Monday, March 9, 2009

Requiem for a Pioneer will cease operations on March 13th. The following was posted on their home page today:

Fabchannel Stops

After nine passionate and beautiful years of sharing the most amazing concert recordings with you, Fabchannel is stopping. A great number of record labels still won't allow us to record their artists. This prevents us from offering what we need to keep Fabchannel alive.

We want to sincerely thank you for all support through the years! It has been an amazing time, but unfortunately this is where it ends.

With a bleeding heart we're pulling the plug of our online archive Friday 13th of March. Until that time, enjoy your favorite concerts and who knows… we'll meet again.

Justin Kniest, CEO

Everyone who loves music should observe a minute of silence. The future is put on hold again. The visionless Luddites who have driven the music industry to the very gates of Hell have claimed another victim. I would urge anyone with a financial interest in or a passion for music to read Justin's final blog entry:

Justin's final blog

Fabchannel made its share of mistakes. They scaled too early and they let their costs get too far ahead of their revenue. Many years in the venture capital industry taught me that being too early can be as fatal as being too late. On the other hand, their vision for the industry is absolutely spot on.

Live music is the future. As I noted in an earlier blog discussing Shepard Fairey, there is a complex relationship between using your art to promote your art and using your art to make a living. The modern audience is too technically sophisticated and nuanced to be reached by the ham-fisted approach of "charge for everything" and "pay for everything". There is an old saying, "If the only tool you have is a hammer then everything looks like a nail." Unfortunately it appears that (most of) the recording industry has only a hammer when the times demand a more sophisticated tool kit.

Music - writ large - is going to survive the death of the traditional recording industry. Music will re-emerge in a format that embraces internet technology. It will rise from it ashes of the 20th century model. Music is too much a core part of the human spirit to die.

Unfortunately there is no guarantee that classical music will make this journey. We are fragile. We cannot afford to be followers. The loss of the promotional power of the recording industry could be fatal. There is a very real danger that the audience will vanish before a new promotional engine is created. Classical music could become a museum exhibit instead of a lively and thriving art form. Let us all hope that we can collectively seize the initiative before it is too late.

Friday, February 27, 2009

Barack 2.0

Are you an executive with a classical music Arts Organization? Are you suffering from a decline in your audience? Are you struggling to determine how to keep your donations at the level necessary to sustain your quality and presence? Are the old mechanisms for audience development and fund raising failing you?

Perhaps you should "get with the times"! Barack Obama was a black man who's middle name was Hussein. He was a one term senator with much less that 10% name recognition. He was competing against Hillary Clinton who had over 95% name recognition, a list of major donors a mile long, the support of the entire democratic establishment and was a prohibitive favorite to win the democratic nomination. Against those odds, in a period of 18 months, Obama raised more money than any candidate in history, won the nomination and became the 44th President of the United States. How did he do it?

A new book has just been released by It is sub-titled "Barack Obama's Social Media Lessons for Business". A brief excerpt:

"Barack Obama's victory was due to an extraordinary internet presence and a solid policy for engaging his potential constituents."

"What was truly historic in a different way was that this was the first time a digital community was a prime mover in a successful election. In the Barack Obama campaign the internet housed a community that helped drive his victory. The tools - the social media like blogs, texting, podcasts... outreach programs aimed at external communities and social networks...led to the record millions in donations and the enormous volunteer armies that did the sweat work day in and day out to make Barack Obama POTUS." (President of the United States).

Politics will never be the same! You can find this invaluable guide on Check it out by following the link below:

Barack 2.0

In these days of economic crisis it is critical that Arts Organizations engage their constituents in the same way that the Obama campaign engaged their voters. The audience must be promoted from their historic roles as listeners and attendees to their new role as classical music missionaries. They must be made to understand the crises faced by the classical music that they love. They must be recruited to become part of the campaign to save that music and the arts organizations that make it possible. You - their local Arts Organization - must motivate them to engage in audience development by reaching out to and recruiting the "fans who don't know they are fans". You must also motivate them to donate the small sums they can afford and to solicit their friends and colleagues to do the same. Only the internet can make such solicitations cost effective. You will be astonished by how fast these donations can add up. The social networking tools needed to drive this kind of program are well understood. They are, however, useless unless they are marshaled by a dedicated, focused, sustained and inspirational program. To accomplish such a program, Arts Organizations need to staff a full-time position which is exclusively focused on building these sustained internet campaigns. This position should be staffed by someone under the age of 30 - someone who has lived the new media experience and understands it down to their very core. I have often heard that organizations cannot afford such a position. Baloney! 21st Century Arts Organizations will not survive without a focused new-media program and the dedicated leadership to drive it!

There is some help! Most organizations cannot afford to build the infrastructure to deliver this campaign from scratch. I hope that the tools we have created at can make such an effort affordable and successful for a wide range of classical music participants. Check us out:

I will be sharing success stories and promoting a dialog on how to really make this work in future posts. Good luck to you all.

Thursday, February 26, 2009

A Real 21st Century Artist

Shepard Fairey has recently become front page news as a result of his Obama “Hope” poster. Fairey started as a street artist who regularly got arrested while painting his work on buildings and in other public places. Before the internet he would Xerox his work and hand it out on the streets and at events. He would encourage the recipients to copy it again and distribute it further. After the internet he became a master at viral distribution of his work. In the process he has managed to keep a counter culture image while becoming the image designer for such commercial icons as Saks.

Fairey is a classical example of the 21st century artist who uses his work as the primary tool to expand awareness and to promote his commercial career. The cognitive dissonance of giving his work away and charging for it at the same time is not a mystery to him, it is his natural process. There is a wonderful interview with Terry Gross at Fresh Air which illustrates his strategy in his own words. If you are interested the link to the interview is below:

Fresh Air Interview - Shepard Fairey

There is much that can be learned from this and applied to classical music.

Someone alerted me to another great piece from 60 minutes:

Sixty Minutes Interview

Tuesday, January 20, 2009

95% of music downloads are illegal!!

An interesting analysis from the UK. If the conversion of music sales from CD to digital downloads results in payment for product going to 100% to 5%, the total revenue has to drop catastrophically. This is consistent with the revenue curve we showed in the last post. Check it out:

Wednesday, January 14, 2009

Another Nail in the Coffin

The largest remaining CD store in America is closing. Virgin MegaStore in Times Square.

Looks like a good CD buying opportunity. This was one of the last retail outlets in the US with a reasonable classical selection. Get em while they're hot!

More Radical than Moi??

Driving into work today I heard an interview on Fresh Air with Steve Knopper, a reporter with Rolling Stone and author of the recent book Appetite for Self Destruction - The Spectacular Crash of the Record Industry in the Digital Age. I only forecast that the Labels will drop classical. He predicts their imminent demise!! I can't wait to see his hate mail :-). The interview is well worth the time to listen. The classical artist and fan will find many useful observations. How does an artist make money? Perform! What is the role of recording? To promote performances! How did Bruce Springsteen promote his upcoming tour? He released free music for download on the Internet! How has the model changed? Touring was used to promote the sale of recordings. Now recordings are used to promote the tours.

The New York Times reviewed the book here:

I have the book on order (I haven't read it yet) but the review warns that an interesting subject is not done any service by the clichés dominating the prose. Perhaps you can get all you need from the interview. If the book is really valuable I will report on it later. The audio for the Fresh Air show is not up yet but you can check out the Fresh Air site here:

I will post a link here to the audio after it goes on-line.

Update on Recording Industry Economics

I recently acquired an up-to-date graph of the sales of recording media through 2008. I have revised the graph in the earlier blog on the supply chain to include this information. It shows CD sales have dropped to less than half their numbers at the peak of the market in 2000. Some people point to the rapid rise of download sales to make the case that the recording industry is still OK (despite the daily barrage of news to the contrary). I have made some pretty conservative assumptions about the average sales prices of CDs, cassettes, LPs and single and album downloads and plotted the total industry revenue in the graph below:

As you can see the download revenue has come no where near to replacing the lost revenue from physical sales. Total revenue has dropped by more than $6B or nearly 50%. Downloads do not represent the economic salvation of the industry!

Friday, January 9, 2009

Recent News of Note - January 9, 2008

I received my copy of Opera News today and found this very interesting article:

The article recounts the story of 2 recent CDs. The first was a studio financed release (on Decca), Soprano, featuring the exquisite voice of Nicole Cabell. The author states, "Trouble is, Soprano may be the last of its kind."

The second is a self produced CD by the equally talented Anna Maria Martinez. With heroic effort and focus she financed and produced her own CD and looked for a distributor. She connected with Naxos who released it as Soprano Songs and Arias.

An interesting juxtaposition of the old and new model.

Saturday, January 3, 2009

Classical Music after the CD – Redux

I was somewhat surprised by the number of comments and the energy of the dialog that resulted from this post. As my objective was to stimulate an exchange, this response was gratifying.

I thought it would be useful to follow up both to clarify my original post where it was inadequately clear and to respond to some of the comments where a response might be useful.

I thank Alan Bise for his long and thoughtful comments. There are 2 issues that he raises that I would like to clarify.

First is the role of labels. As he describes, the nature of the job performed by record labels is changing dramatically. He observes that “Rather than go out of business, they (the record labels) will simply become service companies and charge artists an amount that covers expenses and provides a small profit.” The majors will find it very difficult to transform themselves to this business model. There is, however, a job to be done here. For artists who have the means it is great to be able to partner with a modern “label” that will market and distribute their music. I think that Alan and I both believe that any time an artist’s music touches the public it promotes that artist and improves their brand. There is an opportunity for boutique and very efficient next generation “labels” to fill this gap. For those who do not have the means, there are mechanisms like Facebook and InstantEncore to self-promote. There are also opportunities to participate in festivals and other events where live music can be recorded and distributed by the organizer. I think that selectively taking advantage of these options is an imperative for a modern artist.

Second is the role of live and studio recordings. I think we probably disagree on this issue but not to the extent that one might conclude by reading the post and response. I was a roadie for the Grateful Dead in the summer of 1967 when they started encouraging fans to bring recorders and tape their live concerts. The recordings that resulted from these efforts over many years became hugely important to the creation of the “deadheads” and to the whole Grateful Dead subculture. They were “traded” (before the internet) by exchanging tapes. They did capture something that could never be present in a studio recording. The Dead were way ahead of their time.

I do not have an esthetic problem with studio recordings. I have been listening to them for 58 years. I have purchased over 30,000 LPs and CDs. Many are superb. I love them. They can be sterile but not all are. I was not sufficiently careful in the way I addressed this issue in my original writings. However studio recordings of orchestras and operas are economic dinosaurs. The cost can never be recovered by the sale of the recorded music. Whether they disappear completely or simply become very rare depends on the willingness of donors to keep coming up with the money. My guess is that they disappear. As Alan points out, many “live” recordings are recorded over several performances and engineered later to create the highest quality final product possible. I would call these “hybrid” recordings. They are less expensive to produce than studio recordings and will become more cost effective as new technology and new contracts (artists and others involved) evolve. It is still unlikely that they will become an important economic contributor as the market for these recordings is small and the costs are still considerable. Small groups and individual artists can elect to record themselves under studio conditions and engineer the music to achieve the desired result. It is unlikely that any “label” will advance the money required to make these recordings (the 20th century model) so the cost will have to be borne by the artists or the donors. Whether enough copies of this recording can be sold to make the recording an important profit center for the artist, worth the effort and the risk capital, is the big question. In the past the Labels created the recordings at their own risk (they put up the money) and marketed and distributed them. This was a business that was worth being in. When the generation of the “risk capital” is moved from the label to the artist there is a reason. So the ultimate question is whether the creation, including the provision of the risk capital, of a studio recording is a viable economic business, “generating an adequate financial return in exchange for work and acceptance of risk” (definition of a business). I maintain that it is not - that it only “works” if it is subsidized, either by the artist or a donor, or if it is included as a promotional cost in creating and improving other forms of income. There is no harm with that. It may be an important part of an overall business campaign by an artist, presenter or ensemble. It is simply not a business in and of itself.

As an aside – I would refer the reader to the presentation by Nielsen SoundScan at the 2008 NARM conference for accurate data on music sales:

On slide 33 they show album sales by genre. Classical albums represented 3% of CD sales and 2% of digital sales. I find that hard to reconcile with classical sales being 12% of iTunes sales?

I also appreciate Mr. Tate’s comments. While I am not an artist, I understand the artists desire to “refine and preserve my (the artist’s) creations”. While live performances are imperfect, I struggle to understand where the money will come from to create studio recordings in the future. It certainly won’t come from the labels. While some orchestras are “self-producing” recordings, few, if any, are making money doing so and they rely on fairly large donations to make it work. This model may continue but it is very fragile. The current economy will test it to the limit.

Sarah takes issue with my statement that “Everyone will have a home theater”. I refer you to the following research report:

Note that the percentage of US homes with a TV is 99%. The average number of TVs per home is 2.24. The number of hours watched by Americans in 2007 is 250 billion. Every Sony TV sold by the end of 2009 will have a native internet connection and be able to receive video directly from the internet without a cable, satellite or over-the-air connection. All others will follow. Any video program material available on the internet will be directly accessed by these TVs and millions of others with a very inexpensive accessory box. For Christmas I received a subscription to the Berlin Philharmonic live webcasts:

This is the first of many that will be offered. I will watch it on my TV.

I responded to Alex’s questions as a composer in the comments. I am personally very interested in promoting new composers as I believe that this is one of the keys to renewing the classical genre. Composition has rarely been a standalone business – though Puccini did really well – and probably is not for the classical genre today. However commissions, university positions and patrons are still around and should remain the economic support for new composers.

Joe Shelby gives us a review of the economics of CD distribution. I offer the following from Rolling Stone Magazine:

This breakdown of the cost of a typical major-label release by the independent market-research firm Almighty Institute of Music Retail shows where the money goes for a new album with a list price of $15.99.

$0.17 Musicians' unions
$0.80 Packaging/manufacturing
$0.82 Publishing royalties$0.80 Retail profit
$0.90 Distribution
$1.60 Artists' royalties
$1.70 Label profit
$2.40 Marketing/promotion
$2.91 Label overhead
$3.89 Retail overhead

As you can see the packaging and manufacturing account for only $.80 of the $16. Digital distribution is less expensive but even that doesn’t improve the equations dramatically. You have to impact the last 5 items to make a real difference.

WJ Keizer extols the European model of government sponsorship of the arts. I am personally in favor of government sponsorship of the arts. I believe that it is as fundamental to human existence as roads and the military. Unfortunately neither the US nor the European governments listen to me. In fact, sponsorship by European governments has been declining at a rapid rate. This is a matter of great concern and much needs to be done to continue the economic viability of the arts in Europe. I hope to write about this further in the future.

Anonymous took issue with my statement that "None of the pre-2000 material had digital rights cleared when it was recorded and the cost of clearing these rights now dwarfs any income that could result." In fact my statement was correct. The big labels tried to assert that the existing contracts covered digital distribution and that no additional rights clearances were necessary. This issue was taken to court and the big labels lost. During the early years of the digital revolution, when everyone was naïve, a lot of money was spent clearing rights for digital distribution of long tail classical music. DGG was one of the most aggressive. At some point the accountants got involved and stopped the effort. There is a body of pre-2000 recordings that are cleared because of this early effort but there is no ongoing effort to add to that body of recordings. Anything not cleared now is likely to never be cleared until the copyright expires. Everything from 1958 became public domain a few days ago.

Richard B is, thankfully and like me, happy to pay for recordings of classical music whether CDs or downloads. I think it is probably true that the classical music audience is more likely to “behave well” and to pay for music even when they can get it for free. Unfortunately we are caught in a tidal wave of contrary behavior. Digital Music Review just issued their report on 2008. CD sales declined another 20% and digital downloads were FLAT for the first time ever. Total revenue for recording sales dropped 16%. While I do not forecast the end of recording sales, the issue of building a business to serve the declining number of buyers is very daunting. Probably the leading expert in the world on this matter is Lawrence Lessig of Stanford (now Harvard) Law school. I would strongly recommend reading his new book “Remix” or listening to his excellent interview on NPR:

He proposes a new model for the distribution of media. While I am not sure I agree with him, his analysis is very valuable.

A.W. Carus makes a couple of very interesting points. I agree with him that the old recordings will not disappear. They are in the digital cloud and they are valued by many, including me. The problem is that they will not represent a business. They will essentially be available for free. If we want a vital and lively art form we have to continue to reinterpret and reinvent our music and art. With the cost of capturing and distributing live performances falling rapidly, I predict that the audience will be more interested in seeing or hearing something fresh and innovative than something 50 years old. I don’t think it is an all-or-nothing proposition but I hope, for the futures sake, that our appreciation of contemporary performances and music continues to grow. He also observed that classical music needn’t be for profit to be viable. In fact classical music has basically never been for profit. Creating and selling recordings has been for profit. In this blog I am attempting to address the business or economic issues of classical music.

One theme which reoccurred throughout the comments was the issue of my conflict-of-interest as a CEO of I have been involved in a number of successful businesses in my life and I have promoted them all. Most of these businesses have been successful because they met a need in their market and did it better that the competition. InstantEncore is an attempt to build a small, commercially viable business to support and facilitate the evolution of classical music into and through the 21st century. I believe that classical music artists and presenters need the help and that InstantEncore offers much to them that is valuable.

I believe the whole music ecology changes in the future. People may "save" performances that are in some way memorable, either because of the quality of the performance, an emotional connection with the artist or music or an emotional connection with the event. However most performances on the net will be "disposable" (not meant in the pejorative) much like a live concert. They will be enjoyed, perhaps shared and then discarded. This is inevitable as the range of choices becomes so very wide. In the old model you had the perfectly transitory (the performance) and the perfectly permanent (the CD). There was nothing in between. With the rise of the internet, simulcasts of live events, time shifted performances, space shifted performances, streaming available for limited time or forever, downloads available for limited time - or forever - you have a continuum of "durability" of music. The "owners" of the music can determine where to place the music on this continuum from absent to fleeting to permanent. If they don't want it there they won't put it there. As for the audience - rather than having a shelf of CDs and an occasional ticket to a local live event - they will be presented with a vast panoply of options. They can attend live events in their local; they can participate in the excitement of live events far away through the cost effective space shifting capability of the internet; they can participate at more convenient times through the time shifting capability of the internet; they can follow their favorite artist, group, work, symphony or opera even when that performance is far away or at a time they cannot manage; they can invite their friends to experience performances that they particularly enjoyed, even if that performance is past; they can preserve, if enabled by the performer, those performances that created a particular emotional response and that they want to re-experience later. This is a much richer experience than a shelf of CDs and an occasional ticket. What is needed to make this work is a system where the performer can decide where to place each work on the continuum of availability; where the performer can reach the prospective audience easily; where the audience can navigate through the vast ocean of choices easily and find what they most want and where the audience can easily promote the things they love to others. That is InstantEncore.

No one objected to the recording industry when it was thriving and it provided an important component of the music ecology. It is important that classical music is supported by a few commercially viable businesses which symbiotically exist with it. We are attempting to create one. If I were interested in making the maximum money from my time I certainly wouldn’t be spending it in classical music. I make no apologies for my promoting the concepts behind I promote them because I believe in them. It is my fervent hope that, in addition to making the business successful, InstantEncore will make a real contribution to the art.