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MUSIC BIZ INSIGHT #12 Power Reading for Busy Music Professionals Hope you're hungry! MUSIC BIZ INSIGHT is published for musicians, songwriters, managers, label reps, booking agents, entertainment attorneys, studio owners, music publishers, and all others involved in the music business. Its purpose is to help boost your business, find new markets, make the right connections, develop professionally, work smarter and improve your bottom line. "As a general rule, the most successful people in life are those who have the best information." Benjamin Disraeli Published bi-monthly by Peter Spellman, Director MUSIC BUSINESS SOLUTIONS: Turning Music Business Data into Useful Knowledge. Career and Business-building books, articles, consulting and more. P.O. Box 230266, Astor Station, Boston, MA 02123-0266, USA Phone: 978-887-8041 Email: success@mbsolutions.com Website: www.mbsolutions.com © 1997 - 2003, Peter Spellman, Music Business Solutions FEATURE/ THE BIG PICTURE: Music Industry Trends to Ponder This issue's feature is basically a running list of industry trends I see unfolding that I think we should all be aware of as we map out our own music career plans. 1. Record companies since the early 80s have been repositioning themselves as entertainment companies. The new goal of these companies is to exploit their artist/stars on a global scale and create "synergies" (i.e. powerful alliances) across other "divisions" within the parent Corporation. Ideally they want stars who can sing a song, star in a video, perform on stage, act in a movie, write a book, schmooze with TV culture and, if at all possible, develop clothing, perfume and food-product lines as well. The lesson is: it's a 'multimedia' world and creative alliances which cross industries are the key to survival. Along with this, it's worth noting that the major record companies now act more like distribution companies than production companies. The indies find, record and develop new talent; the majors "market" & distribute it. I put quotes around the word 'market' because, with the releae schedules of most major labels, a record is lucky to get anything more than a generic marketing "plan". Perhaps this is one reason why 9 out of 10 new records don't recoup their production costs, much less make a profit for anyone. These "failures", however, do provide the very necessary "losses" in annual corporate tax accounting. The big news this month is that the Big Six record companies may now be the Big Five. Seagram of Canada (owner of Universal Music, formerly MCA) just made a bid for the Polygram Label Group (A&M, Island, Mercury, Motown, Def Jam, Verve, etc.) for a little over $10 billion. Consolidation, consolidation... 2. Searching for the music consumer: As far as the recording industry is concerned, people are no longer finding the record stores as much, so the record labels are now trying to find the people. 25 years ago you could buy records at record stores; today you can buy them at record stores, grocery stores, drug stores, book stores, consumer electronic stores, department stores, plant stores, museum shops, thru the mail, over the Internet, at kiosks, at the airport, at MacDonalds, at Starbucks, at Victoria's Secret, thru 800#s, and dozens of other places--MUSIC IS EVERYWHERE! Competition for consumer dollars has become extremely fierce. Today's marketplace is more cluttered than ever with new consumer spending opportunities and diverse entertainment products. Cocooning: Realizing the savings in time, effort and gasoline, more and more people are choosing to stay in their own homes when shopping. After all, why not avoid the uncertainties of safety, traffic, parking, and waiting in line at busy counters. Instead, many are choosing to shop virtually via catalogs, the telephone and the Internet. Data Mining: Labels are relying more and more on market research companies like Music Marketing Network and Records Research for the demographic data they need to reach consumers directly. On a more crass note, labels are signing arists with huge fan databases as much for the database as for the artist, sometimes more. Yuck! The lesson here: Independent artists would be wise to pursue any and all possibilities of placing their product in non-music oriented businesses and stores where their fans might find their music. 3. Biggest Change: From Mass Market to Mass Customization. People now want it their way. It's becoming increasingly more difficult to treat people like a "mass market". The trend is towards "mass customization" where consumers are dealt with as unique individuals with unique needs. Some marketing gurus refer to this trend as "The 1-to-1 Future". This trend of the consumer taking more and more control into his or her own hands means that record companies will have to become more like the music publishers of old, making their money from facilitating and licensing the recording and performance of music. This can be seen in the many new "customize your own CD" websites, etc... 4. We are already seeing a pronounced shift of record company income from primary sources (selling records) to secondary sources (collection of publishing and performing rights). The old music business of selling packges of music to relatively passive consumers will remain a large business for quite some time. The point is that a very different sort of music business is growing up along side it. This is why it is important to ask, not so much, where music is sold, but where music is being used. Superstar IPOs and the value of publishing: David Bowie- raised $55 million through the sale of bonds tied to the earnings of his first 25 albums. Another similar deal has been signed with the legendary Motown songwriting trio Holland-Dozier-Holland. The Rolling Stones and even Pavarotti are presently working out similar deals. It's so attractive because it enables their heirs to pay estate taxes without liquidating inherited assets and gives the artists cash to invest and diversify. 5. Musical Diversity/Segmentation. Remember that in the 1990s the number one slot in the Billboard album charts has been held by artists as diverse asMetallica (heavy metal), Michael Jackson (pop), Garth Brooks (country), Nirvana (grunge), Aerosmith (rock), Snoop Doggy Dog (rap) and Ace of Base (Swedish pop). This is a positive trend for indie "niche" labels that specialize in niche musics (bluegrass, jazz, reggae, ambient, childrens, etc.), but not for the majors which are optimized for "mass markets", not niches. 6. Digital Enablement/Digital Fiasco. Gene deRose of Jupiter Communication made a great comment on the effect of the Internet on the music business at last year's "Plug-In" conference in New York: "For the music industry, the Net is a blender that will shatter and enmesh the compartmentalized mini industries that are dominated by traditional type cast players. Today, the business and logistical dynamics of concert tours, TV and radio stations and record sales are entirely separate. But over time, the Internet will render, as artificial, the distinctions we see today between performance, broadcast and distribution and this will have dramatic implications." "Disintermediation" is the technical term for what is taking place. This is where various "middlemen" are being taken out of the picture and manufacturers and service providers are selling directly to their customers via the Internet, bypassing traditional mediators. In the short term, this is going to have a devastating effect on the traditional recording industry. The Net handcuffs the major labels who have long-term relationships with all the middlemen (retailers in particular). 7. Music Retail Trends. The traditional record store, where only CD's, Tapes, and Vinyl product are sold are receiving strong competition from large chain stores who are combining their inventory of CD's etc. with related products like computer software, multi-media products, videos, books and magazines, and even home electronic equipment and appliances. Best Buy, The Wiz, Circuit City are examples. Traditional record retail stores that are making it are doing so because they've gone the direction of "retail as theater" (Tower Records is a good example of this) and as segmented boutiques (department stores did this years ago). In many urban and suburban shopping centers, large chain stores now charge large sums of money to record labels to "buy" or "lease" promotional space in their stores. What was once a free service, is rapidly becoming a lucrative source of extra income to a music retailer. Table space, window and in-store wall displays, newsletter space, and the aforementioned listening posts can generate fees ranging from a couple hundred dollars to several thousands of dollars. This trend puts a great deal of stress on the individual artist, or small independent label who cannot afford the fees, and therefore loses an opportunity to display their promotional materials to the public. 8. The big promise of a new "multimedia format in music (CD-ROMs, Enhanced CDs, etc.) has turned out to be a bust. These new CD's play on a regular CD player, but can be read by a home computer equipped with CD-ROM hardware to enjoy the "extra" benefits of interactivity. But it's turned out that development costs were prohibitively high, time-to-market was too long, hardware configuatations were too varied, and software custormer service is not a record company skill. The whole thing is "on hold" until further notice. Labels have also been making moves into non-traditional retailing areas. Fast food chains have aligned with record labels to offer selected titles from various superstars to their customers. Coffee companies have featured Jazz and Blues CD's, and national magazines offer limited edition sampler CD's that feature the latest pop releases from the labels. As it stands any co-promotional idea is open for consideration in the music business of the 90's. 9. Radio Trends: Pay to Play trends: Labels are purchasing airtime from radio stations to create infomercials in order to advertise their product more directly. Some labels have also decided to buy radio stations in order to have complete control over music programming. Radio stations are entering the Digital era, as soon as the new hardware and technology for digital satellite broadcasting is completed (already happening on the Net). There will be an expansion of the radio frequencies, adding more choice in programming for the listener, but the verdict is still out on how this will affect the exposure of new music. This new technology will probably require the consumer to purchase new equipment, which may delay the impact of this new technology on the industry. 4. Music Performance prospects: Demographics upturn: Good news! The club-going demographic (18-25 yrs.), also known as the baby boom's boom (or "echo boom"), is now swelling and will continue to grow through 2010. This will create a healthier club scene than we've seen during the past ten years. Doing your own shows: from Lilith Fair spawned by Sarah Mclachlan to local artists renting out VFW halls for all-ages shows, musicians are finding alternative outlets to perform their music. 5. Conclusion: All musicians received encouraging news late last year when the Bureau of Labor Statistics released its "1998-99 Occupational Outlook Handbook" which stated that overall employment of musicians is expected to grow faster than the national average (21-35% growth) over the next ten years. ))) ILLUMINATING TRIVIA ((( Peculiar Origins of Group Names THE BEATLES: After the Crickets, because Buddy Holly influenced them so much. DEPECHE MODE: After a French fashion magazine. LED ZEPPELIN: The Who's John Entwistle (originally slated, along with drummer Keith Moon, to be a member of Jimmy Page's post-Yardbirds band) joshed that such a group would go over like the world's biggest lead balloon--a veritable Led Zeppelin. THE O'JAYS: Cleveland deejay Eddie O'Jay gave them their break, and they named themselves in his honor. THE POUGES: Short for the Gaselic expression "pogue mo chone", which means kiss my ass. STEELY DAN: The original Steely Dan appeared in William Burrough's novel "Naked Lunch". A milk-squirting dildo with which lesbians buggered males, its specific appeal to the young Donald Fagan and/or Walter Becker remains lost in the shrouds of time. UB40: Named after the form English workers have to fill out to receive unemployment benefits. Genre Spotlight: CONTEMPORARY CHRISTIAN MUSIC (Genre Spotlight covers "niche" music styles that are either ignored by or don't always receive the marketing push they deserve from the larger record companies.) First, let me get this out of the way: One of my college professors (John Covey at Gordon College, Wenham MA) used to say, "Remember, 'Christian' is a noun, not an adjective". Right on. I've read the Bible three times through and have never seen one instance of the word 'Christian' being used as an adjective. Hmmm...Just something to ponder. Anyway... INTRODUCTION: Contemporary Christian music has been called the fastest growing form of popular music in the United States today . While traditional gospel music has remained confined within the individual house of worship, connected to a loose national mosaic of churches, the new sound has borrowed from secular styles including hard rock, rap, reggae, country, and pop to reach a much larger and more mainstream audience. The rationale of copying "secular" music is that, in order to attract new believers, you must first give audiences a tate of what they already know. Already a fixture in a nationwide network of Christian bookstores, contemporary Christian music is becoming more available through secular record stores, retailers such as K-Mart and Wal-Mart, and the well-known Columbia House mail-order club. A key factor in this wider availability has been the entrance of major record companies into the Christian field. Over the past several years mainstream labels such as BMG and EMI have purchased Christian labels, and companies including Virgin and Elektra have signed Christian bands to their rosters. This interest from mainstream investors has enabled contemporary Christian music to garner revenues of some $500 million a year and to grow at a rate in which the genre is projected to account for 10 to 13 percent of American popular music sales by the end of the century! Given the growing interest in contemporary Christian music among music producers and consumers alike, it is not surprising that the genre now has its own cable television channel. In March 1993 a service called "Z Music Television" was made available to cable operators; and, owing largely to an investment made last year by Gaylord Entertainment Company (at that time the Nashville-based owner of Country Music Television and the Nashville Network, which now belong to CBS), the channel subsequently has developed to the point where it is available in over 27 million U.S. households. Like the secular MTV network in its early years, Z Music presents a fast-paced and continuous blend of music videos, advertisements, promotions, and brief features about singers and bands. As the network's manager of marketing points out, "A lot of people perceive something Christian as the Jim and Tammy Bakkers of the world of evangelical Christianity. We are musically positive, yet we look like MTV". Although there are numerous other regional Christian music video programs, Z Music is the only national outlet; and most industry observers agree that this broader reach has allowed the network to succeed in "cornering the Christian music market". Even so the core of the Christian music industry remains the small Christian bookstores. For example, the band Jars of Clay, despite its massive mainstream exposure, sells most of its albums in the bookstores. Before Billboard magazine changed its charting methods, switching to the computerized Soundscan system that includes the smaller, independent stores as well as the chains, the bookstores' impact went unnoticed. Christian music wasn't alone in that. The old system favored the major labels, largely ignoring independent labels dedicated to rap, alt-rock and other niche genres. In the past several years, thanks to Soundscan, those styles have had a much larger impact. Since up to seventy percent of Christian music is sold at concerts, sales figures are even higher than the elelctronic tallies indicate. Even so, contempoarary Christian music now outsells classical, jazz and new age music. MARKETING TRENDS/STRATEGIES Since the marketing network for this music style is limited to the Christian culture, and since that culture's media does not permeate the secular culture, the Christian marketer must rely on in-store exposure--such as point-of-purchase material (posters, mobiles, and other material) to make Christian consumers aware of new material. Less than half the annual sales in Christian bookstores are Bibles and other books these days. Music, gifts and greeting cards make up a significant percentage of sales volume. In fact, the industry is diversifying so much that the industry trade group is considering changing its name - from Christian Booksellers to Christian Retailers. And while sales of Christian books are increasing in Christian bookstores, more titles are also available in more mass-market outlets. Children's products, including both books and videos, are bringing in money to publishers and producers. The expansion of the Christian retailing industry is being driven by baby boomers seeking products to help them raise their children, an increased interest in leisure products and the conservative shift of the political climate, according to industry officials. Women make up 88 percent to 92 percent of the shoppers at Christian bookstores. Chart: What sells in Christian stores The Christian retail industry is estimated to be a $4 billion annual business, up from $1 billion in 1980. Sales by product category in Christian retail stores in 1997:
Source: Christian Booksellers Association PERFORMANCE The Christian world also provides a network of bookings and venues, primarily through churches. Large churches have budgets for the youth minister and music minister and some of this is earmarked for bringing in recording acts. There are also a number of Christian colleges with budgets to bring in Christian musical performers. These offer a large audience of like-minded believers and provide an excellent forum for performers as well as a good market for sales of recordings. LIST OF CONTEMPOARY CHRISTIAN RECORD LABELS CONTEMPOARY CHRISTIAN MUSIC WEBSITES A service of Broken Records that offers resources to independent Christian artists looking to build a following, sell records, etc. Also sponsors the Christian Musicians E-List. CCMusic is a loosely organized group of people who have the common goal of promoting Christian music through the World Wide Web. Its Directory lists links to CCM artists, newsgroups, businesses, organizations, concerts& festivals, publications, radio shows, record labels, video resources, and more. Contemporary Christian Music Magazine (online) Packed with lots of good info. Not associated with the previous. Good jump site for lots of christian-related music and entertainment links. TLeM Christian Music Resources Another jump site with a terrific directory of christian music sites: festivals, concerts, radio, labels, stores, artist resources, and more. Unsigned-Indie.com is a free service for "ministry-centered" unsigned and independent artists. It is also a centralized tool for A&R folks, Record Company Execs., Management Companies, Producers, etc. Did you know that MUSIC BUSINESS SOLUTIONS offers one-on-one consulting to help you plan your next release, scope out new markets and develop promotions that get noticed? Rates are reasonable. Call 978-887-8041 or email success@mbsolutions.com to boost YOUR next project! BIZ SMARTZ Business tips to help you work smarter, not harder. Getting Credit Card Merchant Status for Your Business Industry experts claim that taking charge or credit cards can increase a company's business from 10 to 50 percent, depending on the type of business and its clientele. But it's not always easy to become a credit card merchant. It is fairly easy to establish an American Express merchant account by calling (800) 528-5200. The same is true for Discover which offers merchant accounts by calling (800) 347-6673. Visa and MasterCard are more difficult to obtain. Below are three avenues to pursue.
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Reads & Resources... BOOK-- "Soulsville, USA: The Story of Stax Records" by Rob Bowman (1997, Schirmer Books, $25.00). This 400-page book provides a provocative education in record company dynamics like no textbook can. Started by a musician (Jim Stewart) and bankrolled by his sister Estelle Axton, Stax Records was one of the most successful indies from 1962-1974. It produced the "Memphis Sound" thanks to the labors of artists like Booker T & the MGs, Carla & Rufus Thomas, Otis Redding, Isaac Hayes, Jean Knight, The Staple Singers, Sam & Dave, Johnny Taylor, and many others. The book offers tasty sidelights on all these artists but its main story is that of an indie record label's development and all the challenges inherent to this type of business venture: discovering and nurturing talent, creating public awareness for the label brand, working out fair royalty deals for artists and producers, the pros and cons of teaming up with a larger companies, the incessant frictions between "creative" and "commerce", and the pains of company growth. It's an uplifting story both of how a musical family came together in Memphis, Tennesseee--against all odds and expectations--to create a new sound, and of how the larger forces of the music industry reacted to this success--and ultimately destroyed it. If you're interested in music career-building handbooks, check out these three from Music Business Solutions:
All of these books are based on our popular seminars by the same names and all are packed with hard-to-find info to help you grow your music business and career. If you like what you see in MUSIC BIZ INSIGHT, you'll love what's in these books. WEBSITES worth knowing about This Web site from Cambridge Technologies Inc. is for anyone searching for the best printing deals to be had. Send one detailed estimate via online forms, and printers from across the country will price it. Constructed by Palo Alto Software, Inc., this Web site is designed primarily for business managers and entrepreneurs. Intended to assist with company planning strategy, Bplans.com offers free sample business and marketing plans (most were contributed by actual executives), business planning and start-up advice, interactive tables and graphs, explanations and examples of cash flow versus profits, and an interactive forum. That's all for now folks. The HTML version of this issue will be up at the MBS website in about three weeks. Issue #13 will appear in mid-September. Did you know that MBS offers both music career and business consulting and career-building publications? Check out the MBS website at www.mbsolutions.com. Discover some powerful tools and leads to help you grow your music career and business! SUBSCRIBING TO MUSIC BIZ INSIGHT: The email version of MUSIC BIZ INSIGHT appears two weeks before the hypertext version. To subscribe just send email with the message in the body, "subscribe" to success@mbsolutions.com It's not an autoresponder so feel free to include any other comments, ideas, suggestions, etc. you may have. About the Publisher PETER SPELLMAN is Director of MUSIC BUSINESS SOLUTIONS, a business and marketing consultancy to the music industry, and Director of Career Development at Berklee College of Music, Boston. He is the author of several books for music entrepreneurs and teaches music industry courses at Northeastern University (Boston) and the University of Massachusetts (Lowell). A musician since he was ten, Peter continues to spin riddims in the improvisational collective, Friend Planet and sing Cat Stevens' songs to his kids every night before bed. BLOOM WHERE YOU'RE PLANTED! Quote of the Month-- "Talents are best nurtured in solitude; character is best formed in the stormy billows of the world." - Johann Wolfgang Goethe E-mail: success@mbsolutions.com © 1997 - 2003, Peter Spellman, MBS Business Media, www.mbsolutions.com P.O. Box 230266, Boston MA 02123-0266 978-887-8041 Rise up!
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