Principles for Artist Compensation in New Business Models

April 3, 2009 11:05 AM

Principles for Artist Compensation in New Business Models

Written by Ann Chaitovitz, these principles guide music-based business models in the key areas of Licensing, Collection and Distribution of Revenues.

I thought this would be a better place to post it than the front page, probably because my last post was a double. [Via Pitchfork]
posted by dobie (6 comments total) 1 user marked this as a favorite

great link dobie! my own tiny little label (which my wife and i also use to release our own stuff) tries to adhere to the kiss (or "keep it simple, stupid") principle, while being as artist-friendly as possible, so we guarantee a straight 75-25% mechanical royalty split from our net sales receipts, with the artists collecting the biggest part of the split. our basic agreement is also non-exclusive.

we don't have any stake in publishing or licensing rights except for our own band, and one other act whose publishing rights we administer (for a 15% cut) but don't own.

we can offer relatively generous royalty terms like this because we have very, very low operating overhead as a home-based business that relies chiefly on word-of-mouth for promotion (with occasional one-off purchases of PR services or advertising, if we've got extra budget). but i think the basic business model could also scale up effectively.

we use third-party on-demand physical CD fulfillment and digital distribution services to distribute our releases, so there are no real inventory or up-front physical CD manufacturing costs. (the one exception to this being that we generally supply bands on the label with relatively small advances of on-demand physical CDs for sale at live shows; any sales made on the CD advances are subject to the same royalty split, which the bands pay back out of whatever receipts they take or i deduct from their total royalty share.)

on the flip side, we've had for the most part only modest sales, which is due largely to the fact that we don't have a significant promotions budget. my aim when setting out was to avoid making any large capital investments in establishing the label, and to survive by letting the label self-fund its growth at a slow, but steady and sustainable pace so that any losses along the way would be manageable. it's been slow going, but there have been periods of growth.

i wish i could do more to help our artists turn their music into full-time careers, but then, music sales in general are in steep decline these days, and even when we have put muscle behind promoting a release, results have been mixed: the release we push might generate serious interest, but sales generally don't pick up enough to justify the big promotional expenditures.
posted by saulgoodman at 2:05 PM on April 3, 2009 [2 favorites]

At a certain level of sales, Ann's proposals make good sense. However, the "per unit" sales approach only works with large sales volumes.

For the rest of us? I wonder why we persist in following the example of the corporations who can afford huge promotion and distribution budgets, and who actually own the music playing field. We can and should de-legitimize the unit sales model, by refusing to play along. It doesn't really work for us, anyway.

Sold as units, music is way undervalued in our culture. Seriously, what is the value of your favorite song? Is it the five or ten cents that may have gotten back to the performer from your purchase? What if you gave the performer, directly, what you personally felt the song was worth to you. How much would that be, when you leave questions of mass consumption (and assumptions of millionaire status) out of it?

At smaller, more realistic exposure levels I promote the idea of sponsorship. Rather than pay for the song as such (which is really a non-object, an advertisement, a thing used for promoting the talents of the performer) I suggest that people pay for the work behind the song, and for the work yet to come.

$20 a year seems like a good amount to request. A few thousand sponsors can easily support a musician's career...

Steam Powered Studio
posted by Liv Pooleside at 7:46 AM on April 10, 2009

That's a fascinating point Liv. aims to do this [video pitch].
posted by dobie at 8:31 AM on April 10, 2009

Sold as units, music is way undervalued in our culture. Seriously, what is the value of your favorite song?

If I could afford to pay a $20 annual sponsorship to even 1/1000th of the artists that I think deserve my financial support, I'd be a rich, rich man. Alternative compensation models like donation or sponsorship driven models are nice in theory, but I haven't see too many examples of them paying off yet--not to say that they won't.

And I still think the long album format will make a comeback one day, although albums won't be coupled to a particular form of physical storage media in the way they once were. There's going to be a long, awkward transition period when everyone's struggling to figure out just what new form the album is eventually going to have to take to really recapture audiences. The web will be integral in how albums are released and promoted in the future, that much seems hard to dispute.
posted by saulgoodman at 1:12 PM on April 21, 2009

If I could afford to pay a $20 annual sponsorship to even 1/1000th of the artists that I think deserve my financial support, I'd be a rich, rich man.

Suppose there is a finite amount of money across the board that gets spent on music. Picture where the bulk of it goes- that's right, it goes to the most heavily promoted artists.

(I'm not referring to your personal music budget, necessarily, but to the world's music budget)

With sponsorship I think that there will be a sort of inverse relationship develop between the popularity of the artist and the amount people are willing to send to them. Once an artist has a major record company promoting them, and they are getting lucrative ad deals and high concert ticket prices, let them fend!

OK, so that leaves maybe a couple thousand other bands that you'd like to sponsor. Well, you've just got to make the hard call, is all. You realize that other fans are out there, helping to support your second through 999th tier favorites.

You can help those guys in other ways- put out the word about them (you do this anyway), share their music around (you probably do this too- that's how we hear about new bands).
posted by Liv Pooleside at 3:53 AM on April 22, 2009

(oops- never finished the point I started with- more coffee!)

So there's this finite music budget. So, if sponsorship means that people spend less money on the most heavily promoted bands, and if they pocket 50% of what they would have spent (just because they can), that's still 50% of a massive amount of money that is free to be spent sponsoring those what deserves it!

(I know it sounds like there must be underwear trolls in there somewhere, but really, the entire battle is in convincing people that it's a better way to pay)

And it is a better way to pay. I've written a song that got airplay many years ago. On two local stations, it's true, but the money I got that summer looked very good. Except that three $20 sponsors now give me more than the money I made on those (costly and very rare) record spins.

I'm basically unknown, yet I'm getting hundreds a year through sponsorships. If I were playing out, developing an audience and promoting my career through those channels (and were better looking and had more talent,) I believe I could support myself through sponsorships.

More so than on CD sales, anyway.
posted by Liv Pooleside at 4:14 AM on April 22, 2009

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