July 2012 - MBJ

Music Business Journal
Volume 7, Issue 6 www.thembj.org July 2012
Berklee College of Music
Inside This Issue
Mission Statement
The Music Business Journal, published
at Berklee College of Music, is a student
publication that serves as a forum for intel-
lectual discussion and research into the var-
ious aspects of the music business. The goal
is to inform and educate aspiring music pro-
fessionals, connect them with the industry,
and raise the academic level and interest in-
side and outside the Berklee Community.
(Continued on Page 3)
One of th e music community’s most
popular – and romantic – memes is that tech-
nology has leveled the playing field to the point
that musicians can “do it all themselves”. Why
sign with a record label when it’s cheap and
easy to get your music on iTunes? Why hire a
publicist when you’ve got Twitter? Who needs
a booking agent when you can create a follow-
ing on YouTube?
In the past ten years, a vast array of
technologies and services have been developed
to help musicians create, promote, distribute
and sell their music. Many music observers are
quick to categorize these technological devel-
opments as a good thing for musicians, espe-
cially when compared with the music industry
of yore, with its bottlenecks and gatekeepers.
While it’s fair to say that musicians’ access to
the marketplace has greatly improved, there is
a question that lingers; how have these changes
impacted musicians’ ability to generate revenue
based on their creative work?
In 2010, the nonprofit advocacy or-
ganization Future of Music Coalition launched
the Artist Revenue Streams project to assess
whether and how musicians’ revenue streams
are changing in this new music landscape.
Over the past two years, we have
collected data directly from individual artists
through three methods: (1) in-person interviews
with over 80 US-based musicians, composers
and managers; (2) financial case studies that
dive deep into the accounting and bookkeeping
of a handful of full-time performers; and (3) a
widely distributed online survey completed by
over 5,300 musicians. The full study is avail-
able at http://money.futureofmusic.org.
The results are compelling. The
earned income from music of the 5,300 survey
respondents was $34,455 in aggregate. Live
performance was the biggest slice of this col-
lective revenue pie, accounting for 28 percent
of the survey populations’ income in the past
year. Other significant revenue streams includ-
ed teaching (22% of aggregated income), being
a salaried player in an orchestra or ensemble
(19%), session work (11%), income from sound
recordings (6%), income from compositions
(6%) and merchandising/branding (2%).
We have resisted publishing this
collective, top-level revenue pie because
of something else that we discovered, espe-
cially through the interviews and financial
case studies – the American music creator
community is large, diverse and specialized.
Because of this, a single pie to describe US-
based musician income would be misleading.
How a salaried player in an orchestra is com-
pensated is vastly different than how an indie
rock band makes money, which is different
than how a composer who writes bumpers
for film and TV makes money. All are musi-
cians, but the revenue streams on which they
rely are largely determined by copyright law
and business practice, which has historically
treated compositions, sound recordings and
public performance as distinct streams, even
in the cases where one individual plays all
three roles simultaneously.
Broadcasting Rights
Breakthrough
Page 6
A Dollar for Amanda
Page 7
Soda, Music, and Social Media
Page 9
A Chaperon of Brands
Page 8
Mechanicals for the New Age
Page 14
The Stand-Alone Musician:
By Kristin Thomson
A Vanishing Breed

Table of Contents
Business Articles
Technology and Musician’s Income.......1
Palmer’s Financial Prowess....................7
Coke at the Olympics.............................9
Pepsi and Coke Need Music.................10
A Comeback for Vinyl..........................12
An Essay on Branding..........................13
Law Section
Clear Channel and Big Machine............6
Expanding Mechanicals.......................14
Interview
Eric Sheinkop of Music Dealers............8
MBJ Editorial
Mission Statement...................................1
Editor’s Note...........................................2
Upcoming Topics...................................16
Sponsorship
Berklee Media....................................... 15
Editor’s Note
Volume 7, Issue 6 Music Business Journal

Our summer issue focuses, above all, on two themes: musicians making a living and how con-
sumer brands are partnering with artists and music companies to present alternatives to traditional
record-label and publishing deals.
Our cover story examines an important question: does the Internet actually help musicians make
money? While technology has opened greater access to the music marketplace, Kristin Thomson, who
is co-director of the Future of Music Coalition’s Artist Revenue Streams project, carefully weighs the
pros and cons of the DIY model. Teamwork, it turns out, is crucial
Advertisement-generated revenue is gaining momentum. Mariana Celeste Migliore assesses the
role of commercial branding at music festivals, while Mical Franklin Klip reports on Coca-Cola’s
involvement with music at the 2012 Olympics. My own piece details the recent partnerships between
Coke and Spotify, on the one hand, and Pepsi and Twitter, on the other. Finally, Zosia Boczanowski
interviews Eric Sheinkop, a broker between music artists and top consumer brands.
We also explore the growing potential of crowdfunding. Megan Dervin-Ackerman analyzes
Amanda Palmer’s recent success using Kickstarter. Palmer’s constant interaction with her fans online
allowed her to thrive in the medium.
Other topics we cover in the issue are the new precedent set by radio giant Clear Channel for ter-
restrial broadcasting rights and the Copyright Royalty Board’s extension of mechanical royalty rates
for digital media. To end, Bernard Mantel, from the University of Miami, dusts the old and reports on
the surprising and intriguing re-emergence of vinyl.
From all of us at the MBJ, we hope you enjoy this issue.
Emilie Bogrand,
Editor-in-Chief
PS: In the interest of space we have included some articles without footnotes. Please consult
www.thembj.org for the footnoted version.
Contributors
Editor’s Note..................................................................................................................................................................Emily Bogrand
Business Articles...............................................................................Emily Bogrand, Megan Dervin-Ackerman, Mical Franklin Klip
Bernard Mantel, Mariana Migliore, Kristin Thomson
Law Section..................................................................................................................................Luis Augusto Buff, Nicholas Spanos
Interview..................................................................................................................................................................Zosia Boczanowski
Staff................................Haven Belke, Troy Church, Megan Dervin-Ackerman, Lau Meng Wai, Jonathan Rodriguez, Yea Jin Youn

2 www.thembj.org July 2012

Management
Editor-in-Chief..............................................................................................................................................................Emily Bogrand
Content Editor............................................................................................................................................................Mariana Migliore
Webmaster...........................................................................................................................................Itay Shahar Rahat, Haven Belke
Faculty Advisor and Finance.....................................................................................................................................Dr. Peter Alhadeff
Layout Editor..................................................................................................................................................................Lau Meng Wai

In almost all instances, signing a major label
contract means that you transfer your sound
recording copyrights to the record label for a
long, long time.
Second, the label might give you
an advance – an upfront payment for signing
with them – but it is very difficult to recoup
against costs. While you may receive me-
chanical royalties if you are also the compos-
er, it’s unlikely you will see royalty checks
for the sale of your sound recordings in the
future. And, history is littered with stories
(and legal briefs) about unscrupulous label
accounting behavior.
Third, signing a label deal means
you are no longer the sole decider about the
timing and arc of your career. There’s no “I”
in this team.
Self-releasing sound recordings
Can musicians self-release their re-
cords? Again, absolutely. It happens all the
time and, indeed, services like CD Baby and
Tunecore make it easier than ever to enter the
digital marketplace.
But the compromise for retaining
control is that you have a lot of work to do.
Someone is going to have to deal with manu-
facturing, promotion, and distribution. This
might be a team of folks, or it might be the
band itself.
And, someone has to pay for all of
this. There are a lot of options – more today
than in the past – but each of these also in-
volves some work, and some risk; fan fund-
ing via sites like Kickstarter or Pledge Mu-
sic, profit sharing models with indie labels,
sponsorship, personal investment, credit
cards, or asking family and friends to support
the work.
Performers and booking shows
For performers to make money,
they need to connect with the right venues
and festivals to play. It sounds easy, but if
anyone has tried to book a show before – let
alone arrange a string of shows into a tour
– you know how complicated it can be. So
usually, performers and bands hire a book-
ing agent, who negotiates all the details and
guarantees with the venue or promoter. If the
band is going out on tour, agents can arrange
July 2012 www.thembj.org 3
Business Articles
First, a self-published artist will
likely never have the same leverage, con-
nections or expertise that an experienced
publisher can offer. And second, there is an
administrative burden. Someone has to be
the designated point person for composition-
related requests. If a cable TV show wants to
use your music, they’ll need to contact you.
If you are relaxed dealing with requests and
various negotiations, then self-publishing can
work. And, if you self-publish, you get to keep
100% of any income earned by your composi-
tions.
Recording artists
When musicians go in the studio
and record either their own songs, or covers
of songs that others have written, they end up
with a sound recording; songs affixed to tape
or hard drive. Traditionally, it has been the
job of a record label to take the sound record-
ing and manufacture the commercial product,
whether it’s vinyl or 8-tracks or CDs, then
distribute it to retailers. For this service, the
record label keeps a hefty chunk of wholesale
price, and a percentage – usually 50% – of any
deals when the sound recording is licensed.
But that’s not all that record labels
do. In many instances, labels are also a source
of up front cash. They write checks so that
artists can go into nice studios and hire good
producers. Labels also give recording artists
access to producers, to booking agents, and
publicists. They also have a staff that can deal
with all the boring stuff like accounting, or
sending out promotional mailings. The major
labels, especially, also have PR muscle. They
can get music played on commercial radio.
They can get reviews in big magazines. If
you’re label-less, getting airplay on commer-
cial radio is virtually impossible.
Record labels also give artists some
legitimacy. A label deal means that you’ve
piqued the interest enough at a label for them
to invest in you. This is a green flag for many
other things in the music industry. It makes it
a lot easier to get a good booking agent, who
can then get you bigger show payments or
guarantees. It can get you on bigger tours. It
can get you more prominent management. So,
a record label deal can impact a recording art-
ist’s income directly and indirectly.
That said, there are some signifi-
cant tradeoffs to signing a record label deal.
The Artist Revenue Streams project
was designed to collect data from musicians
playing any or all of these roles, because we
see all of them as valid and important parts
of the music ecosystem. Instead of lumping
the aggregated data together into one set of
findings, we have isolated certain popula-
tions for apples-to-apples assessments. For
instance, we’ve released research memos that
look at musicians working in specific genres
like jazz. We’ve explained musicians’ rela-
tionships with technology. We’ve looked at
whether radio airplay matters, and to whom.
And, we’ve examined the changes in par-
ticular revenue streams, such as income from
sound recordings. All of these reports are
available online.
Back to our original question: has
technology leveled the playing field to a point
that musicians can do it all themselves? And
an even more critical question, should they try
to do it themselves? What are the net effects
of teammates and partnerships on musicians’
earning capacity? This article examines data
collected through the Artist Revenue Streams
project to better understand the impact – and
tradeoffs – associated with musicians, income
and teammates.
Before we get to the data from the
survey, we need to review the three most
common teammates – publishers, record la-
bels and booking agents – and whether musi-
cians can take on these roles themselves.
Composers and publishers
Composers and songwriters write
music, and they want their compositions to
be licensed for use. This means they need to
make connections with recording artists, re-
cord labels, movie producers, TV shows, and
other places that might want to record or li-
cense their works. This is frequently done via
a publisher, who shops the songs around to
performers, record labels and music supervi-
sors, and – for certain composers – also pub-
lishes physical sheet music. Publishers also
deal with license negotiations, paperwork and
payment. And for this work, publishing com-
panies get a percentage (usually 50%) of any
licensing deal.
Can composers self-publish? Ab-
solutely. Many songwriters or composers
choose to retain control over their publishing.
But there are some challenges.
Artist Revenue Streams (cont.)
(From Page 1)

Business Articles
that takes care of various tasks. This could
include orchestral performers who are on sal-
ary, for whom roles like a publisher or a street
team are not applicable, or session musicians
who are hired to perform in the studio or on
the road, for whom a booking agent is unnec-
essary. The “not applicable” answers serve as
a reminder of the scope of the US-based mu-
sic landscape.
We were also able to filter the data
by a number of criteria to see if the teammates
changed for different types of musicians.
Overall, the survey data suggests
that certain musician types are more likely
to have specific team members. Younger art-
ists rely more on volunteer support, as well
as connections to income from performances.
High earners are twice as likely to have a paid
or contracted relationship with an accountant,
attorney, booking agent and graphic designers
as their musical peers who earn less. Full time
musicians are more likely to have an accoun-
tant or an attorney. This could be a chicken
and egg scenario: does the attorney make it
possible for full time musicians to earn more
money, or do they hire the attorney because
they earn more money? The data cannot tell
the difference, but the associations between
various musician types and teammates are in-
teresting, nonetheless.
Teammates’ impact on earnings
Asking questions about team mem-
bers is one thing, but how do these team re-
lationships impact musicians’ earning capac-
ity? In this final section, we will look at how
survey respondents’ income was impacted by
publishers, record labels and booking agents.
(Detailed results can be found at http://money.
futureofmusic.org/teams/4/.)
In the aggregate, income derived
from compositions accounted for 6% of our
survey respondents’income in the past twelve
months (N=5371). But respondents who said
they had a paid/contracted relationship with a
publisher, were deriving three times as much
income from compositions.
The same pattern applied to sound
recordings. In the aggregate, income from
sound recordings made up about 6% of all
respondents’ income (N=5371). But for those
with a record label, that percentage more
than doubled to 15%.
a series of shows, hopefully in some reason-
able order. And for their work, booking agents
get ten to fifteen percent of tour grosses.
Can musicians book their own
shows? Again, yes. The two biggest chal-
lenges: it takes a lot of time and perseverance,
and calls and emails to promoters during their
office hours. Plus, very few bands have the
same amount of leverage that a good booking
agent has. It’s very likely you won’t get paid
as much, and you have nobody to defend you
or troubleshoot if things get weird. But, book
your own shows, keep 100% of the profits.
The front office
So we’ve quickly described three
common team members – publishers, record
labels and booking agents. But there are other
top-level teammates that creators often need or
have, whether they are a composer, recording
artist or performer:
• A manager, who plays traffic cop on ALL of
the other elements
• An attorney, to review contacts
• An account, to deal with compensation and
taxes (see graph, below)
If you’re a recording artist or performer, you
might also need the services of a publicist to
help you promote new releases to radio or re-
viewers. You might also turn to a webmaster,
a graphic designer, photographer or video per-
son, to assist with merchandise design or other
visuals.
And if you’re on tour a lot, you might
also need a tour manager, sound person and/
or road crew. And, if you’re touring reaches a
certain level, you might also need a lighting
director, and/or a bus driver.
All of these teammates are optional,
and every musician needs to assess the net val-
ue of working with them. For some musicians,
a manager is crucial. For others, self-managing
is the way to go. The important part is under-
standing the roles that each play, and assess-
ing whether they will improve your situation,
whether that means giving you more capacity,
making you more money, introducing you to
the right people, or doing the tasks that you
don’t like to do.
The Team Approach
Among many questions on last fall’s
Money from Music survey, we asked musi-
cians and composers about who was on their
“team”, and about the relationship – whether
it was a paid/contracted relationship, a partner-
ship or equity deal, or whether the work was
pro bono or volunteer. (See http://money.fu-
tureofmusic.org/teams/3/ for more details on
the chart “Team members: all respondents”,
page 5.)
For the 4,062 survey respondents
who answered this question, bandmates is at
top of list. The list then goes on to accountant,
booking agent, and producer. But there are two
other things to take away from this chart.
First, there are a lot of possible team-
mates and, second, there are a great number of
working musicians for whom most teammates
are simply not applicable, either because they
are not a necessary part of their career struc-
ture, or that there is a bigger institutional body
(From Page 3)

Business Articles
And, finally, we looked at income
from live performance. In the aggregate, this
was the biggest slice, accounting for 28%
of income for all respondents. But for those
who had a booking agent, income from live
performances jumped to 43% – an enormous
increase.
It’s important that we read this data
as correlation, not causation. The data sug-
gests that certain teammates have an impact
on musicians’ earning capacity, but they are
unlikely to be the sole reason for the differ-
ences.
Conclusions
The Artist Revenue Streams project
was designed to get a snapshot of musicians’
revenue streams in 2010 and 2011.At the most
basic level, we have learned that the majority
of US-based musicians and composers rely on
a small array of revenue streams, the mix of
which is highly dependent on the roles that
they play and the genres in which they work.
We’ve also learned that technology and the
music-related services act as a double-edged
sword. Today’s music creators have easy and
affordable access to the marketplace and their
music fans. But this lowering of barriers has
also made the music field more competitive
than ever.
Can musicians do it themselves?
Probably. There are dozens of technologies
and services out there to facilitate it. But the
self-made musician’s job title might also in-
clude booking agent, publisher, label, graphic
designer, merchandiser, accountant, and so-
cial media maven.
What about the opposite scenario:
should musicians simply farm out all of the
non-creative work so they can focus on the
music? The data above suggests that some
teammates make a difference, either in giv-
ing you capacity to do more, or increasing
your earnings. But take these findings with a
dose of reality — there have been many in-
stances where musicians have been deceived
by potential partners, or signed terrible deals.
Choosing the right teammates takes research
and a full understanding of the risks and ben-
efits. And, even then, there’s no guarantee
that good partners will make you successful.
Today’s musicians and compos-
ers face new challenges in a landscape with
diminishing structural resources and ever-in-
creasing competition. Choosing the appropri-
ate teammates – and designing partnerships
that provide a net benefit – is part of this new
calculation. The equation will be unique to
each musician, but understanding if and how
various teammates could have an impact on
creative capacity and earnings is an important
part of building a successful, sustainable ca-
reer.
Kristin Thomson is co-director of Future of
Music Coalition’s Artist Revenue Streams
project. She is also a musician and co-owner
of the indie label Simple Machines Records.
(From Page 4)

Law Section
By Luiz Buff and Nicholas Spanos
The deal bypasses the existing
royalty structures for sound recordings,
leaving SoundExchange outside of the col-
lection process, with the broadcaster paying
monies to Big Machine directly. Big Ma-
chine will then allegedly split the payments
equally with their artists. Again, and as was
mentioned earlier on, it is important to note
that in the rest of the world the concept of
paying sound recording performance roy-
alties already exists, so Clear Channel and
Big Machine are not inventing the wheel.
Rather, they are pioneering the concept in
the US.
The Future
The conflict between artists and
broadcasters goes back, in the end, to the
early days of radio. Yet it is possible that at
long last radio can do more for talent than
simply argue for their preeminent role in
artists’ discovery and later success. Cer-
tainly, the parties involved in this bilateral
and historical entendre see it as a forward-
looking agreement. Above all, this is be-
cause the principle of a percentage take out
of revenue is easy to work with. As Clear
Channel’s CEO, Bob Pittmann, has said, “I
can’t build a business space paying money
for every song I play, but I can [taking a]
percentage of [the] revenue I bring in.” Ditto
for Scott Borchetta, CEO of Big Machine
Label Group: “Now, we can align our inter-
est with radio in a predictable model based
on ad revenue so that we can drive digital
growth.”
It remains to be seen if other labels
or artists will adopt their own agreements
with broadcasters. Skeptics hypothesize
that if this happened, indie labels and artists
that were left behind could be cut out of ra-
dio playlists: if their content did not drive
enough ad revenue, there would be no com-
mercial advantage for Clear Channel or oth-
ers to sign with them—clearly not the case
with Taylor Swift’s Big Machine.
If the value of indie repertoire suf-
fered, it is suggested too that smaller radio
stations might endure forced acquisitions.
This, however, has not happened in Europe,
although the broadcast sound recording
right there is not negotiated on a piecemeal
basis.
the new model of digital
transmissions, the record
companies were able to
receive royalties for their
sound recordings through
a pay-per-play basis
model, collected and then
distributed by the collec-
tive management society
SoundExchange, (which
was created specifically
for that purpose). This
was agreed upon when
streaming music was a
very small portion of
the music trade. And
however much legisla-
tors were bowing to new
developments, they also
recognized that the ruling applied only to that
incipient market. In fact, they had no intention
to transfer their exception on the treatment of
music streams to the much larger market for
terrestrial radio.
As Clear Channel’s terrestrial listen-
ers are still 98% of the total (though there has
been much growth in streaming music, both in-
teractive and non- interactive), the conclusion
must be that the pay-per-play basis for royalty
payments on digital transmissions acted as a
disincentive for Clear Channel to develop new
online businesses.
The Deal
The deal that Clear Channel signed
with Big Machine is in fact a beta test for a new
standard of royalty payments that will allow
the company to promote and advance its online
services at lower costs; under the existing rules,
the broadcasting giant cannot scale them down
as it expands. The surprise over the deal is
Clear Channel’s willingness to take a loss early
on. The hope is that the rapid changes in this
industry will save money in the long term, and
help the company expand with new media.
The terms of the deal, and its novelty,
are best appraised by comparison with the ex-
isting arrangement. Instead of paying the legis-
lative mandated fixed rate of $0.0021 per song
played on digital transmissions, Clear Channel
has decided to share an undisclosed percentage
of their advertising revenue – generated both
from terrestrial and digital transmissions – with
Big Machine Records. This gives them use of
Big Machine’s music catalog in different radio
platforms.
Clear Channel’s Giant Step
The largest broadcasting group for
radio in the US is Clear Channel Communica-
tions, and much of its holdings are in terrestrial
radio. It recently struck a special deal with Big
Machine, the country music label whose artist
roster includes, among others, Taylor Swift and
Rascal Flatts. In a move that is a first in the US,
Clear Channel will pay sound recording royal-
ties on terrestrial performances to Big Machine.
Radio had always paid blanket broad-
cast performance licenses to ASCAP, BMI, and
SESAC, and they in turn distributed the collect-
ed income to songwriters and publishers. How-
ever, US law does not so far consider any pay-
ment by broadcasters on the sound recording
right of a performance. This is unlike Europe
and the rest of the world, where broadcasters do
pay costs for sound recording rights and collec-
tion societies distribute such funds regularly to
songwriters, publishers--and even sidemen in a
recording.
In the US, broadcasters have justified
not paying the sound recording right by arguing
that radio airplay affords labels and perform-
ers much promotional value. They have so far
won, preserving the status quo despite continu-
ous lobbying by the recording industry. Now, a
free market solution that does not yet involve
the drafting of new laws and regulations may be
the seed of a new standard for royalty payments
on broadcast radio.
Background
When streaming and listening to mu-
sic over the Internet became a reality in the early
1990’s, laws were put forth to ensure proper pay-
ment of royalties on digital transmissions. For

Business Articles
Amanda Palmer’s Crowdfunding Triumph

Amanda Palmer, a punk cabaret singer and one
of the most productive users of social media to-
day, has set a new record for the highest amount
of money that a single musician has raised from
Kickstarter. On May 31st, she exceeded her tar-
get of one hundred thousand dollars ten times.
Nearly twenty five thousand fans pledged to-
wards her new record, the accompanying tour,
and an art book. It took as little as thirty days to
raise $1.2 million.
Following the completion of Palmer’s
Kickstarter’s campaign, questions arose about
how the funds would be put to work. Palmer
posted a rendition of sorts online, both to her
fans and the public at large --she called it “salty
but detailed” . The money, Palmer says, will
be used mostly to offset costs of recording and
printing (CDs, vinyl records, and a book), to
create customized turntables, to fund a six-city
tour and an art show, and to pay visual artists
on stage. She suggests her net take will be less
than one tenth of the funds received, for she
has to deduct five percent of the pledges for
a Kickstarter’s commission and another five
percent for Amazon’s credit card processing.
Palmer also points out that the amount collected
is treated as taxable income (fans can write-off
their donations).
Expert User
Palmer’s strategy relied heavily on
the way that she typically interacted with social
media and her fan base. From there, she was
able to build her “army of fans” for the project
by connecting with them “day after day”. Her
engaging directness and creative flair worked to
her advantage, and in the process, confounded
the notion that new generations are unwilling to
pay for music.
Palmer started her career as part of the
Boston-based cabaret duo, The Dresden Dolls.
They were picked up by Roadrunner Records
and enjoyed some success. However, after a
bitter fight with the record company, Palmer
pleaded to end her contract early and shortly
after became a poster child for independent
artists.
The fans that Palmer has acquired
over the years are not a passive audience; in
fact, they consider themselves to be a part of
the so-called “Amanda Team ”, a large fam-
ily. If Palmer is consistently seen as much
more than a performing artist on stage, it is in
part because she signs autographs and chats
after every show, blogs continuously, tweets
to over 500,000 followers, and responds to e-
mail. For instance, using Tweeter, Palmer will
search for “a good vegan joint for dinner [and]
get 200 responses”--and still find time to thank
her followers. Famously, she has changed the
spelling of a word in the title of her new al-
bum because her fans asked her to, which cost
her three thousand pre-produced watermarked
CDs.

Palmer likes to be herself, i.e. “an
authentic human being with needs and a life,
instead of a picture of a pop star on a bill-
board.” In social media, attributes like this
can take one far. Familiarity there does not
seem to breed contempt, unlike the traditional
artist-fan relationship. For instance, when her
Kickstarter campaign closed, Palmer invited
fans to a complimentary celebration in NYC.
Her followers inundated twitter with celebra-
tory tweets of the sort “She/We did it!” One
writer penned that as Amanda succeeds so do
her fans.
Moreover, Palmer’s online strategy
fits well with the novel notion of permission
marketing, where intimate knowledge of one’s
target audience, including activities in com-
mon, enables success in sales. For Palmer, this
may be nothing more than an extension of her
ebullient persona, but Seth Godin, the Ameri-
can entrepreneur, author, and public speaker
that popularized the concept, would concur
that her intense artist-to-fan connection is key
to her success.
Kickstarter
Palmer seems to show that “[going
outside] the label system to fund one’s work”
can work well. However, it took Kickstarter to
make this happen for her.
Since launching in April 2009,
Kickstarter has assisted in funding 20,000
projects. The popular crowd-funding site
has arguably become “one of the most dis-
ruptive and innovative platforms to emerge
for the creative community.” Many types
of creators have used and continue to use
it, including musicians, filmmakers, visual
artists, novelists, writers, developers, inno-
vators, and even small start ups. It is based
on a good-better-best marketing strategy: the
more you pay as a backer, the better gift or
experience you receive in return. Every per-
son that pledges a certain amount of money
to the project receives a gift such as a digital
download, limited edition product, or an ex-
perience, like a private party.
In general, Kickstarter offers “pre-
orders” of a product or service. Buyers be-
come investors placing a bet on a project that
they believe has a future. These “backers”,
however, are not buying business equity;
rather, they pledge money against a return
in kind. Ultimately, they pay for a product
or experience and support a limited goal that
they understand well.
One of the most notable examples
of a Kickstarter product is the Pebble watch.
Pebble is a wrist controller for a smartphone.
It displays information such as speed and
distance for bikers and runners, as well as
text messages and caller-IDs—and it plays
music in mobile devices, communicating
with iPhone and Android via Bluetooth 4.0.
The Pebble watch reached the all time record
for Kickstarter last week: a whopping $10
million that easily compares to a typical first
round of venture capital financing.
Adventures in Crowdfunding
Like the Pebble watch founders,
Palmer was able to raise the amount that she
did for music because fans understood her
vision, got something in exchange, and be-
lieved they were part of a larger ‘tribe’with a
similar outlook (Pebble supporters may have
the common identifier of being technology
nerds). As Slava Rubin, the founder of Indi-
egogo, another crowdfunding platform, has
said: “caring about the person or company;
wanting the product; or being part of a com-
munity ” are the three big reasons underlying
fan pledges.
By Megan Dervin-Ackerman

Interview
Eric Sheinkop: Industry Matchmaker
Eric Sheinkop, who is in his twenties, is the
Co-Founder and CEO of Music Dealers. Af-
ter a brief career in the recorded music busi-
ness, following studies at the University of
Wisconsin and Full Sail, he began work with
Fortune 500 companies, including McDon-
alds, PMI, and Kellogg. He launched Music
Dealers in 2008 and now licenses music of
independent artists around the world to top
consumer brands. A year ago his company
partnered with Coca-Cola, and Sheinkop be-
came a music kingmaker for unsigned musi-
cians worldwide (for additional coverage on
the topic, see The MBJ, “Music’s Fizzy Log-
ic”, cover article, March 2012).
MBJ: Why do you think Music Dealers
was a match for Coca-Cola?
ES: It’s always a struggle for brands to find
new and independent music and have the se-
curity to know that they can use that music
across all media, globally and for the length
of terms they are looking for. Coca-Cola was
interested in our database with musicians
around the world. We could supply custom
content and help them discover independent
artists.
MBJ: How does this compare to a tradi-
tional record label?
ES: We are definitely
not like a traditional re-
cord company. We find
the right partnership for
a brand. Also, the me-
chanics of signing artists
and the money flow are
quite different. As an up-
coming artist, you would
hope to sign with a tradi-
tional music label for the
sole purpose of market-
ing and distribution. You
hope your single will be-
come a household name.
But the million-dollar
advance that goes with it
has to be recouped from
your income.
If you work with the
right consumer brand,
ad spends are going to
be between five and five
hundred million dollars.
So if you get one of your
songs featured, you’re
getting five hundred times what a record label
would put towards your marketing--and that
comes with a ton of exposure. Moreover, it is
not a loan. You can invest that money back into
your career.
Our most successful artists have started record
labels, publishing companies, and funded their
tours. The Swedish group You Say France And I
Whistle did very well with the initial Coca-Cola
ad. They invested in themselves and started
touring Europe. We were able to bring them
to the US for festivals such as SXSW. They
were smart, of course, and catapulted their
career. We have also placed another Swedish
band, The Majority Says, in a major European
ad campaign and the band self-invested in a
European tour and a new album to be released
shortly. Now, there are many more band manag-
ers wishing to take advantage of this new way
of doing things.
MBJ: How do you discover songs?
ES: We have an A&R team whose only job is
to discover the best independent emerging tal-
ent around the world. They will screen blogs
and social conversations, getting geographi-
cal analytics and metrics on fan discussions.
We monitor ‘heat maps’ of new artists as they
spread to different territories. That helps us put
them in front of the right brand and show them
the partnership is right. For every festival in
the world like Coachella and Lollapalooza, we
focus on getting the opening acts for the big-
ger shows. Meanwhile, we accept three to five
thousand submissions a month but turn away
ten times as many.
MBJ: Can you tell us more about your in-
ternational reach?
ES: We now represent the best emerging indie
talent in about eighty countries, in all genres
and styles of music. We have about eight of-
fices in five countries. Recently, we have been
working quite a bit with China. Our current fo-
cus is Brazil, where we are opening an office
as we speak. Asia will be our next market.
When Coca-Cola was looking for artists to
write a song for the 2012 Olympics “Future
Flames” campaign, we crowd-sourced the
A&R throughout our global community. You
Say France And I Whistle won, and although
the band was from Sweden it might have been
some other group or artist from around the
world.
Talent that just didn’t know how to access the
music industry and just couldn’t get their mu-
sic to the right people is now uploading into
our system from all over the world. In addi-
tion, we take existing songs and produce local-
ized versions for territories on demand.
As I said earlier, our technology platform al-
lows us to identify the world’s best trending
artists and leverage them with brands. Getting
talent paid well for marquis live performances
is the natural evolution of our model. We are in
charge of eighteen parties organized for Coca-
Cola during the London Olympics this sum-
mer, for which we will be bringing in artists
from all over the world. During our event this
year at MIDEM, we had one of our UK artist’s,
one from Spain, and YSFAIW from Sweden.
MBJ: What are some of the difficulties of
doing business abroad?
ES: It is a challenge to understand the per-
forming rights societies in different territories.
Every country is different. The regulations
that exist in France for mechanicals or sync li-
censes, for instance, are specific. But whether
it is SACEM in France, GEMA in Germany,
JASRAC in Japan, or BUMA STEMRA in
By Zosia Boczanowski

Interview/Business Articles
By Mical Klip
MBJ: What is your perspective as a young
professional?
ES: This is the best time ever in the music in-
dustry. There are incredible opportunities for
artists, brands, and entrepreneurs to get in and
change things. Anybody who comes up with a
good idea to fill a void in the market, of which
there are tons, is going to have success. There
are income streams to support talent other than
earnings from physical music, which is going
nowhere.
Also, there is no apparent road map for success
in the music industry. If you look at the people
who have done well, they come from all type
of backgrounds, from the formally uneducated
to those with experiences in the tech sector and
business, including MBAs. So one of the most
important skill sets for today is, I believe, am-
bition and follow-through.
Beyond that, I think artists should start think-
ing about themselves as a brand, both in terms
of how they would like to be represented by
one and how the brand itself might like to part-
ner with them. But the new music economy
is providing ways of doing business that are
valuable even if a game-changing partnership
with a brand does not materialize. Each of our
offices is licensing about forty tracks a day in
television shows around the world. It may not
be big money upfront, but over years and years
of playing the checks for our clients add-up.
Holland, we have to tread with care about mu-
sic rights. For example, knowing when we can
do a direct license with an artist, as well as the
details pertaining to all her royalty collections,
is always a consideration when we move into a
new territory.
MBJ: This must be expensive to manage,
and we understand Coca-Cola’s financial
commitment to you has been strong.
ES: Coca-Cola will have spent about two hun-
dred million dollars using music in different
campaigns around the world in 2012. Our part-
nership with them draws on this, but it is not our
company’s policy to disclose the terms of the
agreement. Of course, we have become Coca-
Cola’s main source for music around the world.
MBJ: What are the types of deals that Music
Dealers signs with artists?
ES: There are two ways of working with us.
The first is uploading your existing music.
What we really like is to get an album a couple
of months or six weeks before it hits the iTunes
stores or retail, so that we can find the right
brand to partner with and prepare the marketing.
Second, we request custom creations. A lot of
talented musicians don’t have aspirations to be
performers or put out albums, but they are com-
posers and take orders from us. We do a lot of
film, television shows, and video games. They
all need the right music fit.
By the way, the deals are standard and involve a
50/50 split. We receive fifty percent of the pub-
lishing share of royalties but we don’t touch the
writer’s share. So its really 25% of residual roy-
alties. The final fee really depends on the use
of the music, whether the commercial plays on
global, national, regional, or local TV, or other.
The length of play is an important consideration.
MBJ: Does Music Dealers take on the func-
tions of a traditional publisher?
ES: It’s a different model because we are not
locking the artist into an exclusive deal--wheth-
er they do something for you or not. So, no mat-
ter what, we do not own the publishing.
We come from an artist background and are very
artist focused. We’d never want to limit talent in
any way. If we place a song in a television show
and the artist places the same song in another
television show, we’re only going to share rev-
enue on our joint work. If they want to pull out
at any time and go sign with a major, they can do
that. We want to be a tool artists can use to help
further their careers.
(From Page 8)
The Coca-Cola Company has been
associated with the Olympic Games for over
eighty years and the partnership is build-
ing momentum. The company unveiled this
year’s Olympic theme song: an atmospheric
pop anthem called “Anywhere in the World,”
produced by Mark Ronson and sung by Katy
B - both UK artists. Coca-Cola has released
a video series chronicling Ronson’s interna-
tional voyage as he built the track using sam-
pled sounds from Olympic sports and athletes.
This video is only one of hundreds of “pieces
of content” to be released by Coca-Cola as
part of their Move To The Beat campaign for
the Games—a massive step up from their in-
volvement in the 2008 Beijing Olympics,
which consisted of just ten pieces of content,
of which the most extensive were two sixty-
second campaign videos.
and the Olympics
A Note on Coke
Coca-Cola’s participation in the
Olympics is emblematic of the company’s
new marketing strategy towards young people.
The strategy is focused on social media and
narrative advertising that functions indepen-
dently of the brand while strengthening its im-
age. Because music can be placed in differ-
ent media and is easily transmitted via social
networks, it has become an advertising Trojan
horse.
The inherent risk, acknowledged by
Coke’s Global Advertising Manager Jonathan
Mildenhall, is that there is less control over
the campaign’s final results. As he says, “[the
company has to be]…comfortable with the
random nature of creative communication.”
Indeed, the current juncture seems
more volatile and unpredictable. Top con-
sumer brands are relying less on focus groups
than before and this helps the music industry.
Coke’s new partnerships with Spotify and
Music Dealers are a case in point (see MBJ,
May 2012). Coca-Cola benefits from exposure
to Spotify’s ten million Facebook-linked ac-
counts, and saves outsourcing costs with Mu-
sic Dealers.
Moreover, Coca-Cola can help drive
customers to each company with a mobile ad
campaign worldwide. That campaign, accord-
ing to one of its executives, is “the heart and
foundation for London 2012, amplifying [our
connection] with music”.
Fifteen years ago, this trio would
have been an unlikely alliance. A top music
distributor would have been proudly self-suf-
ficient and marked its independence from any
other commercial enterprise. Neither would an
indie label and publisher come close to get-
ting a sizeable investment for outsourcing vast
quantities of music to the world’s best-known
brand. But, as is suggested above, times are
changing for Coke too—which helps the music
citadel move along.

Business Articles
Soda Brands Tap Music Well
By Emilie Bogrand
Music has become the cen-
terpiece for global marketing cam-
paigns involving Coca-Cola and Pep-
si, two of the most valuable brands
in the world today . Both companies
work to protect their image and seek
to recruit new and younger custom-
ers. Music is their go-between.
Indeed, on April 18th, a
few months after Spotify signed
its deal with Facebook (MBJ, Oct.
2011), the streaming service an-
nounced an international partnership
with Coca-Cola. A month later, Pepsi
announced its “Live for Now Music”
campaign and a yearlong deal with
Twitter.
Spotify and Twitter wish to
grow their user base and benefit from
the connection with music. But there
is an added sense of urgency in the
soft drinks market.
Many consumers seem
concerned about soda-related health risks. For
instance, in the latest anti-obesity campaign ef-
fort targeting sugary drinks, New York City’s
Mayor, Michael Bloomberg, proposed a ban
on sales of large-size sweetened beverages in
many of NYC’s venues, including theaters,
bodegas and restaurants. Coca-Cola and Pepsi
are pushing new advertising alliances at a time
when young music fans at Madison Square
Garden might be unable to purchase a large
Pepsi at a Pepsi-sponsored concert.
Pepsi - Twitter
Brands, online services, and music
professionals are reacting to shifting consumer
habits, and finding ways to work together. The
Pepsi-Twitter partnership makes use of several
mutual promotion strategies including a con-
cert series, weekly music-news videos, and
free music downloads.
The Pepsi pop-up concert series will
stream between three and twelve shows live on
Twitter spontaneously throughout the summer
and fall. Shows will be announced no earlier
than two weeks in advance and subsequently
be available “on demand.” Twitter’s @Pepsi
followers will be invited to post song requests
and influence artists’ set lists for each concert.
Pepsi has not yet revealed which artists it plans
to collaborate with, citing value in the element
of surprise.
Pepsi and Twitter will also post a
short music-news video every Wednesday, an-
alyzing and re-capping that week’s top trend-
ing music-related tweets by American users.
The video commentary is scheduled to last
fifty-two weeks and has already covered Katy
Perry’s Fleet Week concert as well as perfor-
mances by Jay-Z, Kanye West, and a special
appearance by Johnny Depp. @Pepsi will also
tweet weekly about new music that aligns with
the company’s “Live For Now” campaign.
Furthermore, Pepsi and Twitter have
also teamed up with the Amazon.com MP3
Store to offer free music downloads to Twitter
users who use hashtags related to #PepsiMu-
sicNOW in their tweets. Pepsi also struck a
partnership with Viacom in order to implement
a program using the Twitter handles of Com-
edy Central, MTV, VH1 and CMT.
Twitter users who post images with
“Live For Now Music” related hashtags enter
to win a variety of music-related prizes. For
example, users who tweet images with the
hashtag, #playnow could be featured on VH1’s
morning show, “Top 20 Countdown”. Users
who tweet images with the hashtag, #mtvnow
enter for a chance to become a “Pepsi Now”
correspondent at the MTV Video
Music Awards in September. Win-
ners of the Comedy Central hashtag
challenge (#comedynow) will be
featured on the Colbert Report and
attend the filming of the Colbert
Summer Music series in August.
This is not the first time
that Twitter has looked towards
music to widen their user base.
The “Live for Now Music” cam-
paign is the second partnership to
be secured by Joel Lunenfeld, who
runs the company’s brand-strategy
group and joined the Twitter glob-
al marketing team in July, 2011.
Lunenfeld was previously CEO of
Moxi Interactive, an Atlanta-based
digital agency whose clients in-
clude Coca-Cola, L’Oreal and Veri-
zon. His first campaign for Twitter
was with American Express during
the SXSW festival in March 2012.
AmEx created a buzz by sponsor-
ing a Jay-Z concert and streamed
a free Jay-Z “Amex Sync Show” online for
cardholders as an effort to entice members to
connect their accounts to Twitter.
Coke-Spotify
Music will be at the center of Coca-
Cola’s marketing campaign, “Year Of Music”
– an effort to reach out to teenagers, beginning
in 2013. Joe Belliotti, Coca-Cola’s director of
global entertainment marketing, told reporters
that reaching younger audiences is important
because the teenage demographic is “project-
ed to represent one-third of the global popula-
tion by 2020. The U.S., China, India, Indone-
sia, Nigeria and Pakistan are expected to have
half of the teen-age population by then.” The
beverage company has identified music as a
vehicle powerful enough to reach potential fu-
ture customers and has partnered directly with
Spotify.
Spotify can help Coca-Cola connect
to a younger generation but can also help in
other ways. Coca-Cola is leveraging Spotify’s
API (Application Programing Interface) to
create various, new applications. In April, the
companies co-hosted a “hack den” event in
New York City where independent developers
competed to create apps. The winning team,
named “London Calling,” is reported to be

Business Articles
Europe and the US
Many have argued that expediency
has trumped politics, for US legislators could
not be expected to move fast and find a general
market solution for the treatment of perfor-
mance sound recording royalties. Europe has
made progress on a country-by country basis,
because each nation is a smaller market onto
itself and speaks its own language. This brings
affected parties to the negotiating table more
easily, in part, because the broadcasting indus-
try there does not have the weight that mass
media can attain in the Anglo-speaking US. As
a result, there are powerful stakeholders in the
US that make this legislation difficult. Plus,
the role of the state in Europe is generally more
defensive of authors’ societies, and tends to in-
tervene on their behalf and accelerate reform
more than can be expected of the US govern-
ment.
Conclusion
Musicians can be happy that Amer-
ica’s largest radio company seems to be tak-
ing the lead in finding a practical solution to
its growth and recognizing a new right for
music in terrestrial radio. It is possible that
other labels will want to cut similar deals. If
so, this will be the first step to a more sustain-
able industry wide solution that recognizes
a fairer compensation for the use of artistic
copyrighted materials created by performers
and producers.
Resources:
Christman, Ed, “Exclusive: Clear Channel, Big Machine
Strike Deal to Pay Sound-Recording Performance Royalties
To Label, Artists”; Billboard, May 5 2012
Sisario, Ben, “Radio Royalty Deal Offers Hope for Industry-
wide Pact”, New York Times, June 10 2012
“Clear Channel and Big Machine Make Royalty Deal”, Roll-
ing Stone, June 11 2012
“Come Stream With Me”, The Economist, June 16 2012
“Performance royalties for terrestrial radio broadcasters back
on the US music-industry agenda”, Music & Copyright, June
13 2012
(From Page 6)
working on a customized version of the “Spo-
tify Play Button” for Coca-Cola’s Facebook
page, which has over forty million fans. The
Spotify Play Button launched on April 11th
and is a music player that can easily be em-
bedded into blogs and websites. It is notewor-
thy because the player draws from the Spotify
catalogue legally and compensates copyright
holders for each play, regardless of where it is
located.
London Calling is also said to be
building apps for to the upcoming Olympics.
Coca-Cola recently hired Mark Ronson, a
British music producer and DJ who is famous
for his work with singer Amy Winehouse, to
compose this year’s official Olympic anthem,
“Anywhere In The World.” The dance track,
featuring singer Katy B., is constructed using
audio samples gathered from various Olympic
athletes’ training sessions. The sound of an
archer’s arrow hitting a target acts as a bass
drum. A gymnast landing on a springboard
sounds like a snare drum. Coca-Cola launched
an interactive website and app called, Move To
The Beat, which allows users to follow Ron-
son’s musical journey and also remix the song
by mixing and matching two categories: a mu-
sic genre, such as hip-hop and a sport, such as
table tennis. From a mobile device, the user
can use physical movements and gestures to
further refine the musical mix.
Coca-Cola is not the only entity that
stands to gain from the partnership. The deal
is equally as valuable to Spotify for a several
reasons. Securing sizeable ad-generated rev-
enue from Coca-Cola could push Spotify one
step closer to finding a fiscally stable busi-
ness model as the company negotiates expen-
sive music licenses within different countries’
disparate music systems. Spotify, along with
many online businesses such as Pandora or
even Facebook have fallen short in convinc-
ing the public that they can generate stable and
self-sustaining income.
Large-scale brand partnerships, like
this one, present one type of solution. In ad-
dition to needing money, Spotify needs help
expanding internationally. Its footprint is
currently limited to only the U.S. and parts of
Europe. So in return for providing Coca-Cola
with access to young music fans, Spotify will
use Coca-Cola’s global presence to expand
worldwide in 2013. Promotional strategies
might include TV and billboard placements,
the printing of Spotify access codes on Coca-
Cola bottles and cans, or advertising in Mc-
Donald’s restaurants. Spotify will also benefit
from the non-exclusive terms of the agreement
and has already accepted advertising from
competing corporations.
Overview
The partnerships between Pepsi,
Twitter, Coca-Cola and Spotify place these
companies in powerful curating positions
amidst the music industry with the authority
to choose which artists make headlines. Online
businesses like Spotify and Twitter are acting
as the new filters for upcoming musicians.
Brands are looking to them to find out what,
or who, the public likes; the brands then have
the power to make artists into stars. In this re-
spect, such services replace traditional record
labels as the middlemen between musicians
and brands.
These partnerships also confirm the
tremendous value of music as content around
which moneymaking business models are con-
structed. Twitter’s vice president for global
brand strategy, Joel Lunenfeld, said that forty-
nine percent of Twitter’s users follow at least
one musician on the website. “We’re looking
for those big content areas that people are talk-
ing about and retweeting,” explained Lunen-
feld.
Brands are recognizing and embrac-
ing the new ways in which listeners access mu-
sic and are finding ways to capitalize. In turn,
musicians want exposure for their music. As
Daniel Ek, the CEO of Spotify, famously said:
“We want music to be like water, everywhere;
but when you think about it, we want music
to be like Coke, which really is everywhere.”
The music industry can indeed learn a market-
ing lesson or two from Coke and jump on its
bandwagon—and not least because that com-
pany has protected the returned value of its
product so much more effectively.
Giant Step (cont.)
(From Page 10)

Business Articles
Holding Out for Vinyl
The U.S. Copyright Act requires
that in order for a work to be entitled to copy-
right protection, it must be “fixed in a tangible
medium of expression.” With the rise of the
digital age, one might argue that the majority
of musical works that are consumed today are
not quite “tangible” in the general sense of the
word because they are embodied in computer
files or streamed via websites. Today’s most
popular form of music cannot be held, flipped
through, opened, or closed. A digital down-
load cannot be visually admired or showcased
in a collection on a bookcase. Recent statistics
reflect that a group of unique consumers are
gravitating towards purchasing music, in what
some might call, an antiquated and primitive
medium – vinyl records.
Global Internet piracy has changed
the recorded music industry. As overall sales
continue to decline, most record companies
have slowly begun to revise their sales and
marketing strategies in an effort to adapt to the
rise of freely distributed digital music. De-
spite a major plunge in global CD sales, global
digital sales increased in 2011 by eight per-
cent. This has led to speculation that conven-
tional modes of retail are no longer profitable
in the music industry. However, recent market
statistics have revealed that vinyl record sales
have surprisingly surged over the past five
years in both the US and the UK. Moreover,
this sales boom could only be the tip of the ice-
berg, as major distributors such as Best Buy
and Wal-Mart have only recently begun to car-
ry vinyl. In addition, vinyl’s recent top sell-
ers have ranged across a variety of artists from
different genres and time periods, including
Radiohead, The Beatles, Arcade Fire, Vampire
Weekend, Beady Eye, Pink Floyd, Metallica,
The National, and Pavement. This suggests
that a younger demographic of high school and
college students who grew up in the digital age
are choosing to buy vinyl records.
By Bernard Mantel
While it is true that vinyl sales rep-
resent a small fraction of the overall global
marketplace, these puzzling numbers raise
an important implication about today’s ever-
changing music industry. What is it about vinyl
records that appeals to consumers who are now
accustomed to spending less time, energy, and
money by downloading music? There may still
be profit to gain by selling music as a fixed and
tangible medium.
A recent study at BYU University re-
veals a growing movement among the student
body that has gravitated towards vinyl records.
In a series of interviews, students revealed that
there are some qualities about vinyl records
that simply cannot be enjoyed when download-
ing music. One student said that listening to a
vinyl LP provides a richer listening experience
than listening to mp3s: “With the digital me-
dium, it’s not so much an experience thing as it
is a convenience thing.” Another local musi-
cian added that vinyl, “forces someone to sit
down and listen rather than have a soundtrack
going on while they’re doing other stuff… it
creates more value.” Finally, a record store
owner simply stated, “everyone knows that vi-
nyl sounds better.” While these individuals do
not represent all music consumers, many be-
lieve that the only redeeming characteristic of
the digital market is the convenience and ease
with which music can be obtained.
Further, these individuals are still
willing to pay for music if doing so will pro-
vide them with a superior listening experience.
This suggests that if record companies could
provide a superior listening experience to that
of an mp3 from Amazon, iTunes, or The Pirate
Bay, a base of consumers who truly value the
experience of listening to music would likely
pay for it. The interviews above reflect that
selling a product that delivers a higher sound
quality and level of interactivity could sway
at least some consumers into legally obtaining
and paying for their music.
Similarly, an LP’s album artwork
might be more enjoyable in a tangible form
than in a digital one. Last year, the vinyl edi-
tion of Radiohead’s “The King of Limbs” was
advertised as the world’s first newspaper al-
bum. The package featured two clear plastic
45 records, a series of artistic inserts, a copy
of the CD, and a full-length newspaper filled
with lyrics, additional artwork, and various
writing pieces. Needless to say, the artwork
gave consumers an artistic experience that had
never before been coupled with the purchase
of a record. These additions were only avail-
able to those who purchased a vinyl copy of
the album, evoking a sense of exclusivity for
those who bought it. Those who paid the extra
money for a vinyl copy of the album in the end
received a substantial addition that others did
not get to experience. Not surprisingly, “The
King of Limbs” was the top grossing vinyl re-
cord of 2011. This demonstrates how artwork
can be used as a powerful marketing tool in
luring consumers to pay for music. It also sug-
gests that superior and exclusive benefits can
be used as a powerful marketing tool to sell
hard copies of albums.
One of vinyl’s major shortcomings
in the modern era is its lack of portability.
Consumers have grown used to having all of
their music on the go with portable mp3 play-
ers, phones, tablets, and the like. In an effort
to work around this inherent deficiency, Uni-
versal Records has launched a new initiative
called “Back to Black,” which aims to provide
consumers with the best of both vinyl and
digital music. Universal now inserts a slip
of paper with a unique code in every vinyl re-
cord that it presses. Consumers who buy the
record redeem their code online and receive a
free digital copy of the album, allowing them
to enjoy the experience of having the album
on vinyl without sacrificing the portability of
modern music. In addition, Universal has cre-
ated a unique brand to promote this effort, ad-
vertising the Back to Black campaign with the
slogan, “Vinyl is Back.” The success of the
campaign, as reflected in the recent surge of
vinyl sales, demonstrates that providing con-
sumers with this kind of validation and flex-
ibility is a successful adaptation to the digital
evolution of recorded music without complete-
ly abandoning the conventional model of sell-
ing it. As a result, combining the convenience
of the mp3 with a hard copy of an album could
be another step in the right direction in reviv-
ing the conventional music market.
While these tweaked marketing
methods might not be the quick fix to the mu-
sic industry’s declining sales, vinyl’s re-emer-
gence suggests that there are ways for record
companies to reclaim a portion of their lost
market. It appears that many music fans want
tangible objects of art, an impression of exclu-
sivity and better sound. Even if vinyl’s resur-
rection is gradual, it produced positive sales
over the past five years. The recent successes
of creative marketing strategies that provide
consumers with enriched and interactive ex-
periences demonstrates that the traditional
method of selling music is not quite dead – it
just needs a facelift.

Business Articles
Branding: A Summer’s Tale
Linking brands with music through
advertisements or sponsorship of artists is
hardly new. With Experiential Branding,
however, a brand is supposed to become both
a player and a participant in a social event, not
an agent for a sale. This branding, which has
been around for two decades, is now widely
practiced in live music shows and other large
public performance events, including sports.
The concept has been associated in the past
with merchandise giveaways and paid spon-
sorships and today it ties into social media.
Of course, targeting well-attended
public events can cements a brand’s name
into a particular lifestyle. In particular, sum-
mer music festivals offer an opportunity. This
is because consumers are otherwise harder to
reach since they tend to be less exposed to city
or web advertising.
Branding and Music Consumption
It should be realized that, by and
large, consumers remain loyal to a brand if
its image is consistent and understood. This
applies to festival audiences too. In fact, the
product being sold is not crucial as long as at-
tendees can connect with it at a social level. A
car commercial, for example, can play music
with a compelling storyline that uses words
like “dream”, “happiness, and “fly”. Emotion-
al freedom does not come from owning a car,
but a consumer relates to being free by buying
that car—here is where the brand adds extra
value to the experience of using the vehicle.
That is why it is convenient for a
brand to associate itself with an image prop
like music and, especially, why festivals are so
interesting to brands. For instance, being out-
doors, wearing summer clothes, seeing bands
on stage, and dancing and meeting people is
what many would consider “cool” (in part,
this is also because festivals offer the perfect
opportunity for music fans to enjoy live shows
outdoor, escape from the city, and enjoy a
carefree environment).
Moreover, the bigger festivals, like
Lollapalooza, Bonnaroo, Coke Live, CMJ,
Virgin’s V Music festival, Coachella, and
SXSW, mix established acts with upcoming
bands. Putting different groups together helps
increase other bands’ fan bases because one
ticket allows the buyer to watch an act that
By Mariana Migliore
typically plays to large audiences with other
opening acts and bands that do not. These
smaller audiences can become the new adopt-
ers of the brand. As the population of some of
these festivals can reach into the tens of thou-
sands, the odds are good of finding potential
customers.
Branding, Artists, and Society
If festivals are supposed to be about
the music, and brands are joining the party
for reasons other than music, it is curious that
we do not perceive the brands as outsiders.
After all, much of Rock-‘N-Roll, to take an
example, is about rebelling against society. So
it is disconcerting that fans generally transi-
tion gladly into the brand’s world and its alter-
native modus operandi, ethics, and, perhaps,
politics.
Artists, of course, are the mediators
between music fans and the brands.
The exposure from the festival is often a suf-
ficient reason for performing there because
recorded music sales are becoming less valu-
able in musicians’ revenues. In this case, a
reluctance to be associated with a particular
sponsorship may not prevent a band’s perfor-
mance. Besides, there is always the proverbial
retort, coming either from the band’s manager
or the band’s entourage, “if you don’t do it,
someone else will”.
In the end, it is the diminishing role
of the record labels in the fortunes of recorded
music, and the shift to a single song economy,
that is to blame for an increased dependence
of bands on alternative patrons, such as the top
consumer brands. They do not really function
to promote music, something which the early
Rock-‘N-Roll stars seemed to know intuitive-
ly. Moreover, times have changed much since
1950-2000, when recorded music was the cash
cow of the business: Artists reflect culture too,
and society seems to feel more comfortable
identifying a lifestyle with a consumption pat-
tern.
Conclusion
As long as music is perceived as an
intrinsically attractive value and a force of
positive self-expression, the marriage between
artists, fans, and their brands might be long-
lived. However, the problem is that consumer
branding is not as well suited to support re-
flective and iconoclastic music. It risks dilut-
ing the contributions of a significant part of
the music making population whose creativity
we have deemed invaluable precisely because
they were outside the commercial mainstream.
In the meantime, music fans, as al-
ways, drive the business and seem unmoved,
suggesting that artists are not out of touch
with them. The brands may not be getting in
the way, but they would do well to not get too
ahead of the music with their marketing cam-
paigns.

Law Section
New Five-Year Standards for Mechanical Licenses
Legislators have tried to adapt copy-
right law to new inventions since the time of
piano rolls. This is because creators beg remu-
neration in new media. In the Copyright Act
of 1909, the exclusive right of the copyright
owner to make mechanical reproductions of
music was secured through the provision of a
mechanical license, a term that is now used as
well for electro-acoustical and digital repro-
ductions.
In 1995, bowing to the pressures of
the Internet era, Congress passed the Digital
Performance Right in Sound Recordings Act.
It broadened mechanical licenses to include
digital phonorecord deliveries online. Accord-
ing to section 115 of the US Copyright Act,
publishers and songwriters are obliged to is-
sue mechanical licenses to companies that fol-
low proper procedure and pay the rates set by
law for songs that were previously recorded
and released. These royalty rates, commonly
known as statutory rates--as well as the terms,
and the different categories in which music can
be distributed--are defined by the Judges of the
Copyright Royalty Board (CRB) every five
years. In 2008, the CRB defined new regula-
tions effective through 2012.
In April 2012, main music industry
stakeholders led by (i) the Recording Industry
Association of America (RIAA) representing
the record labels, (ii) the National Music Pub-
lishers Association (NMPA) for the publishers
and songwriters, and (iii) the Digital Media
Association (DiMA) for the digital service
providers—all reached agreement on rates and
terms for the next quinquennium and defined
new standards to support five prior unlisted
categories of digital distribution. The effort
was meant to jump-start potentially novel mu-
sic business models.
By Luiz Augusto Buff and Nicholas Spanos
This agreement maintains the eight
categories set in the past, extending the same
rates through 2017. This means that for physi-
cal copies and permanent digital downloads
the rates are still 9.1 cents per track or 1.75
cents per minute of playing time per unit dis-
tributed; for ringtones, the rate also stays put
at 24 cents a track. The complicated formulas
and structures for the preexisting subscription
and ad-based interactive streaming services
like Spotify also remain in place. The parties
in the agreement confirmed as well that non-
interactive, audio-only, streaming services do
not require reproduction or distribution (me-
chanical) licenses from copyright owners.
The five new categories are for busi-
nesses operating with Mixed Service Bundles,
Music Bundles, Limited Offerings, Paid Lock-
er Services, and Purchased-Content Lockers.
The legislation will bring more clarity to these
providers, enabling them to better plan for their
intellectual property costs. Moreover, new in-
vestors should come forward, for the risk of
unforeseen legal developments hurt them too.
All the categories above have their rates based
on either a percentage of the service revenue or
a percentage of the payments made to record
companies for sound-recording rights, which-
ever is greater. There is at last some basis to
exploit the new consumption of music.
On closer look, the agreement de-
fines Mixed Service Bundles as the combi-
nation of locker services, limited interactive
services, downloads and ring tones with other
non-musical products such as a mobile phone,
a consumer-electronics device, or Internet ac-
cess. Music Bundles are defined as a packet
of music products such as CDs, ring tones and
permanent digital downloads. The third cat-
egory, Limited Offerings, are usually subscrip-
tion-based and offer access to certain genres
of music or specialized playlists at reduced
prices, and for that reason have a slightly low-
er rate than the other categories. Paid Locker
Services, encompasses subscription-based
cloud music storage for streaming and down-
load, such as those offered by Apple, Amazon,
Google and a growing list of technology com-
panies. Lastly, Purchased-Content Lockers, are
defined as those services that offers free cloud
storage for digital music previously bought by
the user as a permanent digital download, ring-
tone, or CD.
The agreement was sent to the CRB.
It then published the proposed regulations to
garner public comments and objections until
June 18, 2012. Since the CRB encourages
parties to agree on terms and rates, the agree-
ment will likely turn into federal law, with
minor changes after a review of the US Copy-
right Office.
Recognition should be given as well
to the recording and publishing companies
that are clearly taking digital-music providers
more seriously—and coming to terms with
them. After the dimming of physical music
sales, this may not surprise (although sales
have been falling for quite some time). This
new business represents only a small fraction
of the music industry’s income, but its poten-
tial is what likely brought all the parties to-
gether.
It is important to mention that al-
though this new agreement has extensively
covered the mechanical licenses issued by
publishers and songwriters for the reproduc-
tion and distribution of their copyrighted ma-
terial, this is only one of the elements of the
royalty obligations of digital music services.
They still need to factor in their calculations
the royalties paid to record companies for the
use of their masters, as well as the public per-
formance rights that are covered by blanket
licenses from ASCAP, BMI and SESAC.
Resources:
Federal Register / Vol. 77, No. 96 / Thursday, May 17, 2012
/ Proposed Rules – LIBRARY OF CONGRESS - Copyright
Royalty Board 37 CFR Part 385 [Docket No. 2011–3 CRB
Phonorecords II] -Adjustment of Determination of Compul-
sory License Rates for Mechanical and Digital Phonorecords
“Meeting Of Minds: New U.S. Publishing Rates Deals”,
Susan Butler’s Music Confidential, April 13, 2012.
Us Music-Industry Groups Agree On Mechanical Royalty
Rates And Standards For New Digital-Music Services. Mu-
sic & Copyright, Issue 456. April 18, 2012.

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Amanda Palmer (cont.)
(From Page 7)
While Kickstarter can be a helpful
tool for some, it is not necessarily for every-
one. “First-time users”, Godin writes, “believe
that [crowdfunding] will magically help them
find new followers, new customers and new
friends…Alas, with the rare and celebrated
individual exceptions, none of these platforms
magically and regularly turn the unknown au-
thor into a sensation.” Kickstarter can have ad-
vantages for artists and innovators who already
have an audience. If backers are familiar with
the creator and already like them, they will
be more inclined to support their projects. On
the other hand, a band or company that is just
starting out does not have that base, and, with
the possible exception of the Pebble watch, is
unlikely to succeed.
Still, Hal Varian, Google’s chief
economist said that, “crowd-funding is well
suited to industries that create intellectual
property.” Small tech startups have histori-
cally gathered funding from sources like ven-
ture capitalists. But venture capital may not
be the fundraising method of choice for other
startups, and even for tech startups there now
may be an alternative (although this still seems
somewhat far away).
Duncan Niederauer, the boss of
NYSE Euronext, claims that properly done,
crowdfunding “will become the future of
how most small businesses are going to be
financed.” Fred Wilson, the prominent New
York financier and venture capitalist, said, “if
Americans used just 1% of their investable as-
sets to crowdfund business they would release
a $300 billion surge of capital.”
Some Lessons
So be it. But an artist, brand, or com-
pany cannot make a product without the sup-
port of someone who believes in it or a com-
munity that is well informed about the maker’s
history. In this regard, the work that Palmer has
done to obtain and sustain the community that
surrounds her is proof that artists and musi-
cians should be interacting and communicat-
ing with their fan base. Palmer has marketed
her brand and her persona successfully by
building credible and lasting relationships with
her consumers. She has proven that fans make
success possible.
There is, of course, a question about
the time that one can earnestly spend with
one’s customers or fans without impairing
productivity. Amanda Palmer wisely engaged
the services of new media, marketing, and
management company Girlie Action to run her
Kickstarter campaign. To build a semblance
of a genuine human-to-human connection be-
tween a producer and a consumer more effort
is needed than ever before, and not just in the
music industry but also in other trades. A team
approach still seems de rigueur.

July 2012 - MBJ

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