sidized on both sides of the transaction. Spotify gains
access to Orange’s large distribution net-work and will acquire
customers effortlessly. In turn, Orange can use Spotify as a
sweetener for potentially new lifelong customers. Spotify’s
strategy uses a free, ad-based service to attract new users and
create a large cus-tomer base. Over time, and after building a
large customer base, Spotify may attempt to taper its free service
so that users are compelled to switch to the premium service.
Bundling, therefore, can be an effective way to gain paying
customers. This is working well outside of the United States.
Twenty-five percent of Spotify’s premium subscribers in Sweden are
a result of its bundling deal with Telia, which offers TV, mo-bile,
and landline bundles. In fact, Mark Little, an analyst at Ovum, a
branch of Informa Telecoms and Media, predicts that bundling deals
will be one of the major factors pushing the emerging
unlimited-music subscription segment to nearly 50 per cent growth
annually. Yet, given current global music sales of about $15
billion, it is hard to imagine the $22.5 billion market that Little
does for 2017; if, as he also claims, bundling will boost digital
music revenue by 15% annually,2 the recording industry would truly
emerge from its Dark Age into its Renaissance. Things are still
slow. The 2012 Digital Music Report3, put out by the International
Fed-eration of the Phonographic Industry (IFPI), gave the number of
paying Spotify subscribers at 2.5 million worldwide—not yet a
critical mass. Art-ists still receive more royalties from streams
by paid subscribers and, in Sweden, ninety percent of Spotify’s
user base has upgraded to Premium
By Troy Church
Bundle It and They Will Come
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8 www.thembj.org March 2013
Volume 8, Issue 3 Music Business Journal
Business Articles
Ten Music Business Highlights from 2012By Emilie Bogrand
As the music industry’s traditional structures continue to fall
away, new models are building upon unsteady foundations. Some of
the new companies that stepped onto the playing field in previous
years fought in 2012 to stay in the game. Major music companies
merged and reorganized while digital startups gained more and more
attention. Digital Mu-sic News reported that 1 in every 43 venture
capital dollars was spent on music related busi-nesses last year.
One example, The Echonest, a music data and analysis company,
popped up from under the radar and secured over $17 million in
funding. With success stories from Amanda Palmer, Kickstarter
pushed funding into uncharted territory, creating viable new
streams of capital for musicians. Here are ten examples of trends
and events that marked the music industry in 2012 and that will
continue to have an impact on the months and years to come.
1) Electronic Dance Music was the dominant new genre of 2012.
Flooding the mainstream market and pop audience, the EDM industry
is reported to have an annual worth of approximately $4 billion.
Acts like Skrillex, Swedish House Mafia, Deadmau5 and Avicii drew
herds of fans to specialty and major festivals across the globe. In
2012, Dutch producer and D.J., Tiesto, earned over $22 million.
2) Live music revenues have contin-ued to rise since 2010. The
Coachella Valley Music and Arts Festival, for example, expand-ed
from one weekend to two in order to sat-isfy the higher demand.
Meanwhile, recorded music sales continued to stall. 2012 was also
the first year during which digital albums outsold other formats
and channels including physical copies and distribution
outlets.
3) Streaming services faced some negative publicity last year
yet they continue to accumulate more users and subscribers.
Re-ports detailing Spotify’s poor payouts to art-
ists sparked conflict between copyright hold-ers and the online
tech sector. Meanwhile, on Capitol Hill, Pandora turned to
litigation in an attempt to lower intellectual property costs via
the Internet Radio Fairness Act. Rumors about a similar Internet
radio service by Apple spread across the media outlets, sinking
Pan-dora’s stock.
4) Crowdfunding emerged as a new fundraising method for small
businesses and musicians. Amanda Palmer set a prece-dent when she
raised over $1 million in only one month using Kickstarter.
IndieGogo and PledgeMusic are also important crowdfunding websites
for musicians. As it currently stands, artists and businesses in
the U.S. cannot trade equity for online donations. That may change
this year when the JOBS Act goes into effect and relaxes equity
regulations for small busi-nesses.
5) Venture capitalists and angel investors are increasingly
present at music conferences such as MIDEM and South By Southwest.
A study by the National Venture Capital Association,
PricewaterhouseCoo-pers, and Thompson Reuters indicates that total
financing across all sectors dropped 10% in 2012 while financing of
music companies rose by 34%. A separate international survey,
quoted in Digital Music News, put Sonos at the top of the pack,
raising $135 million. Deezer and Spotify trailed closely
behind.
6) EMI Music was acquired by the Universal Music Group for
almost $2 billion. The sale represents a continuing consolidation
among the major music companies. Now, only Universal, Sony and
Warner remain. The Eu-ropean Commission finalized the deal nearly
one year after the acquisition was announced in November 2011. The
approval by the EC came with the stipulation that Universal would
sell off one third of EMI’s assets.
7) The publishing sector continues to tap revenues and is taking
better advantage of market inefficiencies and licensing holes.
Technology helps and is increasing the market share of independent
companies like Kobalt Music and Rights Flow, now under Google. The
“Do It Yourself” model continues to gain traction here too, as
control decentralizes and moves away from traditionally powerful
enti-ties. In what could be a sign of the times, and a threat to
the PROs, Sony/ATV/EMI Publishing withdrew its digital catalogue
from ASCAP and BMI, recently preferring to negotiate mar-
ket rates directly—and with good results, driv-ing collections
from Pandora up by as much as one-fourth.
8) Two young ladies dominated the charts for recorded music
sales in 2012. Tay-lor Swift’s album, Red, was the year’s
stron-gest debut. Adele’s 21 was the year’s highest selling album
for a second consecutive year on iTunes – an unprecedented
accomplish-ment by any artist. The singer continues to break
records after being the first female artist to win six Grammy
Awards in one night.
9) South Korean rapper, Psy, crossed international borders and
entered the U.S. mainstream with his viral hit song, “Gangnam
Style.” In November 2012, the music video became the most-watched
YouTube video in history. He quickly signed a management deal with
Scooter Braun, who discovered Jus-tin Bieber and Carly Rae Jepsen.
Until now, K-Pop acts have experienced difficulty break-ing into
the U.S. market. If Psy continues to make progress as a cultural
crossover, it will be an impressive achievement.
10) Dr. Dre is 2012’s top-earning musician according to the
Forbes’ list: “The World’s Highest Paid Musicians 2012”. The
artist, producer and entrepreneur earned $110 million between May
2011 and May 2012, mostly due to his Beats headphone line. The
success of this merchandise venture exempli-fies a creative
strategy to maneuver the shift-ing music industry – and it proves
that there is still money in the music business. Dr. Dre, Jimmy
Iovine and Ian Rogers plan to intro-duce a new streaming service
called Daisy later this year.
Many have agreed that streaming represents the future of music
consumption, but the debate over how its meager profits are
allotted is widespread and impassioned. On-line radio services like
Pandora and interactive streaming applications such as Spotify
argue that their businesses help musicians and copy-right owners.
But musicians, songwriters, record labels and publishers have
expressed concern over being devalued and undercom-pensated for
their work. Some see streaming as a race to the bottom. Billboard
Magazine named 2011 “a year of tectonic shifts” and de-scribed 2012
as “a year of consolidation and contention.” In the wake of ongoing
changes and conflict, perhaps we can hope that 2013 might be a year
of compromise and coopera-tion.
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Business Articles
March 2013 www.thembj.org 9
Volume 8, Issue 3 Music Business Journal
vation, and embracing a more optimistic vi-sion for the
business.
Still, there is a question mark about the relevancy MIDEM. A
global and wired marketplace and the drop in value of record-ed
music sales seem to justify a more austere approach to travel
budgets all round, even for publishers (for whom MIDEM was
histori-cally valuable). Moreover, conferences like SXSW,
non-existent twenty years ago, are cheaper and cater to innovation
and startups just as well. MIDEM is certainly a good fit for
European policy makers looking, among other things, to harmonize
music rights and get the pulse of the industry. But more is needed
to rescue the event, which could become a regional rather than
international gathering: attendance seemed to be much lower than in
2012, and the overall trend was already downwards.
Endnotes
1. Brandle, Lars. “Did Midem 2013 Hit the Target?” The Music
Network, Feb. 1, 2013.
http://www.themusicnet-work.com/music-features/industry/2013/02/01/did-midem-2013-hit-the-target/
MIDEM is one of the largest conven-tions devoted to the state of
the music industry. Hosted annually in the southern-coastal city of
Cannes, France during the final days of Janu-ary, this event draws
mostly European policy makers, labels, publishers, artists,
start-up en-trepreneurs, and other music business interests,
including some students.
When it began in 1967, MIDEM served as a venue for companies of
different nations to negotiate deals. It was a forum for discourse
upon which music’s globalization hinged. In its infancy, industries
of various nations revered MIDEM as a festival of op-portunities –
a place to showcase their artists and ideas to potential partners.
In 1968, for instance, early MIDEM organizer, Bernard Chevry, could
tell Billboard Magazine that it was a venue for music industry
participants to discuss problems, exchange products, expand their
business internationally, and discover the strengths and
opportunities of other nations.
Global is as global does, and the business has changed. Today,
artists and mu-sic intermediaries may enjoy more indepen-dence and
freedom and find followers or users among the most specific niches
of the Internet, diminishing perhaps the need for face-to-face
encounters. Meanwhile, lumbering labels con-tinue to look for a way
to knock down walls instead of fitting through doors.
Midem 2013
Richard Gottehrer, co-founder of Or-chard, has touched on the
importance of “rein-vention”, a major point of interest at this
year’s MIDEM conference.1 Indeed, through a litany of competitions
and panels, several forward thinking individuals showcased a
variety of new ways to interact with, perform, and mon-etize
music.
In the MidemLab contest series, for instance, a collection of
ventures took on one of the biggest challenges in today’s music
landscape: finding a way to introduce addi-tional value. The hype
and extensive coverage of this start-up competition reinforces the
in-creasing importance of creative thinking in the music industry.
In the end, Evan Lowenstein’s “Stageit” – a service that enables
artists to per-form impromptu concerts online and allows fans to
show their gratuity by tipping - received an award for innovation
in content monetiza-tion. Additionally, Fleur Pellerin’s
start-up,
By Kyle Billings
“Audience.fm” received a special prize for cre-ating a new
approach to artist/fan engagement.
Another key theme at this year’s MIDEM was the evolution of
branding. In re-sponse to record sale troubles, many artists have
opened up to brand partnership opportunities in an attempt to
support their careers. The festival included numerous events geared
towards ob-serving recent advertising campaigns and offer-ing
advice on how to maximize potential. The challenge in organizing
effective branding, as many panelists and contestants addressed, is
the difficulty in creating a mutually beneficial, “au-thentic”
partnership. One panel questioned the effectiveness of Taylor
Swift’s affiliation with Diet Coke, while rapper Theophilius London
spoke about which type of car he would love to customize and
endorse.
Many companies are attempting to form more genuine affiliations
with artists. The electronics company, Philips, is using its “Sound
of Creation” campaign to collaborate with the Portlandia theme song
creator, Washed Out. NOKIA is working with Rihanna to create mobile
apps and host web-casted performances. This growing industry-wide
motion towards deeper, more meaningful, branding relation-ships
will undoubtedly lead to more opportuni-ties for artists and
companies in the future.
Context and Final Thoughts
Blogger and tech-visionary Robert Scoble succinctly summed up
the state of the industry during his speech. He explained that
music today has the most value for consumers when in “context.”
This statement resonated across the festival, both in Scoble’s
“Visionary Monday” presentation and from other panelists throughout
the weekend. At its core, the con-text concept suggests that
consumers today are responding more positively to music when it
in-tertwines with other aspects of their lives. This idea is
becoming the basis of many developing approaches towards
advertising, social media, and new monetization models.
In summary: this year’s conference offered a variety of
interesting perspectives on the future of music. As the music
industry has given way to a surge of independence, confer-ences
like MIDEM are now valuable not only to the major players, but also
to start-ups, stu-dents, and passionate entrepreneurs willing to
experiment. These are the people exchanging refreshing ideas,
pushing collectively for inno-
The Future of Music and MIDEM
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10 www.thembj.org March 2013
Volume 8, Issue 3 Music Business Journal
Business Articles
A Berklee Report on Music Industry Salaries: Business JobsIn
December 2012, Peter Spellman, head of Berklee’s Career Development
Center, produced a listing of salary ranges for US music positions
in performance, writing, business, audio technology, education, and
music therapy. This is the update of a similar report published in
December 2010. Here we reprint, with permission, the business
salaries. The complete report can be found, in PDF format, at
www.berklee.edu/pdf/pdf/studentlife/Music_Salary_Guide.pdf or
www.thembj.org. The MBJ staff has not ascertained the accuracy of
the data.
B U S I N E S SCATEGORY JOB TITLE SALARY ADDITIONAL
INFORMATION
Music Products Instrument Maker $15,000 - $65,000 Training or
apprenticeship programs are required. Pay scale depends on the
quality of the work, reputation, and amount of experience.
Instrument Repair Technician $9 - $55/hourPiano Tuner $100 –
$185/tuningMusic Dealer – Sales $13,000 - $50,000 Salary often tied
to commissions.Marketing/Advertising Specialist $28,000 -
$116,000Music Instrument and/or Acces-sories Distributor
$19,000 - $75,000
Music Publishing Music Editor $20,000 - $60,000 English or
Journalism degree helpful.Notesetter $15,000 - $50,000 Transcribes
music and sound onto paper for other musi-
cians to read and perform.Song Plugger (Sales
Representa-tive)
$20,000 - $64,590 Pitches compositions from their publishing
house to art-ists and record companies to be recorded and
performed.
Copyright/Licensing Administra-tor
$20,000 - $60,000 Manages all the exclusive rights related to a
creative work. Business/law experience/ education helpful.
Record Industry A & R Representative $27,000 - $85,000+
Researches talent for the company to sign to recording
contracts.
A & R Administrator $25,000 - $65,000 Responsible for much
of the clerical functions of the department.
Artist Relations Representative $25,000 - $65,000+ Acts as a
liaison between company’s artists and media, etc.
Regional Sales Manager $35,000 - $85,000+ Supervises the sale of
the label’s records to wholesalers and/or retail outlets in a
specific region, creating sales campaigns and policies, and
overseeing sales staff.
Artist Manager 10% - 50% of artist’s earnings
Negotiates business relationships, advises on all business
decisions, and guides creative directions for the per-former they
represent.
Music Attorney $70,000 - $150,000+ Evaluates all legal issues
concerning musicians, par-ticularly issues with copyright,
trademark, and contract negotiation.
Webmaster $28,000 - $150,000+ Designs and maintains the
company’s website dealing with site architecture and
functionality.
Digital Marketing Manager $24,000 - $55,000 Communicates the
value of a company to their cus-tomers through digital advertising
channels like social media, websites, and email.
Website Content Producer $28,000 - $75,000 Develops interesting
and unique content for a label’s site including artist bios,
stories about upcoming tours, announcements about new releases, and
features about label artists.
International Department Varies Oversees foreign sales and
ensures effective communi-cation between domestic and foreign
affiliates.
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Volume 8, Issue 3 Music Business Journal
March 2013 www.thembj.org 11
Concert Industry Booking Agent $20,000 - $1,000,000+
Commis-sions range, typically 10% - 20% of the act’s gross income
per show.
Secures engagements for musical groups through building
relation-ships with buyers.
Tour Coordinator $35,000 - $175,000+ Researches and assembles
tour details.
Road Manager $25,000 - $125,000+ Supports artist on tour
regarding travel, budget, merchandise, etc.
Tour Publicist $30,000 - $100,000+ Announces an act’s tour to
both fans and the media through press releases, press conferences,
and special promotions.
Advance Person $25,000 - $48,000 Arrives ahead of the act on
tour to prepare for a concert.
Concert Promoter $0 - $1,000,000 Manages all details of
presenting a show.
Concert Hall Manager $26,000 - $90,000+ Oversees all activities
that hap-pen in the facility.
Concert Hall Marketing Director $25,000 - $100,000+ Develops
advertising campaigns, creates marketing materials, and pitches to
press outlets for their venue.
Stage Manager $24,000 - $75,000+ Supervises all technical needs
for sound, lighting, electric, and staging both on stage and back
stage.
Sound Technician (see also Au-dio Technology section)
$27,000 - $65,000+ Working in a club, theater, con-cert hall,
arena, performing arts center the resident sound techni-cian
provides house sound and monitors for concerts/events.
Music Communications Publisher or Editor of Music Books or
Periodicals
$24,000 - $100,000 These positions require strong writing
skills, a good contact net-work, and previous experience.Music
Journalist $15,000 - $30,000 $50 - $150
for a review $100 - $500 for a feature
Public Relations Specialist $25,000 - $200,000Music Blogger
$23,000 - $66,000
Non-Profit Arts Administration
Administrative Assistant $20,000 - $35,000+ Typically,
entry-level arts admin-istration positions require
organi-zational/interpersonal/ computer skills, office work
experience, and knowledge of music/arts.
Development Associate $36,000 - $55,000+ Previous fundraising
experience is required. Experience in public speaking and database
manage-ment are also necessary.
Public Relations $30,000 - $75,000 These positions require
relevant work experience, strong com-munication skills and computer
skills.
Executive Director $20,000 - $250,000 Bachelor’s degree is
required and a master’s degree is pre-ferred.
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Volume 8, Issue 3 Music Business Journal
Business Articles
12 www.thembj.org March 2013
Roger Faxon, Captain of Industry
Roger Faxon has had a distinguished career in the entertainment
industry. He was executive vice president/COO at LucasFilm, a
founding partner of the film and television production unit Mount
Company, and a senior executive vice president at Columbia
Pictures. He joined EMI in 1994 after serving as CEO of
London-based Sotheby’s Europe. Until a year ago, he was CEO of EMI
Group. Faxon or-chestrated the sale of EMI’s Recorded Music and
Publishing Assets, respectively, to Univer-sal Music Group and
Sony/ATV Publishing.
MBJ: You have extensive knowledge of mu-sic, TV, and film. Where
is it all going?
Roger Faxon: You have to think about “digi-tal” as a modality.
It doesn’t create revenue, it’s the content that does. Digital is a
way to reach consumers. We’ve seen a plethora of ways in which that
happens, but we’re only at the very beginning. Right now, in the TV
and cable world, programming is reaching consumers outside of the
normal network of schedules and cable systems. This changes the
structure of how entertainment reaches con-sumers. It also changes
very fundamentally the economics of how entertainment products are
financed. We’re going to see huge changes here. People are less
likely to subscribe to a cable system today because they have so
many alternatives. With an appropriate modem, like Apple TV or
Google Box, you can watch Netf-lix, Hulu, YouTube, or other
services.
MBJ: What about the streaming of live events, like concerts, on
YouTube, VEVO, or other providers?
RF: Live compels people to gather in a broad-cast environment,
to use an old fashioned term. They want the immediacy of the
experience. That tends to be the most powerful way for channels to
maintain their positioning. People have loyalties to programs. They
want to see their programs when they first come out be-cause they
want to chat about them. However, as we’ve seen quite consistently,
Tivo has revealed a huge viewership, which has time-shifted the
television world.
MBJ: Do you forecast any radical changes with respect to the
financing of music or the entertainment industry?
RF: Yes, and Tivo is a great example of these changes. Tivo
reports that if 60% of the shows are time-shifted, advertising is
bypassed. And then of course, there is “the hopper”, which is a
mechanism TV is using to tie in its subscribers
By John Ioannidis
by essentially giving them the ability to com-pletely jump over
all ads. So, that fundamen-tally shifts the economics of linear
television. With 40% of the audience time-shifting and 60% skipping
ads, the entire economic system of network television is turned on
its head.
MBJ: What about music and the do-it-your-self approach? Is it
really a paradigm shift?
RF: Perhaps it will be in the future. Right now, there are no
effective, naturally available
means artists can use to become broadly and widely known without
spending substantial sums of money. Let me explain. Record
com-panies do not discover completely unknown artists. It’s very
rare for somebody with no audience or records to break through.
Major companies go out and find those people who already have an
audience. The size of the fan base varies, but that’s what they’re
looking for—and artists today, it is true, are much more effective
at developing their own fan base than they were at any other time
in our history.
But there is a ceiling. The reality is that the old world still
exists, and it is the big-gest part of the music market. 45% of the
mar-ket is sold in stores. 80% of the awareness of music is from
radio. The things that made the
record companies important as intermediaries in the past still
exist. Bargaining power, on the other hand, is very different than
it was. Today, you have mini bands with established brands coming
into the record companies with support from the marketplace. So
that has changed, but the reality is that record companies still
need to be in the mix. If the major labels become more and more
effective at marketing –and that means reaching consumers and
exciting them about the music – they will preserve their position
in the chain. But they won’t maintain, over the long term, the
power they’ve had by virtue of distribution.
MBJ: How do you see the recorded music divisions of the major
record labels evolv-ing?
RF: I think there are two ways for them to go. They could stay
pretty much as they are, in which case their relevancy will slowly
erode as others who are more willing to experiment with new forms
of distribution find effective ways of exciting consumers: they
will weak-en, but likely not go away. Alternatively, the major
record companies will understand that their central role is to
create demand for music and market it. They have to be absolutely
fo-cused on deriving value wherever anybody in a commercial setting
listens to music or experi-ences music. They will have to develop
differ-ent skills than they had in the past and reach out to new
kinds of businesses. If they do those things, they will grow the
market substantially.
MBJ: You led EMI through a turbulent era under Terra Firma. EMI
was forced to turn the company over to Citigroup, and eventu-ally
sold its publishing to Sony and its re-corded music division to
Universal. Do you think that the executives at Sony and Uni-versal
should themselves be worried about the future?
RF: The circumstances are different. At EMI, a private equity
company created leverage and borrowed huge sums to buy the business
on the basis that the market and the business would turn around in
an ex-traordinarily short period of time. Then, the financial
market crashed and they couldn’t re-finance. This forced the sale.
But even in debt we made a lot of money and both the record and
publishing sides of the business were oper-ating extremely well.
Many people would say that we were the most profitable business in
the industry.
(Continued on Page 13)
-
March 2013 www.thembj.org 13
Volume 8, Issue 3 Music Business Journal
Music and Society
Music Meets FootballBy Megan Graney
(From Page 12)
The Super Bowl is a TV extrava-ganza that has a special place in
American life. Viewers tune in regardless of the fortunes of their
football team, often just to watch the jaw dropping commercials and
the extravagant halftime show. This year, an audience of 114
million, three times as much as the number of viewers of the
Grammys, saw the Baltimore Ravens defeat the San Francisco 49ers at
the New Orleans’ Superdome. The music industry was there in force.
Jennifer Hudson and 26 students from Sandy Hook Elementary School
kicked off the event with an emotional delivery of “America the
Beautiful.” Alicia Keys joined in for a gra-cious accompaniment
during the National An-them. Above all, many would argue that
Be-yoncé, with other members of Destiny’s Child, gave one of the
most memorable halftime shows since Michael Jackson’s Super Bowl
performance in 1993.
The Halftime Show
In the past, halftime shows were not focused on headliner
superstars or big produc-tions; instead, ensemble type performances
were the norm. Michael Jackson changed this and set a precedent for
the future. Since then, Madonna, The Rolling Stones, Prince,
Jus-tin Timberlake and Janet Jackson performed. This was Beyoncé’s
year (at the Superdome, she also announced her new European and
American tour, “Mrs. Carter Show World Tour ”, a reference to her
marriage with Sean Carter, i.e. Jay-Z). Music revenue drastically
increases in connection with the Super Bowl, as mil-lions of people
are reminded of old songs or
exposed to new singles. Beyoncé was the most-discussed musical
performer of the night on Twitter, prompting more than a third of
the night’s 750,000 music related tweets. Her mu-sic sales
subsequently soared through the roof following the release of her
fifth album. Be-yoncé experienced a 230% boost in her digital album
sales during the week leading up to the big game, and Destiny’s
Child’s leaped by a re-markable 600%. The trio released Love Songs
a week before the game, a strategic plan that undoubtedly
benefitted the album’s sales. Digital song sales also received a
boost: Beyoncé’s most downloaded songs were “Halo” and “Single
Ladies” and overall her sales tripled and Destiny’s Child’s
qua-drupled. Indeed, it appears that compared to an average day,
any song performed sold three times as much. The event equally
impacts catalog music. Destiny’s Child’s “Say My Name,” wasn’t even
played at the Super Bowl, but be-came the song of the week, while
Kelly Row-land, who in the past sang a few songs with the group,
was bumped up to #27 on the iTunes R&B Chart for “Kisses Down
Low”.
The Commercials
Halftime performers are not the only musicians benefitting from
the Super Bowl. The songs that are placed in commercials also see a
spike in revenue. Background music can make or break a
thirty-second ad, which is why companies pay big money to place the
right track. Shortly after the game, 7digital, a music provider
that carries more than 22 mil-lion legal, high quality, tracks,
followed Super
Bowl ads and documented the boosts artists received in digital
music downloads. Apparently artists received a lot of love from
football fans this year. Budweiser’s Clydesdale “Brother-hood” ad
plucked at America’s heartstrings. Fleetwood Mac’s single,
“Landslide” was the soundtrack for the touching commercial and, as
a result, saw a 500% increase in download sales. Building on the
increased awareness, the band conveniently lined up a three-month
tour beginning in April. “I Wish” by Skee-lo played during Toyota’s
“Wish Granted” com-mercial and consequently saw a 300% increase in
download sales. Similarly, The Rolling Stone’s “Sympathy for the
Devil” saw a 600% increase in download sales after being featured
in a Mercedes Benz commercial. Finally, Psy made an appearance on a
bucking pistachio, “Gangnam Style”, for the “Get Crackin”
commercial. Sexy long-legged pistachios, and Psy, may not do for
the fruit what his original YouTube video, with a billion plus
views, did for him. But growers must be pleased: Korean Pop and its
newfound dance helped brand their pistachios as exotic rather than
plain. As for Psy, he immediately added another 100,000 views to
his hit.
Universal, on the other hand, is part of Vivendi. Vivendi has
some issues – and some debt – but they’re taking care of that by
selling some of their telecommunication busi-nesses.
Sony’s entire business operation is facing some financial
challenges, but I don’t think anybody expects they won’t be
resolved. Besides, the consortium that, led by Sony, bought EMI
publishing, had other parties holding a majority of the ownership.
The Abu Dhabi fund, Mubadala, is actually in control. So the entity
that contains EMI Music Publish-ing should have no financial
difficulties.
By the way, I’m well known for ar-guing that merging the
recorded music and the publishing divisions of a major is a good
thing, particularly as we move forward in a digital world where
licensing is key. As the two busi-nesses become intertwined they
become more compatible and complementary, and there is a lot of
value in that. Naturally, it can be diffi-cult organizationally:
the larger a business is, the slower it responds to change, making
the merger harder at the start; in successful busi-nesses, it could
even reinforce entrenched ways of doing things.
MBJ: Do you think much about success,
and if so what would you say is the root of your success?
RF: I believe it is curiosity and my absolute admiration for
creativity: you have to love it, enjoy the way it operates, and the
people who make it possible. There is a third element too, I think,
which is being completely honest and open with others; if my
colleagues feel that they have benefited from my actions, and I
from theirs, together we have been successful. Beyond that, in a
big organization like EMI, with more than five thousand em-ployees,
it is important to project a vision and trust others. That is what
really made EMI so successful.
-
14 www.thembj.org March 2013
Volume 8, Issue 3 Music Business Journal
Business Articles
Irving Azoff Leaves Live Nation
Three years shy of his tenure with Live Nation, executive
chairman Irving Azoff has called it quits. He was reportedly
frustrated by the constraints of working at a public com-pany,
which he deemed as stifling to his entre-preneurial spirit. As
Azoff moves forward, he is taking some of Live Nation’s biggest
clients with him. Live Nation may be well served to reflect on
Azoff’s departure as a signal to fo-cus on creative innovation and
keep up with the changing times.
Background
Azoff, who came primarily from a management background, joined
Live Na-tion as a result of two mergers, the first being between
Front Line Management Group and Ticketmaster in 2008. Azoff founded
Front Line in 2004, and grew the company into ar-guably the world’s
largest artist management firm. Front Line boasts a roaster of over
250 artists including Christina Aguilera, the Ea-gles, Seal, Van
Halen, Neil Diamond, Fleet-wood Mac and Steely Dan. In 2008,
America’s largest ticket sales and distribution company,
Ticketmaster, purchased the majority share (30%) of Front Line
Management for $123 million – a move that lead Azoff to become CEO
of Ticketmas-ter. Azoff steered Ticketmaster through a sec-ond
merger with the world’s largest concert promoter, Live Nation, in
2010. Azoff was ap-pointed Live Nation Entertainment’s executive
chairman in 2011 before his departure at the end of 2012. The
Ticketmaster/Live Nation merg-er has been successful. The share
prices of both companies rose by approximately 15% soon after, and
the deal itself was reported to be worth $835 million. Live Nation
Entertainment poses a triple threat combining three companies at
the top of their game: Front Line in artist manage-
By Annette Atieno Oduor
ment; Ticketmaster in ticket sales and distri-bution; and Live
Nation in concert promotion. Azoff himself states that Ticketmaster
has done well since the merger with Live Nation and that its
prospects look promising.
Resignation
So why leave, one may ask? Azoff claims he was discouraged in
his efforts to re-form the concert business. He had planned to use
the Ticketmaster/Live Nation merger to fix problems plaguing the
concert business such as rapidly rising ticket prices and
widespread scalping. He also wanted to kill service fees and create
a long-planned online market to bundle T-shirts and downloads.
However, despite his best efforts, Azoff’s plans of reformation
faced an impas-sible wall. He attributes his frustrations to the
struggles of running a public company. He felt that the board was
constricted by the treasury and institutional shareholders, making
innova-tion difficult. Conflicting interests between man-agers and
promoters within Live Nation was also a key factor in Azoff’s
departure. Accord-ing to Azoff, he could not achieve coopera-tion
within the industry to institute paperless ticketing, dynamic
pricing and all-in ticketing – three things he believed to be
important for artists and consumers.
Repercussions
In fact, one of the concerns caused by Azoff’s departure from
Live Nation is the likely power shift between managers and
pro-moters. Azoff came from the management side of the business and
looked out for the artists’ best interests. When Azoff was with
Live Na-tion, artists usually won financial negotiations with
promoters. However, with Azoff’s de-parture, it is predicted that
Michael Rapino’s promoters will try to seize power within Live
Nation. Rapino, the CEO at Live Nation, is from the promotion side
of the business and is believed to be more concerned with the
inter-ests of Live Nation’s venues rather than those of the
artists. This shift in power from manag-ers to promoters could end
up hurting artists. Another concern is the loss of pre-vious and
potential revenue from Azoff and his management clients. As one of
the most powerful managers in rock music, Azoff is now a free
agent. In leaving Live Nation, he takes with him some longtime
clients includ-ing Christina Aguilera, The Eagles, and Van Halen,
costing Live Nation revenue.
The Eagles, for example, focus heavily on touring and grossed
$173 million from tours between 2008 and 2011. In ad-dition to
ticket sales and merchandise, The Eagles can command top dollar for
VIP sales and private events. Van Halen grossed $54 million from
its 2012 tour. Live Nation will receive favorable treatment when
dealing with Azoff and has secured the right of last refusal to
promote at least 75% of his artists’ concert dates in 2013 and
2014. Nevertheless, Azoff’s retention of these clients allows him
to explore other op-tions outside of Live Nation, including Live
Nation’s largest rival, AEG Live. Moreover, although Azoff has a
two-year non-compete agreement with Live Nation, he is allowed to
work on projects including recorded music, TV, movies and
publishing. For example, Christina Aguilera reportedly earned about
$10 million from the last season of “The Voice,” representing a
huge chunk of potential revenue that Live Nation will not have a
stake in. The 1976 Copyright Act provision, which allows artists to
reclaim ownership of post-1978 works 35 years after their creation,
comes into play here. The departure of The Eagles will cost Live
Nation revenue from the band’s recording and publishing catalogs,
especially given that the band is set to take ownership of the
rights to their 1979 release, “The Long Run,” next year. Van Halen
also has four albums that are eligible to revert back to the band’s
ownership in the next five years under the same provision. There is
also another potential power shift to consider as a result of
Azoff’s departure. Liberty Media, one of Live Na-tion’s largest
shareholders, will buy 1.7 mil-lion of Azoff’s 2.6 million shares
representing a 26.4% stake in Live Nation. Some sources predict
that Liberty Media’s John Malone will expand his presence within
the company, pos-sibly resulting in layoffs and other corporate
cuts. Live Nation will need to adapt to the loss of its leader and
rethink some of its practices in the face of change. The company
could struggle without a veteran closer like Azoff to sign major
tours because of compe-tition from AEG Live. Nevertheless, there is
some good faith surrounding Live Nation’s future as evidenced by a
4% rise in shares oc-curring shortly after Azoff’s departure.
Still, uncertainty looms over the company, who has yet to clarify
who Azoff’s successor will be.
-
Volume 8, Issue 3 Music Business Journal
-
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(From Page 4)
The Promise of Daisy (cont.)
the team at Daisy will need to create some incentive to keep
users engaged with the page. Perhaps Daisy will only be attractive
to dedicated music fans, therefore making the goal of “bringing it
to the mainstream” harder.
Conclusion:
The service is scheduled to launch globally in late 2013.
Daisy’s approach to streaming could be a game changer for the
industry. “We’re going to do this right,” says Rogers. “We’re going
to take streaming subscription services to the mainstream and we’re
going to win.”13 The sentiment may be an expression of hope. But
the creative team of Rogers, Trent Reznor, and Jimmy Iovine, is
experienced and the startup is at least bound to make a splash.
Moreover, Daisy owes its deep pockets to the success of the
headphones
of Dr. Dre. There is something especially refreshing about this.
The business got its initial seed money from the sale of a music
product by an artist, not an angel or venture capitalist looking
for an ad-financed venture for which music is just a social object.
For the trade to be self-sufficient, and for music to matter as
something more than a medium at the service of things other than
the sound made, Daisy could perhaps be welcome news.
Endnotes
1.http://www.billboard.com/biz/articles/news/1084843/beats-electronics-acquires-mog2.http://www.fastcompany.com/3004702/beats-electron-ics-announces-subscription-music-service-project-daisy-trent-reznor3.http://www.hypebot.com/hypebot/2013/01/details-of-beats-daisy-project-revealed-ceo-ian-rogers-states-our-mission-here-is-to-win.html4
. h t t p : / / w w w . d i g i t a l m u s i c n e w s . c o m
/
permalink/2013/20130110beats5 .ht tp : / /www.bi l
lboard.com/biz /ar t ic les
/news/re-tail/1083361/beats-by-dre-press-conference-announces-part-nership-with-trent6.http://www.pcworld.com/article/2014023/streaming-mu-sic-showdown-xbox-music-versus-the-world.html7.http://pitchfork.com/news/48879-nine-inch-nails-best-of-due-with-new-songs-reznor-working-on-streaming-service-with-beats-by-dre/8.http://pitchfork.com/news/48879-nine-inch-nails-best-of-due-with-new-songs-reznor-working-on-streaming-service-with-beats-by-dre/9.http://www.latimes.com/entertainment/envelope/cotown/la-et-ct-beats-partners-with-topspin-daisy-subscription-ser-vice-20130110,0,305852.story10.http://topspinmedia.tumblr.com/post/40186276350/top-spin-beats-creating-artist-opportunities-inside11.http://www.fistfulayen.com/blog/2013/01/beats-daisy-topspin-putting-the-pieces-together/12.http://www.latimes.com/entertainment/envelope/cotown/la-et-ct-beats-partners-with-topspin-daisy-subscription-ser-vice-20130110,0,305852.story13.
http://www.hypebot.com/hypebot/2013/01/details-of-beats-daisy-project-revealed-ceo-ian-rogers-states-our-mis-sion-here-is-to-win.html