TIME Music Industry

Why Linkin Park Launched A Venture Capital Firm

Rock On The Range 2015 - Day 3
Jason Squires—WireImage Musicians Mike Shinoda and Chester Bennington of Linkin Park perform at MAPFRE Stadium on May 17, 2015 in Columbus, Ohio.

Remember Linkin Park? The nu-metal band rose to popularity in the late 1990s/early 2000s with the album Meteora and, arguably, peaked in fame with a Jay Z collaboration of mashup tracks, Collision Course. In its heyday, MTV2 even crowned Linkin Park the sixth-best band of the music video era.

Since then, Linkin Park has turned to creative business efforts to keep the money flowing. It opened up an “innovation company” in 1999 called Machine Shop, and now, 16 years later, the band’s newest project is a venture capital firm.

Kiel Berry, the band’s executive vice president of Machine Shop, laid out the thinking in an extensive blog post this week at the Harvard Business Review. Why there? Linkin Park worked with a Harvard Business School professor, Anita Elberse, and some of her students, on a semester-long independent study to identify new avenues for innovation and revenue. (Imagine listing that on your transcript: Independent Study on the Business of Linkin Park.)

Berry writes that the band and HBS folks examined everything from how well the rapper Tyler, The Creator (cofounder of the hip-hop group Odd Future) sells merchandise, to Jay Z’s extensive business ventures, to the tech investing of the actor Jared Leto. They looked at Beats Music, Vice Media, and even the expansion of Red Bull. Any noteworthy music artist’s business strategy that you can name, any entertainment brand’s unique efforts, they appear to have considered. The team also looked at “niche creative studios… that have gained currency among the Fortune 500.”

What they came up with was a series of imperatives (“build a differentiated brand ecosystem that partners want to buy into; diversify revenue streams across multiple business verticals to mitigate financial risk; partner with a broader community or network of global influencers”) for the band, and Machine Shop, to employ. It all sounds pretty wonky for a screaming rock band, but the final result was simple: the band restructured Machine Shop from an agency model to one that will focus on videos, partnerships, merchandise, and venture capital.

In layperson’s terms: Linkin Park as a band is less relevant now, so Linkin Park, as a business, needs to try new things. Hence: produce cool videos, sell more schwag, and invest in startups.

The firm has already invested in some very hot names including investing app Robinhood, ride-sharing service Lyft, and ultra-hip coffee brewer Blue Bottle. It partnered with Lisa Kidd, who helped Gwen Stefani launch her fashion lines, to beef up Linkin Park’s merchandising.

Lest this all start to sound like a very non-rock band thing to do, Berry writes: “To be clear, we are still in the music business, but creating and selling music now plays more of a supporting role in our overall business mix.”

MONEY Media

Digital Music Revenue Beats Global CD Sales for the First Time Ever

spotify on cell phone
Alamy

Streaming revenue alone increased 39% since last year, taking in a total of $1.6 billion.

The CD is one step closer to death.

A new report from the International Federation of the Phonographic Industry, a recording industry trade association, shows that 2014 was the first year in which digital music revenue exceeded physical music sales. Streaming services and sales of digital downloads generated $6.85 billion worldwide last year, while sales of CDs and LPs took in $6.82 billion.

The rise of digital music over the last two decades has been extraordinarily painful for the music industry. The IFPI’s report also shows overall industry revenue has now fallen below $15 billion. If revenues are adjusted for inflation, that number is roughly 2.5 times less than the recording industry made during the late 1990s, when revenue approached $40 billion in today’s dollars.

The good news for music publishers is that revenues from streaming services like Spotify have continued to expand rapidly. Streaming accounted for almost $1.6 billion in revenue for the industry, up 39% year-over-year, and streaming services now claim about 140 million users. Back in March, the Recording Industry Association of America reported streaming and downloads together accounted for 64% of the total U.S. music market, with streaming revenue passing CD sales alone for the first time.

Downloads still make up slightly more than half of digital revenue both internationally and domestically, but that may soon change. Edgar Berger, CEO of Sony Music Entertainment International, told the Telegraph that streaming had already overtaken digital downloads in 37 markets.

Despite the streaming market’s lucrative prospects, some artists have revolted against the prevailing ad-supported model, which allows customers to listen in for free. Taylor Swift has been especially vocal, pulling her music from Spotify in protest of the service’s free tier. In March, Jay Z announced Tidal, a new pay-only streaming service that seeks to place pricing power back in the hands of artists. However, reviews of Tidal have been largely negative, and Swift’s battle against Spotify may ultimately prove unwinnable as streaming comes to further dominate how we listen to music.

TIME Music

Here’s Why Music Lovers Are Turning to Vinyl and Dropping Digital

Sales Rise On Vinyl Records
Martin Divisek—Bloomberg/Getty Images A worker listens through headphones and checks the sound quality of 12" inch vinyl records before they are dispatched, after being manufactured by GZ Media a.s. at their plant in Lodenice, Czech Republic, on Nov. 25, 2014.

Consumers want good-quality sound and like the feel of vinyl records

Music purists and nostalgists alike have reason to rejoice: sales of vinyl records are on the rise.

According to data released last week by Nielsen Soundscan, more than 9.2 million vinyl records were sold in the U.S. last year, marking a 52% increase over the year before. The Wall Street Journal also reports that the vinyl sales are the highest numbers recorded by SoundScan since the music industry monitor started tracking them back in 1991. Meanwhile, data from the British Phonographic Industry revealed that for the first time in nearly 20 years, more than one million vinyl records were sold in the U.K. in 2014. (The last time the milestone had been achieved in Britain was in 1996.)

Even more startlingly are the figures on digital sales. While Nielsen revealed that streaming was also up, purchases of digital downloads dropped 9% for albums and 12% for songs in 2014.

Some are rejoicing at the new figures and anticipating a new trend. German-based company Optimal recently told the Guardian that they’re expecting to press 18 million records in 2015, while a new vinyl pressing plant called Canada Boy Vinyl (CBV) is scheduled to open in Calgary, AB, later this year.

But what’s behind this resurgence of vinyl? And why does the digital download industry seem to be floundering?

According to music industry experts in vinyl and digital, the answer is two-fold. Vinyl remains popular because the high-quality sound it delivers. While everyone from DJs to your grandfather has been saying for years that the sound on vinyl is richer, warmer and clearer than what’s being released online, it might not just be music snobbery talking. Most industry experts agree with them to an extent.

Jon Lloyd, a music genre specialist at Juno Records, an international online shop that sells both vinyl and digital music, tells TIME that in many ways digital music has been its own worst advertisement over the last decade. “You can set up a digital music label for a [relatively] very low cost meaning the market is flooded with record labels that aren’t particularly high on quality control,” he explains. That glut of low-quality, sloppily produced music has likely put off many music listeners who have turned away from downloading music online. Contrast that “throwaway culture of music,” as Lloyd describes it, to the labels that are putting out vinyl — which is expensive to produce — and sinking money into the product. “If there’s a serious investment, you have to have serious quality control because you have to know your vinyl is going to sell,” says Lloyd.

Simon Cole, the CEO of 7digital, a U.K.-based platform for creating digital music and radio services, agrees that digital music has had a quality problem in the past, which he says are reflected in sales figures. But “let’s be clear about what is in decline. What is in decline is the download of low-quality MP3 files,” he says. “I don’t think many of us will regret its passing.”

Cole also believes that along with the decline of low-quality downloads, digital music is now starting — or perhaps being forced — to become a lot more sophisticated. He says that future of music will be “higher-quality [music] files” and people are starting to look for in digital music what they once looked for in analogue: sound quality.

Yet sound isn’t the only part of vinyl’s renewed appeal. Many agree that the tangible aspect of vinyl, its physicality, is a draw for most people. “There’s a physical thing about putting a record on a record table and dropping the needle,” Cole says. “I think that physical thing is great. I think there is a new generation that is discovering the physicality of playing a piece of music like that.”

Lloyd confirms that the physically owning a record offers a connection in a way that a digital file doesn’t, comparing the digital/physical divide in music to that in the book world. “People will buy a Kindle for convenience, but people will still want to have a bookshelf [on their home],” he points out. (Interestingly, U.K. book chains have recently reported an increase in sales of paper books and a decline in e-Readers such as the Kindle or the Nook.)

Part of that appeal could come down to good old fashioned consumerism — we allow our possessions to define us. Nik Pollinger, a digital anthropologist who advises companies on the factors that motivate consumer behavior, told TIME in an email, “What we display in public is used to send social signals about our identities. Making our taste in music visible has historically played an important role in such signalling for many people.” Owning a vinyl collection, of course, “restores this ability.”

Yet while the boost to vinyl sales has been welcomed by many, there are potential problems if the market continues to grow. Josh Lachkovic, the co-founder of Wax & Stamp, a vinyl subscription club launching this year in Europe, tells TIME that if vinyl sales continue to increase, the demand on the few pressing plants out there — not to mention on those plants’ aging presses — might surpass supply.

But while vinyl sales are seeing something of a renaissance, it’s still too soon to worry about excess demand. Yes, vinyl sales are surging, but their sales still only made up six percent of album sales last year. Even so, for the beleaguered music industry, it’s nice to see a bright spot — and important to understand what’s inspiring it.

TIME Music

Taylor Swift Says Other Artists Thanked Her For Pulling Her Music From Spotify

49th Annual Academy Of Country Music Awards - Arrivals
Jason Merritt—Getty Images Singer/songwriter Taylor Swift attends the 49th Annual Academy Of Country Music Awards at the MGM Grand Garden Arena on April 6, 2014 in Las Vegas.

The 25-year-old pop star says she made the right decision

Taylor Swift may have caused waves when she pulled her catalogue of music — including this year’s album 1989 — from the streaming service Spotify, but there was one group who applauded the decision: other musicians.

In an interview with The Hollywood Reporter, Swift explains that she was surprised by the media-storm over her decision, though she ultimately realized she’d made the right choice. “I didn’t think that it would be shocking to anyone,” Swift told THR. “With as many ways as artists are personalizing their musical distribution, it didn’t occur to me that this would be anything that anyone would talk about. But I could never have expected so many text messages, emails and phone calls from other artists, writers and producers saying thank you.”

She doesn’t elaborate if one of those artists was Kendrick Lamar — whom Swift wishes she “was best friends with” — though their mutual admiration for one another is well-documented.

[THR]

TIME Germany

Angela Merkel’s Sweet Overtures to Angry Punk Rocker

Leaders of the Christian Democratic Union sing with Chancellor Angela Merkel as they celebrate the exit polls in the German general election at the party headquarters in Berlin, Sept. 22, 2013.
Kai Pfaffenbach— Reuters Leaders of the Christian Democratic Union sing with Chancellor Angela Merkel as they celebrate the exit polls in the German general election at the party headquarters in Berlin, Sept. 22, 2013.

German Chancellor's apology illustrates that politicians and popstars often don't mix

She has won three elections and seen her popularity soar by rarely putting a foot wrong and learning from her mistakes when she does. Yet German Chancellor Angela Merkel appears to be just as fallible as other politicians when it comes to annoying one of the smallest but loudest segments of the electorate: musicians.

Campino—real name Andreas Frege—has revealed that Merkel made a personal apology to him after television cameras caught her and her colleagues thoroughly mangling a tune by his band Die Toten Hosen (the literal translation is “the dead pants”; the phrase also means “deadly dull”). This karaoke-style crime against music (the song is “Tage wie diese”, days like these; lead vocals by Volker Kauder, chairman of Merkel’s CDU parliamentary party) wasn’t the issue. Campino minded seeing—and hearing—his punk-y, spiky, counter-cultural music co-opted by a political party.

Disharmonies often resonate between the political classes and the music industry. A campaign adopts an anthemic track or a politician confesses in an interview to loving a particular band only for the musicians to repudiate vigorously any connection to the party or politician. In 1984 Bruce Springsteen complained to Rolling Stone magazine about Ronald Reagan appearing on the stump to the strains of “Born in the USA”: “I think there’s a large group of people in this country whose dreams don’t mean that much to [Ronald Reagan], that just get indiscriminately swept aside.” In 2012 Tom Morello, guitarist of Rage Against the Machine, also turned to Rolling Stone to throw some rocks at a leading GOP figure, in this case then Vice Presidential candidate Paul Ryan. “Paul Ryan’s love of Rage Against the Machine is amusing, because he is the embodiment of the machine that our music has been raging against for two decades.” Ryan finally hit back this year. Rage “never were my favorite band,” he said.

And so it goes in the U.S. and Europe. Britain’s Prime Minister David Cameron, schooled at the impeccably posh private school Eton College, once declared that the Jam’s “Eton Rifles”, a biting critique of the privilege represented by Eton, was his favorite track. “Which part of it didn’t he get?” asked the Jam’s former front man, Paul Weller.

That Merkel fell into the trap for a second time is more of a surprise. Her 2005 brush with the Rolling Stones might have been expected to alert to the dangers of relying on rock for an electoral boost. Back then, during her first campaign for the Chancellery, TIME wondered if Stones knew that their 1973 hit “Angie” had become Merkel’s de facto theme tune. They did not. “The Rolling Stones are startled to hear that the track from their album Goats Head Soup has been pressed into service,” we reported. “’We didn’t grant permission,’ a spokesman for the musicians told TIME. ‘We are surprised that permission was not requested. If it had been requested, we would have said no.’”

A CDU spokesman insisted the party had cleared usage of excerpts from the song with the German music-distribution rights regulator, GEMA, but that of course was not the point. TIME had highlighted that the Stones weren’t on her side, setting off a crescendo of dissonant headlines. Die Toten Hosen raised their own noisy protest when the CDU first started using their music in the run-up to Germany’s 2013 election. The band members issued a statement on their website to ask that the CDU stop playing “Tage wie diese” at campaign events: “The danger that people might get the idea that there is a connection between the band and the content promoted at these events makes us furious,” said the statement.

Merkel may finally have learned that bands and bandwagons are a dangerous combination. A new book about Die Toten Hosen, excerpted in the German news weekly Der Spiegel, reveals Merkel’s sheepish phone call to Campino a few days after the election night singalong. “Mr Campino, I’m ringing because last Sunday we trampled all over your song,” the Chancellor said. She offered praise and a reassurance as well as an apology. She found his song “very lovely” but promised “it would not become the next CDU hymn.”

Campino describes his response as “a mixture of surprise and alarm. Alarm that she didn’t have anything else to do except call me. But also touched that she explained all that in such a relaxed and humorous way.”

 

TIME Music

Taylor Swift’s 1989 on Track to Break Sales Records

Taylor Swift Epic 1989 Times Square Concert On GMA
Kevin Mazur—WireImage/Getty Images Taylor Swift performs on "Good Morning America" on Oct. 30, 2014 in New York.

Her fifth album is on track to sell more than 1.3 million copies

Welcome to the top of the charts — it’s been waiting for her.

Taylor Swift’s 1989 could sell more than 1.3 million copies by the end of Sunday, Billboard reports, which means the pop star could set the record for the biggest-ever album sales week by a female artist.

The current record-holder is Britney Spears, whose 2000 album, Oops! … I Did It Again, sold 1.319 million copies in its first week, according to Nielsen SoundScan.

But that’s not all: 1989 is expected to have the largest sales week for any album since 2002, when Eminem sold 1.322 million copies of The Eminem Show in its first week. That’s not too shabby considering how record sales hit a historic low this past August and that streaming services have been taking a bite out of digital sales. (Not that you’ll find Swift’s album on Spotify.)

Fans will find out if the former country star really did dethrone Spears with her “first documented, official pop album” when final sales figures are announced on Nov. 5. In the meantime, artists might want to take a look at Taylor Swift’s op-ed in the Wall Street Journal about the future of the music industry — clearly her advice is worth following.

[Billboard]

TIME Media

This Is Why Taylor Swift’s Album Isn’t on Spotify

"Charles James: Beyond Fashion" Costume Institute Gala - Candids
Mike Coppola—Getty Images Musician Taylor Swift attends the "Charles James: Beyond Fashion" Costume Institute Gala at the Metropolitan Museum of Art on May 5, 2014 in New York City.

Haters gonna hate, hate, hate that they can’t stream Swift’s latest

It feels like Taylor Swift has been everywhere lately—mentoring would-be stars on The Voice, performing “Welcome to New York” atop one of the city’s skyscrapers, joining New York City’s tourism department. One place she’s not, though, is Spotify, one of the world’s most popular streaming services.

Swift’s new pop album, 1989, debuted in stores and on iTunes on Monday, but it’s nowhere to be seen on Spotify or other streaming services like Pandora. The album is widely expected to be the best-selling release of the year, so its absence from the online services is notable.

But it shouldn’t come as a surprise to anyone that Swift maintains tight control over how fans access her music. The singer kept her last album, Red, off Spotify when it dropped in 2012. And in a Wall Street Journal op-ed earlier this year, Swift lumped streaming in with file sharing and piracy as reasons that album sales have shrunk dramatically over the last decade and a half.

“It’s my opinion that music should not be free, and my prediction is that individual artists and their labels will someday decide what an album’s price point is,” Swift wrote. “I hope they don’t underestimate themselves or undervalue their art.”

Digital album sales, which were supposed to be the life raft that saved the flailing music industry after the Napster era, declined nearly 12% in the first half of 2014. Some people like Swift have blamed the decline on streaming services, which jumped 42% in usage during the same period. Artists make considerably less money when a fan listens to a track on Spotify rather than buying a track outright, but the streaming service says that as it achieves scale it will be able to pay artists even more than they’re able to earn selling discrete units.

Other big-name artists have recently followed Swift’s lead. Beyonce’s surprise December album still isn’t available on Spotify, while Coldplay’s 2014 release Ghost Stories arrived on the streaming service four months after the physical version debuted. The Black Keys, who have long opposed Spotify’s model, have also kept their latest LP off the service.

For its part, Spotify says it wants to bring 1989 to its users, and the company did eventually manage to get Red up and streaming. “There are over 40 million music fans on Spotify and Taylor Swift has nearly 2 million active followers on the service who will be disappointed by this decision,” Spotify spokesman Graham James said in an email. “We are working to bring this album to fans on Spotify as soon as possible.”

As consumer habits shift and streaming becomes more popular, artists will likely face more pressure to release their albums online immediately. But with 1989’s first-week sales estimated at 900,000 units, it’s hard to argue that Swift is behind the times. “Music is art, and art is important and rare,” she wrote in the Journal. “Important, rare things are valuable. Valuable things should be paid for.”

TIME Music Industry

Record Labels Suing Pandora Over Oldies

Major labels say Pandora is violating their copyrights to a slew of pre-1972 oldies like the Beatles, Rolling Stones and Aretha Franklin. While federal copyright laws don't protect the older tunes, record labels argue that the music is protected by some states

Sony, Warner and several other major record labels are suing Pandora for copyright infringement, accusing the Internet radio mogul of playing pre-1972 songs by artists like Buddy Holly and the Rolling Stones without licenses.

The record companies argue that while the pre-1972 songs Pandora plays aren’t covered by federal copyright protection, they are protected by common law in states like New York, where the case was filed Thursday, the New York Times reports. The labels control the rights to a litany of major artists like the Beatles, Aretha Franklin, Bob Dylan, James Brown and others.

The record labels claim that Pandora is unjustly profiting from their artists, denying them tens of millions of dollars each year from Pandora and other streaming services.

“This case presents a classic attempt by Pandora to reap where it has not sown,” the labels say in the suit.

María Elena Holly, the widow of Buddy Holly, said in a statement: “Just because Buddy and the other ’50s musicians recorded songs before 1972 doesn’t mean their songs have no value. These companies’ failure to pay the rock ’n’ roll pioneers is an injustice and it needs to change.”

Pandora plays songs according to user-preferred categories like “Motown” or “60s Oldies.” The company said it was confident in its legal position.

[NYT]

TIME Music Industry

Wu-Tang Clan Says It’s Already Received $5 Million Offer for Secret Album

Paid Dues Independent Hip Hop Festival
Imeh Akpanudosen—Getty Images

Legendary hip-hop group the Wu-Tang Clan has an ambitious plan to promote its upcoming album by releasing just one copy to the world. Now the group’s frontman, the RZA, says the strategy is already paying off.

RZA, born Robert Diggs, told Billboard that the Clan has already received offers of up to $5 million for its upcoming album The Wu — Once Upon a Time in Shaolin. The 31-track LP was recorded in secret over the last six years and will only be made available to a single buyer. Before being sold, the album will be demonstrated at museums and galleries in a kind of touring art exhibit that the group hopes will “provoke questions about the value and perception of music as a work of art in today’s world,” according to an official website for the album. RZA did not specify who the current interested parties are, but they could include record labels who want to distribute the album widely, wealthy magnates who want to donate the album to a museum for the public good, or really, really big Wu-Tang Clan fans.

The Wu-Tang album is the latest in a string of increasingly elaborate promotional stunts that artists are using to get people to pay attention to their music. Beyonce released a surprise album in December that crashed the iTunes Store, and her husband Jay-Z distributed his latest work via smartphone last summer. RZA cites both endeavors as inspiration for the Wu-Tang’s strategy.

TIME Music Industry

Cue the Sad Trombone: Global Music Sales Are Diving Again

Spotify
Jonathan Nackstrand—AFP/Getty Images

After a brief respite in 2012, a new report shows that global recorded music revenues slipped 3.9 percent in 2013 to $15 billion. Streaming platforms, however, continued to grow, topping $1 billion in sales for the first time

After a brief respite in 2012, music sales are once again on the decline. A new report by the International Federation of the Phonographic Industry shows that recorded music revenues slipped 3.9 percent last year to $15 billion globally.

A precipitous fall in revenue in Japan is mostly to blame. The country is the second-largest market for recorded music in the world, but sales fell by a huge 16.7 percent there in 2013 because of a decline in both physical music sales and older digital products such as ringtones. Taking Japan out of the equation, global music sales were nearly flat year-over-year, dipping by 0.1 percent from 2012 to 2013.

The biggest growth sector in the industry was once again in subscription services such as Spotify and Rdio. As the number of paying subscribers rose from 20 million to 28 million from 2012 to 2013, revenue from such platforms grew by 51 percent and topped $1 billion for the first time. Revenue from ad-supported streaming services like YouTube and the free version of Spotify also grew by more than 17 percent. In total more than a quarter of the industry’s $5.9 billion in digital revenues now comes from these free and subscription-based streaming options.

Physical music sales continued drive the majority of revenue for the industry, but likely for the last time. Physical formats comprised 51 percent of music sales last year, down from 56 percent in 2012. The rise of digital is expected to continue unabated for the foreseeable future.

The mixed data from the report cast 2013 as “a year of good news and bad news,” Universal Music Group International CEO Max Hole told Billboard. Another yearly decline—the 13th in the last 14 years—is not the step the industry wants to take as it tries to claw its way back to the heyday of the ‘90s, when global industry revenue was close to $30 billion. But executives are confident that people will one day pay for music subscription services en masse. The international CEO of Sony Music Entertainment told Billboard he expects 100 million people to sign up for music streaming services “in the near future.” The question is whether streaming will be able to rise fast enough to make up for ongoing declines in physical sales and, more recently, digital downloads. The IFPI report noted that digital download revenue dropped 2 percent last year.

Despite uncertainty about the industry’s future, the biggest pop stars are still doing quite well. Robin Thicke’s “Blurred Lines” was the biggest single of the year. Taking into account track sales and streams, it sold 14.8 million units globally. “Blurred Lines” was followed by Macklemore & Ryan Lewis’ “Thrift Shop,” which sold 13.8 million units and Avicii’s “Wake Me Up,” which sold 13.4 million units (and is now the most-streamed song ever on Spotify).

On the album front, One Direction’s Midnight Memories took the 2013 crown, selling 4 million units globally. Eminem’s Marshall Mathers LP 2 followed with 3.8 million in sales, and Justin Timberlake’s The 20/20 Experience rounded out the top three with sales of 3.6 million. Beyonce’s self-titled album, a surprise December release that was only available on iTunes its first week, even snuck into the bottom of the top 10 with 2.3 million units sold.

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