Digital Music Distribution

Andy Richards / Uniform Motion

This is a presentation I made at the French Festival “Les Siestes Electroniques” in Toulouse, June 2013

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40 000 - 60 000 B.C

Prehistory

Why start a presentation about digital music distribution with a picture of a caveman playing a guitar?

Because guitar players are all cavemen? Maybe!

In fact, music has existed for about 50000 years and for tens of thousands of years, the only way to get your music heard was to play it for people.

2,000 B.C

Writing

Things start to evolve when man invents writing..

The Nrst traces of written music are from 4,000 years ago.

1490

Printing

Then we invented printing, which allowed us to reproduce written music more easily.

1791

European Copyright

And following the French Revolution, French writers obtained the 'Droit d'auteur' (copyright) which allowed them to get paid when a copy of their work was made.

New technology: you adapt and get organized.

1850

SACEM – French PRO

In the 19th century, songwriters were rather unhappy to see their work played in public places without them getting any compensation.

Ernest Bourget, a French songwriter, refused to pay the bill in a restaurant that was playing his music.

The resulting lawsuit, which he won, was followed by the creation of SACEM, a performance rights Organization..

19th Century

Recorded Music

During this time, inventions like the phonograph changed the way we listened to music. For the Nrst time in history, you could record sounds, and play them back.

The mechanical piano (a piano that can play on its own using perforated paper became more and more popular) and printing machines became more industrialized..

1921

Radio

The Nrst public radio station in France was launched in 1921 (1920 in the US).

On the one hand, you can record sounds, and on the other, you can play them over the air usingradio waves.

1935

Mechanical Royalties

Mechanical piano and phonograph sales, and radio ads all generate revenues, partly thanks to compositions written by members of the Performance Rights Organization, SACEM.

The writers adapt to these new technologies and get organized so they can collect their rights.

The SDRM (society for the administration of mechanical rights) is founded in 1935 to collect rights when compositions are played mechanically. ie: phonograph, piano, radio)

1948

The album

The next invention to revolutionize the music industry was the 33 1/3 RPM vinyl, released by Columbia in 1948.

Prior to its release, a record could only play about 10 minutes worth of music.

This new Long Play format allowed you to play roughly 40 minutes of music, which become the default format for albums, and has been ever since.

Television

1950's

Television became more popular in France after the Second World War.

SDRM quickly adapted by signing an agreement with ORTF (Public broadcast company) to collect rights for music played on TV.

1954

Pop stars

One of the consequences of the development of television is that people could see what the performers looked like.

1954, Elvis Presley performed on the Ed Sullivan Show and pop music has not been the same ever since.

The performer era begins.

1955 - 1959

Performers' rights

Up until the 1950's, the French PRO, SACEM, was defending songwriters' rights only so the performers decided to join forces, to adapt and get organized by setting up ADAMI in 1955 (who represent the performers whose names are on the album cover) and SPEDIDAM in 1959 (who represent the performers whose names are not – studio musicians for example.)

1962

The cassette

A new format comes along that's going to shake up the industry, the cassette tape.

It's small, cheap and you can record music on it yourself, and make copies of other cassettes.

1979

The Walkman

With the Walkman, cassette tapes become highly portable and sales increase.

1981

Video killed the radio star

Next important date, 1981.

MTV is launched in the US.

The labels are selling large amounts of music at the time and see MTV as a way to promote records so they don't Nght hard to monetize the videos.

1982

The CD

The next year, the compact disc is released.

At Nrst, the CD is considered as an audiophile format, especially for classical music.

Rikodisc beneNt from this perception, when they Sign David Bowie, Frank Zappa and Robert Wyatt to their CD-only record label.

1985

“La rémunération pour copie privée”

SDRM ADAMISPEDIDAM

SCPA

SCPP/SPPFSACEM/SACD/SCAM

The labels hate the cassette tape.Songwriters, performers and record producer organizations lobby the French government to vote an exception to copyright law in exchange for a tax on blank cassettes. Today, these taxes still exist on CD-R's, hard drives and even smartphones. SDRM = 50%ADAMI/SPEDIDAM = 25%SCPA = 25%

1991

The PC

The CD is a digital format. It's fairly easy to convert the contents of a CD to a computer readable Nle.

In the 1991, the WAV format is released.

However, few households are equipped with PC's at the time and songs in WAV format take up a lot of space on the small hard drives people were using.

Add to that the fact that PC loud speakers were lousy, it's not that surprising that the record industry didn't see computers as being a much of a threat

1995

Then the MP3 format comes along.You can compress the song to make it smaller.

Internet

1990's

Then all you need is a worldwide computer network and sharing music freely is easy!

We all know what happens next.

The slow and painful death of the music industry!

1997

CD distribution

Perhaps not all of it...The internet has also had some positive side to it like when Derek Sivers founded CD Baby in 1997.

Derek wanted to set up a webite to sell his CD's. His friends asked him if he could sell theirs too and then CDBaby, who are great at designing logos, became one of the biggest distributors of unsigned music.

1998

1st MP3 store / MP3 player

People generally think of Apple when you mention legal download stores and digital music players but the very Nrst MP3 store was launched in 1998 by eMusic, and the Nrst MP3 player (MPMan) was released the same year in Korea.

1999

Peer to Peer

Napster was founded in 1999. The site was based on peer to peer technology and allowed people to share their music collections. It was almost an overnight success. 80 millions users within less than a year.

At the time, I thought it was a great promotional tool and uploaded some demos I had made on my 4-track.

What I didn't understand, was why artists like Madonna were sharing their music for free on the site.Strange!

2000

The lawsuit

I got a better grasp of what was going on the next year when the record companies (with the help of a few artists) sued Napster.

2001

January July November

Death of Napster – The rebirth of Apple

Napster was forced to close down its service in 2001.

Coincidentally, the same year, Apple released iTunes (which at Nrst only allowed you to rip CD's and play back your digital music collection)

And towards the end of the year, the iPod!It's a revolution!

2002

Social

2002 marked to beginning of social recommendation in music with the launch of Last.fm/ audioscrobbler, a plugin that scans the music you listen to and uploads it to site that displays what you've been listening to and makes suggestions based on what people with similar taste listen to.

2003

iTunes Music Store & Myspace

2003 : Apple releases the iTunes Music Store. It's the beginning of the Apple ecosystem. They Nx the 99 cent download price.

The same year, Myspace was born. A place for friends which soon became a place for unsigned bands.

2003

Digital Distributors

Just like some were able to adapt quickly to the CD, certain companies were quick to react to the new digital landscape.

Digital distributors, based on the same model as physical distribution were set up to provide music to iTunes. They are selective and take a percentage of each sale.

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2005

Digital distribution for DIY musicians

Luckily for DIY artists, CD Baby (who improved its logo slightly) and Tunecore..CDBaby takes a small % and Tunecore takes 0%.

For the Nrst time, independent/unsigned artists can get access to worldwide distribution for a small fee and keep all their rights.

2005

Other types of online music

Jamendo, a website with royalty free Creative Commons based music, proposes various different synchro and public performance licenses.

Pandora, after failing to successfully sell their automotive orient music product, based on the Music Genome Project, decides to launch Pandora Internet Radio. Using 400 criteria (vocal style, instrument type, tempo, etc...) gives a digital fingerprint to a song. Their service then makes playlists based on the similarities between songs.

Even though YouTube was launched as Video sharing platform, many users start uploading songs with static images.

2006-7

The birth of streaming, Amazon enters

Although Spotify was not the Nrst streaming services (Rhapsody was doing long before they were) it was the Nrst to use peer to peer technology to improve the reliability of its service. The interface is simple. The catalogue of music is huge. Spotify has been pretty successful.

Deezer has been doing rather well in France, mainly due to a deal they have with Orange, the largest internet provider.

Around the same time these streaming services started, Amazon entered the digital music space, becoming a fairly serious competitor for Apple.

2006-7

The Marketing Tools

As digital music became more widespread, marketing tools and services were made available.

Like Topspin (initially only for big name artists) and Reverbnation (for DIY artists).And SoundCloud, which is the YouTube of sound according them.

2008

And in 2008, Bandcamp is launched.

I love Bandcamp.

They have loads of really useful stuff for DIY artists. You can Nx your own price, the user gets an immediate download in the format they want when they buy a CD, you can integrate your page really easily with your website. They have fan proNles, stats.

Along with MailChimp, Bandcamp has been a great tool for us.

2009

Content ID

In 2009, Kickstarter started the crowdfunding trend.

The same year, YoUTube started experimenting with Content ID, a technology that allows you identify your content on YouTube.

€0,000/stream!

€0,01/stream

€0,004/stream

€0,004/stream

€0,00028/stream

€0,70/song

€0,70/song

€0,70/song

€0,21/Song

Streaming & Download Revenues

Source: Uniform Motion Sales

So let's look at some numbers now.

Concerning Spotify, the number above is an average. I have a seen per stream rates ranging from €0.0002 (free version ) to €0.0122/stream (premium version).

The current debate is about whether a) the rates are high enough and b) whether or not streaming cannibalizes sales.

Downloads Vs Streams

Source: Uniform Motion Sales

2010 2011 20120

20000

40000

60000

80000

100000

120000

140000

160000

180000

Downloads

Streaming

Our download sales (iTunes, Amazon, Bandcamp) are in blue.

Our streaming numbers (Spotify, Deezer and YouTube) are in orange.

You can see that streaming has largely increased over the past 3 years and downloads have decreased slightly.

Revenues in euros

Source: Uniform Motion Sales

2010 2011 20120

500

1000

1500

2000

2500

3000

Downloads

Streaming

Total

But this is a little apples and oranges so let's look at revenues instead.

Download revenues are in blue, streaming revenues are in the orange and the sum of both is in yellow.

For the moment, it looks like streaming is cannibalizing download sales and isn't paying enough to compensate for the loss.

2012Spotify = Stable revenues

Source: Uniform Motion Sales

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec0

500

1000

1500

2000

2500

Streams

However, one thing to note is that unlike the old model, streaming is a constant, regular revenue stream

You can clearly see that the numbers of streams is fairly stable over a whole year.

2013: Spotify streams growing

Source: Uniform Motion Sales

Jan Feb Mar0

500

1000

1500

2000

2500

Streams

And the trend so far in 2013 is that the numbers are increasing.

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LP

Cassette

CD

Digital

Streaming Sub

Total

Worldwide album sales (Source: IFPI)

If we look at the sales of various different formats over the past 40 years (thank you IFPI) you can clearly see the rise and fall of the LP, the cassette tape and the CD.

You can also see that it took the CD 20 years to get to its sales peak.

Streaming is in its early stages, you have to give it some time.

Services like Spotify, Deezer and Rdio, are still fairly small and are used mainly by early adopters.

2011

€0.002/match

So far, Apple has not launched a streaming service but they have been testing the water.

In 2012 they launched iTunes Match, a service which allows you to store your music collection (even songs you didn't buy on iTunes) in the cloud?

For each song that is matched by iTunes they pay €0.0025.

2013

iTunes Radio

€0.0009/stream+15% of ad money

In 2013, Apple announced iTunes Radio.

According to several reports, the service will pay €0.0009/stream and 15% of ad revenues.

How do I get my money?

So what can I do as an independent DIY artist to get my money?

Sell your soul to the devil !

One solution is to sign with a major label. They can do all the work for you but you don't necessarily want to work with a major, and perhaps they're not interested in your music. :)

50%

EDM artists

As a side note, just in case you think that it's not really an issue, you may be interested to know that according to PRS for Music, 50% of EDM artists do not collect their songwriters royalties for radio play. And electronic music makes up 15% of the music played on BBC Radio 1.

CDBaby just released a cool infographic that explains how the money from streaming services is collected.

Getting your music on Spotify and iTunes is easy. There are loads of digital distributors who can do that, who then pass on the royalties from the master.

But as you can see on the CDBaby infogaphic, certain rights are collected by PRO's and mechanical royalty collection societies. Without being a member of all of them, it's next to impossible to collect all the money you're owed.

TuneCore and CdBaby both recently set publishing services.

They register your songs with ASCAP, BMI, SACEM, GEMA, etc... and collect your rights.You could do this all on your own, but it will cost and arm and a leg and a lot of time.

YouTube

Source : Digital Music News

We've talked about iTunes and Spotify, but what about the biggest streaming platform of them all, YouTube.

As you can see on the graph above, YouTube is huge compared to other streaming sites.And YouTube generates revenue from your music on their site, through ads.

Monetizing YouTube€0.00028/stream

You can become a YouTube partner and monetise the videos on your channel.But what about songs that were uploaded by someone else?

A new company called Audiam can help you identify your songs on YouTube, place a buy ad next to them and monetise them.

Zimbalam and some other digital distributors propose similar services.

USA

In the US, the 1998 Digital Millenium Copyright Act was voted. It allows companies to set up internet and satellite radios, and non-interactive streaming services without having to license the music directly. They just have to pay the rates fixed by the government.

20 million users

2.5 million users

70 million users

DMCA

SoundExchange is the organization that collects the rights on behalf of record producers and performers. It's free to register with them as a producer and performer.

(Pandora and SiriusXM pay songwriters via PRO's - ASCAP/BMI/SESAC)

ADAPT & GET ORGANISED?

As we've seen so far, for the past 200 years, we've been adapting to new technologies and getting organized to make the most from new opportunities.

Today, PRO's are protecting the interests of songwriters, the SCPP is Nghting for the labels.And ADAMI is doing their best to help performers.

But it's pretty everyman for himself.

So who's out there defending the rights of DIY artists who compose, record and release music on their own?

Because some are getting organized and are adapting quickly, like Sony ATV – one of the biggest publishers in the world, who recently separated from ASCAP in order to negotiate for their songwriters directly.

Adami sent an open letter to the French government to plead with them to help protect the industry from Apple and YouTube.

Pandora is paying lobbyists to help try and lower the rates Nxed by the copyright board, and even went so far as to buy a radio station in North Dakota so they could beneNt from special internet rates for FM radio stations.

In Germany, an alternative to the PRO's (SACEM/GEMA, etc...) is currently beging set up that would allow artists to release music under Creative Commons licenses and collect rights for commercial uses, which is next to impossible to do under the current system in place.

ADAPT? GET ORGANISED?

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Thanks!

andy@uniformmotion.net

www.uniformmotion.net