Tag Archives: David Lowery

DAVID BYRNE: GREAT MUSICIAN, TERRIBLE MATHEMATICIAN

The latest anti-Spotify editorial screeching around the internet is David Byrne’s editorial on why he’s taking as much of his music off Spotify as he can. As an artist who owns their music, he’s totally within his right to do so. His personal reasons to do so are ones I can certainly respect. However, his public forum explaining his reasoning is full of gross inaccuracies, misrepresentation and bad math. In fact, this isn’t even the first time he’s used bad math to prove a point. Believing Byrne’s anti-streaming diatribe can be harmful to a musician’s own future earning potential. Let’s look at the facts.

Most of the misinformation is found in the fifth paragraph where Byrne mentions several previous artist posts about streaming revenue. To correct each point:
Damon Krukowski’s payouts for “Tugboat”, a 25 year old song that was not originally a hit, largely focused on minuscule songwriting revenue, while Byrne is referring to royalties from the master recording. Once again, an artist uses most people’s lack of knowledge of the different revenue streams to forward an anti-streaming agenda.
• David Lowery’s widely-distributed blog post on Pandora also referred specifically to his songwriting revenue. See: previous bullet point. Plus, I debunked this here.
• The number of streams quoted by Byrne to make minimum wage for a group of four people comes from data that is actually four years old. Based on royalties rate my own label receives, the figure in 2013 would likely be around 75,447,280 streams a year. This is 68% lower than the figure Byrne mentioned, and while still a large number, the decrease is an indication that Spotify’s royalties are improving as adoption increases.
• Similarly, based on Byrne’s presumption of a 15% royalty rate, each Daft Punk member would earn close to $42,000 each for “Get Lucky”, not the $13,000 Byrne claims. But the 15% is likely a very low figure considering that Daft Punk’s record was the subject of a major label bidding war that certainly resulted in both a high advance as well as a higher royalty rate.

The rate that I used for the above math is $.00533 per stream, which is the blended worldwide gross royalty rate for Spotify that my label personally received for all recordings in a sample month from 2013. The rates for each song vary depending on how many plays are from subscription vs. non-subscribers. The rates also vary greatly from country to country, which can be as low as $.002 in countries such as Poland and Estonia, and get as high as nearly a full penny per stream in many of the Scandinavian countries with large adoption rates.

One of the issues artists need to wrestle with in a new streaming world is their ability to attract a global audience. If our music catalog were only attracting a US audience on Spotify, our rate would actually be lower than our overall royalty average. However, we’ve been able to have music that attracts people throughout the world which raises our overall rates. This also occurs with iTunes revenue, which typically pays out at higher rates in first world countries than the US does.

Another issue is the need to have a large body of work. I have been an advocate of artists releasing more music more often. This both creates more opportunities for revenue as well as more possibilities for a song to become popular enough to sustain an artist. Complaining about Spotify’s royalty rates and focusing on individual song examples rather than whole artist catalogs is a classic misdirect. It’s similar to when news media describe a trend, yet focus on one individual’s story (as outlined in Barry Glassner’s great book ‘The Culture Of Fear’). Saying that each member of Daft Punk only got $13,000 for one hit song sounds scary. Yet add in the streams from the other tracks from the new album, and then add in the new Spotify streams for tracks from previous albums that almost always occurs with new hits (not to mention the correct math). Even with Byrne’s likely incorrect assumption of a 15% royalty rate, each member of Daft Punk is likely to be receiving over $500,000 this year. Each. Just from Spotify. Music royalties are part of the reason that Celebrity Net Worth cited the duo as the #2 richest electronic DJs in the world.

But part of Byrne’s doomsday scenario is a world envisioned by Spotify dominance. For my label, Spotify only represents 15% of all digital revenues, and gets smaller when other income streams are factored in. Logic would dictate that as Spotify’s percentage of sales increases with us, so would the amount of streaming because they also would bring along more music listeners. In the last year, this has indeed been the case.

Byrne, however, points out that he’s concerned about tomorrow’s revenues, stating that if Spotify’s growth continues, there won’t be other sources of revenue. A very similar argument made around similar technology shifts such as the advent of radio. Yet my royalty statements include revenues from brands such as EMusic, Nokia and Myspace, all brands that have been left for dead. The future will certainly see the royalty percentage mix shift, but it will likely be one where some people stream, some download, and they’ll all do it on a variety of different types of sites around the world.

The real issue is the larger question that Byrne addresses about the overall effect free and cheap streaming has. But the issue is really about supply and demand. Spotify as a whole is paying out hundreds of millions of dollars yearly, which is a net positive for recorded music. But even with the claim that 4 million songs go unplayed, there’s still tens of millions that are, which means the collective pie of revenue is spread much thinner than it ever has. The good news is the new music business allows more artists in. The bad news is that most get paid less because the pool doesn’t grow proportionally.

The fundamental issue an artist has to deal with is not one of royalty rates, but this simple concept of supply and demand. If any service, download or streaming, is going to have millions of tracks at your fingertips, than there is an overabundance of supply. The only way to make money is to increase the demand by a significantly higher factor. By this simple definition of business, music is in the volume business game. Those who are able and willing to play that game are reaping enormous benefits.

The other way to combat supply and demand is by creating diversified revenue streams. Each artist I’m currently working with has a different mix of what those streams look like. But the important thing is that while there may be one dominant player in one revenue stream, that doesn’t mean that this is all recorded music revenue streams. Our label generates revenue from download sales of singles, download sales of albums, streaming transactions on demand, streaming transactions in radio players, online licensing revenue, sync revenue, performance revenue, direct sales from band websites, road sales, advertising, and even physical product.

So, in a way, I’m thrilled when artists choose to take their music off Spotify. Because in a small way, this limits the number of songs that may take attention away from songs in my catalog. We are still in the throes of a very disruptive period that is clearly resulting in winners and losers. There are many successful artists, both commercial and creative winners, who are not complaining about royalty rates. They are focusing on making amazing music that is desired by many people the world over. Rather than Byrne’s comment on the internet sucking “all creative content out of the world”, what’s actually happening is artists are finding even more creativity to succeed. Because that’s what artists do. Those that focus on improving their craft and growing their body of work are finding varying levels of success. At that point, the math starts to take care of itself.

PANDORA ROYALTIES: THE REAL ANSWER

Pandora royalties came under fire once again last week, with a firestorm of blog posts pointing a ton of virtual fingers. Facts become “facts” as each side is skewing the story to their benefit. All sides should take equal blame for misrepresentation. The truth is that online plays equal audience impressions, and this disparity causes confusion on both sides. When you do the actual math, Pandora is likely paying songwriters less than other broadcasters, but also has a royalty at an enormously higher multiple compared to others for their “all in” rates. Yet even if royalty disparities get fixed, it won’t solve the issue of low payments to artists and songwriters because Pandora’s enormous catalog means tiny slices to a greater range of creators.

For those who haven’t been following, here’s what happened:

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IS STEALING MUSIC REALLY THE PROBLEM?

Once again, the issue of stealing music and its moral/financial/ethical arguments are dredged up. And once again, most people miss the overall point, causing the collective issue to dig a deeper ditch while those who’ve moved past it (i.e.: major labels) are busy raking in the dough in the new music business.

Yeah, you heard me. It’s 2012, and now the neophytes are actually many indie artists (not all) while the smarter ones tend to be concentrated at major labels, thereby strengthening their power.

What started this was a post on NPR’s website by an intern named Emily White who admitted to buying very little music in her life but owning a lot via various levels of legality. This led to an impassioned response by Camper Van Beethoven/Cracker frontman David Lowery, who eloquently argued for the ethical and moral obligations Emily should have towards these artists and how stealing music has dramatically impacted their financial lives. This post has sprung up impassioned responses by, among others, Bob Lefsetz and a manager who is also, coincidentally, named Emily White. People have dug in their heels and have spilled many hours defending and vilifying both sides.

Yet lost in this discussion is one important element. Facts. Because if you’re going to argue that stealing has impacted your business, you should actually prove that…y’know…a lot of people have actually stolen your music.

Google, as the worldwide leader in search results, is a strong indicator of actual file trade demand. In fact, industry watchdog Moses Avalon argued such this week at New Music Seminar. Yet, when I went to look on Google Insights to see the level of demand for free music by David Lowery’s group Camper Van Beethoven, the message I get is, “Not enough search volume to show graphs.” This basically means, from what I can gather, that less than 50 people per month in the entire world are even showing intent to steal his music. Statisticians basically refer to this as essentially zero. Technically, the same search terms for his band Cracker show some potential thievery intent at work. However, if you actually searched these terms, you’d find most people were actually looking for a program to crack site passwords, and if they were looking for music they were more likely intending to steal the music of Uncle Kracker, who might actually have a legit beef on music stealers.

None of this is to say that I’m naive to think nobody is stealing music. Far from it. I just don’t think they’re stealing the music of the majority of artists bitching about thievery’s impact on their business. The statistics don’t bear it out. At my panel at New Music Seminar, Musicmetric CEO Greg Mead pointed out that file trading is actually decreasing in recent months. This echoes what fellow panelist Russ Crupnick reported in NPD Group’s “Annual Music Study” back in March when they reported that P2P site activity decreased from 19% of the internet population in 2006 to 13% last year.

Respected blogger Cory Doctorow also noted last month that a summary of over 20 different papers on file trading shows very little impact on sales from file trading. Drew Wilson, the author of the summary, got his results from such “fringe” groups as The Wharton School, The Journal of Law And Economics, and The Journal of Business Ethics. The most interesting line in the summary to me is this one:

Judging by the evidence we’ve collected, the evidence does not point in the direction that file-sharing, in and of itself, displace sales, but rather, other factors would also play a role in displacement of sales.

The primary “other factor” is the fact that there are too many artists competing for shrinking dollars, largely due to the shift from albums to singles. Despite the economic number that David Lowery quoted of the number of professional musicians falling by 25%, if you took “album releases” as an indicator, it seems like the number of pros has increased. In a decade, we’ve gone from about 30,000 albums being released to over 77,000 last year. And that’s just albums going thru legit channels. The problem, as noted by Chris Muratore of Nielsen on the previously noted New Music Seminar panel, is that 94% of those releases sold less than 1,000 units. Indicators that I have examined showed those low sales aren’t because of people stealing them. They come from too many releases causing most people to not even realize they are out. For example, 80s rocker Lita Ford has a new album that came out yesterday. As of this writing, it’s the 91st most popular new release on Rdio. How many of you have the patience or time to sift thru the other 90 releases to get to #91? Let alone decide to even put in the effort to steal it? Whether you were going to listen to it or not, I’d be willing to bet that almost everyone reading this found out that Lita Ford had new music from this paragraph. Stealing it is even further down their priority list.

And now that you know Lita Ford has a new record, what are you going to do about it? If you have a remote interest in her music at all, you’re most likely going to listen to it on a perfectly legal source such as YouTube, Spotify, Rdio, Mog, Rhapsody or Slacker. Why? Because I bet you caught yourself subconsciously saying that it would be quicker and easier to stream it and see what it’s about there than finding a site to steal it from, let alone having the downloads clutter your hard drive. Guess what? This is what most people do now. Having a download on a hard drive…single or album, purchased or stolen…this is the 2012 equivalent of “buying a CD with one good song on it”. People are smart and will legally stream something before any sort of ownership decision solely because they don’t want their hard drive cluttered with music they don’t like. And guessing by the demographic of my readership, I would also guess most people just want to check out what Lita is up to and have no intention of any sort of ownership. The music would have to be mind-blowing to shift the decision from “let’s see what she’s up to” to “I need to own this”.

So while all these independent artists argue thievery, do you know who’s winning? Major labels. This week, of the top 100 tracks on Spotify, only 6% are on independent labels. Major labels have figured out that the game is about exposure and awareness, two things that they are actually quite good at. It’s not about royalty rates, thievery, or even quality of music. It’s all about how I get people to know I exist. Major labels aren’t ignoring file traders, but they have moved past how much of their day they concern themselves with it. Instead, they focus on putting energy behind making music that the public wants and marketing the shit out of it so it rises above everyone else. While you’ve spent the last few years claiming the major labels are “dinosaurs” who are going to be “out of business”, they’ve actually become stronger behemoths who are more progressive than you realize.

As for the quality of their music, that’s a subjective opinion. And it’s no more subjective than the independent artists who have figured out how to make a big business out of the new music business. Artists like Tyler Ward, Kina Grannis and Alex Day, amongst others, are making six figures a year in the new paradigm. They struggle to get respect from traditional media because they’re not considered cool, credible musicians. Yet they run rings around the businesses these so-called cool bands deliver. Why? Maybe it’s simply because they deliver the kind of music more people want nowadays. As far as I can tell, they spend not a minute worrying about the money they don’t make and instead spend time making more money from the sources that do pay.

I agree ethically with David Lowery’s assessment. A person who spends extra to protect migrant workers in a third world country but takes money out of musicians’ mouths is a hypocrite. Emily White should stop complaining about wishing for a Spotify-like service and actually…y’know…subscribe to Spotify. But for actually succeeding in 2012, it’s the wrong argument. The biggest problem that David Lowery has to face is exemplified by Zach, the 24 year old New Media indie label guy at the end of Bob Lefsetz’ response post to Lowery’s “screed”. When told by a co-worker that David is the founder of Camper Van Beethoven and Cracker, he replies, “Not sure what either of those are…”