All posts by Brian Rawlings

Jun 19 2014
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15 Years after Napster

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This week marks 15 years since Napster invaded the previously secure executive suites of the record labels and music publishers.

Napster (and what followed) disrupted a lot of things. Distribution, the album model, forced allegiance, radio, artist development and therefore should have ushered in a new era of fan-engaged, educated, best-music-wins types of scenarios. Although there has been some progress, not much has changed.

The only thing that is noticeably different is the elimination of the profit margin that physical product created. When you look at the top selling artists they are the same as they ever were, albeit with different names. If you look at the record company processes, they are the same, but a bit less opulent. In many ways the music business reminds me of the auto business: they can only do things one way. As far as they’re concerned, there are no options, no pivots, no new models.

On the other hand, the music creator community has screamed for a world of DIY, more direct to fan engagement and a bigger cut of the revenue, but have done absolutely nothing to deserve it. As a whole, the artistic community has been sitting on the sidelines waiting for Universal to give them a record deal and lots and lots of money. Yes, they all have a Facebook page and a clunky website, but not much more. They’re artists after all, and artists suck at business. In this world where you can take back control of your art and your life, artists have proven themselves (exceptions noted) to be fairly helpless.

As I think about a music world “post-Napster”, I think we need only look at the historical successes in entertainment. They were collaborative, they were messy and they were magic.

We can’t organize it, streamline it or tidy it up.

Music is a sordid affair that happens drunk in Vegas, not a lunch date from match.com.

Digital music is how we listen, nothing more. The decline in music is directly attributable to what we listen to.

We don’t miss the profit margin from physical goods, we miss rock stars.

May 06 2014
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The Flashlight, Part 1

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Maybe I’m the only one who sees it, but I think the Flashlight is the ultimate X-factor in the music business.

Anyone who has tried to build software tools or other products for the independent artist has surely, whether they know it or not, dealt with what I call the Flashlight.

The Flashlight refers to the dream of stardom, the intoxication of being a rock star, the recognition of the public and most specifically being such a big deal that you have a roadie with a flashlight guide you up the dark stairs to bright lights of the stage.

Business people don’t understand the Flashlight. When they present a perfectly good idea to an artist they are always surprised by the artist’s reluctance to take advantage of a product or service that would clearly advance their career. Or when the artist says “that’s awesome, let’s do it”, then leave the meeting never to be heard from again.

This is because being a success in music isn’t about the money, it’s about adoration and worship. Kids who are good at baseball dream about hitting a home run in the ninth inning of the World Series, not playing for a minor league team in a small midwestern town. Musicians who receive their first guitar when they’re ten dream about playing in stadiums and having the Rolling Stones open for them.

Perhaps the only difference is the age factor. By the time most of us reach our twenties, we are fairly sure we won’t be drafted by the Yankees, but artists hold onto the dream of being led around by their handlers for a lifetime. They always feel like they’re one “big break” away from being discovered by the uninformed masses who, if they only heard the new record, would immediately thrust them into superstardom.

The Flashlight it that special treatment reserved for the rock star. Rich people don’t get the flashlight, baseball players don’t get the flashlight, movie stars don’t get the flashlight. The Flashlight is the right of passage from opening act to headliner. The Flashlight means you have made it. The Flashlight is the dream.

When you get frustrated by artists who seemingly won’t help themselves, against all logic, don’t blame them, blame The Flashlight.

We’d love to hear your Flashlight experiences. Please comment or email us with your stories. We could write a book!

Apr 17 2014
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Nashville’s Poison Pool

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Dead fish

One of the dark secrets in media tech investment is what I call the Poison Pool. For the last ten years, a number of music tech start ups have found angel investments and some Series A rounds from the wealthy investors in Middle Tennessee.

This all seems well and good, except for one sad fact: the investments were made for the wrong reasons and without proper guidance.

Picture this: you are a multimillionaire who made his money in healthcare. You have large sums of it that you may use to buy a boat, go to Italy for the summer or buy your college kid a Mercedes. This is money you can afford to lose, money you are going to spend anyway and you don’t really give a rat’s ass what happens to it (or so you say).

Then a friend of a friend gives you a call and says they’ve found a good investment in music tech. They tell you all about how great it is, and let you know that your investment may allow you to hobnob with those cool people on Music Row. You think Awe what the hell?

So you get the prospectus, and surprisingly it makes tons of sense to you. People love music, music is going through a business transformation and this guy (who used to be a big record producer) seems like he knows his stuff. So after a few courtesy meetings and some back and forth about the valuation, you go for it.

For the first few months things are humming along. You do, in fact, meet some cool people at the cocktail parties arranged by the founders. Then there’s an office with people buzzing about doing music-business-looking things. There are white boards covered with tech terms and wireframes, and even a mobile developer. Everything is going perfectly. You may have just stumbled into a good one.

Then come the press releases and the launch event. Music guys are awesome at launch events. Their friend gets a country star to sing at the event whose friends (also famous music people) all show up to show their support and admiration. There’s an article in Billboard that mentions you as an early investor. The social buzz is through the roof, and in the first few months thousands of people sign up for the new (free) app.

Then it happens: nothing. Yep, absolutely nothing. What the hell went wrong? It’s been 18 months, and you threw in another 50K to support V2. All was still going so well. And now two years in… silence. The CEO decided to start charging for the app. You went from several thousand excited bands downloading your app to a few dozen paying customers. Yep, you’ve been duped.

All this familiar rhetoric is common knowledge among those of us who have been around for a while. And we wonder, sometimes aloud, why didn’t he just call me and ask? I would have told him it wouldn’t work. But that’s where the breakdown occurs. The lure of meeting stars and being in Showbiz claims another victim. This is fair game, but the outgrowth is poison.

The money guys get skittish. They talk amongst themselves and tell the story (with certain ego-protecting caveats), and their friends all hang out at the Palm and swear to never get sucked into that showbiz crap ever again.

This poisons the pool.

It’s common conversation in VC firms and angel groups that, no matter how logical it sounds, stay out of entertainment. Those people are crazy and crooked.

There is a solution to this bias, but it comes at a price. We as entertainment entrepreneurs have to seek out a business model that is lean, effective and honest. The best way to do this is to ask for the advice of someone in the music business (preferably several): “will this work?” You may find that some of us are honest, direct, and focused (add cynical, and use this to your advantage).

Over decades, I have found that any idea that claims to have it figured out is patently bogus. Because we have to accept that music is special. It’s special to the people who make it, and it’s special to the people who enjoy it. It’s also completely unpredictable. Stay out of the taste game. Stay out of the politically impossible distribution segment. Stay out of royalty based products. Invest in products that will work whether you like rap or country. Invest in products that build a better mousetrap – a mousetrap that already works, just a better one.

There’s no going back and un-poisoning the pool, but we can guide investors back into the field by honestly vetting ideas and leading with a few solid exits.

Jan 14 2014
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Happy 2014 from “The Music Business”

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2014 Blog

Happy 2014 from the music business.

We wanted to write one of those cheesy holiday updates and put it in your Christmas cards but we quit sending Christmas cards after we got addicted to Facebook and thought the business had been killed by Napster.

Turns out the rumors of our demise has been highly exaggerated.

But just to keep you all up to date, we’ve had a busy and bustling year. First let me update you on the children.

Susie Streamer (Streaming):  We’re so proud of our new offspring, she’s growing like a weed! (up 24% in the first half of 2013) This year she started playing for free on mobile devices, raised butt tons of investment money and made all of her cousins really really mad because people, who like music, seem to like her best! After all she’s attractive, young and fit who could blame them. She has struggled to profit but we think this is a matter of time and she’s talking about a big deal with car makers that could put her over the top. She’s set to have a great 2014!!!

Dougie Download (iTunes):  He wanted me to tell you all hello, especially the 5% that quit visiting him this year. He has been sitting on Grandpa’s knee and listening to stories about the old days and he’s learned that being over the hill is just part of life. Things will start slowing down now and sunsets can be beautiful. Steve Jobs didn’t live to see his baby die and I’m sure that is merciful. We don’t see iTunes dying this year of anything, but, let’s be realistic…it’s all over but the crying.

Cousin YouTube (Streaming with Pictures):  YT wants you to know that she has a lovely collection of adorable cats and children. She has continued to have a growth spurt. But because of her odd genetic anomaly (gigantism) her rapid explosive growth may also signal a shortened lifespan. We will all continue to take advantage of her as long as we can but, like facebook, the kids are getting restless and something else will grab their attention soon enough. YT is happy to retire to a life of archivism and occasional party fun, so please stay in touch.

Grandpa (Physical Sales):  Grandpa is having a tough battle. As you know he’s been fighting off a serious bout of antiquity but just doesn’t want to give up! He’s a fighter. Fueled by 7 figure salaries and a full fledged panic about the death of the “old days” he shuffles around the nursing home screaming at the nurses “back in the day!!”. We know he doesn’t have long left, but he’s a tough old nut and probably still has a few years left in him if his two cousins, “Big Box and Target” can figure out a way to keep him resuscitated. If it was up to me I would write “”DNR” on his chart, but a bunch of rich white lawyers are appealing the decision that has been made by the customers…

Tammy Touring:  What a wonderful year for this mature strong woman. By being chummy with the 1% and selling tickets at all time high prices she has given us all the impression that touring is the end all be all. Of Course if you eliminate the tours that include septuagenarians she still get’s weak and pale but we’re hoping for a natural supplement to keep her fit in the coming year. My goodness she has grown, but like all parents we worry about her future. Within the next 10 years more than a third of the top grossing tours of 2013 will be dead or disabled…another third will be forgotten or in rehab or both…

Martha Merch:  steady as she goes is all we can say, the only real update is that Martha is now including physical sales of CDs as part of her world. Seems these old relics are now officially souvenirs.

Gary Gaming: After a long, long distance relationship we have to say that we wished we had understood him better as a child. Now that he’s grown we can’t help but wonder why we spoiled him so much with free goodies and falsely deflated prices. Now he feels entitled and arrogant and honestly we can hardly get him on the phone anymore. We thought he was a fun fad and had no idea he would grow up to be the biggest thing in entertainment. But just like his great Uncle VHS, we didn’t’ see this whole thing coming and assumed he would just be a good way for us to promote our CDs. So we remain proud of his growth but are sad to report that we are not very close to him anymore. Gary, if you’re listening, we’d love to work with you more!!

I suppose the conclusion of our reflection centers around the news that we have no new offspring in the works just a few clones and more of the same. I sure hope someone somewhere is having raucous techno musical sex right now and birthing the next great innovation. We will continue to love music, she is our love child and our future, but we will also lovingly embrace the next great idea that can help our love child be adored and enjoyed by future friends and lovers.

Happy New Year!

Jul 24 2013
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Middle Men

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It was 1993, and I had just spent $500,000 of a major corporation’s money on songwriter/artist advances. The finance department called a meeting to discuss balances. I was new in Corporate America, and had never been to an actual finance meeting. I was mortified.

It seemed to me that the options were simple:  I had screwed up and was fired, or I was to be told I could have more money when I got this balance recouped. Neither was what happened.

Instead, I was asked a rapid-fire list of questions about an artist we’ll call “Jones”:

Finance: “Jones – 57K?”

Me: Justifying my creative decision and explaining how slowly music money comes in, I explained how “Jones” was doing exceptionally well for a new artist, and I thought we should keep at it. I told them about co-writing, producers and opportunities. I blathered on about image and talent and the unseen equity of intellectual property.

Finance: With a blank stare, “Jones – 57K. Are we getting it back this year or not?”

Me: “Probably not this year, but things looked excellent going into next year and beyond.”

You see where this is going.

Finance: “We don’t give a shit. Just tell us what percentage is coming back this year.”

Me: “None.”

Finance: “Fine! Smith – 96K?”

Rinse and repeat.

I had forever been changed by my introduction to the “write down”. I became somewhat addicted to this magical process. And as long as I had a “hit,” the rest was forgiven as a tax loss. How cool is that?

This brings us to a touchy but important topic that was referenced by Aimee Mann and written about on GigaOm. If it wasn’t for middlemen there would be no music business; the business is the middle. But the scruples of such characters have always been suspect.

To be fair and going back to the fifties, the A&R community and the surrounding execs are street smart and savvy. They are paid to hear hits. But as the business became more and more lucrative, the once simple business became complex. Companies were formed, and the corporate music business evolved.

Skip ahead thirty years… a massive financial expansion occurred with CDs. Then the scruples weren’t the problem anymore. It became a problem of actual business acumen. These guys weren’t very good at balancing the books. Almost none of them have been to business school, and fewer had business backgrounds.

At this point, the percentages of the take for record companies escalated at an alarming rate that was masked by the staggering sums of cash that were flowing in. That’s when, gradually, the cost of recording and promoting a record went through the roof and the companies started “charging back” the artist accounts for everything from lunches to private jets.

By charging back the costs of their day to day they could right off their bad creative choices as a tax loss. Clever, but devious. We were all on a complete holiday from responsibility. As long as we had a hit, we could do almost anything we wanted.

Now we have a business that is markedly smaller, but the existing generation of middlemen are still attempting to take the same usury cut that they have become accustomed, if not addicted, to. The business moved the risk back to musicians in the eighties. The musicians just didn’t see it. It was done with smoke and mirrors (or fruit and flowers).

So how do we go forward? Should the manager and agent get the same cut for responding to email that they got for six hours of phone calls? Should record companies get 88% of your gross income? Should PROs get 6-11% of your performance dollars?

Hell if I know. But I know they think they should. After all, it’s harder today than ever to break out and have a hit. When it comes to the contentious new revenue source, streaming, I don’t think any middle men should get a cut. Artists should be able register their work online and collect micropayments directly.

But then the current version of “new” was designed mostly by “old.”

 

Jul 04 2013
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How to catch a band… and other shiny objects

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As of January of 2013 I have been involved in the music business for 33 years. That’s a long time. I have been fortunate to work in small companies like Ronnie Milsap’s publishing company in the eighties and, on the other end of the spectrum, Disney for a very, very long time. I have worked with unknowns and superstars. I’ve worked in pop, rock, country, and Christian. I have worked on my share of extreme flops and a few notable successes. I’m a regular working music guy, nothing fancy or glamorous. I was in the trenches. I had to show a profit. I had to do presentations to finance people. I had to do balance sheets and ROIs.

What I learned from all the time and experience is singular: it’s never about the money. I hate to hear songwriters and artists say, “Well, it’s called the music business.” For God’s sake, you guys aren’t middle management at Sony! You’re artists!

Why did most of the memorable music stop being made in the 90s? Because we changed something.

We changed the way you got CASH.

We made a radical change from royalties to advances. Music attorneys had spent years trying to make a living on hourly charges to five alcoholics that lived in a van off Sunset (the band). The collection process was dicey at best. So they (the lawyers) went to their cousins and brothers-in-law at the labels (the weasels) and started the process of front-loading record deals. If they did this they could get 5% of the six- to seven-figure advance upfront. It was genius for the lawyers and easy for the A&R guys. By the end of the era, a standard “bidding war” record deal was $1MM and a band pub deal was over $300K.

This filled Los Angeles with flashy sports cars and cocaine, but created a financial meltdown for hundreds of new business startups (the band), who were now saddled with $1.3 million in debt before they had recorded a note. We had moved the payoff from after accomplishment to before accomplishment and the implications are still being felt today (not unlike the internet bubble, but that’s my next post).

Until this thing got out of hand, we would give advances that were roughly based on how much you needed to quit waiting tables. By the time I was head of creative at Disney, all deals were based on who gave you the biggest advance, and only lip service was paid to the idea of working with the person who was most passionate about your music.

I will be writing further about advances until I’m blocked by the NSA (or the NSAI), but I think we may have had it right before advances were considered your artistic entitlement.

Speaking of artistic entitlement, here’s today’s quiz:  What do I mean when I talk about “the flashlight?”

Stretch VW Bus

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May 02 2013
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The Music Business in a Box

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A very senior executive in the music industry recently extolled the virtues of a new piece of music tech by calling it “the music business in a box.” I totally understood what he meant, but it spoke to the heart of the problem. This senior exec thinks of the music tech biz as being a bunch of young geniuses that will put his beloved money grab in a box. I get it! I get it! But if you’re out there trying to decide if you can afford to go on tour with your band in Oklahoma, you don’t give a shit about good solutions for Lady’s GaGa or Antebellum. You need to know what to do next!

Music tech and the music business started out at odds and, even with the broad adoption of many of the tools available, the two worlds still seem mostly contentious. There are tools galore and some of them actually work, but the old music biz establishment seems to think these are transitional processes that will one day return them to the glory daze of selling product at a high margin to cover the inconceivably high costs of their creative mistakes.

On the other hand, the music tech community mostly creates complex overreaching “solutions” that are lost in a world somewhere between “free music for all” and “getting their piece of the pie”. Both of these groups are being intellectually dishonest to the music consumer. Both of these groups are “mature” businesses that are protecting their space.

True innovation, which I would define as changing the game completely, has come to a near stop. The tech guys all got caught up in the VC world and had to show profits because they wanted to pay themselves like A&R guys. The music guys know lots of money people (who all want to be in showbiz) so they bring investment to the table and get a vote on how the product is monetized.

So what we have now is a slate of tools that would have worked perfectly for Lady GaGa if they had been around when she broke out (her numbers look really good in pro forma docs) but they do little for the “next” big artists. I have heard many, many tech guys say, in no uncertain terms, “we don’t make products for poor musicians!” To be clear, I can’t afford (yet) to make tools for poor musicians either, but I think it’s prudent to take a portion of every dollar earned in music tech and reinvest it in solutions for “poor musicians”, because until we do, the game will not really change and we won’t be part of the “next big” thing.