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FROM
THE PRESIDENT - Record Store Day (Saturday, April 19th)
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In honor of Record
Store Day (Saturday, April 19th), I'm going to turn the lead article in
this newsletter over to our good friend Eric Levin who leads the AIMS
Independent Music Store Coalition (which includes Grimey's in Nashville,
Rock-A-Billys in Detroit, Vinyl Fever in Tampa, Eric's store Criminal
Records in Atlanta, and a number of other great indie retailers). But first
a few personal comments.
As a child of the 70s, growing up on the lower east side of New York City,
my Independent record store was Dayton's at Broadway and 11th Street.
I used to go 3-4 times a month, sometimes to buy, sometimes just to
hangout. It was a small store but always seemed to have a great
selection. Four guys worked at the store on varying shifts (the owner
worked at his other Dayton's store on the west side) and they all knew me
by name and what artists I liked (and kept it quiet that The Carpenters
were on my favorites list which was not cool at the time) and they would
turn me onto new music as well. Vinyl was king (no 8-tracks for me,
we didn't have a car) and the gatefold albums had a second purpose which we
won't get into here. Sometimes the guys would even save me a
promotional copy or two of a record so I could save a few bucks. I
loved it!
My son is a child of the 90s and I always found it sad that the Manhattan
marketplace had changed and there was no Dayton's for him. Tower and
Virgin were cool for selection, but too big and became too impersonal as
the staff became clerks rather than music tastemakers. There were a few
NYC indie retailers that super served a specific genre such as the Fat
Beats store for Indie hip-hop but to get a taste of something close to my
record store experience of the 70's with a wide range of music within a
single indie retailer my son had to wait until the Summers when he lived in
Pennsylvania when he'd go to Gallery of Sound, but even then he had a long
ride to get there.
Where I'm going with this is we MUST support these remaining Independent
music stores that create the future music lovers of tomorrow. These
accounts, unlike mainstream retail and radio, are more willing to try and
promote new music (look at their charts each week!). The cooperative
advertising program costs of the Independent coalition accounts may seem
high but these accounts do execute the marketing plans with high compliance
rates and try to promote our music (when they do return product at least
all the product comes back with store price stickers on them, can the big
box accounts say that?!?!).
So, on Saturday, April 19th let's support the retailer members of the AIMS,
CIMS, and Music Monitor Network Independent retail coalitions and the great
Newbury Comics stores. There are great Independent retail stores all
over the country participating in Record Store Day like Electric Fetus or
Fifth Element in Minneapolis, M-Theory in San Diego, Music Millenium in
Portland, OR, Record Archive in Rochester, NY, Silver Platters in Seattle,
Twist & Shout in Denver, and Waterloo in Austin to name just a
few. Metallica will be playing at Rasputins in San Francisco.
To see what Fingerprints will be doing click
here. Get out to an Independent music store, I will!
Before turning it over to Eric I'd like to share with you that John
Baldacci, governor of the state of Maine (home of Independent music
retailer Bull Moose), has officially declared April 19th Record Store Day, click
here to see the proclamation. Take it away, Eric - Best always,
Rich Bengloff
from Eric Levin, AIMS Retail Coalition
Howdy, indie label friends.
I want to thank you, very seriously and honestly, thanks for continuing in
your mission of furthering the art of music. In no uncertain terms, the
members of the Alliance of Independent Media Stores understand your fierce
struggle to patronize the arts. Within the seventeen AIMS members, we have
fourteen indie labels: we work for you, we rely on you, and we are you.
So, don't you feel a little put upon? I don't mean by the vagaries of this
wacky business, like the unlevel playing field in all aspects of our
businesses, or the perceived privilege of a generation weaned on an
all-you-can-eat buffet of free music.
I'm talking about the prevailing mores, the preconceived notion that we've
made bad career decisions.
It kind of pisses me off.
Do you get the sinking suspicion that your in-laws are waiting for you to
get a real job? Do old acquaintances sadly shake their heads when they
learn you're in the music business, asking, "So, what are you going to
do next?" Do you get funny looks at the bank?
When did everything shift? For a moment in time (for me, this might have
been when I was fifteen, working part time at the mom & pop), there was
no place cooler to be than behind the counter of the record store. Or, in
the label's case, in the recording studio, behind the stage, at the radio
stations, on the tour bus, any of the wonderful places your career has
taken you. When did that change? When did we go from Captains of Industry
to schmucks, when did we become dead men walking?
And why are the ups and downs of our particular industry front page news?
We seem to be the subjects of a strange mix of nostalgia and schadenfreude;
the public is cheering for our demise, while prematurely mourning our
absence. When Tower fell, there was a strange glee in the air: "I sure
will miss that place, but, tee hee, I've got an iPod full of free
songs."
I'm sure some Atlantans would be sad to see the "Going Out of
Business" sign on the front of Criminal Records, but I imagine the
local press would have a field day. Failure sells papers, not success
stories.
I'll blame the media. Why not? As iPods and MP3's became de rigueur, the
opposite became passé, and nothing is more opposite of digital media than a
living, breathing, local temple of music and culture, the Record Store.
(The record stores filled, of course, with independent music.)
It's particularly fun to be celebrating Record Store Day as we stand at the
moment when the shine came off the digital diamond. Oh yes, it's coming,
still too far away for the industry to see it, but for those at street
level, it's pretty much here. I'm not implying that the convenience of
digital media won't forever be a part of our lives, but the love affair is
over. When grandmother has an iPod and mommy is making mix CD's on her
laptop, it really isn't that cool any longer.
Our recent reunion with our collective love of vinyl records is just the
tip of the iceberg, and it is not nostalgia driven. Our customers are
looking for a more wholesome and real experience, they're ready to break
free from the central CPU and start communicating face to face again. This
is a trend that's worth investing in. (Hint: put your money in the
community-building, guys.)
Of course, the truth that we all know is that we've never been wrong in our
pursuits.
I'm often asked to defend the success of indie retail. Recently, a reporter
at a major music industry publication wanted to report about the
groundswell of support for Record Store Day. He interviewed me about the
health of the indie sector, the resurgence of vinyl, the gathering strength
of the last remaining music specialists. We talked about new stores opening
up and the fact that these remaining retailers are holding strong during a
lackluster economy, selling items from an industry that's having a hard
time producing.
His editors asked me to prove it.
How do I defend the success of an indie record store? Would it be the size
and style of my car? Perhaps, the softness of my pillow could be measured.
The size of my savings account would be impossible to measure because it
does not exist. A simple measurement of success might be the continued
existence of my store, but it isn't very hard to pay your rent and keep the
lights on.
How do you measure the success of your label? Is it solely defined by the
size of your bank account? I seriously doubt it.
I bet it's similar to my success. The first time you put a test pressing on
your turntable and you know you've created something special that will
stand the test of time. Or, that feeling when your artist is standing in
front of an audience, bringing some wonder and joy to the world, and you
get to stand to the side and enjoy a taste of that, knowing you helped.
Best case scenario - you are that artist, one can always dream. Perhaps
it's just putting something special in somebody's hand, knowing it's going
to impact their life in a positive way.
In that, our success is the same. When business conditions are muddy, and
you start to waiver on your personal commitment to keeping the awesome rolling
and keeping the party going, and you just feel like throwing in the towel,
don't you seize those wonderful memories? I think of the seven-year-old
neighborhood kid who comes to my store, he's got a diary/autograph book
from in-store performances his dad took him to from when he was a baby
until now. This kid's seen a lot of great bands and has a killer scrapbook,
along with some damn good memories of Criminal Records.
I think of a former staffer, a young kid who left for college sometime in
the 90's, nice guy, always liked him. He wrote me a note about five years
ago, telling me about his boring corporate death life and how he'd turned
into everything he despised, and that he was going to follow my example and
open up his own store. He said that I'd inspired him, and that moved me
because I'd done nothing more than what I've always done.
Recently, on the fine example of a fellow AIMS member, Darren Blase at
Shake It Records in Cincinnati, Ohio, I started providing health insurance
for my staffers. This was against the counsel of my CPA and business
advisors. A scant few months after the premiums kicked in, one of my main
team members was stricken with cancer. The insurance opportunity changed
his life, changed all of our lives. My CPA was humbled, I felt like a
success.
I rankle at the implication that I've made a bad business decision by
following this foolhardy path. I'm no fool. My business model is sound.
Recently, I purchased a coffee company to augment my efforts at music
retail. I signed a 15-year extension on my lease. I've taken out loans to
build this business. I have a staff of 30, some with me for over a decade,
and one has been by my side for over seventeen years.
Record
Store Day -- on April 19 this year and the first of many to come -- was
designed to shine a light on a success story. The lazy reporters might
paint this differently, a brief look at the dinosaur before it sinks
beneath the tar, but we all know different. We know this is a celebration
of David beating Goliath, it's a full kick in the prick for the corporate
culture that's taken over this land. You guys are more than a part of it.
You are it.
Henry Rollins gave us an apt quote for Record Store Day, "If we lose
the independent record store, we lose big. Every time you buy your records
at one of these places, it's a blow to the empire."
This isn't Appliance Store Day or Toilet Paper Store Day. It's RECORD
STORE DAY. Join us, won't you?
(And join my weekly newsletter by emailing eric@criminal.com. I'll keep you up to
date with street knowledge.)
Best,
Eric
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INDEPENDENTS DAY (July 4-6, 2008) - WE NEED YOUR HELP!
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This July 4th weekend we will be celebrating Independents
Day, a day to celebrate Independent music and the worldwide unity of
the Independent music sector! Fourteen trade organizations from as
many countries across the globe have already agreed to participate.
Independents Day will be a worldwide event to celebrate Independent music
through an historic on-line auction. This multi-purpose fundraiser will
raise money and will provide the Independent sector with unprecedented
media attention spotlighting importance in the global landscape.
A2IM needs you to gather auctionable items, for examples:
*Dinner with an artist/label manager
*Autographed paraphernalia
*Autographed guitar strings
*Rare recordings
*Attendance at a session/video shoot
*Night out with a band
*Specially produced merchandise
*T-shirts & other products designed by Independent acts - eg. White
Stripes & Independent's Day - associate ID with popular acts to create
appeal
The event will include:
*An on-line auction of memorabilia - we need you to help us gather
collectables from your artists, plus invitations backstage or to
dinners with artists, etc.
*The sale of a virtual album, for three (3) days only.
Fifteen tracks will be worldwide tracks (including from the U.S.) and five
will be available in the local territory only.
*We'll work with Billboard and announce a list of the Top 10 Independent
albums ever. We'll get back to you on the track selection process
(remember: it's from labels when they were Independent labels so the
Doors on Elektra counts but the Pixies on Elektra do not).
*We need sponsors! So far eMusic, IODA, & Amazon have signed
up. We need your help in getting more. Where do the proceeds go?
*25% will go to the World Independent Network (W.I.N.), of which A2IM &
eighteen (18) other countries belong, helping W.I.N. serve as our advocate
on a worldwide basis.
*25% will go to an emerging countries/territories fund (eg. Peru or Western
Africa) so that they have seed money to start Independent music label trade
organizations in these territories.
*50% will go to A2IM to fund our organization. Your A2IM board of
directors has agreed that we will donate 25% of the net proceeds that we
receive to the Recording Academy's musicians' charity, MusiCares, which
helps all artists in need plus has an education in the school program.
Any questions? Contact W.I.N. VP Peter Gordon of Thirstyear
Recordings (peter@thirstyear.com or
203 838 0099) or Consulting A2IM Executive Director for US Independents
Day, Rob Weitzner (rweitzner@yahoo.com)
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WAIVING ROYALTIES IN EXCHANGE FOR PROMOTIONAL SERVICES
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Media companies & social networking sites sometimes ask labels to
waive their statutory royalties for streaming or non-terrestrial
performances as they provide "promotional opportunities. As a
result we decided to re-print the below message, with slight changes,
that we sent out last Fall as follows:
Every Independent music label has or should have its own business plan, but
as our industry continues to shrink in terms of sales, from $14.6 billion
in 1999 to approximately $10.5 billion in 2006, and the trend down is continuing
in 2008, artists and labels need other income sources.
As a result, as a consequence of music consumption migrating from a sales
consumption model to a performance (internet radio, satellite radio,
time-shifting, etc.) consumption model, music label income from internet
and performance sources, and music licensing, has become crucial for
financial existence for both artists and labels.
At the same time, artists and music labels need to promote their
music. Deciding whether to provide music royalty-free or at a reduced
rate for promotional purposes is an individual artist's and label's
decision, weighing lost revenues against potential promotional
benefits. The decision to forego royalties may pay off in increased
spins, or it might not. The key question is will the promotional
distribution, whether royalty-free or at a lower rate, lead to the spins
needed to make the audience impressions that will drive sales and further
licensing deals?
There are two ways revenues are earned from internet sources, via statutory
regulatory royalty rates or via direct licenses.
The remainder of this this article is for A2IM
members only.
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A2IM EVENTS RECAP - Nashville with Marsha Blackburn, Noise Pop
in San Francisco, New York Chapter Party, & SXSW
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A2IM members have had a busy social and travel calendar since
we last wrote. In the last 6 weeks Independent music labels have been
well represented across the U.S. at industry events such as Digital
Music Forum East (NYC, Feb. 26-27), Noise Pop (San Francisco, March 1),
Billboard Music & Money (NYC, March 6), SXSW (Austin-TX, March 12 -
15), and Billboard Mobile Entertainment Live! (Las Vegas, March 31).
Panels, roundtable discussions, networking events, and in the case of Noise
Pop and SXSW hundreds of live music performances - the message of our
artists, our labels, and our business needs and concerns are being stated
loudly and consistently.
At Digital Music Forum East, Rich Bengloff moderated a panel on Independent
label issues. The panel included A2IM members Jaylaan Ahmad Llewellyn
(Bluhammock), Jim Cooperman (Wind-up), Matt Laszuk (IRIS Distribution),
Amaechi Uzoigwe (Definitive Jux/World's Fair) and Mitchell Wolk (ADA)
messaging the benefits and needs of Independent music companies. This
continued during Billboard Music & Money where Rich Bengloff joined
A2IM members Jim Cooperman and Michael Koch (Koch Entertainment) on
Billboard Independents columnist Cortney Harding's panel, at Canadian Music
Week where we were represented by Tom Silverman, and at SXSW where A2IM
members were on panels at the Film, Interactive, and Music events talking
about Independent's strengths and needs on panels ranging from the digital
economy to the need for a performance right royalty from traditional
over-the-air terrestrial radio.
INDEPENDENTS MEAN BUSINESS! is the motto of A2IM and it is being
pounded wherever we are. Keep it up! The hurdles our community
faces are myriad and the only way to overcome them is to work on them
together, to stay vigilant, and to keep banging the drum for Independent
music.
In addition to the industry events many of our members and staff have
attended, A2IM held several member events as well. Great turnouts
were seen at each of our networking events. On February 21st the A2IM
Nashville chapter hosted a luncheon at the Sunset Grill. The event was
sponsored by MusicFIRST (www.musicfirstcoalition.org
or www.myspace.com/musicfirstcoalition)
and featured guest speaker, Rep. Marsha Blackburn (co-sponsor of the
Performance Rights bill). Forty guests and A2IM members, including
A2IM president Rich Bengloff, attended and even those most in the know
about this long overdue royalty legislation came away with an education
from Rep. Blackburn. Our thanks to Nashville chapter chair, Al McCree
(Military Music) for keeping this chapter vital.
On March 1st, our northern California chapter teamed with A2IM member IRIS
Distribution (www.irisdistribution.com)
to host a cocktail party during the indie music-fest Noise Pop at Doc's
Clock in San Francisco. Another 40 to 50 A2IM members and guests got
together, had a couple of drinks, and took advantage of the opportunity to
network amongst peers.
Across the map, the New York chapter of A2IM gathered at Common Ground on
March 10th for a happy hour after work event sponsored by A2IM Associate
member Popkomm (www.popkomm.com).
New York members of A2IM lived up to their reputation for enjoying a good
drink and chance to talk and approximately 90 members and guests attended
and networked. Popkomm is the German trade conference scheduled for
October 8-10, 2008 in Berlin. We'll be sending along more info about this
event in upcoming newsletters and e-mails.
And if all of this wasn't enough, the A2IM staff and over 130 members and
guests got together in Austin, TX during SXSW for a breakfast business
meeting on March 13th at Old Pecan Street Café. Knowing the risks
involved with holding a morning event at this notoriously late night event,
we scheduled the breakfast on the first full morning of SXSW guessing that
sleep deprivation wouldn't yet be fully set in. Apparently we were
correct (or the need for coffee and eggs was strong enough to get people
out of bed). It was a great opportunity for us to speak directly to
so many members, updating them on a number of the issues we're working on
and giving away a few SanDisk players to some lucky winners.
The breakfast was co-sponsored by A2IM member Mitchell, Silberberg,
& Knupp (www.msk.com)
and the folks from Popkomm.
A2IM thanks our generous sponsors, our chapter chairs for organizing our
events, and everyone who came
out.
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MECHANICAL ROYALTY RATES - January 1, 2008 and beyond
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The songwriter mechanical royalty rates that were set 10 years
ago covered the period through December 31, 2007 with the latest rate set
at $0.091 per song. As we all know, over the past ten years the music
market place has changed drastically and the judges of the Copyright
Royalty Board ("CRB") are in the process of holding hearings to
decide what the new mechanical rates will be for January 1, 2008 and beyond
in both the physical and digital worlds, including subscription services
and mastertones.
Our A2IM members are split on the issue of what future mechanical royalties
should be. Some label members own publishing rights while other label
members do not. The new rates will affect every music sale/stream by
a label member. For most of our members publishing is typically the
smaller segment of their label businesses.
The background facts are the mechanical rate went up from $0.0755 on
1/1/2000 to $0.0910 on 1/1/06, a 20.5% increase (a 28.1% increase from the
12/31/00 rate of $.0710). In contrast, per the RIAA statistics, (and less
people are actually paying retail list price than ever before as music is
more heavily discounted than ever), in 2001 the average retail price per CD
was $14.63 and six years later in 2007 the price has declined to $14.58, a
1.9% drop. Due to merchant pressures to get margin the corresponding
wholesale prices have most definitely declined by more than that
percentage.
Physical sales were still over 70% of the market in 2007 but looking ahead
and looking at digital, with much lower retail prices, the problem of the
mechanical costs as a percentage of revenues is even more pronounced.
Combining the current mechanical rates with the rise in cooperative
advertising amounts being required by the consolidated retail marketplace
presents results that are the main issue. The chart, available at www.a2im.org/downloads/Indie_Profit_Loss.pdf,
shows the effect at different levels of co-op and return rates and the
effect on profitability is clear. On lower priced $11.98 and $13.98
listed titles (I used a blended $12.98) it is hard for labels to make a
profit. In fact, the publishers in many cases earn more than the
labels with less of the talent signing risk and almost no marketing
investment.
The first CRB hearings which included DIMA (The Digital Media Association),
NMPA (National Music Publishers Association), and the RIAA among other
groups started the last week of January, 2008 and have concluded. The
rebuttal hearing period will take place the first two weeks of May and no
CRB decision is expected until October, 2008, when appeals by many parties
are expected. A final decision will probably not occur until
mid-2009. A2IM board member Glen Barros (Concord Records) testified
in the first round and some A2IM members may testify in the May rebuttals.
All parties are very far apart. To give you an example, the NMPA is
proposing an increase from the current 9.1 cents to 12.5 cents per
song. The RIAA, however, has proposed lowering the rate to
approximately 6 cents per song to reflect the current decrease in music
revenues per CD.
For permanent digital downloads, NMPA is proposing a rate of 15 cents per
track while the RIAA has proposed a rate of 5 - 5.5 cents per track and
DIMA is proposing less.
For interactive streaming services, NMPA is proposing a rate of the greater
of 12.5% of revenue, 27.5% of content costs, or a micro-penny calculation
based on usage. The RIAA proposed that songwriters and music
publishers should get the equivalent of .58% of revenue. And DIMA is
taking the position that songwriters' and music publishers' mechanical
rights should be zero because DIMA does not believe they have such rights.
We will keep you posted and anyone who wants to get involved should contact
Rich at Rich.Bengloff@a2im.org.
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WEBCASTING ROYALTY RATE CAMPAIGN
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As outlined in Newsletter
#18, fair and equitable rates have been agreed upon with satellite radio
(which will result in a large retroactive increase back to January 1, 2007
that will be paid in April, 2008), public radio, cable services and
others. Sound Exchange talks with the DiMA represented webcasters
(MTV, Pandora, Yahoo, etc.) continue and we're the most optimistic we've
been in months that an agreement will be reached shortly. Talks will
then continue with the small webcasters we support like Accuradio and
SomaFM.
We recognize how valuable these broadcasters are to our community in terms
of exposing our music but our artists and labels need to be compensated
when their music is used for commercial purposes.
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