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.
The jukebox in the sky is a reality. When I started this blog two years ago, it was all but impossible to open a Web browser, type a song name, and have that song start playing immediately. Now, it's commonplace.
Meuzer found Roy Harper's "The Game," while Grooveshark didn't.
I still like the simple approach of Grooveshark--the other night, my brother and I set up a running DJ battle on it to reminisce and introduce each other to new tunes--but Meuzer is an interesting alternative. Search on a song or artist name, and Meuzer pulls results from YouTube--very similar to the Muziic app I looked at earlier this year--as well as Imeem and other third-party sources. Click any of the results, and you get a four-arrow widget that lets you play, share, rate, or add the song to a playlist. Hit "play," and the song begins playing in an embedded window depending on the original source (a YouTube result begins playing a small YouTube video, for instance). Other features require you to log in, and currently the only way to do that is with a Facebook ID.
Meuzer seems to have a broader selection of music than Grooveshark: a search on Roy Harper's "The Game"--a song I couldn't find on Grooveshark for the DJ battle with my brother--got several results from YouTube. But I don't like the forced log-in, particularly for the essential playlist feature, and the search results aren't organized nearly as well. For instance, searching for the dub artist Scientist returned multiple results for "The Scientist" by Coldplay (eww) but no Scientist. On Grooveshark, I simply selected the Artists tab and the top 10 results were all Scientist tunes. Still, Meuzer could be a useful fallback for songs I can't find on other services.
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Update and correction: based on information I received from Microsoft, I mistakenly credited the wrong blog with breaking this news--it was actually first posted by Zunerama. Microsoft has since put out a press release confirming many of the details, including the specific radio metadata formats that are supported by the "Buy from FM" feature.
I'd been briefed on the upcoming Zune update and was supposed to hold my fire until next week, but somebody at Fry's Electronics posted details online, and the bloggers at fan site Zunerama passed them along to the public, although the site is missing a couple details that are still secret until next week.Like I said last week, the hardware changes--blue, 120GB--are the least interesting part of the announcement. The biggest new feature is something I've been hoping Microsoft would do with the Zune ever since it launched two years ago: wireless connectivity to the Zune Marketplace from any public Wi-Fi hotspot. With a subscription Zune Pass--$14.99 per month--this means you can now listen to any of the three-million plus songs in the marketplace on-demand from a huge variety of locations.
Apple has (so far) held off on an iTunes subscription. I thought this was a huge feature gap that Microsoft, with its endless budget and seeming commitment to take on the iPod at all costs, should have filled a long time ago, but didn't. In the meantime, a couple other players got the jump on this so-called "celestial jukebox" scenario--Sandisk's Sansa Connect and Haier's Ibiza Rhapsody. Apple added the Wi-Fi version of iTunes last year, but it's download-only, so doesn't have the same appeal to instant gratification.
You won't need a new Zune (like this blue model) to get the new features Microsoft is introducing later this fall, such as wireless purchases from the Zune Marketplace.
When I first asked the Zune team about this feature in 2006, they said it would be too "geeky" and hard to explain to non-techncial consumers, and that the user-experience would be less than optimal. The big problem was a lack of integrated browser and touchscreen, meaning that users encountering a Wi-Fi hotspot that required a browser-based log-in would get no response. Apple's iPhone addressed this problem by integrating Safari and a touch screen, giving users the same experience they get on a mobile Mac today.
With the upcoming Zune 3.0 software, Microsoft has come up with what it feels is a workable solution that doesn't require a touch screen. If a hotspot is password-protected but requires no browser, users will be able to scroll quickly through numbers and letters with the Zune Pad. (The on-screen interface looks similar to the function on the iPhone Calendar used to select times of day.) If the log-on requires a browser, however, Zuners are still out of luck.
There's a lot of other interesting stuff planned that the iPod/iPhone lacks today, such as a "tag from FM" feature--if you're listening to an FM station on your Zune that transmits song information via RDS or RT+, you can tag that song for purchase, and the next time you're in a hotspot, find it immediately on the Marketplace. There are also integrated "channels" that rotate through songs in particular genres, or that the Zune software imagines you might like based on your listening habits. As with the buy-over-Wi-Fi feature, these features are best used with a Zune Pass.
So why the leak? I wonder if Fry's was concerned that Apple's planned announcement tomorrow would be the introduction of an iTunes subscription store, which would have preempted the Zune announcement and made it much less interesting or surprising.
Sony BMG and Warner are both reported to be considering subscription-based music services.
The major labels are finally said to be consdering building "celestial jukeboxes," but lack of cooperation could make these services play like a broken record.
(Credit: Frederic Pasteleurs, Wikimedia Commons)Earlier this week, the AP quoted Sony BMG CEO Rolf Schmidt-Holtz discussing a subscription-based service that would offer unlimited downloads of all songs in the Sony BMG catalog for 6 to 8 euro. The downloads would be transferrable to all portable devices, including Apple's iPod. DRM would presumably play a part, so that content would be disabled on a device if you stopped paying the subscription.
Warner is taking a different approach, proposing that consumers be charged a monthly fee by their ISP--maybe five bucks--for the right to download as much music as they want from a massive industry-run database. As Conde Nast Portfolio reported yesterday, Warner has given former Geffen Digital head Jim Griffin a three-year contract to develop this strategy. Not mentioned in the article: since Time Warner owns the number-three and number-five U.S. ISPs, AOL and Road Runner, the company has a built-in audience of more than 17 million users to jumpstart any such service.
It's nice to see the major labels thinking about "celestial jukebox" models of distribution more than 8 years after they were first proposed, but as usual, the labels still don't seem to be able to acknowledge their competition--unlimited free downloads from file-trading networks and random Web sites.
If the Sony BMG service contains only music from Sony BMG, as is suggested in the AP report, it's dead on arrival. Nobody is going to pay a dime for a catalog containing 1/4th of the major labels' output and nothing from independent artists.
I personally think Warner's hit upon the only reasonable compromise between copyright-owners and end-users: bundle a very low monthly fee into some other product and allow--or better yet, encourage--anybody who buys that product to download all the music they want. A mandatory fee would inspire an outcry, but ISPs could solve that by making the "unlimited music" option part of their higher-priced packages--bundle it with more bandwidth, for example. But this can't be a balkanized plan with only Warner content, or it'll fail just as badly as the Sony BMG service.
If the labels each want to build their own celestial jukeboxes, at least they could have a partnership that lets membership in one service transfer to the other services--like ATM cards today.
A few select reviewers got an early hand on the Ibiza Rhapsody player from Haier, but CES was my first chance and I walked away quite impressed, and wondering again why Microsoft hadn't done this much--or more--with the 2nd generation Zune player.
The 30GB Ibiza Rhapsody from Haier America
(Credit: Haier America)The devices are not exactly objects of art--the 30GB player, available now from Amazon.com for $288, is a simple metallic block, and the forthcoming 4GB and 8GB players look like smaller versions of the same design--but the screen is adequately bright and clear, and the company is offering a wide array of downloadable skins and themes to change the look of the player. But the big questions in my mind were (1) how easy is it to connect to a public Wi-Fi spot and (2) once connected, how easy is the process of streaming and downloading songs?
At the CES booth, the Ibiza passed both tests quite well. It provides an available list of Wi-Fi networks arranged by signal strength--nothing more complicated than connecting to a network on a laptop--and connects easily to the strongest one. A Mozilla-based browser lets you get through any sign-in screen, although the on-screen keyboard is a line of letters across the top, which is a bit kludgey. Once connected, searching from Rhapsody's 4-million-plus library is fairly quick (although text search is limited by that on-screen keyboard) and once a song is selected, it starts streaming within a couple of seconds. The streaming sound quality at least as good as FM radio. (I know they use WMA over the air, but not sure of the bitrate.) The song downloads in the background as you stream it, so next time you can access it from your hard drive.
I also discovered that the underlying software was developed not by Haier, but by Varia Mobile, a Seattle-based company specializing in Linux-based mobile apps. Kudos to them and RealNetworks for coming up with a workable celestial jukebox.
Rick Rubin is obviously a guru--just look at the beard! But seriously, this is the guy who oversaw the crossover that took hip-hop to mainstream America (Run DMC, meet Aerosmith; world, meet the Beastie Boys), introduced Johnny Cash to indie-rock hipsters, and produced Danzig, Slayer, and...um...the Red Hot Chili Peppers. (Nobody bats 1.000.)
This week's New York Times Magazine has alengthy article on Sony/Columbia hiring Rick Rubin to help turn the label around. The whole article's an interesting read, but one point that stuck out to me: Mr. Rubin is a big proponent of the celestial jukebox.
That's the idea that for a monthly subscription, users would have access to all music, any time, anywhere, on any device. Got the Beach Boys stuck in your head? Call it up on your car stereo. Want to check out that band everybody's been telling you about before they come to play your favorite club? Listen to the album on your home stereo. This idea's been around for years--I think I first read about it in Salon back in 2000. But it's never been implemented, mainly because it would require a major business model rethink by all the participants in the music industry. Most important, there'd have to be a way to track song plays so that royalties could be split appropriately. Watermarking technology could help on the technology end, but the real struggle would be over how the royalties are split--just look at the ongoing debate over Internet radio.
Nonetheless, here's hoping that Mr. Rubin gives Sony a push in the right direction.
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