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How To Make Money In Today's Music World
By: Bobby Owsinski


 
 

 

 

Bobby Owsinski's Music 3.0


Hit the Road, Jack

The New Publishing Paradigm
Collecting Digital Money

When You Need a Label

To be sure, making money in M3.0 is a lot trickier than it was in previous stages of the music business. When you’re signed to a major label, there’s an ever-changing sea of cross-collateralization between accounts, in which big sales by the record label might still result in small royalty payments to you. Yet at the same time, things are in some ways more cut and dried than before. As an indie artist who’s without a label and is dealing directly with the fans, you know exactly how much money you’re earning and where it’s coming from. No longer tied to the fortunes of a record released by a major label and therefore the uncertainty of a royalty statement, what you see is what you get.

Although the exact recipe for making money in today’s music world is different, the ingredients pretty much remain the same. If you’re looking for a magic formula, however, you won’t find one here, I’m sorry to say. It still comes down to talent and a lot of work, same as it ever did.

Hit the Road, Jack
As said a few times earlier in the book, from the beginning of time in the modern music business, artists have always made the bulk of their money from touring, not record sales. Depending on who you speak to, this figure varies anywhere from 90 to 95 percent of a currently hot artist’s total income, and even more for a former platinum-selling heritage act.

This means that for you to make money, you’ve got to play in front of people, and the more people you play in front of, the more you’ll make. The problem is that large crowds hardly ever happen overnight, and if they do, beware. This can be a warning sign that they’re interested in the spectacle of a media buzz or something other than the music. Any success that comes too fast will probably be short lived.

Unfortunately, developing an audience on any level is slow and time consuming. You still have to build your audience one show at a time. The formula is always the same: the more you play, the better you get at performing and the more the crowd will notice, generating bigger crowds as a result (see my book How to Make Your Band Sound Great for some performance and show tips and tricks). Things can snowball from there if you’ve got what it takes.

We often see bands that try to do too much too fast. A lot of indie labels will say, “We want the band to get in a van and we don’t want them to get out of it for three years.” At some point at the end of year one or 2 that runs its course. Virtually no band can keep on running around the country to try to build an audience indiscriminately. As much as touring is the most important thing, it has to be done strategically, concentrating on certain markets where you see the beginning of growth, then doing them often enough but not too often.
—Bruce Houghton

Are you playing in front of people and still not making enough money to keep it interesting or to even pay your expenses? Maybe what you’re offering just isn’t compelling, either musically or showwise. People will gladly pay to see anything that they’re passionate about, so perhaps they don’t find you enthralling enough to pay for, or maybe even to come to see for free. Then again, maybe you haven’t found your audience yet. If that’s the case, use the marketing tools outlined in chapter 4 to build that tribe. Either way, growing your live audience is always a slower process than it seems it should be.

What you still never get away from is that it’s still about a song and it’s still about a performance of that song. Can you play that song in front of your audience however large or small and create the “WOW Factor?”
—Rupert Perry

First of all, an artist has to have the right attitude, which maybe is no different than it ever was. What’s new is that the artist now must also have the ability to learn, adapt, and communicate.
—Derek Sivers

Describing just how to go about finding gigs, playing a show, and building your team with management and an agent is beyond the scope of this book. There are plenty of other books that focus on just that part of the biz. Suffice it to say that playing live has got to be part of your strategy for developing your tribe and making money.

Hit the Road, Jack

  • Most of an artist’s income comes from playing live.
  • You’ve got to build your audience one show at a time.
  • It always takes longer than you think to grow your audience.
  • Use social media marketing techniques to find your crowd.

Swag Is Your Friend
Performing live is only one ingredient of the recipe, however. You’ve got to have merchandise (other terms include “swag” or “merch”) to supplement your income. It’s always been a huge part of the income of an artist, but until recently was considered just an ancillary revenue stream. Today it’s an essential part of most artist’s earnings.

It used to be that merch required a sizable capital outlay in order to get in the game. You had to buy enough to get some sort of economy of scale, but then you also had to worry about storing the inventory. And what if the item didn’t sell? What do you do with 4,835 custom key chains or 492 pairs of branded underwear? Luckily, there are now alternatives that make the buy-in easier on the pocketbook than ever.

Today both Café Press (cafepress.com) and Zazzle (zazzle.com) make it easy to provide quality merch of all kinds without worrying about either the up-front money or the inventory. Both companies provide a host of items that they’ll manufacture to order, and they’ll even allow you to show examples of merch on your website or store. In other words, whenever an order is placed, that’s when they’ll make the item. They’ll even drop-ship it to the customer for you so you don’t have to worry about shipping and inventory. All this comes at a cost, and so your profit won’t be as high, but it’s an easy and inexpensive way to get into the merch business.

So what kind of merch should you have? You can now get a huge variety of items branded with your logo, but typical merch items are:

  • T-shirts (probably the number one item ever for a musical artist)
  • hats
  • lighters
  • sweatshirts
  • coffee cups
  • posters
  • bumper stickers (a high-profit item because they’re cheap to make)
  • mouse pads
  • bags (timely now, since people use them instead of paper or plastic at the supermarket)

Just about anything you can think of can now have your logo on it. Of course, that doesn’t necessarily mean that just because you can make it available, it’s a good idea. It’s still best to narrow things down, since offering too many types of items can actually prevent willing customers from buying anything because they can’t make up their minds. Keep the number of types of items to a maximum of 2 at first, and be sure that they will sell before you add more options.

Another interesting idea is to offer a tour book of photos (available from blurb.com) like the one the Grateful Dead did on their recent tour. Once again, it’s on-demand printing, and the company offers a number of professional templates to make the design easy.

Don’t forget that in the end, branded items such as T-shirts, hats, beach towels, and Frisbees are for marketing you as an artist, so be sure that the design looks professional. If you’re going to spend hard cash, this is the place to do it. Find a pro or an advanced hobbyist to design it for you. Don’t forget that the true reason for selling merch is that if enough people see your intriguing logo on a T-shirt, coffee mug, or bumper sticker, some of them will be interested enough to check you out.

Price it Right
Whatever you choose to sell, be sure to price it right. The obvious temptation is to price an item too high to try to make a large profit. Don’t fall into this trap. Price things low enough to cover your expenses and make a reasonable profit. Remember, these items are promotional; it’s better to sell more at a lower cost than a few at a higher cost.

Above all, be sure that your costs are covered. Make sure that any costing includes the price of shipping, sales taxes (don’t forget those), and any labor or sales costs involved (many artists will pay someone 10 percent or more of the sale’s gross for manning the merch booth). Also don’t forget that some venues will also take a commission of between 20 and 25 percent. A good formula for pricing might be your costs (all of them) plus anywhere from 30 to 50 percent. If you’re sure the market will bear a higher price than that, go there, but make sure that you test it first. Try a lower price at one gig and a higher one at another and see which sells better. Sometimes a higher price sells better because the customer perceives a higher quality.

Make sure you round it up to a reasonable number. If you use the formula of costs plus 50 percent and it comes out to $6.38, round it up to $7.00. Stay away from change. It’s easier on everybody.

THE SECRET TO THE MERCH TABLE
Even though merchandise is a major revenue stream for the M3.0 artist, most musicians have a natural aversion to selling it (or selling anything for that matter). Yet one simple act that doesn’t directly involve selling can help you greatly increase your nightly take from the merch table.

By just announcing during and at the end of the show, “After our show, we’re going to be hanging out at the merch table, so come over and say ‘Hi,’” without trying to specifically sell anything, you bring your fans that much closer to an impulse buy.

By getting people the ability to casually chat with you, it becomes a low-pressure way of getting people to look at your merchandise, which is always half the battle.

This one simple act can make a big difference in your merch sales, and that’s the one place that you can be assured of making money these days, especially if you’re just starting out. Remember, you don’t have to physically sell anything yourself, just be there and talk to fans. Can you imagine what the sales would be like if Bono did that after a U2 concert?

CREDIT CARD TRANSACTIONS MADE EASY
More and more we’re living in a cashless society. People are more likely to make a purchase with a debit or credit card when they want something, especially if they’re short of cash. Of course this can be a drag at a gig when you’re selling CDs and merch and have to rely on the Benjamins because of the hassle of taking credit and debit cards.

While the ability to take credit cards for merchandise purchases at a gig can make transactions easier, it can also eat into your profits. First of all, you have to enter into a long-term contract with a bank, then pay for the card reader, and in many cases pay a monthly subscription fee. Then, after a purchase, you have to wait for the money to hit your account, with the bank taking its piece through processing and transaction fees that are like the phone bill—lots of small fees for each transaction that no one can seem to explain.

Transaction costs are frequently overlooked, and they are the secret expense that eats your profit. All credit cards charge you multiple fees. First of all, there’s a monthly transaction fee that’s a minimum of $20.00 (usually more), a “gateway” fee of between $5.00 and $20.00 for ecommerce, an authorization fee, a customer service fee, and a monthly minimum transaction total. Slip below that total and you’re charged a penalty.

Then there’s the transaction costs per sale, which can go from $0.20 to as high as $0.35 (it’s usually higher for an Internet transaction), plus a charge of between 1.5 and 3 percent of the total of the sale. Add all that up, and it means that if you only make a dozen or so song sales a month, you’ve actually lost money. Even if you’ve met your monthly minimum, you still may be only making less than half of a dollar per sale, thanks to the transaction costs involved.

But this has all changed recently as a service called Square (squareup.com) has slowly but surely made a big impression on large and small touring merchandising entities alike. With just a $10.00 reader that attaches to any iPhone 4, iPad, or iPod Touch (there’s a $10.00 rebate so it’s actually free), you can now have your customers easily pay by the card of their choice. What’s more, it’s paperless. You swipe the card, the customer uses a fingerprint to sign to the purchase by touching the screen of your IOS device, and the customer receives an email receipt later. Square takes a flat 2.75 percent transaction fee, which winds up costing less than most traditional credit card processors.

Swag Is Your Friend

  • Merch is an essential part of your income. But don’t forget that it’s promotional too. Invest the money on a great design.
  • Use Café Press or Zazzle to avoid upfront costs.
  • Limit the number of items to one or two at first.
  • Make sure that all your costs are covered.
  • Price to cover your costs plus 30 to 50 percent.
  • Meet and greet at the merch table to increase sales.
  • Use Square for credit card transactions.

The novelty of signing with your fingerprint is so cool that many acts report that their sales have increased just by the fact that people want to try it out! The best part is that you can now get the Square reader from the Apple online store, and it’s reported that it will be available soon from their retail stores as well. The transaction software is free.

The New Publishing Paradigm
Despite popular belief, the ones who have traditionally made the most money on the sale of music have been the songwriters and publishers, not the performers (unless they were the songwriters or owned the publishing companies). The songwriter and publisher make money in two ways: mechanical royalties are paid whenever a digital download of a song or a physical CD is sold, and a performance royalty is paid whenever a song is played on radio, on television, in a film, or streamed over the Internet. This payment mechanism hasn’t really changed all that much in M3.0 from previous music eras.

What has changed is that during this period in which music sales continue to take a beating, publishing is the one area of the music industry that has held its own. How does that happen when sales, and therefore mechanical royalties, are down, you ask? While it’s true that mechanical royalties are not nearly what they used to be now that CD sales are so low, they’re offset by the tremendous increase in performance royalties, because music is now played on so many more broadcasts than before. The 500-channel cable and satellite television universe, along with satellite and Internet radio, provides more opportunities for music to be played, and as a result, more performance royalties are generated.

In aggregate, people are still watching as much television as ever if not more, but they are watching it across more channels. They’re watching the cable channels more and the broadcast channels less.
—Larry Gerbrandt

As record company sales have been going down since the year 2000, publishing company income has actually been going up. What’s happened is that performance income (when a song- writer gets paid whenever the song is played) has gone up because there are many more places where music is played and used. Now you have tons of little cable stations and they have to all pay a small fee. As a result, you have the increase in synch fees offsetting and sometimes exceeding the loss of mechanicals. Publishing is still one of the few ways left to monetize intellectual property.
—Richard Feldman, CEO of ArtistsFirst Publishing

While publishing is sophisticated enough to easily fill an entire book (and there are many books specifically on the subject), here’s a simple breakdown of how the money is paid:

Can you make money from publishing if you’re an indie artist? Maybe. If you’re the songwriter on your own CD or digital release, then separating the songwriting money from the recording money only makes sense if you’re sharing royalties with bandmates and getting paid separately for writing. Otherwise, it’s irrelevant.

To receive any kind of significant royalties from streaming or radio airplay, you really have to have a huge hit that gets a lot of plays. So expecting any significant income is irrelevant for all but the extremely lucky indie artists.

Where you can make money is through synchronization fees. Anytime music is played with a moving picture—either on television, in a movie, or on the Internet—it requires a synchronization license. If your song is considered for a movie, you’d negotiate with the producer for a fee, which could be from 0 to $100,000 or more, depending on the placement in the film and its budget. As with everything in the entertainment business, the higher your profile, the more you’ll get paid. But if you have a song that uniquely relates to the movie, television show, or commercial (e.g., the hook of your song is the title of the movie), you can usually get a higher rate. You’ll also receive performance fees whenever it’s played on television.

Bottom line, your income from digital publishing will remain a tiny grain of sand on a beach of potential income for the foreseeable future. There is real money in synch fees, and that’s what you should be aiming for. The problem is, how do you get your songs to the people that will license them? Unless you live in New York, Nashville, Los Angeles, or Chicago (mostly for commercials) where you can network and sell yourself, your only options are to have either so much airplay or so much online visibility that you get noticed, or you get a publisher. Part of what a publisher does (besides collect the money) is to promote your work. Once again, there are lots of books and articles about this to check out. If you want to self-publish, it’s also a good idea to become a member of the Association of Independent Music Publishers, where you can network with other publishers both large and small. It’s well worth the $60.00 per year. See aimp.org for more information.

WHY USE A PUBLISHER?
While many artists feel that they want to control their own publishing and just hate the idea of dividing any income, a publisher can provide a number of useful services that can make that 50 percent (the highest rate that is used when splitting your royalties with a publisher) well worth it.

Besides giving you an advance against earnings if the publisher feels your songs warrant one, a publisher does the following:

  • Registers the copyright for your songs so you don’t have to do it
  • Licenses the songs to commercial users
  • Collects money from the licensees
  • Pitches songs to music supervisors for film, television, and commercials
  • Pitches songs to record companies and other potential users of songs
  • Introduces the songwriter to artists looking for material

Having a publisher is just like having someone take care of your social networking: they’ll free up your time so you can make more music, and they’ll probably do a better job at administering your publishing than you can because they’re pros at what they do. What’s best is, in the right hands, they can even make some money for you.

COLLECTING DIGITAL MONEY
Unfortunately, collecting performance-fee money for digital music streams is a lot more difficult than it should be. There is no standard way of electronic accounting yet, which means that online radio stations and subscription services account to publishers in hard copy (though that’s beginning to change). This hard copy (usually the size of several phone books for a busy publisher) must then be manually entered into the publisher’s system so the songwriters can get paid, which sometimes costs more than the entire amount collected. To make matters worse, it’s possible that a publisher is not being paid because it can’t be found by the digital broadcaster (or so they say), or it’s impossible for the publisher to obtain an accounting of what was played. And after all that, it takes a huge number of streams and an equally large amount of accounting to show any substantial money, because the songwriter is earning only $0.0023 per stream and then has to split that 50/50 if a publisher is involved.

That being said, every artist should be registered with SoundExchange, a service created by the US Copyright Office to collect performance fees for musicians featured on a recording and a song’s copyright owners. SoundExchange collects money for the actual performers on a recording, not the songwriters. It’s not much (from .015 of a cent in 2009 rising to .025 of a cent in 2015), but it’s a good thing any time a performer makes money. Go to soundexchange.com for more information.

Yes, but there are challenges. It turns out that streaming doesn’t really work as a model for selling music. In terms of collection, the statement that the publisher gets might be as big as a phone book yet amount to only 12 bucks in royalties. The problem is it might cost the publisher $100 to input it. If the publisher is get- ting 50 percent of the $12.00, it’s cost them a lot more to input it than they’re making, but they’re obligated to account to their clients, who are the songwriters. That’s a big new problem for publishers.
—Richard Feldman

The New Publishing Paradigm

  • Publishing is still making money in M3.0.
  • The mechanical royalty is the same for a song on a CD or a download—9.1 cents.
  • There’s not much money in streaming for anyone yet.
  • The real money is in synch fees.
  • Register with SoundExchange now.

Crowdfunding
One of the most difficult aspects of being an artist is finding funding for your project. Regardless of where you’re at along the ladder of success, if you don’t have the resources for recording or marketing, you’re severely hampered in the process.

A new trend in social media called crowdfunding (sometimes called fanfunding) is becoming a popular way to finance a recording project, thanks to sites such as Kickstarter, MyBandStock, indiegogo, Rockethub, and Sellaband, among others. Regardless of which site you use, the idea is the same—it allows your fans to pool their money in order to fund your project.

The way this is done is that the artist sets the amount-of-money goal, then the length of time to reach it. There are then different levels of rewards that vary based on the amount a fan contributes towards the project, very much like the multitiered product offerings by Trent Reznor and Josh Freese as described in chapter 4.

While this sounds like a great way to fund your project, it does take a moderate amount of planning and effort, as well as a significant amount of time before you see any cash. More importantly, most funding platforms require that the entire goal be hit before the artist sees any of the money. It does work though, with high-visibility artists such as Public Enemy, Jonathan Davis from Korn, Rockwell, and Marillion having been successfully funded.

THE FOUR TIERS OF A CROWDFUNDING CAMPAIGN
In crowdfunding, a funding tier is a level of investment, going for as little as $10 to increments such as $25, $50, $100, $500 and more. One of the most important elements of a crowdfunding campaign has to do with the rewards that an investor receives for putting money into the project. Just getting credit and money back usually isn’t enough, but Yancey Strickler of Kickstarter had these suggestions in a blogpost on Hypebot to make the campaign a bit more enticing:

1. The Basic Reward: If nothing else, the investor should receive a copy of the recording, be it a CD or a free download, along with a written credit on the project.
2. Limited Editions: For either the first 100 investors or the next- higher tier, the investor receives a deluxe edition that’s individually numbered and personally signed.
3. Share the Story: The next tier investor would receive something even more exclusive, such as pictures or videos from the studio, used guitar strings, or drum heads, the coffee cup used by the artist, or some other personal item.
4. The Creative Experience: Bring the investor into the process itself by asking for his or her opinion on which version of a song or photo to release, bringing him or her into the studio for background vocals or handclaps, or just inviting him or her to sit in on a recording, photo session, or video. The idea is to give an investor at the highest level a once-in-a-lifetime thrill.

None of these cost very much, yet they could mean the difference between someone investing or not, or investing in a more costly tier.

THE FOUR RULES FOR CROWDFUNDING
If crowdfunding is something that you’d like to pursue, here are four rules to help your campaign be successful:

1. Choose an attainable goal amount. Everybody would like a $100,000 budget to work with, but unless you have a large fan base to begin with, you’re probably dreaming if you think you can raise that amount. Even a once huge-selling band such as Public Enemy had to cut their goal from $250,000 to $75,000, so be realistic in both what you need and what you can raise.
2. Concentrate on low price-points. Kickstarter’s data indicates that $50.00 is the optimum investment point, closely followed by $25.00. While most artists include amount in the thousands as well, don’t count on these being filled.
3. Make sure the investment reward is sufficient. Remember that you’re not getting a donation, it’s an investment, and your investors will expect something in return. Check out this list of incentives from Hind, one of the finalists of Netherlands Idol, as an example.
Marketing Manager = 1 Part (€10): The album plus my eternal gratitude, hugs, love and kisses. And the kudos you’ll get from your friends and family for discovering the fastest funded artist on Sellaband ever, in less than 11 days . . . i raised €40.000 with the help of my believers ;-)
Marketing Promoter = 2 Parts (€20): All of the above plus my personal autograph on the album mentioning your name. Plus a chat through KyteTV.
Marketing Guru = 10 Parts (€100): All of the above, plus a pro rata share of 10% in the sales revenue from 10 parts and up, for a limited period of 18 months after releasing the album. If you already have bought parts in the album this will be added to it. Plus a genuine silver Hind keychain made of the Hind logo.
Marketing Department = 25 Parts (€250) All of the above, plus a limited version Hind Crew T-shirt.
Marketing Director = 125 Parts (€1250) All of the above, plus a personal performance through Kyte TV, where u can chat with me after the performance.

Marketing Executive = 250 Parts (250x €10= €2500) All of the above plus an additional pro rata Publishing rev share of 0.01%.

Marketing President = 500 Parts (500 x €10 = €5000) All of the above plus an additional pro rata Publishing rev share of 0.02%.

Each investor also received a free CD and download of the album, and was entitled to participate in 10 percent of the revenue from the album.

4. Keep the campaign short. Kickstarter has found that the optimum campaign is 30 days, with longer campaigns performing significantly worse. The largest periods of investment come right in the beginning and right before it closes, with everything in the middle a somewhat “dead period.” If that’s the case, you might as well make the campaign short, since there’s no advantage to dragging it out.

Kickstarter also has some great additional info and data on their website that’s worth checking out.

THE CONCEPT OF “FUELERS”
Rockethub has a separate site that provides some insight into crowd- funding and how to take advantage of their service, and on it they introduce the concept of “fuelers.” In Rockethub parlance, fuelers are contributors to your crowdfunding project and can be broken down into three categories. According to the site:

The vast majority of your Fuelers will be people you already know. They are your friends, family, and fans. These are people who already know and trust you. For most projects, the number of strangers who become Fuelers is fairly low. That being said, all Fuelers will fall into one of the following three categories:

1. The Committed—already committed to supporting you when they arrive
2. The Inspired—become inspired to support you after they arrive
3. The Shoppers—will shop (and tangentially support you)

Category #1, the Committed, will be populated with your First Degree Network of friends and family. These are folks who will sup- port you every time, regardless of the project, or its quality. Your parents are likely a good example.

Category #2, the Inspired, will be populated with other friends and family members, your Second Degree Network. These are people whom you invite to the project page. They are not committed to contributing when they arrive, but after watching your video or reading your project description, they decide that you are up to something great! They become inspired to support you. Some strangers may fall into this category, but a friend you see occasionally is likely a better example.

Category #3, the Shoppers, will be populated with everyone else (i.e., your Third Degree Network). In order for your project to grab friends- of-friends and strangers, you’ll need to grab the shoppers as well. The best way to do this is by creating rewards that are interesting and/or a good value.
If you think about it, the fueler concept also applies to an artist or band’s audience.

  • The Committed are your “tribe” (as best-selling marketer Seth Godin calls them). These are your most passionate fans that will go to any lengths to attend a show or buy a product.
  • The Inspired are your “casual” audience: the ones that like you but don’t love you. It may only take a single great song to push the casual fan into the committed category.
  • The Shoppers are the part of the audience that really like your genre or even subgenre of music, but either hasn’t been properly exposed to you or just hasn’t caught the fever yet.

Your first job as an artist is to take care of your most passionate members (the Committed or your tribe) first, since they frequently bring the Inspired or casual fan into the tribe just with their enthusiasm.
Spending too much time on the Shoppers of the audience can take too much attention away from the fans that really matter, and you may never win them over anyway. In short, take care of the fans that are already in your corner first. If treated well, they may be your fans forever.

Crowdfunding

  • Allows your fans to pool their money to fund your project.
  • Set an attainable monetary goal. Make the incentives enticing for investors.
  • Embrace your “fuelers.”

When You Need a Label
This entire book so far has been about getting along in the new music world without a record label, but there does come a time when having a label is worth considering if you want to jump to the next level as an artist. Record labels are not intrinsically bad; it’s just that you have to weigh the advantages versus the disadvantages to determine whether or not the time is right for you to be associated with one.

It’s easy to look at them as buffoons (like we do politicians), but most of them are surprisingly smart. This last ten years has been humbling for them. It’s shaken out the people that were only in it for the money, so most of the people at labels today are in it for the right reasons and are more entrepreneurial.
—Derek Sivers

You might want to consider a label if:

  • It’s offering you a staggering amount of money. If this happens, either you must be hot enough for a bidding war to have broken out or they really, really believe in your future. Just remember that this might be the last money you’ll ever see from the label, and it may have a significantly negative impact on any credibility that you have with your fan base. Best to test the notion of signing with a label with your tribe just to see their reaction first, since they won’t buy anything from you if they feel you sold them out.
  • You need money for recording, touring, or any other needs. One of the things that labels do really well is to act like a bank by using your music as collateral. Major labels still do this as skillfully as ever before, but is it worth the price you’re going to pay in terms of the freedom that M3.0 offers?
  • You’re spending too much time on certain aspects of a career. A label can take some of the burden of marketing and distribution off your shoulders. You still have to be involved on some level, though, or you run the risk of things getting way off course before it’s brought to your attention. If you don’t have a manager already, that might be a better association to make at this point than to start working with a label.
  • You need expanded distribution. If distribution into the remaining brick-and-mortar stores is beyond what a small indie label can provide, a major label can be your friend. Major labels have the relationships, the sales force, and the means to collect the money. If you’re distributing by yourself, you’ll get paid if and when the stores feel like it because you have no clout. In some cases, you won’t even be able to get into the remaining chains and retail stores because you don’t sell enough to get on their radar. A major label or large indie sells the stores a lot of product, and they’re trusted, so it’s a lot easier for them to get the retailer to take a chance. Further, the label has some leverage in that they can always threaten to withhold in-demand product if they don’t get paid.
  • You want to expand into foreign territories. Let’s say that you have a huge following in Germany via your online efforts, but you can’t service them properly because you live in Kansas City. A major label can use their overseas resources to promote you and get product in the stores there. It saves you the hassle of reinventing the distribution and marketing wheels.
  • You need economies of scale. Sometimes the power of a big label can be used to your advantage since they can cut a better deal with a service (YouTube and MTV come to mind) than you ever could as an indie.

In the video business, there was a conscious decision made that video was no longer going to be free anymore. How can it be promotional if MTV doesn’t play it? It has become a product, so we’re going to make money out of it. It turns out there’s a tremendous demand for music videos, and they can be monetized. Now we’re the biggest channel on YouTube. But it’s better for us to deal with YouTube on a centralized basis than as individual labels.
—Howard Soroka, Vice President of Media Technologies of the Universal Music Group

  • You need major marketing. Another thing that a major label does well is to market you traditionally. If you want airplay on radio and appearances on television, a label may be your only hope. If you want reviews and articles in mainstream media, they still have the clout to get it done.
  • If you feel that you’ve gone as far as you can go as an indie artist. If you need help to push your career over the edge to stardom, then a major label or major label imprint may be the way to go. This is what they do—sometimes well, sometimes not.

Unless you have a specific need for any of the above that you’re sure you can’t fill any other way, it’s best to stay independent for as long as you can as long as M3.0 is around. Who knows how long it will last? Maybe a year or two if we’re lucky, but maybe a lot less than that, which might be lucky, too, since it will spell the latest music- business evolution.


Excerpt taken from Bobby Owsinski's Music 3.0: A Survival Guide for Making Music in the Internet Age, Second Edition, available now from Hal Leonard Books. Click here and enter promo code MP9 when checking out to receive and additional 25% off plus free shipping (within the US) on this and many other titles, exclusively for MusicPlayers.com readers!

 

   
             
             
             
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