Continued from Part III
IV. Music
Music must be the oldest form of human artistic expression. After all, it can be created without any special implements or media - our own physical beings are natural instruments: we have voices for melodies as well as hands and feet for rhythm. And that's pretty much all you need. I'm sure, way before any rudimentary communications among our prehistoric ancestors have begun, they could not resist the temptation to imitate the beautiful sounds of nature around them.
Music is also the most democratic and universal of the arts. One doesn't need to go to school and learn how to listen to music (unless, of course, you elect to do so). Even if you don't understand the technical intricacies of composition and harmony, or ideas behind the sound passages, or even the lyrics, you can still get knocked out by the angelic beauty of Puccini's Nessun Dorma, or the power of Beastie Boys' Sabotage.
This is why the same piece of music can become instantaneously famous all over the Globe and renown musicians go on the world-wide tours, selling out opera houses and arenas. This explains why people of various nationalities and social classes will do exactly the same thing in their respective countries - camp out overnight to get tickets to see Plasido Domingo or Thom Yorke.
In 2005, I was able to see The Mars Volta (at the paragon of their creative development then) multiple times on their Frances the Mute tour: Milan, Philadelphia, New York, Boston, Montreal, Toronto, Los Angeles. I've never seen a rock-band with so much innovative courage and inspiration – during that period, everyone of their performances was a unique experience, every song was taken to another level of perfection. It was the desire to witness their ingenuity over and over again that sent me to those different locations. But inadvertently it also became a social experiment in the universality of music. In every city, in front of every venue, the hardcore Volta fans with general admission tickets would come 6-7 hours ahead of the door-opening time to form a line, vying for the spots in front, right by the stage, so that they could be as close as possible to the source of the power that stripped their nerves raw.
Nothing matches the magnitude of musical stardom. It's only natural that the word "rockstar" lost it's original connotation and became a synonym with a special sort of fame, the one that comes with instant name recognition and expectations of panache. The kind of fame that made Michael Jackson's death into a world-wide era-ending affair. There is a video on YouTube called World's Reaction to Michael Jackson's Death. It is a slideshow of photos from all over the world; it's nearly 6 minutes long and it's staggering.
I honestly believe that the reason for such special relationship with music lies in our genetic code. We, humans, are simply predisposed to experience strong emotional impacts when exposed to various musical sequences. The effects could be different and the tastes vary widely, but something reverberates inside us one way or another. Just think about it: tribal people drummed themselves to a complete catharsis. Drums and bells announced wars, victories, and celebrations. Moreover, this musical messages were universally understood.
For many people music is an integral part of existence (and I'm not talking about professional musicians). I know a couple of remarkable individuals who were held away from the brink of the real darkness by the music alone. And look around yourself in any public place – how many people do you see with earphones? How many people do you know, who don't own at least one type of a music-reproducing device? Hell, we even have music for elevators.
And what about me? This is the fourth installment in the series after Books, Theater, and Cinema. Those three are my great loves and life would be emptier and sadder without them. Yet, it still would be My Life. But I simply cannot imagine what it would be like without Albioni's Adagio in G-minor, Mozart's Lacrimosa, Rodrigo's Concierto de Aranjuez, The Beatles' You Never Give Me Your Money, Led Zeppelin's Since I've Been Loving You, Leonard Cohen's Hallelujah, or Nirvana's Come As You Are (the list can go on forever). It would be a very-very different type of existence, not a Life at all…
Well, all that is wonderfully emotional for listeners, but at the end of the day, whether it's classical or club-thumping, music is a business (or whatever left of it at this point). As such, it's structured along the lines of the segregation of professional duties, just like all other performance arts and crafts: creators (music and lyrics writers), performers (vocalists and instrumentalists), techies, managers, agents, promoters, record companies with their own executives and staff, publishers, copyrights and licensing specialists, venue owners, videographers, etc.
As with everything, merging several roles within one entity (let's say a rock group) results in combination of incomes otherwise distributed over different contributors. The performers who write their music/lyrics, deal with their own production and recording (at the current state of digital technology this all can be done in the confines of one's living room), and handle their own publishing and promotion, avoid a lot of expenses within the industry's multilevel cost structure.
Otherwise, every component costs money. For example, the Swedish pop-hit manufacturer Max Martin, responsible for a long list of songs made famous by Backstreet Boys, Britney Spears, Celine Dion, Pink, Avril Levigne, Katy Perry, and Christina Aguilera, charges around $100,000 per track. So, if you want another "…Baby One More Time," that's your price tag.
On the other hand, there is such a thing as free music, even if you don't write it yourself. Dead classics cost nothing. Anything beyond 95 years from publication or 120 years from creation, whichever is shorter, is out of the copyright protection. Cole Porter's major hits from the 1930s will become public property in some 15-20 years. The Metropolitan Opera's supporters should keep that in mind, because their money ends up paying Philip Glass for the commissioned opus The Voyage (an unbearable dissonant cacophony based on the life of Christopher Columbus), while Mozart's priceless The Marriage of Figaro is available for free.
In music industry, the driving force behind the revenues are the performers – they deliver the product to the paying listeners and, therefore, the cash flow depends on their tune, name, and face recognition. Whether performed by an opera diva or a hip-hop star, the music income is derived from the same typical sources: live performances, physical and digital distribution of recordings, media royalties (radio, TV, and the Internet), licensing (two types – for usage of musical product itself and for the specific performances), merchandising, and endorsements.
Before the musicians can get their hands on a single penny, everyone else involved takes a cut. Managers receive 15% of gross revenues derived from all sources for making sure that the eccentric artists don't do stupid shit and fuck up their future in one way or another. Agents get 10% for bringing the revenue-generating opportunities to the table. Recording companies (aka "labels"), mp3 distributors (iTunes, Amazon, etc.), radio stations and such, work in the same manner as publishing houses for books, i.e. they first cover their own expenses and pay royalties as a percentage of net profits.
Further business expenses (just like in any other enterprise) include the cost of performance venues (opera houses and concert halls for some, arenas and dive bars for others), equipment capital expenditures, service fees (PR firms, lawyers, accountants, financial advisers), salaries (engineers, techies, roadies, stage hands, backup, and so on), travel (beat-up vans and motels for some, private planes and penthouse suites for others), meals & entertainment (this frequently includes drugs and "personal" attenders – hey, you've got to tame that performance anxiety somehow), etc.
So what kind of pay-rates are artists capable to generate from different resources in order to channel sustenance through this food chain?
The live performances follow the principle of all theatrical events, i.e. revenue depends on the number of seats (or the size of the standing venue) a musician can fill and the price per ticket that can be demanded for the privilege of witnessing the music magic. Opera singers may receive anywhere from $300 per performance of a secondary part in a small regional production to $25,000 per singing a lead at the Met (3800 seats at $35-$450 per seat) or Covent Garden (2256 seats at $60-$500 per seat). One has to remember, however, that classical singers must preserve their instruments and limit the number of stage appearances, yielding reported totals of $10 thousand to $1 million a year.
The disparity of earnings generated by touring pop and rock artists is even greater: from $50 per night (to be further distributed over the group's members) to $600,000 per a sold-out arena show of a Madison Square Garden (20,000 seats) caliber. Most of the merchandise usually sells at the live venues. Therefore, this part of income depends on the attendance as well. If a band's profit is $10 per a T-shirt and 10% of a 100-people audience buys one, the musicians get to split $100. On the other hand, a superstar can sell up to $300,000 worth of merch during a single show.
Nowadays, the selling price and the manufacturing cost of CDs are pretty much the same whether you are Lady Gaga or The Idaho Gagals. The net is about $8 per CD. In fact, the no-label DIY Gagals can keep all of it for themselves, while the artists with names will be lucky to get $2 per CD after everyone else takes a piece (see above). It's the number of units that makes a difference.
Speaking of units… Do I need to say it? The digital distribution of music has already overtaken the physical one. Artists' gross per iTunes or any other paid-for download (out of $0.99 to $1.29 you are charged) is $0.65. Internet-driven streaming services such as Spotify pay 0.5 cent per a stream.
The more famous the musicians get, the more money-making opportunities open up for them. A catchy popular single (let's say E.T. performed by Katy Perry ft. Kanye West) can generate around $500,000 in radio royalties alone.
The licensing rates for using music in film ($1,000 – $50,000), TV ($5,000 – $50,000), and commercial advertising ($50,000 – $500,000) vary depending on the power of the tune's recognition or the popularity of the performers.
A hipster indie filmmaker with an encyclopedic knowledge of music will go out of her way to obtain a license from a narrowly-known small-label band for a song that suits a crucial moment in her movie, spending $4,000 of her already tight budget. While it may well serve it's intended purpose, it's possible that no one in the inevitably small audience will recognize the melody. On the other hand, a few bars of Radiohead's Everything In It's Right Place in the very beginning of Cameron Crowe's Vanilla Sky slyly created an ambiance of familiarity and intimacy for the majority of the viewers. And I sure as hell hope that Paramount has spent at least $100,000 out of the $68 million budget for that license, because that was the best part of the movie.
The differentiation between the two types of music licenses (one based on the rights to the music itself, also known as "publishing" rights, and another for the right to reproduce a specific performance) is particularly evident in commercials. We frequently hear well-known melodies performed in unfamiliar ways.
I know some otherwise peaceful people, who turn very hostile, when they hear The Beatles' melodies in TV ads (the songs come from the 259-titles catalogue, relinquished to Sony by the late Michael Jackson back in 2008 as a part of his debt-restructuring and presently valued at $1 billion of potential licensing revenue). Besides the association of the divine creations with some household products, what really offends these fans are the terrible covers. However, Sony owns only publishing rights for the music itself and that's all they can sell to advertisers like Proctor & Gamble ( "All you need is Luvs," really?). The latter might've spent $1 million for the tune and then hired somebody for a $1,000 to record the blasphemy. But, if you hear the song performed in its original version, know that double fees were paid by the user to obtain both the publishing and the reproduction licenses.
Finally, you really need to be a household name to receive a major endorsement contract. And here it's not the music, but the celebrity per se, who becomes the representative (aka spokesperson) of the product. The bigger the name, the larger the brand and, accordingly, the fees, which can be anywhere between $1 – $25 million per contract, depending on the product's magnitude. Beyonce just signed a deal with Pepsi – that's huge (yes, bigger than her previous engagements with American Express and Cover Girl).
During preparation for this installment, while I was breaking my head trying to figure out where the hell I am going to get reliable information on current CD sales, download units, number of shows, etc., New York Magazine obliged with an article by Nitsuh Abebe on whether rock stardom is a way to make a living today.
According to this source, a barely known DIY band will sell about 500 CDs, 200 downloads, and 200 streams per each self-released album. That's it. Now, if you multiply these numbers by the per-unit rates provided above, you'll get an idea of the size of the loot. Add to that about 45 shows on the tour of rural bars and college cafeterias. Since nobody knows them, licensing requests occur only in the musicians' dreams. Even if the five members of the group can pop an album every year, the per-person earnings are around $2,700.
A well-respected indie rock band signed to a small label (let's say Arcade Fire – only because I am related to a genius with an unbeatable music intuition, who foretold their prominence back in 2004) may sell over a million records worldwide ("Funeral" went gold both in US and Canada), but the averages run around 125,000 CDs, approximately the same number of downloads, plus 20,000 streams. They can sell out 2000-tickets venues at $25-$45 per tickets on a 30-shows tour. These bands usually have a contingent of hard-core followers, who will be honored to obtain a T-shirt with tour dates proving their presence at the live performance. And while it's not easy to find them on the radio (hence, no royalties), the licensing revenue is a definite possibility (all those TV series!), at the rates that correspond to their acclaim. Let's say the band clears $1 million per album (after paying everyone else). The thing is, though, quality musicians cannot pop out 12 new songs a year. Arcade Fire releases one album every three years. There are 7 members. Annual compensation – $47,619.04 per person (my assistant makes more).
Of course, there are superstars propelled by major music labels into multi-platinum record sales and sold-out stadium shows. I'll say, Adele's 21 certifying 128 times platinum worldwide (over $50 million NET earnings from CDs and downloads alone) is an extraordinary fluke, but Pink and Beyonce usually sell 4 million disks and 5 million downloads per each new album, generating at least $10 million after all expenses are deducted. And while they save themselves and limit their tours to about 20 shows, the sizes of the venues they fill make it worth their while – we are talking anywhere between $10 to $20 million of net revenue per tour.
These are also the people, whose singles we hear every time we turn on not just the radio, but, as one old and wise woman said, even the hair dryer – a few more millions in royalties, licensing fees, and endorsements. It's safe to estimate an average compensation of $30 million per record. Keep in mind that these are the record labels' cash cows (obviously, the executives are much richer than the artists, since they collect their dues from multiple acts – think Russell Simmons with his solid gold toilets), so they are under the constant pressure for repeat performances. The companies will send them into the studios and on the road at least every other year. They will hire a roomful of songwriters and producers to make that happen.
The aforementioned New York Magazine's article paints a picture of a deteriorating industry, where Rihanna, Katy Perry, Adele, and Lady Gaga monopolize the No. 1 position on the charts, and nobody buys new music. My first reaction was like: hell yeah, of course the industry is dying – millions of people steal music in various digital formats nowadays. Software developers shamelessly sell their tools for converting even YouTube videos into MP3s!
This is not the core reason, though. After all, people steal ALL music: the more popular a song, the more it gets ripped. The true problem lies with the general public's tastes (and it's true for all branches of arts and entertainment) – what appeals to people now is a low-brow, unsophisticated, easily digestible crap.
"Back in the day," as some people like to say, musical revolutionaries were among the best-selling artists: The Beatles, The Who, Pink Floyd, Led Zeppelin, Queen. In 1991, the top 6 albums were (drumroll, please): Nirvana's Nevermind (US diamond certification = 10 million copies in that first year, plus 30 times platinum the rest of the world), Metallica's Metallica, U2's Achtung Baby, REM's Out of Time, Guns n'Roses Use Your Illusion II, and Pearl Jam's Ten. Only six years later, in 1997, one of Radiohead's best albums (my personal opinion) OK Computer has barely reached double-platinum in the US and triple-platinum in Europe. You know, which album had top sales that year? Spice Girls' Spice - 19.5 million copies worldwide, including 7.4 million in US alone.
The reality is that it's only going to get worse (this is becoming my signature phrase). According to the economic laws, the higher is the demand for the mediocre music, the more of it will be produced. And the real musicians? If they cannot support themselves by doing what they love, they will disappear from the business, writing music just for themselves.
The Frustrated CFO 