Monday, September 18, 2006

Wired 14.09: No Suit Required

Wired 14.09: No Suit Required:

"Musicians generally make very little from the sale of their records. The costs of production, marketing, and promotion are charged against sales, and even if they go multiplatinum and cover those costs, their cut of any extra revenue is usually less than 10 percent.

On top of this, the labels typically retain the copyrights to the recordings, which allows them to profit from the musicians' catalogs indefinitely. 'It's as if you received a loan for a house,' says Ed Robertson, one of BNL's lead vocalists. 'But when you finish paying off that loan, the label says thank you and keeps the house.'

And, funny thing, this model isn't just bad for artists, it's increasingly bad for business. Because the label makes most of its profits from recorded music, much of the money spent marketing an artist benefits third parties like concert promoters and music publishing companies. In addition, copyrights to a piece of music are usually divided between a label and a publisher, which collect royalties every time the work is recorded, performed, or played publicly. 'What other business splits up its key assets and sells them to separate businesses that wind up in conflict with each other?' asks Duncan Reid, a venture capitalist who now helps run UK-based Ingenious Music.

Industry insiders like McBride think the old model is as antiquated as the 8-track. 'The future of the business isn't selling records,' McBride says. 'It's in selling music, in every form imaginable.' And by establishing a series of so-called artist-run labels, McBride is creating the next-gen music company. 'We become the management company, the publishing company, and the record company rolled into one,' McBride says. 'We take our 20 percent cut of the whole pie.'
And that's just the beginning. Between ringtones, acoustic versions, and concert recordings, those 29 songs have been multiplied into more than 200 "assets" – song versions – that can be used individually or in conjunction with others to create a product. "Because the copyrights are in one place [in BNL's hands], we can be really creative," McBride says. Hardcore fans can buy 45 of those assets on a USB drive; others can download the special Sims versions (recorded in Simlish, no less). "For decades, people in music have used the number of albums sold as a measuring stick for success," McBride says. "We're trying to get people to see beyond that. It's about revenue from music, however you make it – selling concert tickets, licensing to TV, or selling packed USB drives."

Eventually McBride would like to pioneer another source of revenue with even greater potential: P2P networks. Earlier this year, he sparked a music industry uproar when he announced he would pay the legal defense for a Texas man being sued for piracy by the Recording Industry Association of America. "The lawsuits are hurting my bands," he says. "If you could monetize the peer-to-peer networks, everyone would make more money."

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