Open the Music Industry’s Black Box

Some fellow entrepreneurs had an awesome idea recently to create a jukebox-like service for businesses, where they could get payed per request and pay a monthly fee for the streaming service.<p>I coded up an MVP and we got a few customers that agreed it was something they would pay for, as long as they had a decent chance to make even a small profit on song requests.<p>Once it looked like a viable product idea, the financial numbers guy did his magic and researched more details about how royalties worked.<p>We got conflicting information from different lawyers and royalty aggregators. After a couple months of research we determined it was completely impossible to make a profit, until we hit maybe 5 million in revenue and could start to negotiate better rates with copyright holders.<p>This assumed extremely cheap tech and bandwidth, and almost no salaries for us three founders.<p>We killed the project because it became clear how sadly broken the music industry has become. They wanted about 50% of our revenue, no matter how we sliced the business model. We are totally miffed at how pandora or spotify survive.

So the problem as I see it is the layers of complexity of record deals. In my limited experience with the music biz(released a record on itunes, a few side soundtrack projects, and 3 friends with major label deals) there isnt much chance of making money from the record deal itself until you have accomplished the following: 1) &gt; 2 profitable and high selling records 2) a solid fan base 3) luck<p>One of my friends was signed to Barsuk records, and released 2 albums with them. He made about 25k per year including touring. He released 2 more albums independently and licensed a song for a microsoft zune commercial. He was telling me about some of the details of his record deal, and it obviously wasn&#x27;t a super good deal for him, but he was just taking whatever he could to get on. He maintained a near constant touring schedule which broke up his marriage, and it generally just made his life really hard. This guy still struggles, I havent spoken to him in about a year or so but he may have given up.<p>Another was signed to hollywood records, got major label promotion as a VH1 artist to watch with heavy rotation. His first album didnt sell very well and he got dropped. He is still a semi full time musician in Austin right now.<p>I recently stayed at an up and coming country musicians apartment(she is a friend of a friend), she sold 1 million copies of her self penned single. While she is doing way better than I was at that age, she lives very modestly.( I dont know all the specifics of her deal, and she is young and wants to live simply so she could have a million bucks in the bank but I doubt it)<p>Anyway, I mention this because from what I know of their deals, the record companies still treat them largely like they still spend big bucks at a big studio, and manufacture vinyl, CDs and cassettes for the bulk of the revenue. The music biz is making a killing on streaming because manufacturing is so low these days, and anyone can have a laptop studio capable of professional recording for 5-10k. The situation for artists wont change until record companies are not their main outlet.

What I would really like to see is a non-profit alternative to Tunecore&#x2F;CDBaby&#x2F;DistroKid, submitting music for digital distribution and disbursing streaming royalties.<p>Tunecore has a nice model and they were great for a while, then they jacked prices and forced out their founder. Distrokid seems good right now, but what&#x27;s stopping them from pulling a Tunecore in the future?<p>The only way to guarantee transparency and stability <i>permanently</i> is for the musicians themselves to control the distributor -- similar to how individual Members of the Apache Software Foundation control it.<p>Speaking as a former mastering engineer and graphic designer, whatever QC DistroKid and Tunecore are doing can&#x27;t be too hard to reproduce. I&#x27;ve often thought of writing some open source software for this purpose.

Question for David Byrne (rhetorical, of course, since he&#x27;s unlikely to read HN):<p><pre><code> I asked Apple Music to explain the calculation of royalties for the trial period. They said they disclosed that only to copyright owners (that is, the labels). I have my own label and own the copyright on some of my albums, but when I turned to my distributor, the response was, “You can’t see the deal, but you could have your lawyer call our lawyer and we might answer some questions.” </code></pre> At some point, you signed a contract with that distributor. (Why you need a &quot;distributor&quot; at all is an obvious question, but never mind that for now.) Why did you accept terms like these?

Contrariwise, Steve Albini - who&#x27;s been at the sharp end of this stuff as well, but without the &quot;I used to be a rock star&quot; bit - considers this <i>the golden age</i>, and that the Internet has solved The Problem With Music: <a href="http:&#x2F;&#x2F;www.theguardian.com&#x2F;music&#x2F;2014&#x2F;nov&#x2F;17&#x2F;steve-albinis-keynote-address-at-face-the-music-in-full" rel="nofollow">http:&#x2F;&#x2F;www.theguardian.com&#x2F;music&#x2F;2014&#x2F;nov&#x2F;17&#x2F;steve-albinis-k...</a>

I was signed to a major label at one point and would do so again in a heartbeat.<p>What you&#x27;re getting in exchange for surrendering publishing and the masters is the huge network majors are tapped into. Syncs, marketing spend, publicity, festival circuits, key relationships with tastemakers, etc - I found the music industry incredibly nepotistic and benefitted over equally or more talented unsigned artists. There&#x27;s a Hollywood Accouting hustle to what the majors say they are spending on you, but I believe you&#x27;re building a better fanbase with a major, which generally means a greater touring revenue.<p>Another point missed: it&#x27;s hard to speak globally about &quot;musicians&quot;. Artists have very different outcomes and objectives, so it&#x27;s very easy to project a mainstream mentality on to the indie, as so with the converse.

In the old days you REALLY needed the record companies. But with digital distribution for sales. And the possibility to accurately log each play of a song on streaming services, and compensate the artists for that. Why are they still used ?<p>The biggest problems will occur from artists want a$ per play, but the streaming services only has b$&#x2F;(month*plays).

&gt; Perhaps the biggest problem artists face today is that lack of transparency. I’ve asked basic questions of both the digital services and the music labels and been stonewalled. For example, I asked YouTube how ad revenue from videos that contain music is shared (which should be an incredibly basic question). They responded that they didn’t share exact numbers, but said that YouTube’s cut was “less than half.”<p>Transparency is the problem not only with music labels. It is also a problem with services like Uber, and with the App Store. The sad thing is: people think they can make a decent amount of money on these services, but that might just turn out to be an expensive mistake on average (there will always be outliers, and those cases will hit the news, but they are not the norm).<p>I think the government should step in and demand complete disclosure on these services.

&gt; Musicians are entrepreneurs. We are essentially partners with the labels, and should be treated that way.<p>There&#x27;s no reason that Byrne and other musicians shouldn&#x27;t earn as much as they can, but let&#x27;s try to remember that musicians are artists. I seem to remember many of those disliking record labels for imposing onto their art the desires of commerce.

Hmm. I can see the problem right there. Google takes 50% for distribution. If that figure was less then artists would get more.

great article. we need some disruption