Master Class: Show Me the Money

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Mathieu Drouin

Taking to heart what's already happened to the “music business” over the past 10 years, one couldn't help but fear for the 21st-century musician. As record sales plummeted, attention initially turned to concerts for making up the lost revenue. But now, with a recessed economy and news of so many dropped concert dates and canceled tours, many are looking for a silver lining. Just what the heck are musicians going to do to make a decent living in the future? We checked in with some industry leaders to get their perspective; as far as they're concerned, there's huge upside for the independent over major label acts in this new and more challenging music economy.

The Manager's Perspective
“You look at the situation as it exists today and it's inevitable that, on the medium-term event horizon, there's a lot of opportunity for the power base to shift back away from the record companies and the publishers toward the artists and their managers,” says Mathieu Drouin, the young and forward-thinking Montreal-based manager for the multi-Platinum-selling Canadian indie band Metric. “There's the opportunity to re-evaluate the value chain, to cut out a lot of the middlemen.”

Drouin has supercharged Metric's career for the digital age over the past three years, using a finely-tuned set of objectives that he repeats like his mantra. “I think that quality is hyper-efficient online,” he says. “If you have something that's of quality and you start with whatever fan base you already have, and you give them the tools and the incentive to do the marketing for you in highly network-affected environments like the social networks, you can engineer virality on a super scale, orders of magnitude greater than you could in just a traditional brick-and-mortar world of word-of-mouth. Then what you'll find is—if it is indeed of quality, and people like it, it spreads.”

And so does free music. The irony, he says, is that the more a song is given away, the more it sells. “In my opinion, you've got people who buy music and you've got people who don't. That being what it is, if you can give away the music and that builds the brand and you make money in every other revenue center, at the end of the day, if that's what it takes to succeed and you can build a business that way, what's wrong with that?”

Drouin insists that you have to structure yourself properly from the very start, which includes maintaining full ownership over your copyrights. “Alex Patsavas, who's one of the most powerful music supervisors in America, she'll call sometimes at eleven-o'clock, you know, and say, ‘I need a song for this theme and I need to clear it tonight! What do you have?'' She calls us because she knows that with that one phone call, we can clear the master, the publishing, and the artist's name and likeness. So, part of taking advantage of the potential represented by this future is knowing how to structure yourself, and that in my perspective means not fracturing your rights.”

Drouin also suggests building as many direct-to-fan touch points as you can, so as to communicate, harness, and direct that army of fans in focused directions toward focused objectives. “Basically, what gives value to your copyright is people knowing about it and liking it. Once you have a fan base, and there are people who are aware of it, the music gatekeepers in the licensing world will start licensing your music. So do what's necessary to get people to value them without necessarily worrying about making a buck for it right away. The money will come.”

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Jim Jonsin

The Producer's Perspective

Jim Jonsin is a Grammy-winning super-producer/songwriter who's collaborated with the likes of Beyoncé, Kelly Rowland, B.o.B, Usher, Eminem, Kanye West, T.I., Danity Kane, and Jamie Foxx, to name a handful. Although that list is decidedly “major,” his Florida-based Rebel Rock Entertainment also works with a lot of unsigned artists, songwriters and producers, so he clearly speaks from a strong “indie” perspective as well.

“There are so many new artists coming out now, left and right,” he says. “That's because the internet is so accessible to these young artists and there's nobody stopping what they're doing. And I also think that makes it so that fans buy less of ‘one thing'' but more of a lot of ‘other stuff.’”

Such a fragmented marketplace has been cited by many as being at the very crux of the crossroads that is the new music economy. “For the majors, this is really a big adjustment period. They're really going to have to adjust more than the artists, writers, and producers. This is easy for us! Find the artists that the majors are trying to grab, we produce them. Do a joint venture with the artist and we all make money,” says Jonsin.

Jonsin finds fault with popular VEVO channels and videos on YouTube that boast seven-figure viewing tallies yet don't reciprocate with royalties to the non-featured performers and producers. “How do you play all these videos with advertisement going on and nobody's making any money from it—no one but YouTube? Excuse me, but that's just bulls**t,” he continues. “I'm thankful for BMI and the other performance rights companies, because they're actually trying to figure out a way to get paid from all that. Similarly, if you have an artist who's doing extremely well on touring but they're not selling records, I think [the structure] should be adjusted to where the writers and producers get a little piece of that because those songs are doing so well for them, but the consumers aren't going out and turning over sales, so the only one making money is the record label and the artist.”

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Panos Panay

The Promoter's Perspective
While the traditional concert business is having a hard time adjusting to the realities of consumers having less disposable income, “live music” is not just what's performed in stadiums and arenas—“and doesn't always entail a show that involves a consumer buying a ticket,” says Panos Panay, CEO of the matchmaking site for bands and concert promoters.

According to the National Association of Campus Activities, U.S. colleges eager to entertain their student bodies with live music spend nearly $250 million each year. “Most of this goes to artists who generally earn less than $3,000 per show,” points out Panay, whom his company refers to as the “artistic middle class.”

And consider this interesting stat: House concerts have grown in the past two years to become one of the primary touring outlets for emerging artists. Some estimates put the number of house concerts that took place last year in the U.S. as high as 250,000.

Even more promising for emerging artists, there's been steady shift of corporate sponsorship money in recent years toward more “niche” artists who do not yet have an entrenched public image like say, Taylor Swift or Lady Gaga. Why?

“Because more and more companies are realizing that coveted young consumers, coming of age today, demand authenticity from the brands they will endorse—a trait most associated with independent, non-major label artists. Not to mention that these artists tend to be less expensive and carry less PR risks than artists with large public profiles,” says Panay.

He also points out that, in the past couple of years, large consumer brands ranging from Diesel, Converse, Gap, Ford, and Levi's, to more niche ones like Midas, Zippo, Jägermeister, and JanSport, have all spent millions creating programs that use emerging music as the primary marketing means of their wares to social media. Could it be that these brands with all of their marketing muscle and deep pockets are becoming the new record labels?

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Patrick Sullivan

Controlling Digital Assets
Patrick Sullivan, President & CEO of RightsFlow, a technology-enabled licensing and royalty service provider, says that many established artists are often surprised to find out they may already have earned revenues being held in limbo.

“There's a lot of money that was left on the table with the digitalization of music and the revolution that started back in 2003 with iTunes,” he says. “Money that artists aren't even aware is being collected and administered to mechanical and performing rights organizations outside of the United States. So, one thing we discuss with artists is to make sure that everything's properly registered so that we can get it accounted for and collected,” says Sullivan.

Indeed, copyright owners owe it to themselves to ensure that their assets—the music created—be tied to the metadata of songs put up for sale on iTunes or Rhapsody, or that webcasters make available for streaming.

“Our business, in effect, has become that—a content management of data to help release past royalties due for independent songwriters and artists,” says Sullivan, adding that the core of RightsFlow is in tracking metadata, and encouraging and helping the creators tie their assets to the metadata so that it's properly registered in all digital music services and sync services.

“Fundamentally, I think that's something that was never in the control of the artists and songwriters in the past,” says Sullivan. “It was granted or administered to organizations that weren't properly set up for the digitalization of music. I think that's a very big challenge today because, when you look at money that's being withheld in SoundExchange, upwards of hundreds of millions of dollars that are not getting accounted for. And that's not for any lack on SoundExchange's part, but because of the lack of the content data being upstreamed to the right administrators or directly to organizations like SoundExchange.”