Yet Another Example Of A Band Doing Better By Ignoring The 'Old Ways'
from the ok,-ok,-I'll-post-it... dept
A few folks had sent in the LA Times story on the band Metric last week, as yet another example of a band that had ignored the "old ways" of doing things and found they did much better on their own, but I'd thought that maybe we'd seen enough examples of this sort of thing already. However, judging from the fact that more people kept submitting it all weekend and into this week, I figured perhaps it is worth pointing out, as well. Perhaps one of these days we won't find it so surprising that a band tends to do much better by embracing some reasonable choices and ignoring some of the bad old ways of doing things.In this case, the band decided to ignore the label route and go on its own -- and while the sales numbers don't seem all that exciting based on traditional metrics, in terms of the metric that counts the most to the band (money made), it's already made much more than its last record label album. And it did this in just a few weeks, compared to four years of sales on the old album. Not surprisingly, the band focused on a tiered solution that we've seen work so successfully for so many bands -- selling direct off its own site, including a $65 "deluxe" package. In this case, the band had hoped to sell 500, but sold out all 500 in 48 hours, and is now making another batch. While the band didn't make the music available for free (I'd argue they could have done even better if they had), they did allow people to put a widget on a website that would stream the whole album.
One other interesting aspect: in order to pay for the production of the album, the band took out a loan, which they note they'll be easily able to pay off. That seems like a much better deal than the record label contract where it provides what's effectively a loan (an "advance") and then takes pretty much all of the profits from the album itself. While this particular loan was offered by a specific music foundation, you would think that it might make sense for a new business to specialize in these types of loans, helping bands that are likely to be able to repay the loan based on innovative business models.
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Filed Under: business models, metric, music, tiers
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It's all about
MySpace sucks, so don't rely on that as an absolute. Be creative. And create a buzz.
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First, the record company would have done and financed the marketing. Here, the band hired a marketing company:
The website's back-office operations are handled by Santa Monica-based Topspin, which is also overseeing online marketing.
And obtained its own financing:
"Everything is a grant, except the money for the album, which is a loan," Drouin said. "Metric will pay back 100% of the loan, by virtue of the sales we already have."
The grant was free money from the Canadian government, not mentioned in the above summary of the article. It's unclear how much the grant was for, except that it was less than $50,000 (the amount of the loan).
It's unclear how the band financed the marketing: whether it was through some sort of profit sharing arrangement, or whether they paid it out of the grant (based on the indication above that "everything" that wasn't the production of the album was paid for out of the grant).
The band also took risks that they wouldn't have taken with a record company. By securing a loan, they are now on the hook for that $50,000. Presumably they took out the loan as a corporation, so if disaster had struck and the band ended up thousands of dollars in the hole, they could have declared corporate bankruptcy and stuck the bank and its stockholders with the bad debt.
I'm not sure how this works with a record deal, so perhaps someone could shed some light on a few questions on a "standard" (if draconian) record deal:
One additional variable we can't control in this experiment is a tremendous asset the band had: a pre-existing following, from marketing done under the aegis of a traditional record deal. The Internet can lower the barrier to marketing, but the Internet is not a magic marketing machine. In general, it costs a lot of money to convince a substantial number of people they like something enough to pay for it. The Internet is a double-edged sword: here, it costs less to "get the word out," but you're also in competition with many, many others who are taking advantage of the same thing. The target of all that marketing--people's attention--didn't get more plentiful, did it?
So, some promising data here: it might be possible to run a leaner, meaner version of a record company in the age of the Internet, but there's still a record company somewhere. In this case, it's broken up among a marketing firm, a bank, the Canadian taxpayers, and the band itself, but all the key elements, and all the key risks, are still there - just rearranged.
I'm not sure that anything is tremendously new here - bands have been starting their own labels for decades, especially after they get dissatisfied with their existing major labels. The Eagles just did it for their most recent album. Many indie labels probably have their roots in similar circumstances. In fact, the suggestion implies the same sort of thing:
you would think that it might make sense for a new business to specialize in these types of loans, helping bands that are likely to be able to repay the loan based on innovative business models.
Let's imagine a company that makes loans to bands to support the production of albums. That company would have a vested interest in making sure that the album was successful. So much so that they'd probably also want to get involved with marketing the album, and the band as a whole, to ensure that it gets paid back. It might even use the profits it makes on the loan interest from one band to subsidize other bands that haven't quite taken off yet, but in which it has great confidence.
What would we call a company like that? Oh, right, an indie label. And according to a very recent article, coincidentally by the same author, indie labels are having trouble weathering the storm too.
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Bingo
One thing I think will happen, more performing in smaller, more intimate venues for what I'd call "mid-range" bands. Live performance is the one sector of the music business that still seems to be doing well.
SO, we have bands that tour more, use technology more to keep in touch with fans and manage more of their own business (less $$ spent on management that way), with smaller operations on the whole.
The idea of more independent financing is an appealing one; we can only hope that it winds up giving artists more creative freedom.
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# In the above scenario, do other, profitable bands end up subsidizing some of the loss?
# Who ends up liable for those losses in the end?"
It's a little dated, but there's an excellent article by Steve Albini (at Negativland - http://www.negativland.com/albini.html - among other places) about the problems with the traditional major music industry.
Basically, the band would get an advance that would have many of the major costs deducted from it. Royalties would be paid towards recouping this advance, and the band would see nothing further until it was paid off (never, if the album was not a big seller).
So, the band would take much of the financial risk but little of the reward. They would also quite often sign away the copyrights to their songs and original recordings, leaving them little of the royalties to begin with. This was the necessary deal with the devil in the times when the majors were the only route to mainstream success. It's no longer the case, especially when you consider that a well managed band (as Metric appear to be) get to keep the lion's share of the proceeds from their work, and so have to do less to get more reward.
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Re:
And thats without even opening the beautiful world of Cross Collateralisation
For example
You sign for say a 2 album deal and the first album does great - profits all around you make a million and the recording company makes even more...
Everybodies happy
Then you produce a second album, it does great too but this time the record company spend a fortune on packageing and to reduce the unit cost doubled the production run - end result it loses money
Cross Collateralisation says that the record company still get to take theior share of any 'profits' on the second album but all costs come out of YOUR profits from the first
The above example is a very simplified example of something that happens all the time in various guises
For the AC above to say that in a regular contract the recording company takes the risks is just plain wrong - sell your soul to one of the biggies and they OWN you 100%, fail and it will often be you that gets hit by the pain train while they are happily making money off you...
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Bye bye major labels...your irrelevance is most becoming.
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P2P lending (prosper.com / lendingclub.com) are not all that bad. ;-b
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Metric...
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