Manage for Success: Musings, Newsletter #102, November 2009


"Manage for Success" is a free monthly newsletter for record label executives who want to operate their companies efficiently and successfully. It's published by Keith Holzman of Solutions Unlimited, a management consultant, troubleshooter, and trusted advisor, and is based on his many years as a senior executive in the music industry.


Copyright 2009 by Keith Holzman, Solutions Unlimited. All rights reserved.


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I took some time off last month to re-charge my batteries and take a break from the regular day-to-day grind. That's why there was no October Newsletter. Did you miss it? The time away was totally unwired -- no emails, web access, or phone calls. Idyllic!


The downside was that I returned to thousands of emails and snail mail. Included were a number of industry-related messages and newsletters, and I quickly discovered that not much of note had occurred in the music biz while I was away, although I make note of a few tidbits below.


When I got home I was delighted to read that the nation's economy finally had achieved one quarter (three months) of growth, possibly ending a lengthy recession, even though unemployment remains dismal. Many corporations in varied industries have recently posted remarkably good numbers, but our industry, particularly the majors, are dragging their tails in pursuit of elusive profits. CDs sales continue to decline and are not being rescued by a sufficient increase in paid downloads.


Wired reported on October 13th that Peer-to-Peer file sharing was passé, "falling out of favor quickly," quoting a report from Arbor Networks, "a network management firm used by more than 70 percent of the world's top ISPs." Keeping track of all internet traffic, the report claimed that P2P traffic now represents less than one percent as compared to 40 percent of traffic just two years ago. I'm wondering how much of the purported decline is due to the enormous increase of such bandwith hogs as video streams from YouTube, Hulu, and the like, and I really have to question that such a big P2P decline really exists.


French lawmakers recently passed a revised three-strikes bill which requires ISPs to disconnect those convicted of illegal file-sharing. Similar laws are being passed in Ireland and the U.K. Will similar legislation, with real teeth in it, get passed in the U.S., and will ISPs take appropriate action?


MySpace, as I predicted in December of 2007, has lost considerable business, mostly to Facebook, whose share during the last year nearly tripled from 19 to almost 57%, while MySpace declined from 66 to 30 percent. In a report by Digital Music News, "the market shift challenges the dominance traditionally enjoyed by MySpace Music. At present, the conventional logic is that a band missing from MySpace is missing from the world, and that still holds merit. But bands are wise to diversify, and a band missing from Facebook is now equally unacceptable."


In fact, Facebook, along with Google, are expected to introduce new ways to find and sample music on the web. According to The New York Times, Google "has struck deals with several streaming music services to let people easily sample music directly from the search engine...through relationships with...LaLa, Imeem, and...iLike." Subsequent news adds other partners to the mix including Gracenote, Pandora, and Rhapsody, and the four major label groups. Google is also expected to feature music from a large number of independent labels. My concern -- will this help or hinder artists and the industry? Will exposure to new songs increase sales -- or piracy?


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As you've no doubt assumed, I try to stay informed on all matters affecting our industry, especially as related to independent labels. So if you need advice on how to make your label successful, let me help you as I've helped so many others "manage for success." Email me (see below) so we can discuss how I can improve your business.


In addition, if you're considering creating your own label, I recommend my book "The Complete Guide To Starting A Record Company," The Second Edition can be ordered as a printed, spiral-bound volume, or as a downloadable eBook in PDF form. You can read the complete Table of Contents and download the Introduction at <http://www.recordcompanystartup.com/>. Updates are available online to all buyers.


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Variety reported on October 22 that "U.S. music publishers and major labels have finalized an agreement for the distribution of some $265 million in unpaid mechanical royalties." The RIAA represented the labels, and the National Music Publishers Assn. (NMPA) represented more than 800 publishers. The deal was reportedly "hastened after a late 2008 decision by the three-judge Copyright Royalty Board...(which) mandated interest of 1.5% per month, or 18% per year, on unpaid royalties." Kenneth Feinberg, the so-called "Pay Czar" who is working for the U.S. Treasury Department to determine executive pay for corporations that have been bailed out by the government, and who already served as Special Master of the September 11 Victim Compensation Fund, has been asked by the NMPA to help sort out how much and who will receive payment of the publishing payouts.


Here's a bit of good news. The Senate Judiciary Committee, according to The Wall Street Journal, "approved a bill to require radio stations to pay royalties to performers when their music is aired" This has been a top priority for the music industry, and although it will help performers, I haven't read anywhere how it might effect labels, particularly indies. Be aware, however, that it may be some time before such a bill becomes law, and the broadcasting industry is expected to put up stiff resistance.


On October 30th The New York Times reported that Luke Ryan, a 58-year old musician finally landed a corporate sponsor, after 30 years of playing guitar in Grand Central Terminal and on New York City streets. His sponsor is the Axe division of Unilever, a multibillion-dollar global consumer product giant. Axe is a personal care line for young men and they often use unusual marketing tactics. The Times reports "Axe sought out about 20 street musicians and college bands in several cities....In exchange for an estimated $1000, Axe asked the musicians to put up 'Axe Instinct' signs, offer free deodorant samples when they play and, a few times a day, sing a ditty 'Look Good on Leather that Axe is using in commercials." For years I've been suggesting that labels and artists seek appropriate corporate sponsorship, and here's an example that seems to be good for the musician and the sponsor. Every little bit helps.


In sum, while being away on holiday I gained some distance and perspective on the Music Industry. Yes, there are lots of problems that need to be solved, but being an optimist at heart, I feel that really good music will always prevail, no matter current industry or economic conditions.


Until next month,

Keith Holzman -- Solutions Unlimited

Helping Record Labels Manage for Success.

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Copyright 2009 by Keith Holzman, Solutions Unlimited. All rights reserved.