Last week, I shared part one of my conversation with Hannah Boothby from Soundreef about physical distribution, film placement and why getting a record onto a store shelf is not the same thing as getting someone to buy it.
In part two of the Soundreef interview, we moved further into digital distribution, royalties, collecting societies and what I think the future of the music business may look like.
For all the complaints surrounding the transition from physical to digital music, I see plenty to be encouraged about.
Digital Distribution Gives Us Better Data
One of the biggest improvements is simply knowing more about what is happening with our music.
Physical distribution relied on an enormous amount of manual work. Statements could involve paper reports, invoices, accounting systems and people manually putting all of that information together.
Digital distribution gives us much more data. We can receive reports faster, see where music is being consumed and follow the money with considerably more precision.
That does not mean a digital company is incapable of reporting something incorrectly. But when the systems are built properly, there are fewer opportunities for human error along the way.
As I told Soundreef, “I don’t think that the digital space has cheapened music at all. I think it just made it more honest.”
The Cost of Distribution Has Changed
The economics are different too.
Physical distribution requires manufacturing, warehouses, forklifts, employees, trucking, shipping and inventory management. Then somebody still has to get the product into a store.
Digital distribution removes most of that physical infrastructure.
We still need people, technology and systems to deliver and manage music. Those things cost money. But moving a digital file from one system to another is fundamentally less expensive than moving pallets of CDs around the world.
The difference becomes even more obvious internationally.
Not long ago, reaching another country could require separate distribution agreements, physical inventory, customs paperwork, tax documents and international shipping. Today, we can make music available around the world with the push of a button.
That affects revenue, but it also affects access. Artists want to get paid, obviously. They also want people to be able to hear their music.
Collecting Societies Have to Keep Up
The same technological change raises questions about organizations such as ASCAP and BMI.
Collecting societies were created for good reasons. Songwriters needed organizations capable of tracking uses of their work and making sure they were compensated.
The problem is speed.
A payment from a digital platform can sometimes arrive while the activity that generated it is still relatively fresh. Performance royalty statements may arrive much later.
Technology such as audio fingerprinting also exposes some of the limitations of older survey-based systems. Instead of relying primarily on a sample of broadcasts, fingerprinting can identify music across far more outlets.
That can be particularly important for independent artists whose music might never appear on the handful of stations included in a traditional survey.
Collecting societies still have a role, but technology is forcing them to define that role in a faster and more transparent marketplace.
Direct Deals Create New Options
Technology is also making it possible for publishers and rights holders to form direct relationships that previously would have required more intermediaries.
Our publishing company, for example, has a direct agreement with Google for YouTube. When a direct relationship allows us to collect revenue more efficiently, there is little reason to add another layer simply because that is how the industry traditionally operated.
That does not mean every artist or publisher should spend all day chasing every fraction of a cent.
There are only so many hours in the day. We try to identify where meaningful revenue and opportunities are coming from, then put our energy there.
I Am Optimistic About Streaming
Plenty of artists and music-business people are worried that subscription services will replace traditional retail.
I understand the concern, but I am not convinced that services such as Spotify and Deezer are destroying the music business.
From what we can see in our own statements, they are creating revenue from listeners who might not have purchased a record anyway.
They are also giving people a legal and convenient alternative to piracy.
I am not saying Spotify is perfect. No company or business model is. But I am interested in what comes after Spotify, and what comes after whatever replaces Spotify.
That ability to adapt is one advantage independent companies can have. Large corporations can be difficult to turn quickly. Smaller companies can see something changing and adjust course.
Artists Need to Understand the Business Around Them
The technology can improve, but artists also need to understand how much work surrounds a career in music.
A fan may see one artist performing one song on one stage. What the fan does not necessarily see is the team of people who helped make that moment possible.
Managers, marketers, distributors, designers, engineers, musicians, production crews and plenty of others may all contribute to putting that artist in front of an audience.
The artist should get paid. So should the people doing the work around the artist.
I would like to see artists become better educated about that ecosystem and less likely to assume that every person or company participating financially must be stealing from them.
The music business is changing quickly. From where I sit, that is a reason to pay attention, not panic.
Read part one of my conversation with Soundreef for more on physical distribution, creating demand and why simply getting a record into stores does not guarantee sales.