Digital Noise: Music and Tech

If you work in the music business, you probably already know the name Donald Passman. For the uninitiated, his book "All You Need to Know About the Music Business," which was first released in 1991 and comes out in a seventh edition today, is the book on how the music industry works. If you ever wanted to know how major and indie label deals are structured, the different types of royalties that musicians can earn and how they're calculated, what a personal manager does for a band, how much money artists make on tour, where your ticket fees go, or any of countless other nitty-gritty details, this is the book. Music industry people sometimes call it the bible, and they're not joking.

The seventh edition contains numerous updates since the last release in 2006, including the final resolution of the battle over Internet radio royalties, details of how royalties are calculated for iTunes and YouTube, and the latest developments in label deals. I had a chance to talk to Passman on the phone on Tuesday morning about the changes he sees in the music industry and where he thinks it's going.

Q: Since the last edition of the book was published in 2006, what's the biggest change to the industry?
Donald Passman: 360 deals [in which record labels get a cut of the artist's revenue from touring, merchandise, and other sources apart from record sales] are a tectonic shift in the way record deals get done. There was a smattering of them three years ago, but now it's become the norm. Early deals with Madonna and other established artists were really banking deals, where everybody knew the artist's track record and they were making a bet on what the future would be. Deals with new artists are quite different. The labels are saying that they're the only ones really willing to spend money on a new artist's career, and they can no longer make money just in the record business, so they need a cut of this other income.

We're also starting to see some industry patterns in how royalties and payments are calculated for digital music. So far, none of the business models have made a lot of money. Even iTunes doesn't make a huge profit. But part of the problem three years ago was that if you started a streaming music service, you had no idea what you were paying. Now we're starting to see industry patterns.

Do you still think it's worth an artist's time to pay or find funding for a professionally recorded demo in a big studio? Or would you recommend that artists invest that time and money in buying a computer and other home recording gear and learning how to record themselves?
Passman: There's no one-size-fits-all answer. The software that's available now is better than what professional studios used to be like 10 years ago. You can create an extraordinarily good demo in your house. The key is to create a demo that sounds like a hit so they don't have to use their imagination to hear it. People will tell you they can hear a diamond in the rough; they can't.

Do you think the rise of do-it-yourself online services like CDBaby, Tunecore, and Sonicbids will lead to a new thriving "middle class" of musicians--folks that aren't signed to a label, but spend most of their time recording and touring and make a decent living doing it?
Passman: It's a reality today. If you're a niche-type artist and you don't mind staying in your niche, you can make a perfectly good middle-class living that way. If you're more mainstream, you can use those techniques to build buzz and attract a label. Nobody's yet had a major career without a label behind them. I'm certain that's going to change, but for bands that want to be truly international and mainstream, they still need a label.

In your book, you mention that you favor unlimited music-streaming--the "celestial jukebox"--as the most likely future business model to succeed. Do you think ad-supported free services (like Imeem or Grooveshark) will ever be viable?
Passman: I'm skeptical that ad-supported music services will work in a major way. People have had a hard time monetizing music to advertisers because the music is so diverse. Advertisers don't know what type of music they're going to be associated with, so it's hard for these services to get high enough CPMs [impression-based advertising rates]. YouTube's had the same problem: you don't know what kind of video's going to pop up next to your advertisement. Free services will probably be a model, but I don't think they'll be the model.

Why do you think subscription-based services (such as Rhapsody) haven't really taken off?
Passman: They're not convenient enough, they're not truly cross-platform. For me, the ultimate would be anytime-anywhere access to any music for one subscription. On my computer, in my car, on a connected device, whether it's an iPod or something else, on an airplane when I don't have an Internet connection. Not just tied to one or two devices. I'm personally a believer in subscription services. People don't think twice about paying for cable, and when you stop paying it goes away. But with music, there's a kneejerk reaction because we're used to owning it.

We hear a lot of doom and gloom about the death of the music industry. Are you still optimistic?
Passman: I'm optimistic in the longer term. Not for the next few years. I think it'll probably get a little worse, and then we'll bump along the bottom for a while. I don't think we've hit bottom, and that's because I see the trends that are happening now. CD sales are declining and will eventually disappear, and retailers are making it happen. They're cutting back the floor space they devote to CDs, which means less CD sales, which makes them cut back more.

But the digital opportunity is huge. We can sell music to people who've never gone into a record store, people who never listen to music because they stopped listening to the radio at a certain age will now have access. Unfortunately, we're not there, technically or legally. The more pain the industry feels, the easier the legal side gets. The better the technology gets, the closer we get to delivering an experience people want.

Tuesday's post on using Craigslist to buy secondhand concert tickets drew a response from a company called FanSnap, which uses live feeds to aggregate ticket listings from online marketplaces and broker sites (such as StubHub and TicketNetwork) and eBay auctions.

FanSnap would argue Craigslist is fine for price-sensitive fans who don't need to go to a particular show and who are willing to meet and negotiate with other individuals, pay cash where necessary, and run the risk of buying a fake ticket. (Although the only time I've ever seen a fake concert ticket was in 1989 on the streets of Manhattan, when I bought a very realistic counterfeit to a Jane's Addiction show at the Ritz.)

Fans who want a slightly more convenient buying experience might go with eBay, where they can use PayPal and rely on seller ratings, while fans who absolutely need a guaranteed ticket can go with a marketplace like StubHub, which offers a toll-free customer service line, money-back guarantee, and other benefits. FanSnap operates on an affiliate-oriented revenue model, so it gets a commission from sites on which sales are made.

FanSnap shows you where tickets are located in a seating chart of the venue.

I ran a search on FanSnap for Pixies tickets, and it found more than 70 listings for the sold-out show this Friday, compared with about 30 listings on Craigslist. (The Craigslist screenshot in Tuesday's post showed only listings that had been added on that day.) Prices were similar to Craigslist--lower in a few cases--and the site has some great design touches, like a seating chart of the venue that maps tickets to particular locations. Craigslist, of course, is purposely and resolutely lo-fi. I still think there's something refreshing about dealing with a real fan, face to face, but I can see reasons why others wouldn't want to.

Correction at 8:00 a.m. PDT, Nov. 12: This post mischaracterized how FanSnap aggregates ticket listings. The site uses live feeds from its sources, which allows ticket listings to be updated immediately as prices change.

Ticket scalping has been a hot topic in the music industry for years, causing a lot of uproar and complaints among music fans.

The sad fact of the matter is that lots of parties in the music industry try to sell secondhand tickets for a markup. Ticketmaster owns a premium resale service called TicketsNow. It also owns a resale exchange, TicketExchange, which lets any individual (including scalpers) buy or sell a ticket. Even artists and managers frequently take their allotments and sell them on broker sites for a markup, as The Wall Street Journal has reported.

Worst of all is the fan club scam, where fans pay for the right to get in line for presale tickets--but joining the club doesn't necessarily get you a ticket before the scalpers have snapped them all up, as Keith Urban fans in Nashville recently discovered.

I can't get too angry, though. I haven't bought a ticket from a scalper in years, and I've never gone through a ticket broker. I get good seats well after they go on sale and can usually get into sold-out shows. And they almost never cost me more than the original retail price.

It's not magic: it's Craigslist. I wait until a few days before the show, then run a search for the band I want to see. Inevitably, I find a few people who bought a ticket then had an irresolvable conflict. These are normal people--not scalpers, just fans like you and me--and they almost always settle for what they paid, or even less. If I'm not happy with the price, I move on--there always seem to be more sellers, especially the on day of the show.

You can't get tickets to this Friday's Pixies show through the official site for the venue, STG Presents, but there are plenty of tickets at fair prices on Craigslist.

This month alone, I've scored floor seats to Steely Dan well after they were gone from Ticketmaster's site, and a pit ticket to Friday's Pixies show, which is entirely sold out. I've had such good luck that I'm considering abandoning Ticketmaster and other ticket sellers completely. The seats are better, they're the same price or cheaper, and I'm usually helping a fellow fan out of a jam.

There are ticket brokers and other professionals gumming up the ads on Craigslist, but you can scope them out pretty quickly--they often list ticket prices as $1 (because they're actually selling lots of tickets at different prices) or have some other giveaway like an overly generic headline ("Great seats") or obviously inflated prices. Regular fans tend to list the exact seat number in the ad and a price that's pretty close to what they paid.

There will always be some demand for professional ticket brokers; people who want to impress an important business client with great seats don't want to wait until the last minute and risk striking out. And for some shows, fans would rather sacrifice a body part than sell their tickets--I'm thinking of the early shows on the 2007 reunion tour by The Police, for instance. But for many shows, Craigslist is a far better deal than the professional sites. Which makes me wonder how long they'll last.

Record label EMI this week announced that it will begin selling on-the-spot recordings of concerts.

The name of the initiative, Abbey Road Live, is a bit misleading--it doesn't have anything to do with the Beatles album or the recording studio after which it was named.

Rather, EMI is using its Abbey Road brand to indicate that these aren't low-quality bootlegs but professional multitrack recordings, mixed and mastered on the spot, and sold on CDs, DVDs, or flash drives to fans at the venue. EMI also said on Wednesday that it plans to make the recordings available as streams or downloads, so fans can access them from home.

Instant concert recording isn't new: EMI sub-label Mute Records has had a similar program in place since 2004--according to the press release, 10 percent of fans at a recent Blur concert downloaded the show afterward--and Willie Nelson has been selling flash drives with on-the-spot concert recordings for several years.

But having a large record label like EMI on board legitimizes the practice. It's a no-brainer way for live acts to earn some extra cash--and great for fans as well. I can think of many concerts I've attended, after which I would gladly have paid another $20 for a recording. This should become standard operating practice in the next couple of years.

Last week, a music site called BlueBeat made headlines by offering Beatles songs as free streams and 25 cent downloads. The Beatles are known for not making their songs legally available on iTunes or any other online forum, so observers rightly asked "how are they doing this legally?"

EMI, the record label that owns The Beatles' recordings, has a simple response: they're not doing this legally. But here's where the story gets very strange.

The legal reasoning in this case is straight out of "Alice in Wonderland."

(Credit: Wikimedia Commons (public domain illustration))

BlueBeat is owned by a company called Media Rights Technologies, which specializes in digital rights management technology. DRM is supposed to be used to prevent copyright infringement. But according to a 2007 blog post on HuffingtonPost.com by the company's founder, Hank Risan, MRT backed into this business after being--get this--targeted by the RIAA for copyright infringement.

As Risan explains in his post, he and a partner had posted a bunch of streaming-audio files to a Web site about the history of music. The RIAA issued a takedown notice, and the site took the streams down.

The streams had been protected by Windows Media DRM, but according to Risan, an update to the Media Player broke the DRM. In response to this flaw, Risan created MRT and built his own DRM system, which he claimed would be far more robust than the systems on the market at that time. Then, in 2007, MRT sent cease-and-desist letters to Microsoft, Apple, Adobe, and RealNetworks, ordering them to use MRT's DRM technology instead of their own, on threat of legal action.

The legal reasoning was twisted--basically, MRT argued that the Digital Millennium Copyright Act should force these companies to use the most robust DRM technology available, even if that technology was created by somebody else. Predictably, nothing ever came of this demand.

MRT's legal reasoning is equally funny this time around, as Ars Technica reports. According to the report, MRT claims that it didn't post the exact Beatles recordings. Instead, it posted "psychoacoustic simulations," then added simple video content to them. This constitutes a new audiovisual work, and isn't covered by the existing copyrights, MRT argues. In fact, MRT even went so far as to apply for copyrights on the "new" works!

Perhaps this is all some kind of metacommentary on the frustrating inconsistency of U.S. copyright law, but I predict that MRT is going to be laughed out of court. In the meantime, if you want your Beatles music online, it's still available on BlueBeat as of the time I posted this. I didn't want to give the company a credit card to test the whether the downloads work, but the streams sound pretty close to perfect...especially considering that they're only psychoacoustic simulations.

In 2008, the Council for Research Excellence, a research group funded primarily by Nielsen and staffed by researchers from various media and advertising organizations, studied the media consumption habits of U.S. adults. Researchers followed about 300 people around for two days, in the spring and the fall, using a handheld device to track every single 10-second interval of media that they consumed. The study was mainly focused on video, with the unsurprising result that we watch a lot of TV (more than five hours a day on average).

On Tuesday, the group released a follow-up analysis focused exclusively on audio. The results are somewhat surprising for those of us who have been steeped in digital music for the last decade: the most popular form of media for audio is good old broadcast radio.

No static at all!

(Credit: Wojciech Pysz, via Wikimedia Commons)

In fact, it's not even close. About 77 percent of U.S. adults listen to some broadcast radio on any given day--much more than listen to a CD or tape (37 percent). Satellite radio came in third with 15 percent. And the vaunted digital music revolution? About 12 percent of users listen to portable MP3 players on any given day, about 10 percent listen to digital media files stored on a computer, and only about 9 percent listen to streamed audio (including online radio). The study has tons of other data about age groups and time spent listening to each form of audio and so on, but an important point is that even digital music consumers still listen to the radio: nearly 82 percent of people who listen to MP3 players on a given day also listened to the radio. (This 38-page PDF has all the details.)

Now, the caveats. The study had a small sample size--300 people in only five cities. It didn't try to adjust for demographic differences between the sample audience and the population at large. And it didn't measure the type of audio content being consumed. So while we know that nearly 80 percent of U.S. adults listen to the radio, it's harder to know how many are listening to music. My suspicion is that people with MP3 players are turning to radio primarily for news and sports and other talk formats, and sticking primarily with their own collections for music.

How far we've come in such a short time. When I began this blog in 2007, finding a particular song online was an exercise in frustration. You could subscribe to an all-you-can-eat service like Rhapsody, but cheapskates and occasional music listeners either had to dig deep, engage with a questionably legal file-trading service, or settle for 30-second previews from iTunes or one of its Web-based competitors.

Search results for "U2 Beautiful Day" earlier today. The box at the upper-right is an embedded version of the Lala player, which let me play the complete song multiple times.

Since then, as readers of this blog know, dozens of sites offering free streaming music have emerged, from the dead-simple like Songerize and its successor Songite (enter a song title to play it now) to the fiendishly complicated Imeem (whose original user interface gave me a headache, although it's since gotten much better).

But, let's face it, most people don't read this blog. Again and again, nontechnical music fans are blown away when I show them a site like Grooveshark, which lets you play any song, any time, and even arrange songs in queues and playlists. "Is that legal?" they often ask. (Answer: it depends.)

Today, that all changes. Google announced the integration of playable songs into its search results yesterday, and is slowly rolling the feature out to U.S. searchers. I finally saw the feature in action this afternoon, when I ran a search on "U2 Beautiful Day." (You can test it here.)

To an experienced online music listener, the feature seems a little bit random because Google is using both iLike (recently acquired by MySpace) and Lala to power playable results, and the two offer different experiences. For my first search, Google randomly chose iLike as the default player, and iLike only let me play the song once, then relegated me to a 30-second sample. When I cleared my cookies and tried again, Google made Lala my default player, and I was able to play the full song as many times as I liked. (The experience will also vary by song and artist, depending on what the copyright holders dictate--Led Zeppelin, for example, is available only in 30-second samples on iLike, and most of its songs are completely missing from Lala.)

Some searches also give you links to Imeem, Rhapsody, and Pandora, each of which offers yet another experience--Rhapsody lets you play up to 25 songs per month for free, Imeem is best for finding unusual versions of popular songs (like live takes), and Pandora requires you to create a virtual radio station based on a particular artist or song, which can be useful for discovering other music you might like, but doesn't give you an instant fix.

Whatever. For the average Internet user, this distinction doesn't matter. What matters: when users go to Google to search for an artist's name, song name, album name, or even a snippet of lyrics, they won't just get random text links or YouTube videos. Instead, the first set of links will be to the audio recording itself--in many cases, the entire song. Everybody knows that there's free music available on the Internet, but most casual listeners don't bother to find it. Now, the most-visited site on the Internet will put it right in front of their faces. As awareness spreads, it'll be another nail in the coffin of traditional music media--why listen to the radio?--and a boon for the five companies who signed this deal with Google. Artists and record labels might also get a shot in the arm, as users discover new music for free and perhaps eventually buy a copy to keep.

As for the rest of the online music start-ups out there? They better be on the phone right now, looking for a benefactor.

Once the world's largest social-networking service and an essential tool for musicians, MySpace has fallen upon hard times, but I'm encouraged by one of the new services the company announced Wednesday.

The MySpace Artist Dashboard is a new free tool for any artist with a music profile page on the site. For artists, it offers demographic information about the people who are visiting your site, and a breakdown of what they're doing there. The geographic data could be particularly useful for small touring bands to help plan their routes. I was also encouraged by the statement from MySpace Music President Courtney Holt, who's been running the company's music initiatives for a couple years now: "Whether you're a small-town garage band, an emerging indie, or a well-established act, our ultimate goal is to provide the right mix of tools and real-time data to help you gain a deep understanding of who your fans are and how best to reach them." That's exactly what MySpace should be focusing on.

An example version of the new MySpace Artist Dashboard. The Black Eyed Peas probably don't need this feature--they have teams of marketers working for them--but your band might.

Unfortunately, the other new piece, a music video service, will languish in obscurity as part of the misguided MySpace Music site. I've always argued that creating a special MySpace Music site for major label acts, and shutting out the unsigned and indie artists that made MySpace in the first place, was a tragic mistake. Now MySpace is perpetuating the exact same mistake with MySpace Music Videos.

Here's an example. The Curious Mystery--a great Seattle band that recently signed with indie label K Records--has a new video out for their song "Black Sand." It's available on their MySpace page. But if you run a search for "The Curious Mystery" or "Black Sand" on the Music Videos hub, this video doesn't show up. That's a failure. (Overall, MySpace still needs a lot of help with music search.)

So MySpace Music Videos is trying to focus on the big numbers--big bands, lots of hits, big advertising bucks. But fans already know where to watch videos from famous artists--it's called YouTube--and therefore have no particular reason to check out the MySpace Music Video hub. The fun of MySpace used to be that your roommate's band could appear right alongside names like Radiohead, and you could surf easily between content from all types of acts. Until MySpace Music stops distinguishing between big and small artists, it will remain irrelevant.

And in case you're wondering, yes, you can find The Curious Mystery's new video by searching YouTube.

Grooveshark, my favorite free music streaming service, made an important announcement earlier today: the company has settled a lawsuit brought against it by EMI, one of the big four record labels, and has licensed EMI's catalog.

The company is still negotiating terms with other copyright holders, but to my knowledge EMI was the only one that had sued Grooveshark. So with this legal uncertainty out of the way, I can more confidently recommend Grooveshark's $3-a-month premium service, which offers early access to new features (the latest update includes better organization of search results and a slider to move you to particular parts of a song). If other licensing deals follow, Apple might finally approve Grooveshark's planned iPhone app, offering on-demand streams from Grooveshark's massive user-sourced music library.