Let The Heads Roll…More Genius From The Record Industry Braintrust or Mark Mulligan Gets a Calculator…

Happy Halloween and welcome to the scary stupid post of the day…

We’ve been saying this for a long time, music streaming math just doesn’t add up. Would someone please buy some calculators for the record industry braintrust that keeps making these stupid deals? Seriously, it’s just math and it’s not that hard… even Mark Mulligan is getting it… no kidding…

$2.3 Billion In Net Loss To Artists and Labels Per Year

The report extrapolates that YouTube Music Key will generate $400 million in revenues in its first year. But over the long run it will also be responsible for more than $2.6 billion in lost subscription revenue yearly. That’s a negative net impact of $2.3 billion in lost music revenue every year, according to the study.

Ok, that’s YouTube. Let’s revisit how the Spotify math works…

If you own a calculator, let’s just do the math one more time, real slow and simple like…

1) Spotify and former uTorrent CEO Daniel Ek says Spotify only needs 40m paid subscribers for streaming to be sustainable for artists. But that math just doesn’t work.

2) $10 per month subscription = $120 per year per subscriber

3) $120 per year, per subscriber paying out 70% of gross to rights holders equals $84 per subscriber, per year.

4) $84 per subscriber, per year x’s 40 million subscribers equals $3.4b per year in top line gross revenue to ALL rights holders. That’s $3.4b for labels, artists, publishers and songwriters combined.

5) $3.4b per year is HALF of the current revenue of $7b per year where the domestic business has been flat lined.

6) Assuming you could DOUBLE the subscription base to 80m PAID in the USA within two years by dropping the price in HALF to $5 per subscriber per month you still only gross (wait for it…) $3.4b a year in revenue.

We know this is shocking to the math impaired, but doubling scale (imagined as it is) while cutting the subscription fees in half, actually nets you the same amount of money. Shocking the things one can learn with a calculator or a spreadsheet.

Maybe we’re all screwed, but we will not go quietly and we’re gonna call it how we see it on the race to the bottom. We will document the stupidity undoing the business. Maybe it’s time for Lucian Grange to get out that axe again and let people know what time it is? #stopthemadness

READ THE FULL POST AT HYPEBOT:
http://www.hypebot.com/hypebot/2014/10/youtube-music-service-could-cost-artists-labels-23-billion-in-lost-income.html

RELATED:

Music Streaming Math, Can It All Add Up?

Who will be the First Fired Label Execs over Spotify Fiasco & Cannibalization?

Streaming Is the Future, Spotify Is Not. Let’s talk Solutions.

Why is $5 Dollar a Month Streaming Good For Artists? Because 1/2 the Record Company Executives Will Lose Their Jobs! Yeah!

Label executives and many distributors including most indies have been out there trying to sell artists and small labels on $5 a month streaming!  Because at $5 a month many more people will subscribe to these streaming services!

1) No they won’t.  Why would they pay for what they already get for free?  It’s totally irrational you morons.

But Let’s ignore several hundred years of economic theory and proceed to #2.

2)Let’s say streaming gets as many subscribers as cable. Even round it up a bit to 100 million subscribers. Let’s do the math.  Everyone get out your calculators and follow along. YOU WILL BE TESTED!

$5 x 12 months is $60 x 100 million subscribers.  Spotify keeps 30%.  that’s a $4.2 billion dollar music industry.  About half what the industry is now.   And it’s highly doubtful they will reach 100 million subscribers. What does Netflix have now? 40 million? and Netflix isn’t stupid enough to compete with itself with an identical free version of it’s service. 

Either way at least half the money.  And with half the money you can only employee half as many executives.

Let’s hope that the first batch out on the street are the ones that sold everyone on these deals. If it were up to me I’d start with the head of digital and anyone who has ever uttered the phrase “data is the future.”

You DO know there’s not room for all of you executives to work at YouTube and Spotify right?

And here’s some career advice for all you future former record executives: sell t-shrits.

 

 

How MERLIN’s “PANDOLA” Deal Could Give Labels Access to Your Share of SoundExchange Royalties

Do you trust your label to properly apply recoupable expenses against your SoundExchange royalties? Even at the best labels mistakes are consistently made.

Currently all SoundExchange royalties are spit between the performer and the labels regardless of whether the performer is “recouped” with his record label.  These royalties go DIRECTLY to the performer. The record label can not touch these royalties.   This is one of the reasons that these SoundExchage royalties are so important to Performers.  Performers do not have to rely upon the sometimes “creative” accounting practiced by their record labels.

The thing about the MERLIN PANDOLA deal is this gives Pandora and the Labels a “back door” to cutting the artists out of the equation.   That’s the point of direct deals.  Pandora and the labels can bypass SoundExchange.   Pandora’s ultimate goal is to weaken their opponent in the SoundExchange.  Right? By passing SoundExchange this weakens their finances and hence our collective bargaining positions.

Although SoundExchange so far has been able to continue paying the artist share of royalties on a nonrecoupment basis like a statutory license,  There’s nothing stopping Pandora from changing their minds and fighting SoundExchange later.  They can just start paying labels directly and their is really nothing that SoundExchange can do.  Look what Pandora did with Pre-1972 recordings?

We know that many labels are struggling with the bad deals they cut with Spotify would love to get their hands on the artists share of digital broadcast royalties.  The MERLIN deal gives them the perfect excuse.

Not only is MERLIN’s PANDOLA deal possibly illegal Payola, the decision to do a direct deal with Pandora was incredibly shortsighted. It will ultimately hurt indie labels by weakening their only ally in the government rate setting proceedings.  It potentially weakens SoundExchange by depriving them of revenue.    Thanks Merlin!  Thanks Caldas!

Indie Labels Should Demand that MERLIN and Caldas Immediately Repudiate Pandora Filing or Step Down.

We’ve been hearing from Indie labels and musicians all day wanting to know what to do about this threat to our SoundExchange income.

I’ll give you more on this later this week but FIRST we need to back SoundExchange in this fight.  Since unlike MERLIN they really do have our interests at heart. They only make money if we make money. We need to let SoundExchange know that as performers MERLIN does not represent our interests.

Secondly we need to put pressure on Caldas and MERLIN.  They got us into this mess, they need to get us out.  They need to repudiate the PANDORA deal. Publicly and Loudly.

But first let me be honest here.  I’ve never been a fan of Caldas.  In my short career as an artists’ advocate one of the most blatant examples of the record business squandering an opportunity was Caldas’ “response” to my Letter to Emily in Gizmodo.    The whole piece is classic “Old Boss” music business condescension (maybe worse).  “Oh these temperamental artists they don’t know what they are talking about.”  Which in a way is true.  Because people like Charles Caldas cut secret NDA deals with Spotify on “our behalf.”  So yes, we have no idea what the terms of the Spotify deal are because of people like Caldas.  HOWEVER somehow the reporter at Gizmodo was “leaked” a confidential report of just how much Spotify pays the indies associated with MERLIN. (Gee who leaked that confidential report?)   So yes unlike reporters who happen to now work for Spotify we artists don’t know the details of these Spotify deals because of condescending and patronizing jerks like Caldas.

The whole Gizmodo piece was so clumsy and transparent I actually felt bad for the dude at the time. Even though it was clearly a hatchet job directed at me,  I couldn’t help feeling sadness for the reporter and Caldas.  There but for the Grace of God go I.  Without my music career I may have had to become a paid PR hack for some low grade industry trade organization or pretend to be a real music tech journalist (while secretly working for Spotify)  Can you imagine coming home at the end of the day if you did such dishonest work? It also made me sad that these guys didn’t even have half a lobe.  Someone with half a lobe would be smart enough to NOT emphasize that all those Spotify deals and information are confidential.

To civilians confidential=sleazy.  

“Why do they have to hide it from Artists?”

These guys weren’t even very good at being hacks. Sad.

+++++++++++++++++++++++++++++++++

But that’s not even stupidest thing about Caldas’ rebuttal.  Look at the big picture.

Virtually no artist had dared to speak out against piracy and in defense of the recorded music industry since Lars.  Almost 13 years!  And when I finally did speak out the piece went viral. So what did the guy who represents those thousands of  long suffering indie record labels do?   He rebutted it.  On a tech blog.  WTF right?    And apparently like all these record business geniuses that know so much more than we ignorant artists, hIs rationale for doing so was truly and spectacularly myopic.

My read is he was riled up about one tiny little itsy bitsy thing.  Apparently one of the legal music choices I chose to recommend was MOG (it later became Beats).  Caldas had not cut a deal with MOG but had cut a deal with Spotify. Towards the end of this ludicrous and pathetic hatchet job he gets to what’s really bugging him. I quote:

“We won’t do a deal with any platform that doesn’t properly recognize the value of our repertoire, so we’re in business with Spotify and Rdio. We’re not in business with MOG [which Lowery recommends].”

Holy Shit!!!!  I picked the wrong streaming service!!!!!  That’s what this whole thing was about??!!  If I had just said Spotify instead of MOG none of this would have happened???

Right.  This is some serious long term strategic thinking going on here.  This is the guy negotiating on behalf of Indie labels.

So apparently Caldas and MERLIN think I”m wrong about streaming?  Fine.  But may I just remind you how fucking wrong these guys were  with the Pandora deal?  Pandora suckered them into giving them the deal they needed to lower performers SoundExchange royalties by nearly 50%.  This is almost exactly what Chris Harrison of Pandora did when he was at DMX.  The artist (myself) who Caldas implies doesn’t really understand this new fangled  world of digital technology (Funny since I have degree in Math, and am on the board of an angel fund) remembered this DMX deal.  Further we predicted that Pandora would use this deal to lower all our digital webcasting rates the way they did with it was done with the  DMX deal.  So who is it that doesn’t understand this new fangled digital music licensing world again?

Now all you UK artists, labels and managers better hope I’m wrong about what happens next.   Pandora will now take this deal to the PPL.  They will try to lower UK rates as well by citing the PANDOLA deal as evidence of a fair market rate.

Let’s hope I’m wrong.

++++++++++++++++++++++++

So in case you’ve been in a cave let me explain this again:

In a jaw-dropping bonehead move, Merlin cut a direct deal with Pandora to license songs at about 1/2 the rate proposed by Sound Exchange IF Pandora plays Merlin songs more often than everyone else. ( Isn’t that called payola?  Pandora is an FCC broadcaster after all!)  But what’s important here is that Pandora has now taken this deal to the Copyright Royalty Board and wants EVERYONE’S rate cut.  And it may very well work. Pandora’s lawyer did something similar when he worked at DMX and it worked.  You see if they present a “willing seller” rate to the board as evidence of the market value of songs,  the board can conclude that this is the market value of our songs. And MERLIN and Caldas just supplied them with a “willing seller” document. Instantly we all get our Sound Exchange Royalties slashed.  Thanks Merlin. Thanks Caldas.

Let em know how you feel:  http://www.merlinnetwork.org/contact

Did Merlin’s Caldas Lie in Billboard Article About Lower Rates?

On Aug 6th this article  written by Glenn Peoples in Billboard Magazine  “Pandora Signs First Direct Label Deal With Merlin”

http://www.billboard.com/articles/business/6207058/pandora-label-deal-merlin

Quote:

Caldas added the partnership will financially benefit Merlin’s artists and labels. Although no financial details were made available, he suggested the terms are no worse than the statutory rates previously received. “We wouldn’t do any deal where there was any risk we were going to get paid less.”

“No worse than statutory rates previously received”  which when used by normal  human beings means not lower rates.

But we now know from the Pandora filing (even with the redactions) that this is not true.

Read the pandora filing here:

http://www.digitalmusicnews.com/permalink/2014/10/28/pandora-now-steering-playlists-towards-lower-cost-music

Will Billboard call him out on this?  Did Billboard MisReport?

 

 

MERLIN “Pandola” Secret Deal Violates WIN Fair Trade Principles

What is the point of “secret” deals like MERLIN’s “Pandola” pay-to-play deal with Pandora Radio?   I mean the terms are not secret to the label that signs the deal right?   And the terms are not secret to Pandora Radio right?   So who is not in on this secret?

Artists.

Sleazy.

I don’t care if you are an “independent” label. If you make secret deals involving artists recordings that’s sleazy.

Doesn’t this violate spirit and  principles of WIN Fair Trade Principles:

We wholly disapprove of certain practices which leave artists under-recompensed and under- informed in the digital marketplace and will work together with the artist community to counter these practices.

We saw this from MERLIN with the Spotify deal as well.  No one knows what equity and other terms the indie labels got from Spotify.  Here is Charles Caldas talking to a “reporter” (that later turns out to be a Spotify employee) about Spotify.  The reporter has received “leaked” documents from “someone”  that shows Spotify payments.  Caldas clearly knows the details. But Caldas is criticizing artists like myself for being misinformed. Well, yeah cause Caldas cut secret deals with Spotify.  It’s like 1984 here.

NO MORE SECRET DEALS.  WRITE MERLIN HERE: http://www.merlinnetwork.org/contact

Charles Caldas of MERLIN: Independent Labels’ Minus $15 Million Dollar Man

Indie Music’s Minus 15 Million Dolllar Man

 

MERLIN is theoretically an organization that looks after the rights of independent labels and independent artists. Charles Caldas is the CEO.  Last month they made a high profile deal with Pandora.   We knew what would happen at the time. We knew that Pandora would use the deal as evidence in Copyright Royalty Board hearings to lower ALL OF OUR RATES.  And yesterday they did just that.  According to the Radio and Internet News these new lower rates that Pandora has asked the Copyright Royalty Board to impose on ALL performers and labels are about half the proposed SoundExchange rates.   Thanks MERLIN!  Thanks Charles Caldas!

We conservatively estimate that  this will save Pandora approximately $150 million a year starting in 2016. And of course this is $150 million dollars out of the pockets of rightsholders.    If the 20,000 independent labels that MERLIN claims to represent are 10% of Pandora spins, this means that MERLIN just cost it’s own labels $15 million dollars a year!

Henceforth Charles Caldas will be known as “The Minus $15 Million Dollar Man”

And you have to ask why did they have to do this now?
What was the hurry?
Were labels really telling Caldas “Quick let’s cut a deal with Pandora?”

I highly doubt it.

If I were forced to bet on it, I’d say its more likely that Pandora was urging the deal.  It coincides nicely with the line they’ve been privately feeding stock analysts that they’ve “made up” with the music industry.

The only company that clearly benefitted from this deal was Pandora.  This is classic ego-driven music business nonsense. Put your name on a deal. No matter how bad.

Or is it even worse?  This deal already looks like it’s Payola.  Is money changing hands somehow?   No, that would never happen between labels and broadcasters, cause that is illegal. And no label or label group  would ever do anything illegal like that.

 

Mr. Lowery’s Speaking Tour: Interview with @davidclowery after Columbia Law School, George Mason University and CMJ Keynote

trichordist:

David Lowery and Chris Castle talk creators rights, copyright and the internet…

Originally posted on MUSIC • TECHNOLOGY • POLICY:

David Lowery just concluded a whistlestop tour of academic panels at George Mason University and the Columbia Law School, finishing with a keynote at the Continuing Legal Education program at CMJ.  We caught up to him for a recap of his brush with academia:

MTP: What were these conferences about? How did you bring your academic experience to bear on your participation?

Lowery: Ha. My academic experience is relatively limited at this point. Yes this is my fourth year teaching “business fundamentals of the music business” and “publishing and licensing” at University of Georgia, but compared to many of the folks at these panels I’m a relative newcomer. Most of the folks on these panels have been teaching law for quite some time and often have extensive industry experience in entertainment and/or technology.    I think though I’m much closer to the younger students, the young and aspiring artists than…

View original 1,803 more words

WIN Fair Digital Deals Declaration vs MERLIN’S “PANDOLA” Deal

If there were ever two deals and two indie music organizations to contrast and compare these would be the two. WIN and MERLIN

As A2IM reported back in July

On Wednesday, July 16th, the Worldwide Independent Network (WIN), of which A2IM is a member, issued the Fair Digital Deals Declaration, a commitment by Independent labels to support fair accounting to artists. Currently, many music licensing deals include payouts covering unshared compensation, which include equity stakes, minimum revenue guarantees not related to performance, renewing advances, etc. (aka “Breakage”) — all of which are creating issues in digital licensing between services and labels (read previous A2IM item about Breakage HERE).

Meanwhile Merlin cut a direct deal with Pandora to license songs at about 1/2 the rate proposed by Sound Exchange IF Pandora plays Merlin songs more often than everyone else.

UH….  Isn’t that called payola?  Pandora apparently owns a terrestrial radio station and is an FCC broadcaster after all!

Or should we call this deal  Pandola?

So not only  did MERLIN get expertly played by Pandora and as a result ALL performers may lose almost half their SoundExchage revenue,  MERLIN’s excellent deal for Indies artists is warmed over Payola?

That’s really farsighted (sarcasm).    What’s to stop the majors from cutting the same deal with Pandora and outbidding us for airplay?   I suggest the folks at MERLIN read  Hit Men: Power Brokers and Fast Money Inside the Music Business.  Just the first chapter.  The majors specifically used “indie promoters” and payola to lock independents out of the radio market.

So on one hand you have a deal by WIN that is farsighted, egalitarian and benefits all artists.   On the other hand you have MERLIN with their sleazy secret payola deal that could potentially screw all artists across the board.

 

Set, Match and Game to Pandora and Chris Harrison: MERLIN Gives Pandora the Rate Cut They’ve Always Wanted.

 

Harrison trounces performers and labels with MERLIN deal.  Congratulations. 

In the past I’ve had rather unkind things to say about Pandora and their chief legal strategist Chris Harrison.  But today I’d like to sincerely congratulate them on a game well played.  Pandora and Harrison have successfully outflanked performers by exploiting us where we were  weakest (and stupidest).  That weak spot?  The independent label rights licensing association known as MERLIN.

MERLIN led by Charles Caldas represents over 20,000 independent labels.  In a jaw-dropping bonehead move ,Merlin cut a direct deal with Pandora to license songs at about 1/2 the rate proposed by Sound Exchange IF Pandora plays Merlin songs more often than everyone else.  Isn’t that called payola?  Pandora is an FCC broadcaster after all!

We at the Trichordist knew what would happen next. Pandora would present this as evidence of a “willing seller” rate and then ask  the Copyright Royalty Board  to IMPOSE this rate on EVERYONE (even those of us that  never asked Charles Caldas to represent us).  Yesterday we learned that this is exactly what Pandora did.  How did we predict this?   We’re not particularly smart it’s just that  this is exactly the same move that Harrison used when he was at DMX.  You had to be pretty dim to not see this coming.  Apparently MERLIN did recently part ways with a  turnip truck.

Fool me once shame on you.

Fool me twice shame on Charles Caldas.

Congratulations Pandora!  Congratulations Chris Harrison.  Well played sirs, well played.