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TuneCore CEO Jeff Price discusses music marketing and the state of the music industry
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On January 26, 2006, the music industry changed.
I had the opportunity to speak with TuneCore CEO Jeff Price about the state of the music industry, what his company has to offer artists, and marketing advice for up-and-coming musicians. Jeff had a front-row seat for the digital music revolution, and offers insightful commentary on where the business has been and where it's headed. He is intensely dedicated to music and the music business, and doesn't mince words when it comes to the people and companies that have had the greatest impact, both positive and negative, on the music industry.
Jeffrey Winslow: Often people start a certain endeavor because it meets a personal need, only later realizing what they've started might benefit others. Why did you start TuneCore?
Jeff Price: When I got involved in the music industry, the physical distributor played a very important role, and as an artist there was really only one path to having a career as a musician—as a rock star musician. You had to get signed. That's because the record label had the deal with the distributor, and the distributor put the product into the stores, to allow that magical moment—that economic transaction—to occur, where people would buy the music at the cash register.
When you think about it, record labels just made people famous, and then they monetized that fame. And the way they monetized it was by selling the music on plastic discs, or vinyl records, or whatever it might be. But in any event, that's the lay of the land. And up come digital stores, and they change the lay of the land in two very significant ways.
The first way is you had unlimited shelf space. So, for the first time in the history of the world, you had everything in stock, at no detriment to anything else. You no longer had to fight to get onto that shelf space. In the old days, you'd take the buyer from the major national chain—like Borders or Best Buy or Walmart—out to live gigs, you'd get them gifts, you'd send them P.O.P. (point-of-purchase) posters, you'd send them advance copies, you'd stop by the store to play it for them. The bigger stores, like the Walmarts, got wined-and-dined and taken out, and tremendous amounts of money spent on them, to get them to open up their shelf space. But in the digital world, all that's gone. So that was major change number one.
Major change number two was that you had unlimited inventory that could replicate itself on demand. In the old model, in the physical world, there's only enough to sell as there is in stock. And once it runs out, it's out. You also have to outlay the cash upfront to manufacture the CDs. So, if you want to sell 100,000 copies of something, you have to make at least 100,000 copies of something upfront. And if it doesn't sell, you're still out those manufacturing costs. But in the digital world, there's no upfront money for manufacturing. The inventory just sits there, and when somebody wants to buy it, it's available 24/7 as a perfect digital copy, it downloads, and just replicates itself.
So with unlimited shelf space and unlimited inventory that replicates on demand, you really undercut the major record labels and what labels are, because you don't need their infrastructure in order to gain access to distribution. You just need the access.
Up came digital distribution companies that claimed they were going to do people's digital distribution, much as Warner Brothers—or WEA, as they were called—did the physical distribution. In the traditional model, when WEA did the physical distribution, they made their money by taking a portion of the sale. And you know what? They worked their asses off for it. And for each unit that went out—let's say $10 was made—they would take between 10 and 30 percent. For the sake of this example, we'll just say 25 percent. So they took $2.50, and the remaining $7.50 would go back to the label. And then the label, of course, would pay off the band royalty and keep the rest, and hope to become profitable.
In the new environment, with the digital distributors, all they had to do was move a digital file from Point A to Ppoint B. That's it. But the digital distributors said, 'We're going to operate like the old-school model. Every time the music sells, we're gonna take a percentage of the money, because that's what distributors do, right?'
So they had pitched this concept to SpinART [Jeff's original record label]. These digital distribution companies showed up in my office. Now, fortunately, because of my background with eMusic [digital music seller] and where I "grew up" in the digital space, I had access to all the digital stores. And the digital stores, like iTunes and so forth, really don't do deals directly with artists. And the reason they don't is because of the administrative "hell" they'd have to go through to deal with 10 million artists, literally—10 million contracts out, 10 million contracts coming back, addendums to those contracts, keeping track of the terms, updating them and noticing when they expire, sending out 10 million micropayments for all the individual sales, answering any questions, and then the customer support involved with ripping and uploading music and artwork, and the list just goes on and on.
If they could have their wish, they would just go to one place in the world and get all the music in the world. Then they would only have one customer, one music provider, to deal with.
You still had the problem of access, and these digital distributors said, 'Well, we'll play the gatekeeper and get you in there, because we'll get the contract with iTunes, but we're gonna demand a pound of flesh. We're gonna control your digital rights exclusively, like a record label, for a set period of time. And every time the music sells, we're going to take a percentage of that money, with an unlimited amount of money coming into us.'
So, if you're The White Stripes, and you've got four back catalog albums, and you go on to become an international superstar, and then those back catalog albums begin to sell in a digital store like iTunes, 'we're just gonna take, you know, 30 percent of the revenue every time they sell.' What did they do to cause those sales? Nothing.
To me, the thought of a band, for example, going out and playing a gig, and someone goes home and buys the music online—having to pay a distribution fee to somebody else [for that] is just ridiculous.
The digital distribution companies said SpinART Records releases would be "prioritized," and that they would market and promote the releases, among the 5,000 albums they represented. Even though you're taking a limited amount of money from the sale of the records, even though I'm putting all the money into promotion of the bands, I'm paying for the tour support, I'm advancing money to the band—even though I'm doing everything—you're just gonna take 30 percent every time the music sells. And you're gonna market and promote me, you're gonna create SO MANY more sales, that even after you take your cut, I'm still gonna make out great. And they said, 'Oh, yeah.' And I said you know what? Get out. I got really pissed off with that. I just thought they were a bunch of bullies, to be honest.
After that, I thought, there's just got to be a website where people can go and upload their music. They just pay a simple, upfront, flat fee, they get 100 percent of the revenue, and they can cancel whenever they want. I won't make money off their success, I'll help them succeed, I'll turn this into a service industry, which is the other side of what I was thinking before. It was a way I could stay involved in the music industry, and not have to be worried about my revenue being based on whether the music sold. I was going to become like Guitar Center, where you could walk in, you pay a fee, and you buy a guitar. So I took distribution, and I commoditized it.
the charge toward an artist-centric
music industry.
On January 26, 2006, the music industry changed. On that date, for the first time in the history of the world, anybody that created sound, music, or spoken word could get signed. They could just go to a website, upload their music, upload their album cover, pick the stores and the services they want, pay that upfront, flat fee, and that's it. Their music is now distributed around the world. It's non-exclusive, you can take it down whenever you want, and you get 100 percent of the revenue. And that's the TuneCore story.
It was really a moral soapbox. And credit for TuneCore goes to those greedy bastards out there that were just trying to take peoples' rights and gouge because they could. And it really pissed me off.
JW: The movement of the music business from offline to online seemed to take the industry by surprise. I mean, TuneCore was right at the apex of that happening. Do you think the record companies should have been caught flatfooted, and why do you think they weren't better-prepared for the shift?
JP: I was dealing with this in 1996/97 with eMusic [an early digital music provider], and we were trying to license the major labels' content to make it available in eMusic, and they refused to do it.
Many of the major record labels are part of multinational corporations, and they're just one spoke in the wheel. And these multinational corporations like Warner, for example, have quarterly earnings that they have to make. And they've got a stock price they've got to think about, and shareholders they've got to placate. So, as the record labels began to get gobbled up and consolidated by the multinational corporations, the way they operated had to change. They couldn't develop acts over an extended period of time. They had to get a return on the investment they put into them from a financial perspective, because that's the way these companies work. And I'm not passing judgment, good or bad—that's just the way they work. Every quarter, you have to launch your earnings. And once you do that, anything that could potentially upset those earnings has a huge impact.
So, for example, if you're gonna go into the digital world and you're gonna put your catalog up for sale online, and Walmart which—go back a number of years—was the largest seller of music in the United States goes, 'Wait a second. You're gonna make your music available to buy online cheaper than you can get it in Walmart? Forget it, we're not taking in the new Mariah Carey record.' You just undercut your quarterly earnings.
In defense of the labels, it's really hard to move the ship, because they have to deal with continuing to generate revenue without pissing off the places that are providing them that revenue, while at the same time adapting to a new model in which you have to be nimble and take risks. And they can't do that.
Also, many of the majors thought they were in a position to leverage users to utilize technology for which they controlled the patents. For example, Sony and Phillips worked together to create CD technology. So, every time a CD player is sold or manufactured, or anytime a CD is manufactured, a patent-licensing royalty fee needs to be paid to the entity that controls the patent. It's an invention. Somebody owns it, and if you want to use it, you need to license it.
So, what if you could use your music to get the world to use your proprietary technology? Sony had a music format back in the late '90s, and they thought that they could leverage their content and make it available to buy only through their format. Then they could control that format and license it out, and make hundreds of millions of dollars, if not billions, through patent-licensing royalty income. Well, the problem was, the format had already been adopted—MP3. The reason it had been is because it was easy to use, and it spread virally, and there weren't restrictions on the music, just like there weren't restrictions on a CD.
But you had Microsoft battling with Sony battling with Universal battling with Warner—all these guys were jockeying for position in order to figure out how they could leverage their assets to create these new patents and this new technology, which could be further monetized. Makes perfect sense as a business. But as they were in-fighting and creating shitty technology, and the only way they could compete with MP3 was by creating another format which has digital rights management to protect the integrity of the copyright—I mean, that's really the difference. Well, they all failed miserably. Microsoft was saying, 'Who the hell are you to tell us how to make computers," and Sony was saying, 'Who the hell are you to tell us how to distribute music.' In the meantime, the world just took off around them.
It just got to the point where, if the music isn't available in the format that people are consuming it in, then they're gonna go find it on the black market, because they still want it. And that really was one of the major reasons they got screwed. They couldn't be nimble, because it would hit their bottom line too hard and they have quarterly earnings, and they really were trying to find a way to capitalize on the download movement.
And along comes Shawn Fanning [creator of Napster] with peer-to-peer file sharing. Bam! The cat was out of the bag. What pisses me off about that, if you don't mind me saying, is Napster raised about $85 million and then eventually sold for about $7 million. How much of that money did the artists get? None. So, Shawn Fanning and all of his goodwill—empowering the people to have access to music—stepped on the backs of every single musician in order to get there, and took the money and ran.
The music had value because the musicians and artists and the labels and the distributors and the retail stores and everybody else made it have value. And all he did is come in and create a great technology—I'm not knocking the technology—and climbed up on the backs of other people. Napster was simply a way to get something you wanted for free. And the thing that you wanted for free had value, because the people that created it had value. He got paid $85 million in venture capital and a $7 million acquisition off of the value of other peoples' assets, and he didn't share that money. And that pisses me off. That's not fair, and that's not right.
JW: Regarding the future of the music industry, what are some of the things you envision happening in the business over the next few years?
JP: I was sitting on a panel in Nashville recently, and a similar question was asked. A guy next to me gave an answer that I wish I had given. He said, 'I'll say it now. February 20, 2010, is the day the CD dies. This is going to be the last year where there's any form of significant revenue generated from CD sales. The majors are going to be able to keep Walmart and Borders and Best Buy and Barnes & Noble into stocking inventory through this last Christmas season, but after that, the floor space is going to shrink significantly, and CDs are gonna go.' And I don't know if I 100 percent agree with that, but I definitely think he's onto something. This year, you're gonna see CD sales significantly decline—2010, forget it.
I think there will be a lot of specialty outlets, where you get the Victoria's Secret lifestyle music, and the Starbucks-type lifestyle, and the Gap lifestyle. And I think people will buy music on a compact disc in a nontraditional outlet if it's branded around a lifestyle. But the concept of, say, the Syrym album being available on the shelf of Best Buy—I mean, Walmart just announced they're going to cut back on the shelf space even more.
JW: Who are some of the artists that utilize TuneCore for digital distribution?
JP: Some quick additional background on TuneCore, first. More music is released in one day on TuneCore than via a major [label] over the course of a year. In three days, more music is released than all the majors combined. Within a month, there's more music released on TuneCore than all the majors and indie labels combined in the U.S. There's anywhere between 180 and 300 releases-a-day moving through the system. Probably over a million songs distributed through TuneCore at this point.
This is information on sales from January, 2009. Unsigned band The Boxer Rebellion sold 15,000 albums and 14,000 additional songs. Never Shout Never, kind of an unsigned band or a smaller band on an indie label, sold over 120,000 songs in about 45 days. Boyce Avenue, who have been appearing in our top 10 bestsellers now for about eight months, sold 70,000 songs and 122 albums in the month of January. And those guys sell probably around that much every single month for the last 10 months. A band that recently decided to get signed, called 3Oh!3, used TuneCore far before they got signed—68,549 songs sold in the month of January. Some of the other artists you've probably heard of include Jason Mraz, Jay-Z, David Byrne and Brian Eno, Aretha Franklin, and the list goes on.
JW: I'm sure you've seen all manner of promotion tied to music that's distributed through TuneCore. Can you discuss some of the most effective promotional techniques you've seen used?
JP: We do market and promote. We've had about 12 artists as the iTunes Download Single of the Week, we've had a couple as the Download Video of the Week. We gave away seven million albums—it was a 34-song album with one song each from 34 different artists. We tied in with Paypal, Yamaha, and Guitar Center. We're doing another [promotion] where you walk into Guitar Center in the month of May and you can grab a Starbucks download card that's got a code on the back. We've done all sorts of things with Rolling Stone.
That being said, 98 percent of what the major record labels released failed. And I can assure you they spent tens of millions, if not hundreds of millions, of dollars to market and promote them. The only lesson I'm trying to communicate is, the magic isn't in getting marketed and promoted. Basically, the way you market and promote music is you give it to other people to listen to and play, and hope to god they talk about it. So you give it to radio stations or MTV, when they actually played videos, or friends, or tastemakers, or whatever you want. And you hope they listen to it, and if they listen to it, you hope they tag it and talk about it and share it. I mean, that's music marketing and promotion.
But the main way music used to sell, traditionally, was through three media outlets—it was print magazines like Rolling Stone, it was commercial radio stations like Live 105, and it was television and, in particular, MTV. And the labels—who were the number one gatekeepers, by the way, to the general public, because they were deciding, at their discretion, what had value—would reach into the sea of 20 million artists and pick one over the rest. They'd stand up at the top of the dam and tell all of them, 'We're gonna pick this one band. The rest of you, we're really sorry. We don't think this is the right fit.' And they bring that artist over to the other side of the dam.
Then, once the labels did that, they pushed the band to the media outlets. Then the media outlets had a second set of gatekeepers. The newspapers or magazines decided what music they're going to expose to the media outlets and, of course, that's something that's pushed on them by the labels. The general population is having two sets of filters over what they're being exposed to.
The second part of that is, even thought they're being exposed to it, to be perfectly honest, it has to cause a reaction. And this is the most troubling and most difficult thing to communicate to a band. They don't want to hear it, because it's upsetting. It's upsetting for me to say it. The truth of the matter isn't always if people just heard it, it'll work. It's not passing a judgment on the music. Music has to cause reaction.
So, if [the Nirvana song] "Smells Like Teen Spirit" was a shitty song and a bad video, it wouldn't have mattered how many times it was played on MTV or played on Live 105. It wouldn't have caused that reaction. On the other hand, if it's a unique tune and people love it, if it's gimmicky like "Shoes" by Kelly—who's sold over over 1.4 million songs without a label through TuneCore, and he puts up a viral video on YouTube and it causes reaction—it can take off.
And sometimes the reaction has nothing to do with you. It could be that Aretha Franklin, who also used TuneCore recently, sings "My Country 'Tis Of Thee" at the Presidential inauguration and, due to the environment around that song, there's a reaction to it, because that song has an attachment to that historic moment.
So, the hardest thing to communicate is you're not good or bad if someone doesn't react. It's just that who the hell knows which way the planets need to line up. But the second thing, the major thing that's changed, is all of us now have direct access to the major outlets.
You also can go and slap together a Myspace page like Secondhand Serenade did—another TuneCore customer before he decided to get signed—and that guy sold a quarter million songs in a month-and-a-half and was one of the five most-popular bands on Myspace. He worked his butt off for that.
JW: What promotional techniques do you recommend, in order for artists to have the greatest chance of success?
JP: There's really a lot of great things you can do. Check out this link on the TuneCore website that features tips for selling more music online. It's got some great information.
There are some significant things that artists can do that can really stack the deck in their favor and actually sell them more music.
Number one: Frankly, music stores also are sort of social networking sites. Something like iTunes—when you go into it as a fan and type into the search engine, most people will type the names of songs. So the first thing you can do for yourself as a band is do a cover version of a popular song. Do it in your own style—own it and make it yours. Don't worry about being defined by it, because it doesn't work like that anymore. But now, when someone types in the name of the new Coldplay single, "Viva La Vida," your song will surface right next to Coldplay's, so you gain exposure. People love covers. Particularly if they're unique. Covers are a great way to be discovered, and generate revenue.
Number two: In the iTunes music store, albums that are reviewed tend to sell 33 percent more than albums that are not reviewed. Review your own album, ask your friends and your family and every fan that you have [to review it also], and make it a thoughtful review. Don't just put, 'Dude, this rocks!' Put in something like, 'This sounds like Jeff Beck if he had the bastard son of Pete Townsend and Jeff Buckley.' I mean, just something that gets somebody to think and go, 'Wow, I've gotta hear that.' Make sure you give the reviews star ratings, because those reviews that are considered helpful [higher star ratings] surface more. If your album has less than five reviews, the reviews won't even surface, so get at least five reviews in there.
Number three: There's something called iMixes. iMixes are basically playlists of music that exist within iTunes, and anyone can make them. So if I'm a band, I should go in and put in three of my own songs, and nine songs from more popular bands in the same genre that I want to be associated with. Now, if someone is checking out U2 in iTunes, and I put together an iMix that includes my music with U2, my iMix can surface. So people looking at U2 can discover me because on the right side of the page, it says, 'iMixes.' Make sure you rate the iMix. Give the iMix an interesting title, like 'Music To Drive Fast To,' or 'Songs To Use When You Break Up With Your Girlfriend.' You can even write a description of what your iMix is about. 'These songs are great to work out to. They've all got a great bassline and a driving rhythm.' I'm sure you can come up with something much more creative than that. Do a whole bunch of iMixes, don't just do one. Seed yourself out there.
Number four: The next thing you should do is think about the holidays, because holiday music and theme-based music sells extraordinarily well. Okay, new James Bond film coming out? Cover the James Bond theme. Christmas is coming up? Do Christmas songs. Trust me, record Christmas songs now, in April, and get them into the stores by November, because they will sell in December. You've got Valentine's Day coming up? Cover some love songs. Groundhog Day? Write a song about Groundhog Day. Whatever it might be, if you cover songs and make them holiday theme-based, you'll generate profile and revenue.
So if you do all those things—and that's just iTunes—I can almost guarantee you'll sell more music than you used to, and you'll gain a larger profile. The fun thing about this is that the barrier to entry is so damn low, the risk isn't really there. For ten bucks, you can have a single distributed around the world.
JW: If you were to give some music marketing advice to up-and-coming artists, what would it be?
JP: Here are a couple online marketing strategies. Do a Flash-based video game. Instead of going out and trying to buy that new fuzz pedal or get some photo shoot done or make posters, honestly, take the money and get a Flash-animated video game that's addictive set to your music.
Put up your source tracks and make them available to download, and let other people use them in their music, royalty free.
JW: What new products or services are you planning or hoping to launch at TuneCore?
JP: TuneCore is about to launch a streaming widget player in June. The streaming widget player will allow you to collect the e-mail addresses of your fans. You'll be able to decide if you want to stream 30 seconds of your song, or the whole song. You can copy and paste it and put it all over the Internet.
Then the new iPhone app that we're about to launch shows the bestselling music by genre and by your geo-location. So if you're sitting in New York, you'll see the 25 bestsellers in New York, and if you're sitting in Chicago, you'll see the 25 bestsellers in Chicago.
We're about to launch something with a company called Gig Maven. If you sell 100 songs within a particular zipcode—it's either New York or L.A., I can't remember the zipcodes—you get a guaranteed gig within six months, with a minimum $100 guarantee. I thought it was a cool way to start.
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