Apple Disconnects

Originally published on Marx Rand on June 18, 2015.

Sidenotes in the Independent Consciousness

Apple either refuses to, or simply can’t, understand the mentality of a huge growing customer base, that of the independent artist. This is going to present significant challenges going forward, since now that the Internet of Things is beginning to take connective shape, a new sort of revolution is getting underfoot—but without Apple’s involvement being required or wanted. Power breeds knowledge and knowledge breeds power: with the help of the world’s largest value network, the internet, the independents are beginning to have both.

Last week, Apple announced the release of its latest music platform, Apple Music Connect. [1] The product comes on the back of Apple’s shady dealing with independent artists: never mind the fact that the artist which Apple spotlit during the keynote was a manufactured act, it turns out they won’t get any of the precious royalties from Apple for the next three months anyway. [2]  While just 9% of college students say they are willing to shell out for Apple’s new music service, all these things are ultimately sidenotes in the grand picture of the independent consciousness anyway.


 

Simply an Attempt to Mollify

Apple made headlines recently with the release of its new music service Apple Music during Apple’s Worldwide Developers Conference (WWDC). While the presentation was panned by many for numerous reasons, there was one feature that stoked a range of discussions: Apple Connect.

Connect sat amongst a whole slew of cool new things that Apple announced it was releasing that day. (New, remember, does not carry the same weight in the post-Jobs era as it once did, when it used to be a synonym at Apple product launches for unprecedented).

Connect nonetheless seems like an attempt to mollify artists who have become increasingly disgruntled (which is exactly what I predicted before).

Low streaming royalty rates and complexities with the service in general have become a hot-button issue in the music industry lately, so everyone is presently searching in the dark for the magic potion to lead the blind to the place of worship. (Naturally, in such an environment, most preach what they claim is a slightly more purified version of the same stuff as their competitors have concocted already).

What is amazing is how few people are focusing on how irrelevant Connect will end up being as a tool for independent artists.

 

“Even unsigned artists” = “You’re still a secondary priority”

“Apple Music will be great for all artists,” the Cupertino, CA.-based one-time music industry disruptor claimed at the launch. Unfortunately, that’s not quite what independent artists heard Apple say.

“Even unsigned artists [will benefit],” was how Eddy Cue,  the senior vice president of Internet Software and Services for Apple, addressed the possibility for independent artists to use Connect. In other words, they were spoken to like second-class customers. Yet again. Cue might as well have intoned:

“You’re irrelevant and pretty much a second priority for us right now while we continue to fight the bigger media war that’s a lot more profitable with the major record labels on that other platform—the one we can’t seem to get off now that’s called iTunes!”

Try and put this in perspective for a minute: these artists are not in a perpetual minority anymore. They are now a rapidly growing segment of the music universe, and are actively looking for a place to creatively collaborate and build to their strengths, despite being ‘left of the dial’. And yet the words coming through the Connect presentation are basically reinforcing this “You’re nothing but an afterthought!” mentality.

 

The Great Irony

The result of all this is, ironically, that over the long term Apple will come out most shaken of all.

It’s barely days into the product launch of Apple Connect, and there are signs that this is the case already. The technology into which multi-millions of dollars were invested in the form of R&D and product sales and marketing, presently is sitting out there on the high seas, flapping like a half-full galleon with a split in the side of its sail, and no navigational map. The very people that Connect was built to serve Apple is locking out at the first port of entry.

iTunes is a great music library, but what is far too often taken for granted these days is the notion that because Apple disrupted the industry once, it will succeed in doing so again. The reality is that the concept of paying for music is now more elastic and ambiguous than it ever was before, and Apple needs to find a way to adapt. In that sense, the company appears more like Sony did in 1998 than it does any brainchild child of Steve Jobs right now.

Alienating a rapidly growing market segment worldwide is definitely not going to help Apple sail back into the balmy seas of yesteryear.

 

The New Apple Music Q&A Page

If you go to Apple Music’s information page and read through the questions and answers, two of them immediately stick out. The first of those two questions is:

“How do I get my music on Apple Music?”

Apple’s response is flat and corporate: “you can go through either your label/distributor or one of our approved aggregators.”

Screen Shot 2015-06-12 at 1.11.12 PM

Wow. Let’s take a moment to let that sink in.

Basically what Apple is telling the independent artists––who in a rising number of incidents have professed openly to rejecting major label offers voluntarily––is that they need to be a part of the established label/distributor paradigm in order to even have their music played on Connect.

Then there is the question of users having to submit through Apple’s “approved aggregators.” Apple seems reluctant to admit that increasing numbers of musicians are deliberately foregoing the major record label route (or even any label at all), and it looks here like they are trying to cover their bases a bit thinly by aggregating specific unsigned artists in what will be of a halfway house solution.

But what Apple misses is that when it comes to aggregation, the net result is the same for the artist: less creative control over the product, and more control for the gatekeeper. Anyway, even if there was a way to harmonize this risk, the question still lingers: who are going to be the appointed aggregators? Guys at Apple? Guys at major record labels? Now we’re back to square one.

The second question smacks of exactly this sort of highly-selective, industry buttoned-down approach:

“How can I get access to Apple Music Connect?”

Apple responds by providing a link to a Google News-style verification gate.

Screen Shot 2015-06-12 at 1.11.34 PM

Guess who’s in charge of the admission policy? Ostensibly it’s Apple of course, but it’s not a stretch of the imagination to think that major label brass might have a say in the outcome of who gets picked for Connect and who gets the door slammed in their face.

Now I know that many will say that verification is the only way to keep a service from falling to trolls or being overrun by artists who aren’t really serious. But the reality of it all is that trolls and non-serious artists will get through anyway—that’s just the nature of this business. (For a great example of this, look at all the marketing and spam that gets through Google News’ aggregator every day.)

 

The Upshot and the Bigger Picture

Apple is clueless about how independents will—or won’t—react to different innovations. They will wonder why they need to be verified, what “verified” even means, and who gets to decide. And why shouldn’t they wonder? They’ve pretty much spent their entire existence in the independent sphere marginalized and pushed aside by the major label dynamic.

The upshot is that if I’m an independent artist, Connect will essentially be the same to me as all the other services out there. What people need to understand is that the established music field of the music industry moves with a different rhythm and flow than the independent universe. Dynamics that are taken as gospel for the former do not necessarily apply to the latter. Independents have their own rules, and you can’t play their game without learning how they work.

But when it comes to Apple, the company is not even trying to do that.

 

Notes:

[1] The time articles in the piece reflect the original publication date of June 18, 2015.

[2] This policy has since been changed by Apple, while it stood true at the time of the article’s original date of publication.

 

Thanks to Alyssa Shaffer and Shelley Marx for reading early drafts of this.

YouTube Plays Out of Key

Originally published on Marx Rand on June 11, 2015.

Since being embarrassed after some of the more litigious contracts it makes with independent artists using its platform were made public recently, YouTube is in damage-control mode. The media platform provider has  understandably taken a lot of heat as a result. Right now especially the video streaming service, which was purchased by Google nearly a decade ago for $1.65 billion, is in the process of trying to make nice with the artist community as it braces itself for the onslaught of Apple’s new music service release, Apple Music.

YouTube Has Music, But Isn’t About Music

It’s easy to see why YouTube is concerned about Apple Music. After all, the very same (music) community that in significant measure helped YouTube top $1 billion in revenue last year is just as likely, if not more so, to gravitate towards Apple’s serving of the pie as it is to hang out lapping up mainstream internet TV dinners.

For artists– and especially independent artists – YouTube could be quite a useful tool. At least, what the service is capable of offering should be something that sets YouTube apart from its competitors in the music arena, certainly.

But YouTube is still going to struggle to win in the artist arena for one reason: while YouTube has music, it isn’t about music. For YouTube, despite its cool analytics and humongous user base, is still not a music-centered service. This matters because, at the end of the day, artists are a focus, but not the focus.

With the online music landscape heating up, the services that are able to pay more attention to artists as a principle priority will be able to carve out a significant niche for themselves. In the face of such competition, no one else stands a chance. It’s that simple.

The Percentage Points

A big part of YouTube’s problem when it comes to appealing to independent artists is that it’s a victim of its own success. At the end of the day, YouTube has an overwhelming user-base of consumers (and not just of music, but of all sorts of media) that it needs to keep on satisfying – at last count, there were 23 million subscribers to all the various channels on the service. And that’s only the regular users.

Naturally, it makes sense for YouTube to see that its existing customers are well-catered for, but the reality is that such an approach falls far short of what’s acceptable when it comes to satisfying independent music makers and promoters. They can increasingly afford to be much more selective about what they desire and require from the digital distribution channels that they work with.

To compound YouTube’s difficulties with attracting the independents, YouTube still has in place the same tenuous clauses in the contract that upset the artists just recently. The fact that there are a large portion of artists who are currently unaware of this fact only makes the problem worse over the long run too, for the risk that another public embarrassment for YouTube looms large over the shiny brand image that parent Google has cultivated over the years.

There’s a more fundamental problem than any of this, however, and that’s the following: unlike the teenage makeup artists and tween clothing models that have made gazillions from leading their fans to new cosmetics brands eager to pay top dollar for all the eyeballs, the realistic revenue generated from YouTube for music artists is pretty much zilch when you do the math.

Information Is Beautiful, an analytics service based in the United Kingdom, recently published a breakdown of online revenues obtained by artists across a series of music platforms, namely Bandcamp, CDBaby, iTunes, Spotify, Deezer, and—you guessed it—YouTube. The analytics provider concluded that the percentage of independents able to eek out a minimum wage living on YouTube revenue streams was just 0.07%. Here are the screenshots of the YouTube portion:

Image courtesy of InformationIsBeautiful.com; with edits

Image courtesy of InformationIsBeautiful.com; with edits

Here are the pathetic revenue stream earnings for the signed major label artists:

Image courtesy of InformationIsBeautiful.com; with edits

Image courtesy of InformationIsBeautiful.com; with edits

And now, the revenue stream earnings for the independent artists:

Image courtesy of InformationIsBeautiful.com; with edits

Image courtesy of InformationIsBeautiful.com; with edits

That’s amazing – it’s a seventh of a basis point! In other words, it’s even lower than the cheapest commission charged on an online stock trading platform.

And remember, this is not 0.07% of all one billion dollars of YouTube users, or even 0.07% of all 20-something million YouTube subscribers we are talking about here; it is 0.07% of just all the unsigned artists who receive revenue from YouTube streams! It’s likely you can count that number on the fingers of your left hand while clicking over to the next song with your right.

The Discovery Dynamic

The overriding concern here is that the audience consuming the music of these independent artists is incredibly small. But before you leap to your feet and splutter out the old argument that this is because the music created by independents artists simply “isn’t good enough” or “needs to be curated,” step back and think about the fact that these independents are trying to compete on a platform which is essentially not constructed for them.

Though the dynamic of discovery is big on YouTube, it’s not specified to discovery of new independent artists at all (though it’s great for makeup and clothing brands, which adopts an entirely different sort of discovery process through media). As a result, artists end up competing with an amalgamation of other media – most of which is not music-related – and the poor comparative result they are left with ultimately diminishes any chance that there might have been left over of being properly appreciated or even recognized.

All of this adds up to one very simple reality: inasmuch as YouTube is trying to repair its relationships with artists (and independents among them), it is, at the end of the day, very far from being the be-all, end-all for independent artists that the platform is for other genres of media and entertainment. The fact that less than a tenth of a basis point of artists can eek out a minimum wage using the damn thing – while many other professionals in different walks of life make a lot more than that from five minutes of video stream – attests to this fact.

Thus, for all the potential scale and analytical sophistication that YouTube’s platform offers artists, it is still an ecosystem that is fundamentally unsuitable for them and for displaying what they create. And many of them know it now, too.

Independent Music Is Still  Wild West

The independent music market is very much a wild west, and the introduction of a new tool or a new feature isn’t going to win anyone over. To do that, you need to win the trust and confidence of the independent artists, the way Etsy did with hand-crafters, or even the way that Amazon has managed to do with its dominant share of literary readers and authors alike.

This process is not one in which you can achieve ubiquity by striking a deal with a major corporation which fundamentally only offers enhanced distribution such as a major record label. It’s one in which you need to go straight to the product source – in this case, the artists and their fans – and persuade each of them that what you are providing is somewhere they can interact on a creative level and where the music uncompromisingly always comes first. It should not and cannot be a place where their product looks and feels like an afterthought in the ravenous race to profitability.

The upshot – and the sad irony – of all this is that it’s yet another example of a situation in which one of the very same companies that is so adept at spinning creative mainstream entertainment out into the marketplace proves hopeless in creating a fresh and appealing approach to the rising independent music scene.

As Queen so eloquently put it, “another one gone, and another one gone … and another one bites the dust.”

Spotify’s Sony Contract: What It Means for Everyone

With the leak of Spotify’s contract with Sony last week, there’s a lot of attention on the streaming service right now. I’ll be taking a closer look at that contract over the next week, but for now I’ll focus on the fallout over the last week. In particular there seems to be a lot of renewed interest on the music space, more so than I’ve seen in a while. I think, though, that this has to do with a lot more than simply one contract between two companies; for the first time perhaps, the general public (including music producers, artists, and general music listeners) is aware of the kind of deals being struck behind the scenes.

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Even as Spotify soars in newer valuations that have the company somewhere in the $8B range, yesterday’s leak shows that such a valuation may in fact be misleading—Spotify has to cough up around $43M just for licensing from Sony alone. How much do you think they need to cough up for the other two majors, Warner and Universal? Even if we snip off the extra $3-4M, and assume an upfront licensing fee of $40M from Sony—and then simply assume similar prices for Warner and Universal—then Spotify has already spent $120M of investor money. And that’s just for the privilege of having access to the major labels’ stable of artists.

Also, don’t forget that’s before royalties and any other metrics that Spotify has to hit. Therefore it’s more like $43M upfront for the privilege to pay more later on; it’s not a one-and-done purchase. And most unfortunate for Spotify, this latter number is also predicated on how an artist performs in popularity, something they have essentially no control over.

I’m not going to rewrite Micah Singleton‘s article, but I will draw on a number of points he highlighted and what they mean in reality. There are numerous points of importance, but these are the ones I think the general public really needs to be apprised of. Though the contract has since been removed, we got the basic gist:

  1. Written by Sony—First let’s just take a moment to note that the contract was written by Sony. Of course this is their prerogative, but when considering the fact that Sony holds the rights to much of the content that Spotify wants to license, it clearly illustrates who is subject to whom. Frankly, since Sony holds the content rights, they (and the other major labels) essentially hold Spotify’s lifeblood in their hands—that’s not an opinion, it’s a fact. Realistically Spotify is not built around an independent and free model, so they need to play ball with Sony and the other labels, or they won’t play at all. Period.Screen Shot 2015-05-21 at 8.01.23 AM
  2. Advances—Spotify paid Sony $42.5M just for the right to license the music. That’s an upfront fee just to get in the door. This means that anyone looking to compete head to head with Spotify or Rdio needs to magically have about $130M lying around or in funding before they even get their feet wet (projecting the combined upfront licensing fees of the Big Three major labels). One of the reasons that Spotify has to raise such massive funding rounds is because these advances are somewhat annual, and thus need to be renegotiated all the time. And as the major labels continue to get squeezed in their wallets, these numbers are only going to rise for services looking to use major label content.
  3. Screen Shot 2015-05-21 at 2.36.33 PMDivided How and Among Whom?—As Singleton points out, Sony can essentially do whatever they want with that money; there’s no stipulation that it has to be divided in any particular way, or that any of it has to go to artists or songwriters. According to multiple sources, that money usually stays with the label and is generally not shared with artists. This particular point has raised such criticism that its prompted both a response from the EU, which is now looking into Spotify’s contracts, and virtually obliged Sony to come out with a public statement on the matter. Screen Shot 2015-05-21 at 2.36.56 PM
  4. Most Favored Nation Clause—Essentially a clause that guarantees that Spotify’s balls remain in Sony’s vicegrip. The clause guarantees Sony the right to amend  any portion of the contract if it perceives that any other label has a better deal than it does. This means that Sony is essentially never bound to Spotify in any way; it can decide—based on its own perception—that another label has a better deal (which it may or may not) and rework the entire deal for its own benefit. And Spotify has to swallow everything.
    Screen Shot 2015-05-21 at 2.41.24 PMScreen Shot 2015-05-21 at 2.42.20 PMWhere this really kills Spotify is when used in conjunction with the clause dictating payment based on market share. Thus, if another label has a better deal in that regard—perhaps double what Sony is getting monetarily—then Spotify has to cough up and pay Sony the difference.
  5. Spotify’s 15%—Basically exactly what it sounds like. Spotify takes 15% of the revenues from third-party advertising right off the top. What they do with this money is unknown, though it’s quite plausible that they’re not redistributing it to the artists, and are probably giving third-party advertisers a raw-ish deal. Next time Spotify releases a statement saying that they don’t have the funds to pay the artists more money, let’s all remember this little financial tidbit.Screen Shot 2015-05-21 at 2.47.16 PM Screen Shot 2015-05-21 at 2.48.28 PM
  6. Sony’s Ad Spots—This one’s pretty easy to understand: essentially Spotify is obligated to give Sony a certain amount of free ad space on its service. The ad space—which is clearly worth a fair amount of money—is given to Sony at a massive discount.Screen Shot 2015-05-21 at 2.53.33 PMScreen Shot 2015-05-21 at 2.54.09 PMBut that’s not all; Sony retains the right to sell the credited ad space to whomever they want, whenever they want. Again, Spotify gets squeezed.Screen Shot 2015-05-21 at 2.54.41 PM
  7. User Metrics—Spotify essentially has goals it needs to hit in terms of its user metrics (on both payment tiers), and if it misses those, it could be penalized. Conversely, if it exceeds expectations in either of the tier metrics, it recalculates that number so that Sony gets paid more. In English, what this means is that the better Spotify does, the more money Sony is entitled to, but doesn’t necessarily mean that it all works out for the streaming service.Screen Shot 2015-05-21 at 3.07.40 PM Screen Shot 2015-05-21 at 3.07.51 PMIt’s important to remember that Sony isn’t in the business of making sure that it backs up Spotify. It—like the other major labels—is licensing its music to numerous services, so its only real loyalty is to its bottom line. How that affects Spotify is essentially irrelevant to the major label.
  8. The Royalty Distribution (Forget About the Artists)—Without going too deeply into it (Singleton’s initial analysis and infographics are worth consulting), it basically boils down to this: the royalties per stream are so miniscule that you need to be getting millions of streams in order to make any real money (and by real, I mean anything more than $10.00). We all know that independent artists are never going to get to that level trying to compete on an unfair playing field, so let’s just put that point to bed right now. One thing that is worth noting now, though, is that not even every artist has a contract entitling them to royalties. So for all the bluster about royalty payments, many of the artists signed to major labels aren’t even entitled to fair cuts from the streaming.Screen Shot 2015-05-28 at 6.33.02 PMBut even more so, the way in which streaming royalties are calculated is so incredibly convoluted you almost need a degree in economics just to understand it. That’s not how it should be. For independent artists—and even mainstream artists who simply want to understand the financial dynamics—this is yet another way of keeping them in the dark. No one in any other industry would accept some sort of voodoo economics principle when it came to calculating their earnings, so why should music artists—mainstream or independent—have to settle for that? That’s the point, they shouldn’t.

There are numerous other points worth discussing, but these are some of the major ones that discussions of the music industry revolve around. Though arguably a major embarrassment for Sony and Spotify, the leaking of the contract between the two really shines a bright light on what goes on behind the scenes. It clarifies that what happens behind the curtain affects every type of artist, and underscores why more transparency and reform is needed in the music industry. And it highlights something else: the music industry is not dead and foregone. We’re now right on the precipice of a whole new type of music industry that’s taking shape every day. Those who accept and embrace the new dynamics will be the ones who benefit most from them when they inevitably come.

 

Thanks to Shelley Marx for reading early drafts of this.

Tidal Is Losing More Lifeboats by the Day

Yesterday, TechCrunch ran a piece from Kelli Richards postulating the viability of Tidal as a service, and its likely outcome in the streaming wars. The article was essentially an overview of what’s been going on with Tidal lately, with Richards doing a good job of zeroing in on a couple of things I’ve discussed and underscored in my own mind as the real deal-breakers.

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Before getting into the two main things of her article, I think it’s important to note a very shortbut important—sentence in Richards’ piece: “…the prospects of Tidal upending Spotify in the near future are slim…” This falls right in line with something that I wrote earlier concerning SoundCloud, namely that trying to out-Spotify Spotify is a losing battle and a very poor battle-plan. Going head-to-head with Spotify and playing their game their way (that is, general popular music streaming) is such a poor decision because it means you’re starting way behind the starting line. And in Tidal’s case, this goes double for any sort of exclusive content which might be your main attraction.

Now, Richards’ two main points, and my takeaway from each:

1. Premium/Exclusive Content—Firstly, I’ll be the one to say it: “exclusive content” as one’s main gameplay is a very tough sell. It’s a tough sell because it’s a drastically diminished niche of a larger market, which is basically popular music. That means you’re trying to play on two different levels with two completely different mindsets.

The “exclusive content” play is difficult because it requires your customer base to desire those exclusives almost as much as (or more than) the original content. This isn’t anywhere near the same thing as looking at an independent market, since those content producers are increasingly giving away their material for free (including “exclusives” like remixes, acoustic sets, etc.), and making money elsewhere. For a service like Tidal though, they need to first out-Spotify Spotify to gain the market share of the original popular music demographic, then they need to persuade those people to convert to “exclusive” consumers and pay a whole lot more for something they could just as easily get on YouTube if they wait a couple weeks or a month. This is one of the major flaws in Tidal’s plan in my eyes.

Also under the first point is a small comment included by Richards made by Tidal’s CEO Peter Tonstad, which basically asserts that the industry is moving away from the freemium model, and that “it’s going to be the content richness” which listeners begin to look and pay for. This is bold, but false.

First, the sorts of audiences which Tidal is looking to court—general consumers of popular music—are not about to leave the freemium paradigm anytime soon. Secondly—and funnily enough in my opinion—the rabid, content-rich focus which Tonstad identifies as Tidal’s silver bullet doesn’t really apply to popular consumer audiences on a general level anyway. Ask anyone listening to Spotify if they’d pay double (or anything) for higher quality which they can’t even discern anyway, and I’d be surprised if large numbers converted over. Ironically enough, the rabid thought process which Tonstad is alluding to is alive and well—in the independent music industry—where free plays a much bigger part than it clearly does with Tidal.

2. Celebrity Backers—This point made by Richards is a lot easy to wrap one’s head around; people simply don’t feel so bad when Jay-Z and Kanye West start lecturing about needing more money because, well, they’re rich. And not like “we perceive them as rich but they’re really not;” they actually are rich. Being lectured about money from people like that, then, is not only not welcomed, but it’s really irritating. There’s really no way you can look at that celebrity-backed list of Tidal promoters and take them seriously.

Even more so, though, it really alienates artists who are not rich—you know, like everyone else. For the singer-songwriter playing in dingy clubs, or the band on the road and sleeping in their van, Jay-Z might as well be speaking an alien language. Their thought process is almost indignant (and why shouldn’t it be?); they’re thinking “dude, you have all this money and influence, why the hell do you need any more?” And frankly, if I was still an artist, I’d be thinking the exact same thing. Celebrity-backed things like this are rarely ever a good idea, especially when it alienates others within the same industry.

Richards notes that Tidal has someone who Spotify doesn’t—Taylor Swift—but as I explained here months ago, here’s why Taylor Swift is on the same level as Jay-Z in terms of “not getting it.” She’s so engrossed in the major label paradigm and its trappings that she doesn’t see what life is like for normal artists anymore. And, just like Jay-Z, her disparaging remarks about artists “devaluing their music” strikes a sour and indignant chord in a lot of musicians who think she takes her good fortune for granted.

But if one needs any more convincing of why it’s going to be a very tough road ahead for Tidal, you can read about:

  1. Jay-Z’s hissy-fit onstage
  2. Their firing of their previous CEO, Andy Chen
  3. Criticism from producer Steve Albini
  4. Criticism from other mainstream artists
  5. Their highly criticized and misleading relaunch

The storm isn’t about to end anytime soon, and it seems the lifeboats have left the ship.

SoundCloud’s Failed Highwire Balancing Act: The Sony-SoundCloud Breakup

Trying (and Failing) to Balance Two Completely Different Paradigms

The SoundCloud-Sony Breakup

The Sony-SoundCloud Breakup

It’s been a tough week for Sony between its leaked contract with Spotify and criticism over its moves with SoundCloud. And yet, inasmuch as the former is embarrassing and will certainly come back to bite the two companies, the latter is arguably more problematic because it’s not simply between Sony and SoundCloud; it’s between Sony, SoundCloud and the independent artists and fans. That last little caveat is something that Sony can afford to ignore—but it’s going to become an increasingly difficult reality for SoundCloud.

SoundCloud, now a platform for major labels and advertisers

SoundCloud, now a platform for major labels and advertisers

News broke over the last couple of weeks that Sony has started pulling their artists’ music from SoundCloud—regardless of what the artists want. To Sony, SoundCloud isn’t a viable option since it doesn’t presently have a strong monetization plan (as if services like Spotify and Rdio do), and until the label and streaming service can come to terms, it seems that any and all Sony-controlled material will be stripped from SoundCloud.

This has put SoundCloud in quite a precarious position. On the one hand, it doesn’t want to alienate its initial die-hard independent fanbase, but on the other it’s been actively seeking out a deal with Sony, as well as with the other two major labels, Warner and Universal (already having one in place with Warner). SoundCloud is trying to balance two completely different bases and paradigms that are moving in opposite directions: 1) the major label paradigm which is still predicated on an obsolete business model, and 2) the independent paradigm which is increasingly embracing “free” as a big part of the future.

What the major label industry really looks like; The Big Three

What the major label industry really looks like; The Big Three

What I Said a Month Ago

On April 9th, SoundCloud signed a deal with Zefr—that same day, I wrote a post on why independents should very soon kiss SoundCloud goodbye; why the Zefr deal was essentially irrelevant for them. It seems I wasn’t the only one who’d identified SoundCloud’s prospective problems, as a day later on April 10th, PandoDaily writer David Holmes came to the same conclusion and published a piece with a similar premise. Holmes’ post validated many of my points, and cleverly brought up a few others, all to conclude, as I had, that the Zefr deal was a band-aid for a bullet wound. And now the bullet wounds are really beginning to gush blood.

This week, electronic artist Madeon released a heavily critical statement regarding he Sony-SoundCloud breakup, noting: “Thank you SoundCloud for being such a great discovery platform over the past five years. Well done Sony for holding your own artists hostage.”

Ouch. Snap. Burn.

Clearly Madeon (along with droves of other EDM artists who’ve gained significant followings on SoundCloud) isn’t pleased with Sony’s “money first” thought process and strategy. And while Sony has the legal right to pull music which it holds the rights to, in the grand scheme, it’s not exactly a play which will endear it either to the fans it seeks, or the artists it works with. Actually, it has the complete opposite effect.

Who’s the First Priority?

But what lies beneath the surface of this very public breakup is not simply an issue for Sony, but a major issue for SoundCloud. People expect Sony to act like a major label—because that’s what it is. But increasingly, SoundCloud has been chasing the major label content which it thinks could help it become more competitive with Spotify, Rdio and Apple. In the process, it’s spitting in the faces of the people who loved SoundCloud for what it was before: free discovery.

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Excerpt from my original April 9th article

And as SoundCloud moves closer to the major label paradigm, it becomes increasingly irrelevant for independent artists, regardless of genre. Independents are where SoundCloud cut its teeth, so now, moving away from the free-model will leave them somewhat toothless. Case in point: SoundCloud’s new NMPA deal, which, again, is irrelevant for independent artists.

The thing about the independents is that, unlike major label artists who are tied to the major label business model, they’re not tied to anybody. Their loyalty can and will be to whoever gives them the best service as a first priority, not an afterthought. This means the best service for the independents, not the best they can do after the major labels have had their fill. SoundCloud is trying to perform a balancing act on a razor-thin highwire and it’s 600lbs overweight. It’s trying to straddle two completely different business paradigms, and managing to piss everyone off in the process.

Free Is Here to Stay—Live With It

The free paradigm which the labels are beginning to get fed up with isn’t going away—something which Peter Kafka seized on in his article on Spotify. Free is a way of life now, and as independent artists continue to explore the benefits that free affords them, they will increasingly detach themselves from the obligations of the major label paradigm. Services like SoundCloud will eventually have to choose a side—something that’s going to be exceedingly difficult for SoundCloud now that they already have a deal with Warner and are chasing deals with the other two major labels.

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Excerpt from my original April 9th article

It seems that they’ve already made their choice, and it won’t be too long before droves of independents notice. They don’t have to and won’t settle for being second-tier priorities, and will look for alternative options. In the meantime, Sony and SoundCloud will duke it out until the former signs the latter to a major label-style contract.

I said it before and I’ll say it again: if you’re an independent, kiss SoundCloud goodbye.

Jay-Z’s Tidal “Freestyle” Was Basically a Hissy-Fit

A couple of days ago, during one of his Tidal concerts, Jay-Z went on a rant, and basically laundry-listed a bunch of people whom he felt have been wronging artists in the music industry. He called it a freestyle, but that’s not really what it was. To anyone who’s not a Jay-Z fan (and probably to many who are), it came off as a hissy-fit.

Jay-Z at one of his TIDAL concerts

Jay-Z at one of his TIDAL concerts

It’s not surprise that Jay-Z and company have been having a hard time of it with their new Tidal streaming service. I posted about their launch here, and then followed up with posts on criticism of Tidal from folk band Mumford & Sons, famed producer Steve Albini, and the sudden removal of their (now former) CEO Andy Chen. It’s been a tough couple of months for Tidal, yet instead of putting his head down and working to find a solution to differentiate his music service, Jay-Z thinks it’s a better tactic to antagonize the competition. Though it might make him feel better in the moment, it comes off as petty and juvenile. He looks like a kid throwing a fit for not getting his way.

In his “freestyle,” Jay-Z attacked not only other music services (Google, YouTube, Apple), but called out a few people by name (Jimmy Iovine). Jay-Z asserts that he came into the music game as an independent…which may be true, but that was more than a decade ago, and the musical landscape has changed a hell of a lot since then. The same rich people he’s insulting are his peers—I don’t think he goes home at the end of the night wondering if he’ll make enough money to tour next month.

Frankly, watching him play the victim is getting tiresome. Jay-Z needs to accept the fact that running a music streaming service may in fact be more difficult than he had originally thought. So stop whining about it, put your head down, and work out the problem until you have a solution. That’s how everyone else does it. Getting up on stage and attacking your competitors doesn’t make you a good business person. It make you appear socially and strategically tone-deaf.

Here’s the (mainly) full text from Jay-Z’s rant:

“…So I’m the bad guy now I hear,

because I don’t go with the flow

Don’t ever go with the flow, be the flow…

Pharrell even told me go with the safest bet
Jimmy Iovine on for the safety net
Google dig around a crazy cheque

I feel like YouTube is the biggest culprit
Them niggers pay you a tenth of what you supposed to get

You know niggers die for equal pay right?!?
You know when I work I ain’t your slave right?
You know I ain’t shucking and jiving and high-fiving, and you know this ain’t back in the days right?

…You know I came in this game independent, right?

TIDAL, my own lane, same difference

Oh niggers is skeptical about they own shit
You bought nine iPhones and Steve Jobs is rich…”

Music Startups Are About the Artists, Not the Code

You Can’t Hack the Music Industry in a Weekend

You can’t hack the music industry in a weekend by talking to a few artists and trying to extrapolate from there. This is a mistake I see music startups make all the time, and a reason I think that a lot of them fail. The music business is a much more complex system than I see people give it credit for, and I think this really throws a lot of would-be music startup founders. It’s also very different from the tech industry in a number of important ways, and I think that this also scares people away—making the music business seem like a losing battle, and an inevitable death. But it’s not.

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Me on my show, Underground Takeover

I wrote here how and why music startups do indeed succeed because of passion, not in spite of it. Unlike other startup industries where an overflow of passion might very well blind founders from the realities of customer desires and industry trends, the music world works on its own axis. It’s much more intricate than is reported on by the press—so much so that I would even argue that many within the established model may have a skewed view of what’s possible and probable. Thus it’s precisely that overflow of passion that leads to one’s desired immersion in the culture, arguably the real key to building a successful music startup.

I recently read a short blog post from a little while ago, wherein the founder of a failed music startup wrote about the problems which were encountered. As I read through it, I noted a number of mistakes which I think should be deeply examined. Let it be noted here, though, that this is not an attack on the author, nor is it meant to call anyone out; as such, I will steer clear of any terminology (including specific pronouns) that might reveal the author or their failed company. Let’s begin.

The Realities

1. A Few Conversations Aren’t Enough

In most startup industries, talking to your customer base is key, and fast iteration is the name of the game.

But music is different. Music is different because people seem to forget that it’s an industry that can’t be understood by reading a few articles on Wikipedia or having conversations with a few artists.

Who are these artists? Where are they from? How big is their fanbase? How rabid is their fanbase? How many albums or EP’s have they released? Are they teetering on the point of break up, or are they solid? Do they tour or don’t they? These are just a few questions you need to ask yourself before relying on the feedback given to you. It helps qualify the types of answers you get. Different types of artists think different types of ideas are “cool” (which means nothing until you qualify that word as well), and without understanding where in the ecosystem these artists exist, such feedback is essentially useless.

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Never stop talking to artists.

That was the author’s first mistake. The second one was much more egregious. Never ever stop talking to the artists. If you stop talking to them, you’re dead. Period. The music landscape changes every day, much faster than a lot of other companies, even within the context of tech. The artist who was nobody yesterday is a national name tomorrow. If you stop talking to artists and stop putting your name out there, you become irrelevant so fast it’s not funny.

This is not an industry where you can have some conversations, gather feedback, go back and recode something, then collect more feedback. You need to find a way to be coding and strengthening your reputation among artists simultaneously. The artists don’t care about your iteration cycle; the only thing that they understand and connect with is your passion and their voice through you.

Me interviewing (clockwise): Felice LaZae, Alabaster, Christopher Linden (Neverblue), Me vs. Gravity, Isobel Trigger, Diamond Eye, and Heel

Me interviewing: Felice LaZae (left), Alabaster (top), Christopher Lindén (Neverblue) (mid, top-right), Me vs. Gravity (mid, top-left), Isobel Trigger (mid, bottom-right), Diamond Eye (mid, bottom-left), and Heel (bottom)

2. Music Isn’t Neatly Splintered Like Other Industries

In the music industry, the first thing to understand is that things aren’t as splintered and unbundled as they are in other fields. In other arenas, being an expert in data analytics or e-commerce sales might very well be enough of a foundation on which to build a company. But in music, understanding only one aspect means not understanding all of them. This is where the author failed (or rather, misunderstood) in this respect.

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Music isn’t neatly splintered.

“Sales” in the music business can mean different things to different people; it could mean sales of tickets, merchandise, music files, special gifts, etc. And it could mean understanding those sales from the point of view of an artist, fan, promoter, venue, etc. Thus to say that one isn’t a “music sales domain expert” essentially means that one doesn’t understand that there are a very many different types of music sales domain experts, and that they are all very intricately interconnected in different ways. In approaching a music startup with this skewed notion of understanding, I believe the author began on a misleadingly difficult path to come back from.

3. Never Keep Anything from the Artists.

Understand that this is an industry where artists and people are used to being taken advantage of. That’s the norm. For many artists, industry experience has taught them to be wary, and anyone who is familiar with the dynamics of the industry can understand why. Sexual harassment, broken promises, money troubles, and limited access to resources are just a couple of things that plague artists daily.

The music industry is full of all kinds of realities that music consumers rarely see, and even more rarely care about: breakups, bad blood, intra-band politics, collaborations, no money, live touring, ridiculous royalties payments, new releases, band tragedies, sleazy industry “professionals,” loyalty to particular people—these are all things that music startup founders should understand way before writing any code. If not, you’re doing it ass-backwards.

The meaning of this is very simple: if you keep secrets from or mislead the artists you want to work with, you’re dead. Done. Finished.

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If you mislead or keep secrets, you’re dead.

The author did the company a massive disservice by misleading an artist they were working with. Artists are not VC’s; they don’t give a shit if your product is subpar and you need to pull it back, if you’ve missed multiple ship dates, or even if the damn thing works right the first six times they try it. They don’t care. The only thing they really care about is not feeling taken advantage of. If you’re honest and up front, you’re golden, no matter how many ship dates you’ve missed. Their deepest loyalties (most artists, anyway) are to people who they perceive as supporting them the way their fans do. This is where you need to be speaking with passion, not tech logistics.

The music industry is very much like the tech industry when it comes to interconnectedness; everyone knows everyone. They tour together, play together, promote each other, and rely on each other to steer clear of sleazy people. Keeping secrets and misleading artists is one of the sure-fire ways to quickly find yourself a pariah in the music community. (And no, genre doesn’t matter. People talk, and word gets around. It doesn’t matter if you’re dealing with rappers or heavy metal bands, a bad reputation is a bad reputation).

4. Free Is Ubiquitous. Live With It.

Free is ubiquitous in the music industry. No matter how much people might try and fight it, it’s a big part of the future. Period. Fighting the free dynamic will only give you headaches and lead you faster toward the deadpool.

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Free is here to stay, live with it.

If your company can’t exist in a very competitive way within the free paradigm, you’re fighting a losing war. And no, royalties aren’t going to save anyone, so don’t believe that they will.

The fact of the matter is, many artists embrace free. They see it for all its benefits. Again, this has to do with understanding the differences between different types of artists. If you can’t even make those distinctions, then trying to understand this whole point is useless and thus irrelevant.

5. Artists Tend to Be Open-Minded By Nature

The reality of it is, many artists tend to be open-minded by nature. These are not engineers focused on the logistics of how realistic something is. They don’t care about market-cap, valuations, competition, or which programming language will run the best.

This is the music industry, it’s inherently filled with dreamers. These aren’t people who care which classes you took in college, or how many programming languages you know. They are perfectly happy to tour the country in a crappy van, and hang all their hopes on the notion that they might be able to make a living playing music. And there are a lot of them.

Me with: Those Mockingbirds (top left), Bloody Diamonds (top right), The Steppin Stones (bottom left), Sunshine & Bullets (bottom left)

Me with: Those Mockingbirds (top left), Bloody Diamonds (top right), The Steppin Stones (bottom left), Sunshine & Bullets (bottom right)

This means that if your ratio of yes:no doesn’t skew heavily towards yes (like 80-85%), you are doing something very, very wrong. In an industry where the content producers are dying to try new avenues every single day, if you don’t at least capture the attention of 8/10 with your pitch, you have a real problem.

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If you don’t capture around 8/10, you’re doing something wrong.

Again, these are people who live on passion, and are not super bothered by logistics. If you put out a soft beta and it doesn’t load the first six times for an artist, no big deal. As long as they really believe in your vision, they will keep coming back. Period. And they will wait as long as they need to.

(In fact, if you’re not getting emails from artists apologizing for not signing up for your beta fast enough, you’re doing it wrong. This actually happens, and if your inbox isn’t full of apologies for delayed responses, you haven’t gotten through to your key demographic. I actually have emails sitting in my inbox from artists apologizing to me for not signing up for a small test fast enough, hoping that they haven’t lost their spots).

6. Artists Don’t Care About Your Software

Artists are not engineers. They don’t give a shit about your software. None. Zero. Zilch. They don’t care if it’s written in Ruby or Python. They don’t care how many iterations it’s gone through. Many times, unless they’re programmers themselves, they won’t understand what makes your software unique or special. And frankly, they don’t care to understand.

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Artists don’t care about your software. Period.

Artists care about what the software will let them do. What kinds of doors will it open for them, and how many of their fans will they be able to reach through those doors? Is your software just like SoundCloud’s or Spotify’s? Doesn’t matter. The only thing that matters is their understanding of what the core dynamic is that the software is attempting to solve. This understanding is again distilled down to passion.

Most every artist I know—whether they’re from the U.S., Canada, Europe, or Australia— doesn’t give a shit how good your playlist-making algorithm is. It isn’t aimed at helping them, so they don’t care. If that’s your pitch, you should really reexamine your status.

This is where the author made a major error. There wasn’t a clear argument made for how this startup’s software would augment the passion dynamic of the artist. How would it affect the passion of the his fanbase? Would it give the him more dynamic tools to address the passions of the fans with regard to his music? Clearly there wasn’t enough of a distinction to dissuade him from using another platform.

This actually brings up another important point: if your music startup is so threatened by the existence of other music platforms that they can’t be used in conjunction, you have a major problem. The music landscape is populated by numerous services, platforms, apps, and companies. If you need to unseat one or more of these to be successful, go home and redesign your company.

7. You Need to Speak Their Language

All of this culminates in one singular, important point: you need to speak their language. Artists are like engineers, bankers, lawyers, doctors, or journalists in that they have their own language; their own buzzwords (both good and bad), their own tone, diction, emphasis, and colloquialisms. If you don’t know or understand these, you’re out of luck. No amount of good programming will make the difference if you can’t sell it to the artists.

Me in Dublin, Ireland with Chris ____from the Riot Tapes

Me in Dublin, Ireland with Chris O’Brien from the Riot Tapes

If you want to be a music startup founder, you better have at least a few years’ experience in actually talking to artists. Understand that conversations between you and the artists, and you and the music fans will be very, very different. Do not speak to artists the way you would to music consumers. They are not the same as music consumers, and if you treat them as such, you label yourself as someone who can’t distinguish between the two.

If you don’t have a cofounder on your team to translate the tech speak into artist language, you will have a very, very hard time. There’s no substitute. Being comfortable talking to other startup engineers or investors means very little in this respect, except for knowing how to put words together in a sentence. Other than that, you’re speaking a completely different language than the artists you’re most likely talking to. Artists are not engineers, so assuming that they are will kill you.

Me interviewing Cherri Bomb (now Hey Violet) from Amsterdam, Netherlands

Me interviewing Cherri Bomb (now Hey Violet) from Amsterdam, Netherlands

To artists, metrics rarely, if ever, speak as loudly as passion. The passion is what comes across first and last. Most everything else sandwiched in between is somewhat secondary. If you’re a founder of a music startup, accept the fact that you’re going to be speaking to artists and music industry professionals (promoters, venues, organizers, merchandisers, etc.) a hell of a lot more than you’re going to be talking to your music consumers. And if you’re working in the major label paradigm, get used to talking to major labels (that means lots of lawyers and executives). All of these people have different dialects of the same language. This doesn’t mean that the music industry is impossible to crack for new music tech startups. It just means that if you’ve never been in the industry before, you’re starting very far behind the line.

 You Need to Live This Passion

In the end, what this all means is that being a music startup founder has to come from a deep-seated passion. It has to almost be a nagging need that you wake up with. It’s not a one-and-done scenario, where if your first crack as a music startup doesn’t work you move on. If that’s the case, you don’t care enough—you don’t love it enough. You need to live this kind of passion. From how you dress to the slang you use, the little things matter, even if they shouldn’t. And trust me, the artists notice. It becomes an “us/them” mentality. You’re either with the artists—you know them, you understand them— or you’re not. There’s rarely a middle ground.

Me at Warped Tour 2012, with: June Divided (left), The Nearly Deads (middle), Might Mongo (right)

Me at Warped Tour 2012, with: June Divided (left), The Nearly Deads (middle), Mighty Mongo (right)

In the music industry, if you’re an artist and don’t use every tool at your disposal to try and grow a fanbase, you simply don’t care enough. That sounds callous, but it’s true. The same is true for music startups—the only thing that will really get you through to the other side is your passion. You need to breathe the relationships with your artists; you need to be friends with them on Facebook, know them by their first names, know their birthdays, why they started playing music, what their ambitions are—everything short of how they take their coffee, and maybe even that.

Your Code Can Wait—They Can’t

All of this information comes from conversations that never stop. If you stop messaging an artist because you’re busy fundraising, sorry, you’re dead. If you can’t be bothered to respond to their emails because you’re too busy fixing you’re code, sorry, they don’t care, you’re finished. Your code can wait—they can’t and they won’t.

Ironically, this is what I find the most invigorating about being a music startup founder. I love talking to the artists and contacts—I thrive on it. I’ll respond to Facebook messages from artists in Canada, Denmark, Ireland, or California at 4 AM. And I do it because I love it. If you’d rather be writing code at 4 AM than talking to artists in New York or Germany, don’t do a music startup. Do something else that’s not people-based. Because in the end, you can’t hack your way into personal relationships. These relationships take time and care—they don’t happen on your schedule just because you’re trying to code your next app update.

But the flip-side is also true. If you have them going in, you’re lightyears ahead. You have a built-in base that’s invaluable. That’s how you really need to build a music startup: based on the relationships you develop with the artists. Everything else flows from that.

Tidal’s Choppy Waves Keep Rolling

The choppy waves keep on coming for Jay Z’s streaming service Tidal, as today it was hit again with another round of criticism. I myself outlined my thoughts on the Tidal service first in a post when it launched, and then again in a questioning follow-up post earlier this week. This time, though, the critique comes not from disgruntled music streaming fans or competitive services, but from Steve Albini.

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Tidal logo

Tidal logo

For those unfamiliar with Albini, he cut his teeth in the mainstream spotlight producing albums for artists like Pixies and Nirvana, and has become an outspoken critic of many of the streaming services in the last decade. A criticism from Albini can’t be as easily dismissed as it might otherwise be particularly because he has both the industry experience and insider knowledge to call those in the industry on their bullshit.

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Steve Albini; Photo courtesy: Jordi Vidal, 2014

Steve Albini; Photo courtesy: Jordi Vidal, 2014

Albini has been critical of the mainstream music machine even before Kurt Cobain’s death, jumping into the mainstream music business debate in 1993 with his piece entitled The Problem With Music. He’s done the math and lived out many of the results, and so when Albini takes aim at your service, you better realize that other people in the music community will take notice (even if the mainstream isn’t).

In an interview with Vulture.com, Albini used phrases like “little streaming fiefdoms” and the “budget version of Pono” when referring to Tidal. While the latter comment is a critique on the mainstream listener’s ability (or even care) to distinguish between lossless quality and normal mp3 audio quality, the former is almost a little more telling. “Little streaming fiefdoms” is pretty telling in and of itself; it’s dismissive of what Jay Z and company say Tidal is (and purportedly will be), instead asserting that the service is yet another little city-state vying for validation in the greater streaming landscape.

Perhaps the most intriguing thing about this particular thought process is what it means for the dynamic of the current landscape; as Albini (and others) become increasingly critical of services that act like little principalities, the traditional walled-garden approach to music seems to be under siege. And there are those of us who rejoice in that. The walled-garden concept works well in numerous areas of tech and business—it’s great for security, healthcare, and finance. But it is not good for media, and music specifically.

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Criticisms of Tidal on Buzzfeed the day after its launch

Criticisms of Tidal on Buzzfeed the day after its launch

Music is freedom, and needs to be treated as such. To constrain music to the dynamics of a walled-garden system is to take away so much of the actual discovery and freedom that is associated with it in its purest form (though many would argue that there’s still plenty of “discovery” to be had). Regardless of this fact though, it remains an important fact to note that people of Albini’s caliber are taking aim at people like Jay Z and services like Tidal.

One might even argue that they—whether they intend to or not—are clearing the path for new music services yet to be launched. Only time will tell in that regard. For me though, this does not go unnoticed. Anyone interested in the future of the music industry would do well to keep these criticisms catalogued and fresh in mind. It’s precisely by graphing these grievances that we will begin to see how the future of the music industry will unfold.

What Does It Say When Mainstream Artists Start Criticizing Tidal?

I’m not much of a Mumford & Sons fan. I have nothing against them as musicians; I just find that my taste in music to be a little different. But I respect the hell out of them for the statement they put out today.

Pulled by Digital Music News from other sources this morning, M&S were reported as disliking Jay Z’s new service Tidal. They’re not alone; other mainstream artists like Lilly Allen and Mariana and the Diamonds have voiced distaste for the service. And that’s not even taking into account the near biblical response from music fans over the service, all of which I spoke about in my coverage of Tidal’s relaunch a couple weeks ago.

But what makes M&S’s statement so stark is the candor with which frontman Marcus Mumford explained the band’s view of the service:

We wouldn’t have joined it anyway, even if they had asked. We don’t want to be tribal. I think smaller bands should get paid more for it, too. Bigger bands have other ways of making money, so I don’t think you can complain. A band of our size shouldn’t be complaining. And when they say it’s artist-owned it’s owned by those rich, wealthy artists.

Wow, some pretty powerful words from the neo-folk rock frontman. I rest my case. I may not be a major fan of M&S’s music, but I for damn sure am a fan of how they see themselves and their fans. They know what they are, and they know what they’re not. And what they’re not is dying for money in the same way an independent artist is. What they are, according to this, are a group of artists who recognize their good fortune. They assert that other artists on their level should recognize similar good fortunes and stop “complaining.”

If this isn’t telling of the splitting we’re starting to see in the music industry, then I don’t know what is. It’s a big day when even mainstream artists are standing up and articulating the difference between themselves and independents. It’s a whole new world.