Music Business Solutions: Music Biz Insight

MUSIC BIZ INSIGHT

#18

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

Written and 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

IN THIS ISSUE

FOOD FOR THOUGHT: Violence, Music and Water
FEATURE: The REAL Reason Major Companies Suck
GENRE SPOTLIGHT: The Blues
MARKET PLANNING: Market Planning Checklist
ILLUMINATING TRIVIA
BIZ SMARTZ: Money-Saving Business Wisdom

))) FOOD FOR THOUGHT (((

Violence, Music and Water

In David Corn's May 26 (1999) column in the "New York Press," he writes: "According to 'Rachel's Environment and Health Weekly,' for the past 25 years tens of millions of Americans have been drinking tap water contaminated with low levels of insecticides, weed killers, and artificial fertilizers.

Researchers at the University of Wisconsin exposed mice to a combination of these chemicals and found that it changed their thyroid hormone levels and made the mice more aggressive. In humans, irritability and aggressive behavior are also linked to changes in thyroid levels. A study of preschool children in Mexico detected a decline in mental ability and a rise in aggressive behavior among those kids exposed to pesticides.

...Those who cry out for more school prayer and less Marilyn Manson ought to also urge more research on this front. Maybe we are what we drink more than we are what we watch."...

F E A T U R E

THE REAL REASON MAJOR RECORD COMPANIES SUCK

by Peter Spellman, Director, Music Business Solutions

An artist who signs a major label recording contract today is probably taking the biggest risk of his or her career. With a mortality rate of 1 out of 10 failures, it's clearly a crap shoot whether a new major label artist will "make it" or not. The list of "where are they nows" over the last ten years runs into the thousands.

This sucks!

When we try and figure out why this mortality rate prevails, a number of familiar reasons present themselves:

the major labels are putting out TOO MANY RECORDS...True, but I believe this is merely a symptom of a bigger problem;
the major labels are SIGNING ARTISTS TOO INDISCRIMINATELY...Yes, but this too is symptomatic of something deeper;
the major labels are peopled with DYSFUNCTIONAL, TURF-PROTECTING CLIMBERS...True sometimes, but this too is merely a symptom;
the major labels aim for A LEAST-COMMON-DENOMINATOR MUSICAL "SOUND" that will appeal to the masses...Yes, but a symptom again.

We can go on and on with possible reasons and never arrive at the REAL one. The real reason major record labels suck is because they are "divisions" within larger multi-national corporations that are obligated, BY THEIR VERY NATURE, to behave in a certain art-destoying way.

Let me explain.

There are certain obligatory rules by which all corporations must operate. These rules are assumed, accepted, rarely articulated and color everything a corporation does. Now don't get me wrong. There ARE music people within corporate record labels - people who are truly turned on by music creation, recording and promotion. I know some of them.

But when push comes to shove, all their actions must reflect the policies and procedures handed down from "corporate". Too much independence on their part and they will be handed a pink slip and shown the door.

There are seven primary rules corporations (including music corporations) must obey, and each rule has a profound effect on how music and artists are treated, regarded and disposed of.

Here they are:

#1. THE PROFIT IMPERATIVE: Monetary profit is the ultimate measure of all corporate decisions. Shareholders "own" corporations and they expect the value of their shares to increase, not decrease. Forget the little old lady that owns a few shares of stock. Most shares are owned by tremendously wealthy and thus politically influential individuals and most importantly by other corporations, many of which are investment banks. All are itchy for quarterly, measurable profits.

"EBITA" (earnings before interest, taxes and amortization) controls everything. Senior corporate officers are notorious for wearing "ninety-day glasses". Three months ahead is as far as most CEOs can see. This myopia often infects the entire organization, as relentless pressure to perform over the short term radiates from the top.

A factory may be closed rather than modernized and an artist dropped rather than developed because the tax write-off makes the next period look better.

#2. THE GROWTH IMPERATIVE: This goes hand-in-hand with the profit imperative. Profit means growth, expansion of the talent pool, expansion of the master catalog. Corporations live or die by whether they can sustain growth. Music corporations must keep on signing new artists in order to use their vast infrastructures and justify their overhead expenses.

Sometimes company growth doesn't happen fast enough to suit the ambitious, however, and sometimes it doesn't happen at all. What to do then? The power-hungry CEO's typical solution is to expand by acquiring another company. Growth by acquisition has been the modus operandi of the corporate music business since the 1970s.

EMI is a case in point. By acquiring such hot labels as Virgin and Chrysalis and bringing its antiquated operations up to snuff, EMI for a while seemed headed to the top. But chairman Sir Colin Southgate also pressured his executives to maintain double-digit growth, first in good times, then in the face of a rapidly deteriorating market. They responded by pumping out quick-buck anthologies and slashing costs willy-nilly when they could have been building talent for the long haul. Managed for short-term results, EMI has literally consumed itself in pursuit of its numbers.

The profit and growth imperatives are the most fundamental corporate drives; together they represent the corporation's instinct "to live."

#3. COMPETITION AND AGGRESSION: Corporations place every person in management in fierce competition with each other. Anyone interested in a corporate career must hone his or her ability to seize the moment. This applies to gaining an edge over another company or over a colleague within the company.

All divisions of the record company are attempting to represent themselves as an indispensable component of the recording industry. The day-to-day work of dealing predominantly with one specific medium, whether the music, the image in the video, the radio media, or the press, tends to result in different staff assessing the potential of artists in different ways and developing their own agendas and goals rather than working towards a shared overall vision. As a label employee, you are expected to be part of a "team," but you also must be ready to climb over your own colleagues when an opportunity presents itself.

#4. AMORALITY: Not being human, corporations do not have altruistic goals. In fact, corporate executives praise "nonemotionality" as a basis for "objective" decision-making. So decisions that may be antithetical to aesthetic goals or artistic integrity are made without misgivings.

Corporations, however, seek to hide their amorality and attempt to act as if they were altruistic. Lately, for example, there has been a concerted effort by American industry to appear concerned with environmental cleanup, community arts or drug programs. Likewise, major labels are starting to once again toss around the phrase "long-term artist development" as an antidote to the perception they are short-sighted.

But this can only be rhetorical in a corporate setting where quarterly results rule the environment. Product (and its creators) not bringing in the necessary numbers will continue to be dropped like a bad habit.

Don't be deceived! It is a fair rule of thumb that corporations tend to advertise the very qualities they do not have in order to allay negative public perceptions. When corporations say "we care," it is almost always in response to the widespread perception that they do not have feelings or morals.

#5. HIERARCHY: Corporate laws require that corporations be structured into classes of superiors and subordinates within a centralized pyramidal structure: chairman, directors, chief executive officer, VPs, division managers, and so on (based primarily on military models).

Unlike the freedoms of an entrepreneurial business, large company decision-making must pass through layer upon layer of management. This makes the process of product development slow and ponderous (for example, from the time a band is signed it can be a full year or longer before their first record is finally released owing in part to this dense hierarchical management structure).

Furthermore, high executive turnover and frequent management "purges" at large record companies can often delay or even derail a recording project indefinitely, leaving artists in the lurch.

#6. QUANTIFICATION: Corporations require that subjective information be translated into objective form, i.e. numbers. The subjective or spiritual aspects of music, for example, cannot be translated, and so do not enter corporate equations. Music is evaluated only as "product."

Some in the industry would prefer to treat music like other industries treat cars and refrigerators. But music cannot be treated as such. As the creative extensions of human spirit, music will always defy attempts at control. Indeed, just when the majors catch up with a "new" music trend they often find that the market has shifted and music lovers have moved on to something else.

#7. HOMOGENIZATION: Corporations have a stake in all of us living our lives in a similar manner. The ultimate goal of corporate multinationals was expressed in a revealing quote by the president of Nabisco Corporation: "One world of homogeneous consumption. . . [I am] looking forward to the day when Arabs and Americans, Latinos and Scandinavians, will be munching Ritz crackers as enthusiastically as they already drink Coke or brush their teeth with Colgate."

Corporations are structured and optimized for the "mass market" and so what they sell must appeal to the broadest audience possible. Their musical mainstay has been CHR (Contemporary Hit Radio or Top 40 Pop) - predictable, non-adventurous, formulaic. They have dominated the airwaves and circled the globe with this musical pablum.

Incidentally, homogenization is one of the reasons the corporate music business (along with most other corporations) is in such crisis today. It is facing a rapidly segmenting marketplace where consumers have become unpredictable. It always depended on "The Next Big Thing" to flush its corporate ledgers. But the very concept of one artist who can unite a large pop audience and help shape and define it (ala Elvis, The Beatles, Springsteen) seems about as dead as the 45-rpm spindle. Next Big Thing? More like "Next Modest Thing That Might Appeal to a Portion of the Demographic".

But while bad news for the corporate giants, this is good news for their indie counterparts. A number of indie labels specializing in "niche" music markets (hip hop, ambient, folk, celtic, etc.) are grabbing market share almost daily and breaking open a lot of champagne these days.

So in conclusion, let us remember that the Musical Industrial Complex must, by necessity, bow to corporate imperatives that will inevitably clash with art. It's nobody's fault; it's the nature of corporate cultures, and any artist desiring to get into bed with this culture should proceed with eyes wide open. Your partner could be your nemesis.

NEW MBS RESOURCE - MBS Business Media now has available a RECORD COMPANY BUSINESS PLAN, complete with mission statement, executive summary, company description, industry analysis, marketing & promotion plan, management description, complete financials and tips for hunting down financing. This particular plan is for a multi-genre label that puts out a broad spectrum of music, from jazz to contemporary Christian, to rock, but you'll find it applicable and relevant to any label venture. $25 postpaid to MUSIC BUSINESS SOLUTIONS, P.O. Box 230266, Boston, MA 02123-0266. Credit card orders (MC, VISA or AmEx) call 978-887-8041. Please leave full acct. number, expiration date and address you would like the plan shipped to.

And don't forget about our other resources: HOW TO START & GROW YOUR OWN RECORD LABEL OR MUSIC PRODUCTION COMPANY, PROMOTING & MARKETING MUSIC TOWARD THE YEAR 2000 and MUSIC BIZ KNOW-HOW -- three books packed with strategy and resources to help you suceed in the commercial world of music. You can get full info on these at: /books/

!!!!!!! MUSIC BIZ KNOW-HOW: DO-IT-YOURSELF STRATEGIES FOR INDEPENDENT MUSIC SUCCESS is available for $10 (+ $5 S/H) EXCLUSIVELY for subscribers of MUSIC BIZ INSIGHT at the address above. The regular price is $21 plus shipping. Save $16!

GENRE SPOTLIGHT: THE BLUES

''Blues is the roots of everything. Blues has been here since the world was born.''

--John Lee Hooker

INTRODUCTION

Blues music is booming all over the place. The music still sounds pretty much the same, with some mutations here and there. But it's now being presented in a new context (not just in funky bars in out-of-the-way neighborhoods) and with new respect (people realize it's celebratory, not sad, music). It's becoming trendy among baby boomers (who also control the media). They are rediscovering the blues that influenced all the music they grew up listening to.

For many, the 1980 "Blues Brothers" movie starring John Belushi and Dan Ackroyd served as an indelible introduction to the blues. The renaissance built slowly from there, first with the emergence of Texas blues-rock guitar showman Stevie Ray Vaughan in the early '80s, and then along came Robert Cray, an R&B-influenced bluesman who made polished, ready-for-radio albums. His 1986 "Strong Persuader" went platinum (selling more than 1 million copies) and earned a Grammy.

"People are looking for authenticity anywhere in their lives at the moment," said Mississippi-born, Los Angeles-based Isaac Tigrett, founder and CEO of House of Blues. David Z, producer for blues artists Kenny Wayne Shepherd and Johnny Lang, says there is a "demographic that buys a lot of records that has been ignored." He says the current blues renaissance is reaching that ignored baby-boomer audience as well as an unexpected one--teenagers, who are exploring traditional music instead of merely buying the flavor of the month (cited in Minneapolis Star Tribune, 10-06-1996).

see further, Blues Callin' Me - an appreciation site tracing the origins of the blues and some of the many musical genres it has inspired.

THE BLUES MARKET

Some recent indications of Blues marketing successes:

Tracy Chapman scored a hit last summer with "Give Me One Reason," the first blues tune to land in the pop Top 10 in years.
B.B. King, the king of the blues, is featured in TV commercials for Northwest Airlines, John Lee Hooker for Pepsi and the late Muddy Waters for Levi's. Blues music is increasingly being used as the backdrop music for other commercials.
Attendance at blues festivals has been increasing around the country. At the Bayfront Blues Festival in Duluth, Minnesota, about 2,500 people showed up five years ago. This year's three-day fest drew over 40,000. The blues fest in Memphis has jumped from 10,000 to 200,000 in the last few years.
Young artists are incorporating blues into their recordings. It is a widespread practice with rappers, and the Primitive Radio Gods had a major alterna-rock hit, "Standing Outside a Broken Phone Booth...," the chorus of which is built around a B.B. King sample.
One of the biggest markets for Blues recordings today are the public libraries. It's estimated that six percent of a public library's budget is spent on CDs and many librarians are stocking up on current Blues recordings as well as retrospectives of Blues artists of years ago.
How many Blues records get sold? Hard to tell but one of the "major" Blues labels is selling about 15,000 copies of each of its titles and producing around 10 to 12 titles a year. Total annual sales of 150,000 units has made this indie label highly profitable.
Major labels like RCA and CBS, which had early recorded Blues music but had paid scant attention to what they had in their vaults, are now reissuing these discs to a waiting public which is growing bigger all the time.

TOP CHARTING INDIE BLUES LABELS (U.S.)

Blind Pig (San Francisco, CA)

Fat Possum (Oxford, MS)

Madacy

Malaco (Jackson, MS)

Miss Butch

Silvertone

Tone Cool/Rounder(Cambridge, MA)

BLUES WEB HUBS

Blue Highway

Bulletin board, radio broadcasts, bluesmall, bluesnews, and a whole lot more. Very well done.

Blues World

Blues articles, auctions, photographs, reviews, records, CDs, 78s record auction, magazines (one of the best lists I've seen), books, musicians, authors, researchers, resources, links, and more.

Bluestown.com

Streaming audio blues site with weekly internet only shows, live & archived concerts, jukebox, commercial free radio, chat, and more.

Beef Stew's Blues Playground

Directory of sites for blues radio, music, societies and more.

The Mudcat Cafe: A Magazine Dedicated to Blues and Folk Music

Focused on the BIG men in blues - John Lee Hooker, Muddy Waters, Mississippi John Hurt, Elmore James and others of the blues pantheon. Also accessible from here is the Digital Traditions Folksong Database, a searchable database of over 6000 traditional folk and blues songs.

A Page of Blues

A good if subjective list of blues links, leaning toward those musicians "wearing a Fedora hat and carrying a battered Stratocaster case".

))) MARKET PLANNING (((

Market Planning Checklist

Whether you're launching a CD, a new guitar design, or a music instruction service, it's imperative that you give detailed thought to the marketing strategy behind the launch.

To help the process along, be sure to answer the following questions about your business and your product or service:

Have you analyzed the total market for your product or service? Do you know which features of your product or service will appeal to different market segments?
In forming your marketing message, have you described how your product or service will benefit your clients? Have you translated each feature of your product or service into a customer benefit?
Have you prepared a pricing schedule? What kinds of discounts will you offer, and to whom will you offer them?
Have you prepared a sales forecast?
Which media will you use in your marketing campaign?
Have you planned any special sales promotions?
Do your marketing materials mention any optional accessories or added services that consumers might want to purchase?
Is your office infrastructure prepared for the incoming business? Are you set up to follow through with your marketing and sales smoothly and effectively?
If you offer a product, have you prepared clear operating and assembly instructions, if required? What kind of warranty do you provide? What type of customer service or support do you offer AFTER the sale?
Is your packaging likely to appeal to your target market?
If your product is one you can copyright or patent, have you done so?
How will you distribute your product?
Have you prepared job descriptions for all of the employees needed to carry out your marketing plans?

)))))) ILLUMINATING TRIVIA ((((((

Did you know...

In early radio, stations had their own in-house orchestras and playing records was considered a sign of poverty?

BIZ SMARTZ: MONEY-SAVING BUSINESS WISDOM

DEPRECIATION AND INVENTORY OVERAGE: HIDDEN BENEFITS FOR YOUR BUSINESS

Rules for depreciating business property are Byzantine, at best. But here's one bit of welcome tax-cutting simplicity for now. Your company can write off immediately- no questions asked-the first $17,500 of new tangible property (capital equipment) that you buy; and place into service this year. In CPA-speak, this immediate write-off is known as "expensing", and it's allowed under Section 179 of the Internal Revenue Code. One catch: The write-off is phased out in any year that the business puts more than $200,000 worth of equipment into use.

Here's what's so nifty about this write off: Regular C corporations can deduct the full cost of the inventory donated, plus half the difference between cost and fair market value, up to twice the cost. S corporations , partnerships, and sole proprietorships earn a straight cost deduction. Four nonprofit organizations that can handle your donations are the National Association for the Exchange of Industrial Resources(800-562-0955), the National Cristina Foundation (800-274-7846), the Gift-in Kind Clearing House (704-892-7228), and Educational Assistance Limited (708-690-0010). Donated items are redistributed to thousands of qualified schools and charities across the United States.

IN SEARCH OF.........

SAVE TIME AND EFFORT WITH A BETTER SEARCH ENGINE.

More and more, obtaining information online is like trying to find the needle in the proverbial haystack- unless you know how to search. Not all search engines are the same; some are smarter than others, and each has its own quirks that you can learn to exploit. The good news for searchers is that with so many search tools out there, if you pick the right one, you'll be able to find what you need.

So what about the ubiquitous Yahoo!? Its strength is that it's not intended to be a comprehensive index of what's on the web. Edited by actual humans, Yahoo! presents only those sites that make the editorial cut- its index included only a tiny fraction of all the sites on the Web so you don't get bogged down with hundreds of sites to choose from. Yahoo! is a good starting point, but if you don't get the results you need, move on.

To where? Industrial-strength searching is yours at Alta Vista , which features a comprehensive index of Web sites as well as support for Boolean search techniques that allow for fine tuning by using "operators" such as and, near, and not as well as quotation marks around the specific information you need.

Still not getting the hits you seek? Try using a parallel search engine, which simultaneously queries a number of other search engines and then delivers the results to you. A top parallel search engine is Dogpile , which queries Yahoo!, InfoSeek , Excite, Lycos and others. Or try "Mamma", "the Mother of All Search Engines", which seeks information through Excite, InfoSeek, Mining Company and several other engines. Metacrawler does much the same. Try out several search engines, and bookmark the one that best serves your needs.

That's all for now folks. The HTML version of this issue will be up at the MBS web site in about three weeks. Issue #19 will appear in mid-September. Watch for MUSIC CAREER JUICE in mid-August.

Did you know that MBS offers both music career and business consulting as well as career-building publications? Check out the MBS web site at www.mbsolutions.com. Discover some powerful tools and leads to help you grow your music career and business!

TO SUBSCRIBE to MUSIC BIZ INSIGHT: Send email with the message in the body, "subscribe" to success@mbsolutions.com

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BLOOM WHERE YOU'RE PLANTED!

Quote of the Month-- "Never compete, create." --Earl Nightingale

MUSIC BUSINESS SOLUTIONS www.mbsolutions.com

978-887-8041 (Massachusetts, USA)

PETER SPELLMAN is founder 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 also teaches music business 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 the trance-groove outfit Hip Gnosis.