@NARM Royalties Are Getting Messier; Can the Problem Be Fixed?
-- Digital music has record labels and artists swimming -- some may say drowning -- in a sea of data. The NARM panel "Commerce vs. Royalties: Fitting a Square Peg in a Round Role" had the panelists and audience pondering exactly how to fix the mess.
Moderator Ryan Chisholm from Bill Silver Entertainment laid out the royalties situation in practical terms: A major-label artist needs to recoup about $550,000 ($100,000 advance; $200,000 for making the record; half the cost of two videos at $50,000 each; $100,000 in tour support; and $100,000 in marketing and promotion). About 500,000 units -- or equivalent of tracks, albums and streams -- needed to recoup.
That money used to come from albums and would require sales of about 500,000 units, a threshold reached by just 35 new releases in 2011. But now artists fortunate enough to break even have revenue coming from a growing multitude of sources spanning physical, digital and international. As more revenue comes from access models such as subscription services, royalty statements stand to become even more complicated. A month of YouTube data "could be 10,000 lines to 40,000 lines," Hopeless Records' Eric Tobin said.
"It's a real mess," Music Reports' Les Watkins said. Watkins is biased, of course. Music Reports provides directly licensing and royalties solutions for clients and prides itself on simpler and more transparent reporting. "You could be cynical about it and talk about the amount of money that goes unpaid and the reasons why it's not paid, but there's a huge amount of 'black box' money at not only the labels but publishing and societies. You're talking about billions of dollars."
Rob Bonstein, GM at the Creed Company (Bruno Mars), was a bit sympathetic. "Things move incredibly fast and I don't envy the position the labels are in just trying to get their heads around it," he said. But Bonstein didn't cut labels too much slack, saying royalties seem like a "black box" even for artists fortunate enough to recoup on their recording contract.
"You get the statement and it's incredibly long. Ninety-five percent of the pages in that stack have to do with international and digital royalties, and each of the lines on that statement are less than a penny -- some of them are bigger, some of them are smaller. You can't get your head around it," he continued.
The solution is technology, Bonstein said. "The less open the process, the less information that's available to that end user, the more it seems like something nefarious is going on -- even if there isn't. I guess my message is kill us with data, kill us with information, a lot of us can handle and it's important for us as managers to give the best service to our artists to ask the important questions."
Another solution could be for digital services assume some of the cost of better royalties. "Record companies and publishers have a tremendous amount of cost dedicated to [royalties]. Digital services want costless licenses often times," Watkins said. "You can't fault them for that, but there's no real reason they should be entitled to that."
But there's a lot that needs fixing, and some of it's about internal politics. "There are a lot of dead bodies buried at the major companies," Watkins said. "There are a lot of folks who are invested in their careers at these companies as well. You start exposing these problems [and] talking about looking outside the company for solutions and you're out of a job."
Facebook App Store: Not What You Think
-- Facebook has announced an upcoming app store called App Center -- but it's not what you think. App Center does not sell apps that run on the Facebook platform. Instead, Facebook's app store lists iOS and Android apps and provides links for the consumer to buy the apps in the respective store.
A post at the Facebook Developer Blog explains the App Center "is designed to grow mobile apps that use Facebook."
Facebook wins because of its requirement that apps listed in App Center use Facebook Connect for log ins. Developers who get highlighted in the App Center's limited shelf space win a lot of eyeballs (Facebook has more than 900 million registered users).
But will Facebook be able to turn App Center into a profit center? Facebook is not handling the transactions but is sending consumers to either Apple's or Google's app store for purchase -- and that probably pleases Apple and Google greatly. But App Center as a revenue generator would slow down when Facebook tries to charge a fee of some sorts of payments went through Google Credits or some other payment scheme. Don't expect either Apple or Google to share their 30% of app revenue, and don't expect developers to hand over a cut of the remaining 70% without a fight.