Rap Coalition

A HOW-TO RESOURCE FOR RAP ARTISTS, PRODUCERS, & DJs. Since knowledge is power, here is your best defense to succeed in the urban music industry...

Wednesday, February 10, 2010

It hit the internet last week in a study by Tom Silverman that a label that I had built and consulted, TMI Boyz out of Houston, were the second largest selling independent release last year. And while it would have been nice for us to hit #1, I am quite happy with the #2 position as well, of successful indie releases from last year. Upon our first week release, we hit the Billboard rap chart in the Top 10, which as an indie is always exciting. That week we outsold BloodRaw, another artist I had consulted who was signed to Young Jeezy’s CTE and distributed by Def Jam.

Last week, Tom Silverman (he built the most successful indie label in urban music in the 80s and 90s—the Tommy Boy Records empire was responsible for Afrika Bambaataa, De La Soul, Queen Latifah, Naughty By Nature, Information Society, Coolio, House of Pain, Everlast, etc. He owns the New Music Seminar), published a study on numerous music industry websites. (You can see his study and read an interview with him at www.MusicianCoaching.com).

He pointed out that in 2009, there were 1,500 independent releases in all genres. Of those 1500, only 13 releases sold over 10,000 units (that’s only $70,000 to $100,000 in wholesale sales). The #2 release was the label I consulted, TMI Boyz. They were the ONLY rap act on that short list of 13. And that list was based on the (inaccurate) SoundScan sales of 30,000 CDs sold. While on the road for a year and a half, TMI Boyz sold 2 mixed CDs and a full length CD. Tom’s research was based solely on the CDs that were sold at FYE stores in the mid-South. Since we weren’t focused on SoundScan, just on making money, we weren’t trying to have each sale counted. The bulk of sales were at shows, Mall parking lots, state fairs, flea markets, street corners, gas stations, car washes, high schools, clubs--anyplace where a mass of people were gathered so TMI Boyz could jump out of their wrapped van to make a sale. You may have never heard of them, but they made $1.6 million in sales in 2009. Isn’t that the best measurement of all? But being #2 is good, too.

Here’s what Tom said about the State of the Music Industry:
(Excerpted from Musician Coaching from January 2010)

Last Thursday, the new 2009 statistics came out from SoundScan and what we’ve been identifying at the New Music Seminar is that overall music sales are up by 2.1% -- 1.545 billion sales were made. That includes physical, digital, singles, albums, everything, video, music video. Total album sales including digital are down 12.7%. Digital tracks are up 8.3%, which is pretty great considering everyone is saying digital is leveling off, and I find that to be hype. The percentage of increase is slowing down, but that’s because it’s a numerator/denominator thing. The actual amount -- the number of additional units was almost 100 million more digital tracks sold this year than the year before, and 100 million is nothing to laugh at.

Vinyl sales are up 33% going from 1.88 million to 2.5 million; so, the increase on that was about 700,000. Full-length digital albums are up 16%, but then again they started at only 65.8 million, so they’re only up to 76 million. The interesting trend we follow at the Seminar also is the ratio of singles to album sales. In 2004 there were virtually no singles sales-- it was all albums. Last year there were 2.5 times as many digital download singles as albums, physical and digital combined. This year it’s moved to 3.1 times as many, so look to see the ratio of singles to albums to increase. A lot of this comes from the radio hits. What’s happening is that where the major labels play, they’re getting marginalized faster than the indies and the smaller artists. We identified that the Top 10 has dropped 65-70% since 2000, probably 70% as of this year. If you just take records that sold over a quarter of a million that’s down 65%; but if you take records that sold under 10,000 it’s only down three or four percent.

In 2008 there were only 112 releases that sold over a quarter of a million copies. The major labels can’t survive on that. They need sales larger than 250,000 copies sold to survive. So those 112 records are the only records they could make money on at all. Probably 25-50% of those didn’t make money either. So only 60 releases make money, and the amount of money they make except for maybe four or five giant hits – the Lady Gaga and Black Eyed Peas level of hits – aren’t really making significant money. In the old days, one hit used to pay for 20 stiffs. Now one hit doesn’t even pay for one stiff.

What if half of those 112 didn’t even make money or broke even. To sell 300,000 albums and not make money? That’s not a good thing. It’s because they were hoping to sell 600,000 or 700,000 or 800,000. The labels are getting more cautious. So here’s what’s happening, and this is what we discuss at NMS. The labels-- majors and independents, are more conservative; they’re not going to take risks on artists or invest in artists just because they hear the demo and they like the songs or just because they can pack a house. That’s not enough – at least not the major labels. They need to know the artist is going somewhere between 30 and 60 miles per hour already to make an investment in it. They can’t start from scratch anymore, because so few artists are breaking.

Here’s another statistic: in 2008 there were 1500 releases that sold over 10,000 album units. Out of that, there were only 227 of them that were artists that had broken 10,000 for the first time. So in the whole year only 227 of the artists were artists that had broken what we call the “obscurity line.” When you sell 10,000 albums, you’re no longer an obscure artist; people know about you. You may not be a star yet, but you’re in the game. That gets you out of the glut and into the game. We looked at the 227 and identified that only 14 of them were artists doing it on their own and all the rest were on majors and indies; a little more than half were on indies. And that includes Lady Gaga in that number of 227. It includes the biggest artists and ones that sold 10,000 as well, whether they sold a million or 10,001. That’s a pretty daunting number.

By starting the New Music Seminar again and doing tons and tons of research deep in the data, we’re identifying what’s happening and not happening. We’re talking to people who are making it happen and doing it alternative ways; we’re identifying what the opportunities are out there. Tommy Boy is more than a record company; we don’t consider ourselves a record company anymore, we’re much more than that. Now we’re sort of a strategic artists positioning company, and our job is to take an artist from where they are in revenues to a much higher number. If we work with Artist A that’s making half a million dollars a year, our goal is we take them to a million in year one, two million in year two, and three or four in year three. That’s our goal. And then we take a percentage of that revenue. And we’re talking about dollars, not record sales, because we may decide to give the records away, and we may only make about 10% of our money from the music and master use or 20% and the rest of it will come from touring and merch, publishing and possibly sync and other things. We’re not concerned with where the money comes from as long as it comes.

Tommy Boy is known for building brands, from Queen Latifah and Ru Paul, to De La Soul and Afrika Bambaataa, Naughty by Nature, House of Pain, so many household names now that you know. When you mention the name, you can see them; like Digital Underground, when you close your eyes, an image of who they are comes up. Coolio … they all became significant brands, and that’s what we did. Tommy Boy is itself as a significant brand. We’re not just a record company. Our business always was building brands. How we used to make money was selling records; but we don’t see it as the way we can make money now. It’s one of the streams of revenue that we can make money from, but it’s no longer the most significant or even the second most significant way we’ll be making money. We can no longer be limited in how we see artists to the music domain. It’s more than the music. We have to work with the artist’s positioning.

So, back to the New Music seminar. As it’s harder for artists to break, no labels are going to come to an artist just because they like the demo, and that’s hard for artists to take. Artists don’t want to hear that. They’re spending all their time, because they’re musicians making a cool record. And that’s what they should do, but that’s only the very beginning of it. One of the things we identified is that three times as many people buy singles as a whole album, so it probably doesn’t make any sense to make a whole album, or it’s a waste of time and money in the studio making an album when they’re just getting started, because every artist breaks with one song. And they might as well focus on finding that one song before they waste the money on the album.

As you build fans, if you’re touring – and every artist should be regardless of genre right now to build their fan base and also sell merch and actually make money – they should be touring all the time. You create music to satisfy your live audience. Once you have fans that are coming to your site, then you need to keep flowing new music to them on a regular basis to keep them engaged, and hopefully good music. You’re going to say, “I’m no longer an album every 18 months or two years. I’m a song every two months or a song every month. I’m a monthly publication or a bi-monthly publication.” You look at yourself as more of a periodical than as an album-making business.

I think the album days are coming to an end. Unless you’re already established and you already have hundreds of thousands of fans, in which case the touring and album making might make sense. I just talked to one of the writers and producers for Black Eyed Peas, and they’re going out on tour right after the Grammys. They’re bringing out two tour buses that are studios, so they’ll be recording while they’re touring. I think that’s the new world, is that artists will do their shows and then they’ll go into their mobile recording studio and write and record. Now that recording equipment is so mobile, it’s easier and cheaper to do that, and the top artists are going to do that, and even the smaller artists are going to have to be writing on the road constantly. And whenever they’re in a place where there’s a studio, they may want to drop a track or they can record live tracks to perform and practice and rehearse and do live tracks and record those live tracks and make them available. The flow of music from artist to fan is going to be more important. It didn’t used to be important because there wasn’t the kind of 24-7 contact between artists and fans. So as you build your fans, they’re not going to be happy with one album every two years anymore. That’s not going to work. After three months, they’re off finding another artist that’s going to take your place. If you want to keep their interest, you have to keep at the top of their consciousness, and that requires new creative on a constant basis.

So at the New Music Seminar we talked about all of this. We talked about the new model, which is no longer based on records, it’s based on fans and the relationship between artists and fans, and how you monetize that relationship. We talked about the fan relationship pyramid. We have to look at our fans based on their levels of passion and their levels of spending. What kind of content we see delivered to our fans – whether it’s for money or for free – depends on their level of passion and their level of spending.

So somebody that doesn’t want to spend any money – a tire kicker – probably shouldn’t get something first. They probably shouldn’t get exclusives. The exclusives should go to the most avid fans. That’s the new world. And there’s a science – we call it “fan migration science.” How do you migrate a passive fan into an active fan? How do you capture fans? The new music business is about getting fans. That was always the business, but we – artists and labels – were always confused. We thought it was about selling records. Record sales were how we used to make money. It may not be how we make money now. But really how we made money from it is that fans bought our records. Passive fans bought the single, active fans bought the album, super active fans bought the album and went to all the shows, and bought the t-shirt. So we have to look at our audience in that way from now on.

When I think about the indie artists that are doing it themselves, like Sufjan Stevens or Bon Iver or this guy Corey Smith.. This is a guy from North Carolina who was a school teacher and about three years ago and his manager got him up to about a million dollars in revenues, then the next year he got him up to four million in revenues. Really, the game is how can you build your revenues, not how can you sell more records. You may not sell records at all. You may decide to give records away to get your revenues up. If your revenues go up, that’s what you care about. Tommy Boy is in the “how do we make more revenues” business and “how do we create a strategic plan to do that?” That’s what Tommy Boy has molted into. It’s kind of what we always did, but we just never really looked at it that way.
When you have 105,000 albums in 2008 released and 17,000 of those releases only sold one copy, and 80,000 of them sold under 100 copies, it’s a pretty depressing scene. You can’t just build it and they will come. You have to do more than that. I was going to say before that Sufjan Stevens, Bon Iver and Corey Smith are selling a significant amount – above 10,000 units – a lot of which is at their shows, and they’re not active online. They’re not Twitterheads. They didn’t break from the Internet. They broke from touring, and they had a good story, and the good story spread like wildfire through traditional media like NPR.
I’ll tell you the one thing that works: if you’re great live and you bust your ass on the road, that works. And it’s the one thing that has always worked and your social network is at the show. You come to the show and everyone who comes is into the band, so they all have that in common and it’s a social network. But you can actually see them and talk to them and scream with them. There’s an excitement that happens at a gig that never happens online. The online thing is great for finding out about stuff, looking things up or for making purchases; but for exposing stuff, so far it’s been disappointing.

That may not be true with webcasting – Last FM, Pandora and Slacker and some of the other big webcasters as they start to invoke discovery tools and more and more sophisticated discovery tools to suggest and discover new music get better and better. Maybe we can fix some of that, but when the Web was proposed for music ten years or twelve years ago, we all thought this would be the Golden Era and that there would be an Elvis that would break every three months, or some big act. There’d be a Lady Gaga every two weeks, but it’s not happening. It’s not happening at all. And Lady Gaga didn’t break off the Web. She broke by hard, hard work touring and doing promo shows and every place she could go, we saw her. There was nowhere she wasn’t. They pushed and they pushed and put posters on the street – old analog shit. I’m sure they did the online stuff too. A lot of artists think if they do a big online push that’s enough, and it’s really not enough anymore. In fact, you could probably break without any online work at all; but you can’t probably break without any offline work at all. So that’s the big myth that’s being purported.

You know where the investment money’s coming from in the music business now? It’s coming from venture capitalists that are investing in businesses like Spotify or any of those artist service businesses. There must be half a billion dollars in online investment in the music business over the two years. That’s more than all the labels in the world have spent on A&R in the last five years combined – a lot more – and probably on marketing too. That’s where the money’s coming from, so they’re leading the press. So of course everybody thinks shit is selling because of the technology, but it’s not. That’s the hope, and where the investment’s been, but that’s not the reality. We’re really not seeing any evidence that stuff is breaking off the Web.

There are a lot of groups that are breaking because of a big write-up on Pitchfork that leads to maybe a usage on a TV show like The Hills or something like that. People see something on TV or MTV or something like that or hear some song on MTV. The combination of that plus touring might work. If radio and print are moving towards the Internet and they can get enough reach and frequency, which has been the challenge for them so far, like the Huffington Post or maybe you can say Pitchfork. There are Pitchfork bands that consider themselves Pitchfork bands. They’re not going gold and platinum, but they’re getting booked and they’re starting to break that obscurity line. I think the more powerful Pitchfork gets … I mean, Oprah wasn’t Oprah in the very beginning. It took her years to build an audience. Now she can talk about a book and that book goes into the Top 10 on the Best Seller list the next week. There’s not a lot of people that have that kind of juice online. In fact, I don’t think there’s anyone that has that kind of juice online yet. There will be something that everybody watches just like they watch on television online or that they look at that will move the needle substantially. Right now it’s still really early days for that.

And a lot of artists are really putting all their faith in that and focusing on online, but when you look at the numbers, the artists that are doing it are the ones that are doing the grinding on the road. At the Seminar we want to talk to artists about if there’s 120,000 albums that come out in a year, how do they differentiate themselves from all of them? Because clearly it’s tough. There’s such a glut, and how do I break through the glut? The best way to break through the glut if you’re limited in funds – and everyone is – is to differentiate yourself. So we talk about how do we differentiate ourselves in every one of the four important aspects that define an artist: 1) the songs, 2) the recording, 3) the image & concept, and 4) the live show. The concept is really big. It means- “what do you stand for?”

That’s why Susan Boyle sold more records in six weeks than anybody else in three years, and she wasn’t even American and had no radio play or anything. She had a story, and it was a compelling story. Anybody with a compelling story that can get that compelling story told. It is a lot easier to get exposed with a story because everyone wants to talk about and write about a compelling story. You have to have a good story.

The Live show is important too. Your live show has to be great, because so many artists are breaking from the stage now. You’re much more likely to get exposure and get a buzz if you have an unbelievable live show that makes people talk than if you have an unbelievable record. Records are not going to get radio play, because the radio stations that are left are hardly playing anything, and there’s nobody listening, especially in the rock area.

I taught a class at FIT in NY. There were 40 kids in the class, and I asked them, “How do you guys find out about new music? Do you listen to the radio?” And only four or five kids listened to the radio in that whole class. All the rest of them said online-- they find out about it some way, or word of mouth. That’s with every genre. Still, pop and urban are still breaking on the radio, and those are the ones that Eric Garland at Big Champagne said people are downloading and not paying for. The biggest radio hits are the ones that are more pirated. Everybody talks about peer-to-peer being a great way to expose new music. It’s not a great way, because 90% of the files being traded on peer-to-peer are the hits. It would be a much different ratio if it was a discovery tool. People aren’t using it as a discovery tool. They’re trying to get the songs that are already exposed. What we’re doing at the Seminar is saying, “Where should we go to get the exposure?”

In preparing for Los Angeles New Music Seminar, [Tom Silverman] wanted to learn more about how many new artists are breaking each year. After all, the New Music Seminar is dedicated to helping more new artists break. First we had to determine the definition of breaking. At the New Music Seminar we identify the obscurity line arbitrarily as 10,000 albums sold in the year of release. That is not a hard number, nor is it the only meter of success. 300 hard ticket sales for a headliner in multiple cities might be another definition. 25,000 paid single downloads might be another. I’m sure there are many more but 10,000 albums doesn’t sound as elusive as gold or platinum (those archaic arbiters of success) or even 50,000 which only a decade ago might have been considered below the obscurity threshold. Looking at the 1517 albums that were released in 2008 and sold more than 10,000 units in 2008 we find that only 225 of them were by artists that had surpassed 10,000 for the first time in their career (either by themselves or with another band).

The vast majority of these were released by significant indies (110) or majors (103). Last Friday, I thought that only 14 of those were self released artists or artists on start up labels. Further inspection disqualified two of them. One was a gospel record whose Bishop had exceeded 10,000 in the past under a slightly different name and the other was a Soundscan placeholder for a title distributed by Anderson Wholesale, the distributor for Walmart, that showed the title “TBD.” We had thought it was a Dutch electronic artist called Anderson but alas, nay.

Who were these valiant artists? A quick inspections indicated that beyond Bon Iver, the real indie artist success story of 2008, there were three hip hop artists, one that had financing of $10 a unit in marketing spent to sell under 30,000 units, another associated with the big indie hip hop powerhouse Tech N9ne and the last a gospel hip hop artist. The rest were largely alternative rock artists, two had been contestants in America’s Got Talent or American Idol and a few others were on small labels with big budgets.

What does this say about the Chris Anderson “Long Tail” promise he outlined in his book? Clearly the ease of making and distributing music does not benefit “breaking” music. Breaking music requires mass exposure which requires luck or money or both. I can say with great authority that less new music is breaking now in America than any other time in history. Technology has not helped more great music rise to the top, it has inhibited it. I know this is a bold statement but it is true.

Perhaps the greatest challenge to all of the technologists that participate in the New Music Seminar is to correct that issue so that great music can rise to its true potential regardless of politics, power or money. I believe that the next decade will bring improvement to the music web that allows that to happen. In the meantime, artists can still make a very good living without selling 10,000 albums by careful cultivation of their fan relationships. This is another theme of the New Music Seminar…redefining the music business around the artist/fan relationship…how to manage it…how to monetize it. Records are no longer currency in the next music business…fans are.

Here’s the list of the 12 artists that sold over 10,000 albums in 2008 for the first time. Remember these are 12 albums out of 105,575 new album releases that year.

Record Label: Jagjaguwar (US/CAN)
Album: For Emma Forever Ago 103,112

Record Label: TMI Entertainment
Album: Grindin’ For a Purpose 29,119

Record Label: CaptainHooks, also Big Karma Records, a “Texas start up label”
Album: Cas Haley 22,580

Record Label: SHANGRILA
Album: Neptune 19,403

Record Label: BreakSilence Recordings
Album: Reach 16,133

Record Label: Strange Music Inc./ DeadMan Productions Inc.
Album: Tales From the Sick 14,929

Record Label: Brash Music
Album: Running Back To You 14,785

Record Label: GO Aloha Entertainment
Album: Nothing To Hide 14,262

Record Label: Expunged Records,
Album: 3 Rounds & A Sound 11,281

Record Label: +1 Records Album: Talking Through Tin Cans 11,201

Record Label: 1320 Records
Album: PEACEBLASTER 10,601

Record Label: Reach Records
Album:20-20 10,003


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