Economics of Music Number One - published July 2017; all rights reserved
Is music that is referred to as indie (short for independent) really indie? There are some pretty well-known musicians and bands on this planet that get referred to as indie, when in fact, they have agents, labels, managers and other partners that help them not only make their music, but record and sell it. In fact, some labels are referred to as indie – an oxymoron if I ever heard one.
In this first edition of the blog, I’m going to take a shot at defining the term independent musician. I have previously published one recording (as a CD in 2013 – The BOKS of ROCK; Thinking Outside Of) with help from an audio engineer, and CD Baby was used to market it. One of the things I learned in the process was that using CD Baby to “market” a record is roughly equivalent to asking the DOW chemical company for advice on organic gardening. I also learned that digital subscription sites like Spotify aren’t any better than CD Baby for helping an unknown band market their recordings (vinyl, tape, digital). If the people who log into those sites don’t already know you, having your music on those sites won’t help, and YouTube is even worse.
How do you answer the age-old question that all marketers in all industries have always had to answer – How do you make people pay attention to you? More specifically, what makes a person click on your song and pay $1 to download it, or $10 for a CD, or $20 for a vinyl album?
My current project is called HUMANS. While writing the story and the music for HUMANS, I spent the occasional minute thinking through the process of what creating a truly independent record would involve. All of the songs would have to be written by that composer/musician/band. (I’ll just say musician for the rest of the blog.) All of the tracks in each of the songs would have to be played and recorded by that musician. All of the mixes would have to be engineered by that musician. The final mixes would have to be mastered by that musician.
I’m guessing that most musicians would stop there, and think to themselves that they did it all, at least everything that has to do with the music. I understand how that would make sense to many of my fellow musicians, however, I am also an economist, and that influences my perspective. A more accurate application of the term independent requires making and selling your record as well.
There are few musicians who could manufacture their own vinyl albums. The same is true for CDs and cassettes. In our digital age, though, the most popular music format is no longer physical. You don’t have to manufacture MP3s, and the cost of copying them is near zero, which means profit per unit sold is enormous compared to all other music formats. It also means that, in 2017, any musician can “manufacture” their own product – it is simply a matter of copying the file they mastered with their digital audio workstation (DAW).
Some musicians though, continue to choose to reproduce their songs on vinyl records, cassettes, or CDs. Why? Why indeed. When the profit per unit is so much higher for MP3s, it seems a bit crazy to publish songs in any other format from an economic perspective. The simple truth is that musicians, and many fans of those musicians, think that sound quality matters more than profit and/or price. MP3s (low compression MP3s) can sound quite good when played back through good speakers, but they aren’t as good as .wav or .aiff files. A good quality CD will sound essentially the same as a .wav or .aiff file, and is also digital.
There are two analog formats - tapes and vinyl albums. Many people think they sound better than digital formats, but for tapes, that would only be true if they are played with a good audio system that includes Dolby. Vinyl can also be low quality, and can sound awful. However, well mastered, high quality vinyl is preferred to all other recording formats by audiophiles, and in 2017, vinyl is gaining market share.
I chose to manufacture HUMANS on vinyl for two reasons. The first and most important is that is the sound format I prefer. Second, I am concerned about what has become a pervasive attitude towards copying music, which is a criminal act. Every time someone makes a copy for someone else, they are depriving the musician that created the music of income. In essence, they are stealing from the musician (or other copyright holder). The vinyl format does not prevent theft, but it makes the thieves work a bit harder, and hopefully, makes them think about what they are doing, and who they are hurting in the process.
Regardless of which playback format you choose, once you choose it, all that is left between your songs and potential listeners ears is letting them know that the music exists. A large number of musicians think that marketing their music consists of posting something on their Facebook pages and telling friends and family to post something on their pages as well. After that, sharing and “likes” will magically turn into dollars. No. They won’t. If it was that easy, there would be many more rich musicians.
Playing gigs doesn’t work much better, with or without labels/managers/agents. Travelling around the U.S., or any other part of the planet, is not cheap. It has become an article of faith in the music business that you build a fan base by travelling and playing live, however, faith is not truth. The truth is that the majority of musicians still don’t become financially successful regardless of how many live gigs they play, or where they play those gigs, primarily because they don’t have name recognition before they get there.
Does playing a large number of gigs in a large number of places over the course of years sometimes result in fame and high incomes? Yes, but not usually. In the Milwaukee area alone, where I’m from, there are hundreds of musicians/bands. There are only so many venues for them to play in, and the enormous amount of competition means that the owners of the venues don’t have to pay the musicians/bands. The huge majority of them are willing to play for free, because they think getting stage time is going to generate name recognition.
The reality is that the same family/friends come to most of their shows, and if they don’t buy enough drinks, the owner of the venue won’t give the musician another gig. The venue owners only care about musicians that turn a profit for them by attracting enough people to their bar. Musicians who think that the benefits of gigs in coffee shops and dive bars outweigh their costs are really bad at doing math. The bigger the band, the worse the math gets. On a good night for the average band, their take at the door, plus tips, might cover the price of repairing the amplifier they fried during the show. It won’t pay the monthly rent. All of which is a long-winded way to say that, despite all the long hours and hard work, playing gigs is expensive, and usually ineffective, marketing.
To get back to the main theme of this edition of the blog, to remain independent, you not only have to put on the show, you have to do all of the driving, and be your own roadie and agent.
A large number of musicians have already figured that out. In the digital age, live gigs may be fun, but they are unlikely to be as profitable as building a website. However, if all you do is build a website, that won’t be any more profitable than asking friends/family to like your Facebook page, or playing gigs at dive bars. It won’t sell your music. You have to convince potential customers to go to your website, and listen to your music. There are millions of musician’s sites on the worldwide web. Why should anyone go to yours?
Answering that question independently is difficult. Numerous skill sets are necessary. You have to learn how to build a website worth visiting. At a minimum, it has to be visually interesting. You need high resolution photographs, which means you need to be a photographer. Most visitors to a music site will also expect video, which means you need to be a videographer. And since you’re independent, you write, direct and produce, as well as operate the camera.
And that is just about creating content. You still haven’t done anything to get potential customers to visit your site. It doesn’t matter how nice it looks if people don’t know it exists. That’s where advertising comes in. For some, playing live could help. Friends/family could help. Putting posters up at the local coffee shops could help.
Footnote - Getting your songs played on the radio would help more than all of the above put together, but that is usually expensive. It costs tens of thousands of dollars to get a song on to commercial radio play lists. Spotify is monetizing their space in the market the same way. Large labels can play that game. They know that paying the price usually leads to more than enough sales to cover the cost and generate profits. The huge majority of independent musicians can’t afford that, which is why musicians still think that being invited to be an artist for a particular label is a good thing. For some it is. For most, it is not.
Back to the question: how can independent musicians attract attention to their websites? Advertising can be just as expensive as buying your way on to a radio play-list, however, it doesn’t have to be. Before you advertise you need to give some thought to who your audience is. For example, fans of death metal are unlikely to buy anything produced by a folk guitarist. For each genre of music there are specialty websites, and for many, there are magazines.
In addition, you need to keep in mind that your website is international. You can try to attract attention locally, but if that’s all you are concerned with, the posters in coffee shops method would probably work just as well. Placing an ad or paying for a review in a publication with international reach, such as Rolling Stone, will be way out of the financial reach of the average independent musician, but the specialty magazines cost much less, and website ads tend to be even cheaper. There is a reason for that though; the website ads tend to be less effective. Print media remains more effective, especially magazines, precisely because they have already attracted a specific audience. And these days, all of the magazines have websites, which like yours, have an international footprint.
Regardless of what media you choose to advertise with, running an ad of any sort means you have to write ad copy, which means the truly independent musician also has to be a copywriter.
So, to be an independent musician, you have to be a: composer, musician, audio engineer, agent, driver, equipment manager, website designer, photographer, videographer, graphics designer, cameraman, director, producer, copywriter and manufacturer (albums, tapes, CDs). And I’m not quite done.
Assuming you do convince people to visit your website and they actually buy something, you have to familiarize yourself with even more career paths. You have to keep track of who bought what and make sure you ship what they ordered to them. That means the independent musician also has to be an accountant, and a shipping department manager. You also need to keep track of revenues and costs for tax purposes.
In sum, to be an independent musician, you need to have an extraordinarily complex skill set.
The thought I put into defining what makes a musician independent led me to use myself as a guinea pig in the process of creating HUMANS, which is currently for sale on this website. The question in my mind was could I go from blank page to publication on my own; could I be truly independent?
I like composing music. I’ve been doing that for 40 years, and that doesn’t require anything other than pen and paper. However, I hadn’t recorded much of it. The technology you need to make a decent recording has become much less costly the last 20 years, but it’s still not cheap. The studio I set up in my home includes a Roland Octapad ($800), a KORG M50 keyboard/work station ($1,500), a PreSonus compressor/equalizer ($250), a PreSonus DAW ($400), a ZOOM Recorder/Mixer/Interface ($400), 2 Shure microphones (about $800), Sennheiser headphone monitors ($265), Zildjian Hybrid K cymbals ($800) and about $500 for congas, bongos, and assorted other percussion instruments. In total, that is almost $6,000. The good news is that the cost of the equipment can be spread across multiple recording projects, and for tax purposes is deductible if you make income as a musician.
Could I have spent less on equipment (I could just as easily have spent tens of thousands more)? Yes, but it wouldn’t have been as good and I couldn’t have made as good a recording. I recognize that is just my opinion. However, since I did the recording independently, my opinion was the only one that mattered, that is, until the time came to sell it. At that time, my opinion no longer counted for anything. Either potential buyers of the album liked what they heard (agreed with my opinion) or they didn’t (and spent their money on someone else’s music).
Do other musicians make their recordings with equipment that cost a lot less? Yes, much less. But most of what you hear on the radio costs a lot more. To put this all into perspective, a well-known band may spend more than $25,000 just to record an album, with instruments that cost a lot more than what is in my list above. In fact, I know of one recording studio that has a $180,000 piano in it. And that brings us to the next part of the process; using the instruments to record something.
In the case of HUMANS, all of the tracks were recorded into my ZOOM. That saved me from paying for time at a recording studio. It also saved me from paying an audio engineer to mix the tracks into their final versions. At a minimum, an audio engineer will cost $50 per hour. It required about 45 hours to record the 110 tracks that were transformed into HUMANS. It took at least that long to mix the tracks. Some songs went through more than 50 versions before the mix was finalized. At the minimum cost per hour, the $400 ZOOM saved me about $5,000 of studio time.
More importantly, I ended up with the mixes I wanted. I decided which effects to use (or not) on each track and how to balance the tracks. I’m certain there are audio engineers that could have done a technically better job than I did, and while that may matter to some people, it didn’t matter to me. I didn’t (and don’t) care that an engineer working with the latest version of Pro Tools could have done a technically more proficient job than I did with the echo on track 12 of HUMANS 5. From my perspective, the process of mixing has as much of an impact on the music as any of the instruments that were used to create the music. To me, the mixer is an instrument. A truly independent musician should determine how that instrument is played.
Once the mixes were finalized, the songs had to be mastered. That was the first part of the process where I decided not to be independent. I paid someone else to master HUMANS because I trusted that person’s ear and knowledge more than my own. That was in 2016 and cost $100. Since then, I have continued learning, and will master the next album I publish. There is at least one internet site that charges just $10 to master a song. You can use their software to do the job, and it allows for individualization. In my case, I upgraded my Pre Sonus DAW, and will likely use that in future.
Once the songs were mastered they needed to be published. I chose to publish on vinyl. I required help for this part of the process also since I don’t have my own record pressing machinery. I paid a U.S. company that works with multiple vinyl record manufacturers. The low cost option was in the Czech Republic. The price for pressing 250 records and printing the jackets was about $2,300.
I also needed help with the 12-page booklet that was to be inserted into the second pocket of the double album jacket. The booklet was designed by the same graphics designer that did the album jacket, and was printed by a company in Milwaukee. The price for the printing was about $450.
The next task was building a website. I did that myself, kind of, using a web host as the platform, but in the process of doing so, I wondered over and over again whether I should have obtained some help. The annual fee for using a web host is about $200, and they take a percentage of all sales as the price for using their commerce functions.
Last, but not least, I placed ads in two magazines. One of the print ads is part of a public relations package that includes multiple website listings, interviews, reviews, and radio play that runs for three months. The other was one print ad and a review in one edition of the magazine. I wrote the ad copy for the single-issue print ad. The company managing the PR campaign is doing their own ad copy. In total that cost about $900.
I also intend to place some of the initial run of 250 in two local record shops. They are both in the Milwaukee neighborhood that I live in. To help attract attention to their presence in those shops, I will run two weekly ads on a local music website. That will be an additional $800. Advertising is not finalized as I write this. Their may be additional costs.
So, how independent did I manage to be in the process of making HUMANS?
I managed to be a composer, musician, audio engineer (minus the mastering), website designer (bad one), accountant, and shipping manager. I didn’t need to be an agent, or roadie. I was my own label/manager. I wrote ad copy and liner notes. More importantly, I authored the story that goes with the music. What is on the cover of the album is my photograph of a mural on my garage. I also took the photograph of Lake Michigan which is used as background in the infinitwav logo on the back of the album jacket. I did a lot.
I also didn’t do a lot: mastering, graphic design, some photography, and manufacturing of albums/album jackets/booklets. The art on the album cover was created by a friend of one of my daughters. It was painted on the wall of my garage.
But that just scratches the surface of what I didn’t do. I didn’t make the instruments I used to play the music. I didn’t create the word processing software I used to write the story, nor did I build the computer that made my use of the software possible. I didn’t build the microphones, compressor/equalizer, or recording equipment I used. I didn’t build the house in which I recorded the music. I didn’t build the power plant that transmitted the electricity that powered all of my electronic equipment. I didn’t build the internet (neither did Al - DARPA did) nor the web host that allowed me to have a website.
I could go on. The larger point is that the recording/publication of music is a highly complex process that a single human could not possibly manage him or herself. To put all of this in a larger context, musicians are essentially entrepreneurs. To be a musician/band is no different than managing a business. Unless the musician is strictly a hobbyist, the goal is to make a profit; to generate your own income; to be self-employed.
It remains to be seen whether the HUMANS project will be profitable. At a minimum, I need to generate enough revenue to cover my costs. Let’s do the math.
Mastering $ 100
Graphic Design $ 400
Albums/Jackets Manufacturing $2,400
Booklet Printing $ 450
Shipping Materials $ 420
Website $ 200
Recapitalization $ 600
Total Cost $6,570
Total cost divided by 250 albums is 26.28. So that is the price I have to charge per album to break even. Recapitalization is calculated by adding up the value of the plant and equipment used in the creation process and accounting for depreciation. The IRS rule is that the equipment depreciates to zero after ten years. That means my $6,000 of equipment lost $600 of value a year over the period of time it took to record and publish the album. It actually took three years, but I worked on it part-time, so I plugged one year into the cost calculation.
It is worth noting here that labor wasn’t included as a cost, nor was mileage, electricity and a number of other things. So, the real cost was substantially higher than $6,570. However, the average price for an album is about $22, and I don’t believe that the average music fan will pay more for my album than they will for others, regardless of how much my labor might have been worth. In sum, if all I do is sell the 250 albums/booklets that were printed, I will not be profitable.
The only way HUMANS will become profitable is if demand for it is greater than 250. I will then order more albums, and since not all of my costs will be duplicated, the cost per unit will fall. The greater the number of orders, the lower the cost per unit will be. That is the same thing as increasing the profit per unit. To be profitable in real terms, (that is, accounting for labor, electricity, transportation, communication) I need to sell about 1,000 albums. That would be nice, regardless of the fact that I haven't come close to being independent.
To close, all of what has been said here about musicians is just as true for all other types of businesses. As much as some of us like to believe the rags to riches stories about our fellow humans who pulled themselves up by their own bootstraps, the truth is, that story is total nonsense.
All other types of businesses are as complex as the music business. None of us are truly independent. The hardest working entrepreneur didn’t make the food s/he ate for breakfast, didn’t manufacture the phone s/he communicates with, didn’t build the roads s/he drove on to get to her/his place of business. Didn’t erect the building, didn’t produce their own electricity, didn’t build the desk in their office or the computer that sits on it, and on, and on, and on.
No musician/entrepreneur, or any other human is truly independent. Ask your mother. She’ll tell you. And the next time a musician tells you they are independent, refer them to this blog.
Not being independent is human, and that idea is part of the story of HUMANS. Some of the music is available to be listened to on this website. I hope you like it.