Indies Screwed by KaZaa

So it appears that KaZaa is going legit. They've reportedly settled all of their lawsuits with the major record companies and Hollywood studios to the tune of 100 million dollars. Future payments on the settlement will also be in the tens of millions. This makes me wonder :

Indies make up about 20% of the music market. Where's my cut?

The answer is nowhere. While I know the catalog of my label isn't worth (in financial terms) anywhere near the level of a Koch, Epitaph or TVT, I can imagine that there's still been quite a few P2P trades of the Blackout! catalog. This money could go towards advertising, studio time, or other expenses.

As indies become a greater share of the marketplace, paying attention to these kind of details is very important. However, very few can afford the time or expense of keeping track of this stuff that could result in such a windfall.

Interestingly enough, I haven't seen any press from the A2IM on this issue, so I'm not sure if they've been at all proactive in this. Although I do hear they met with the FCC about the highly relevant issue of indies and radio payola. (Way to go! now I have someone to fight for me about access to a virtually irrelevant media platform!) Talk about a day late and a dollar short.

Anyone else's ass stinging right now?

They're Giving It Away

I'm not the only one who knows it's hard out there for an indie. A few days ago I posted about one of my bigger brethren who sold to a major company to survive. There's simply not enough long term return in the traditional model to sustain the enormous marketing and manufacturing budgets necesary to create band/brand ubiquity.

Labels such as Nitro Records are now starting to give it away. The first half of the new album from CA's Hit The Switch is now posted for free on the Nitro site. The second half will be posted soon. The reason?

With stores giving less space for independent CDs these days, indie labels and young bands are under an unrealistic pressure to sell a lot of CDs very quickly,” says Jerod Gunsberg, Marketing and Sales at Nitro Records. “By giving away the music online for awhile we can take that pressure off and focus on getting people to hear the music and let the band develop at a normal pace.

As a marketing strategy, this is an interesting idea. The label keeps it's identity as a tastemaker and creates a flood of people listening to their band. (As free tracks from "signed bands" are somehow deemed more valuable than those from unsigned ones.) For the sake of Nitro and it's band, I hope it works in creating a host of new fans.

I do wonder however, what the long term strategy of this is. Will Nitro be taking a managerial / merchandise piece of the band to recoup some of the lost sales? It seems they are hoping that the download traffic will be part of a story that enables them to convince Best Buy and Hot Topic that this band is worth keeping on the shelves.

Should be a fun experiment to watch. If anyone can get periodic 'scans or other numbers on this, please post to the comment section.

song links:
1. The March of Dissent [MP3]
2. Operation Northwoods [MP3]
3. Heavenly Deception [MP3]
4. Shift [M P3]
5.Mr. Abrasive [MP3]
6. Anarcho-Syndicalist [MP3]

Zune: Microsoft's New Music Network

Microsoft has once again entered the field of music by confronting Apple with a similar hardware/software/ internet service called Zune.

Engadget and Jupiter have some great posts on the service features, so I won't bother rehashing them here.

What intrigues me most about this new venture is they are saying that their service will have a "social" side to it. It's possible their music store will allow some sort of social networking and authorized P2P that surpasses iTunes' editorial and minimal social content. While fun to think about, it still doesn't sell me on Zune taking the 800lb primate to the mat.

The Cupertino camp has proven that the multi-platform strategy of linked hardware, software, and retail is a huge winner. Team Redmond has built their business on following Apple's winning OS format, and now they're going to try to one-up them once again. What's that the President said? "Fool me once, shame on... on.... won't get fooled again." I would imagine Jobs has learned from his previous mistakes and is prepared for this. (Can you tell I'm a Mac user?)

From the label perspective? Yet another music store where the customer still has to pay out the ass for music doesn't make me all that happy. CD's are dying, and despite the huge gains in the digital market, downloads are still too expensive to encourage experimentation and impulse purchases by the more casual listener. This is why I still think that the eMusic subscribe-to-own model is the best because it's not limited by DRM and it's financially pretty painless.

Cracks In The Dam

I was at the Lifetime reuinion at Bowery Ballroom the other day, and a friend casually mentioned to me that a pretty large indie had recently sold an interest in their company to a major label. The reason for doing so was not expansion, but survival.

This particular indie is no slouch. They have some amazing bands and bill exponentially more than Blackout! does. But this proves what I've been saying for a while. You can't keep shelling out massive marketing dollars to sell just enough pieces to break even. What's the point in billing a million dollars a month if you spend 1.1 million to get there? None.

It's pretty clear to me that the next wave of indie music is a digitally distributed talent incubator with an artist management core. The funds will come from other places than selling music. Merchandise and digital means of distribution (and later concert tickets) will provide the financial backbone to growing bands.

In fact, I've just started building a team for a new venture called Interstitial Media (no website yet) to do just that. I'll tell you more as it starts to come together a bit more. If you're interested in getting involved as an early stage investor or partner, hit me up with an email.

Must See

American Hardcore movie trailer

Every Silver Lining Has A Cloud....

I just started reading Chris Anderson's new book The Long Tail . While I agree that the era of the blockbuster is gone and the future is about selling less of more, I have a practical issue with it. In order to take advantage of his theory, indie labels need to be able to manufacture the CD's to sell and this manufacturing requires a prohibitive up-front cost.

The label is in a situation right now where it has missed several thousand dollars in sales because it doesn't make sense to lay out the cash to run 1000 copies of older catalog that will take a year or more to sell. This may not seem like a ton of money to some, but it all hellps pay for publicity, retail promotion, advertising and phone bills. While we'd probably make the pressing money back within the first few months, the true result to the bottom line nowhere nears the negative impact on cash flow.

At the retailer level(Amazon, Netflix) the model holds. On the producer side, it's clearly not worth it. I need to either shift these titles entirely to digital distribution, or find a way to manufacture quality short runs at reasonable prices.