Hamilton Music Scene Keynote Address

INTRO- MY BACKGROUND:

I’d like to share a few biographical facts I believe will help you to understand my perspective in relation to my keynote address to-day.

I blame it on The Beatles. They’re the reason I got into the music business in the first place. They made it look so fun and easy.

Well the music business can certainly be fun, but it’s also lot of hard work too, if you wish to succeed. It’s often 10X harder than you expected. Most music careers are an “overnight” success after 15 years of focused work. I’ve seen this first hand in my law practice. I’ve been specializing in the legal aspects of the music business since 1983.

But as the saying goes, “if you enjoy what you do, you never work a day in your life”.

I am a music lover, player and have been involved with music all my life. I studied classical piano for ten years begining at age 7 and I started teaching myself guitar at age 11. I still play guitar in and write songs for “Blue Room” (blueroommusic.com) an independent group which I founded which has performed at the Beaches Jazz Festival for the last 5 years, has shared the bill with B.B.King and Buddy Guy among others and has three independently released cds to irts credit. I also listen to a lot of music for both client -related and personal reasons.

The first inkling that I might pursue law as a career occurred when I skipped grade 13 Biology class (yes, there was a grade 13 then) to go to the court house in Toronto on University Avenue with a high school friend to see lawyers present their arguments in criminal trials.

I spent three years after high school trying to make my living as a musician and working day jobs to make ends meet. I have some fond Hamilton memories from those times and also more recently. My recent memories include servicing clients who come from Steel Town, drinking Laker beer, attending the Juno Awards at Copps Coloseum and performing at the Mermaid Lounge with Blue Room. Also, one of the earliest bands I was in, played regularly at the McMaster University pub, the “Downstairs John”.

At the time I thought that would be the closest I got to going to university. I had every intention of making my living as a musician, not attending university and becoming a lawyer. Well I’ve since learned “never to say never” and that many are called, but few are chosen for success in the music business as a musician. I also learned first hand the necessity of diversifying and adapting in order to stay in the music business. But that‘s not unusual in this high risk business. For example, agents become lawyers, musicians become A&R reps for record labels, A&R reps become managers, etc..

Later in my teens, I worked for a law firm in Toronto as a messenger when I was still a struggling musician. The idea was formed then that I could marry the two disciplines of music and law. That way, I could try to help change the way that lawyers are perceived- “ an honest lawyer?” and to help musicians in my legal career. Did someone say I’m idealistic? With that goal in mind I went to undergrad, then to Osgoode Hall Law School and became a music business lawyer. 

THE MUSIC BUSINESS PAST, PRESENT AND FUTURE: A TWENTY YEAR OVERVIEW

(FROM THE 1980’S,’90’S AND 2000 0N WITH AN EMPHASIS ON THE INDIE SCENE)

What follows is my subjective overview of the Canadian Music business based on my experience and over 20 years of practice as a music business lawyer.

Three basic questions are raised at the outset:

1.Where have we been?

2.Where are we now?

3.Where are we going in the future?

Three simple questions with no simple answers.

When answering them I’ll comment on the industry generally, refer to copyright issues and discuss the changes in record industry contracts.

I THE PAST

Why look at the past? Looking at the past can provide insights as to where we’ve been and provide guidance as to where we’re going at present and into the future.

I still advise my clients who ask what the “real deal” music business is like, to watch the movie “Jailhouse Rock” featuring Elvis Presley and read “Hammer of the Gods” the biography of Led Zepplin. Of course, now I add to that list Hitmen by Frederick Dannen and The Future of Music by David Kusek and Gerd Leonhard, 2 Berklee College Professors.

Music that sells is what drives the music business. It does not mean that music that doesn’t sell well isn’t worthwhile, or even that it is not good music. If that were the case, classical music or jazz music, for instance, that doesn’t generally sell well, would not be worthy musical pursuits. Or vice versa, if musical merit alone were the criteria for success, then musicians who are the most talented, by that fact alone, would be the most financailly successful, which they generally are not. The music business and the world generally, does not work that way. Success in the music business consists of a more complicated set of factors including timing, image, promotion, musical genre, and the team you have working for you.

Music that sells is music that is popular. That’s a very different criteria for success than good music or musical merit. That’s why the music business is also referred to as the pop (short for popular) music business.

Note the distinction between the music business and music. Its easy to confuse music with the music business, but they are separate and yet can be interrelated. Note also that I don’t refer to the music business as the record industry. That’s because the record industry, although it is a significant part of the music business, is a part of the larger music business. This is an important and I believe increasingly important distinction for the future. People listen to and buy the recorded version of a song or music they love. That’s why music publishing copyright is so valuable. Even more so today in the changing face of the music business.

Based on my experience, the music business is often 80% hype and 20% reality. Not that that’s necessarily a bad thing. Without hype or more accurately promotion, often nothing at all happens.(But you have to be able to distinguish between the two in order to succeed.)

Is it a coincidence that that ratio is similiar to the ratio that exists with respect successful and unsuccessful records released? It has been reported as recently as 2005, that of the over 5,000 records released annuallly in the U.S. by major record labels, only several hundred are profitable. (Quote: Corey Levitan, DailBreeze.com, October 14, 2005.) Roughly the same ratio and reality applies in Canada.

Even today I find that staggering, but the reality is, this ratio has always applied. The odds of a record that is released becoming very successful are similiar to the odds of winning a lottery. In fact, some lotteries have better odds.

Not surprisingly in view of the above, music is a business built on rejection. The industry of “Nos.” Even the Beatles, the world’s most successful recording group ever, were turned down by every record label until they were finally signed by George Martin for Parlophone, a small subsidiary label of EMI, which specialized in recording and releasing comedy records by Peters Sellers and the BBC’s Goon Show.

But the record is still the engine that propels the success of a musical artist. With a successful record comes merchandising, touring, publishing, record income and film and tv opportunities etc..

Where does Canada fit in? Canada remains the sixth largest record buying market in the world. It has approximately 3-5% of the world market. In contrast, the U..S. has approximately 30-35%. Canada is also behind Japan, Germany, France, and England. Canada has one of the highest per capita record buying publics in the world and is in the top seven countries economically in the world.

Canada has been and is fortunate to be one of the countries globally that receives the most financial and structural support from government and industry for its cultural industries, which includes the music business. Such support includes funding programs such as Factor/Musiqueplus, Videofact, local, provincial and federal arts council funding, OMDC and other similiar provincial initiatives Canada wide and a statutory and regulatory framework including Cancon requirements, that fosters Canadian music. The sum total of these have been instrumental in helping develop the music business in Canada as it exists today.

II A CHANGING BUSINESS AND CHANGING DEALS: A TWENTY YEAR OVERVIEW

1. The 1980s- Remember new wave and hair bands?

The pre-dominant sound carrier configurations have dramatically evolved since the 1980s. First it was vinyl, then cassette, then by the 1990s, cds, which remain the pre-dominant configuration today. However, we now also live in the download, Internet, MP3 and soon to be wireless era.

In the 80s artist were becoming more knowledgable and engaged in the business. This change of attitude helped to transform the music business. Before this time, such an attitude was generally frowned upon. Other artists and the public generally considered that if you knew too much about the business, your art would be tainted with commerce.

The indie record deal in the 80s often consisted of a combination of publishing, recording and even merchandising rights. The indie label’s financial risk was spread amongst these sources of income. There were low advances. Flash forward to 2005. The indie labels often ask for and get publishing, recording, merchandising rights- sometimes even live performance income. There are low or no advances. A significant change however, is that majors might do similar “tied” deals. For example, Robbie Williams with EMI.

Indie labels were and are seen to be more cost efficient, faster, more competitive, more artist oriented. They were seen to offer more artistic control, such as choice of studio, producer, a say over marketing, promotion, singles to be released, artwork, etc.

Canada also saw the growth of indie record labels such as Ready Records, with Blue Peter and The Extras, Current Records with The Parachute Club, Duke Street with Jane Siberry, Chalk Circle, etc..

The 1980s also saw the emergence and importance of the music video with groups like Duran, Duran. Along with MTV and Canada’s Muchmusic, music videos became a major promotional component of the business. In fact record labels routinely committed to produce up to 2 or 3, and in some cases up to five videos per album, depending on the artist’s bargaining power prior to signing the contract. This is not the case to-day, the video commitment in record agreements has diminished.

Before that it was radio and a combination of a T.V. show or special, or print that exposed artists. Commercial radio is still is a key way of exposing artists, but it’s formatting has become much less diversified.

The need for national retail record distribution was the mantra of the ‘80s. Give us access to national distribution and we can do it ourselves was the belief. The Bare Naked Ladies sold 80,000 copies of a cassette tape demo, other acts like Moxy Fruvous and The Lowest of the Low also sold well independently.

Partnerships were set up with indie labels and indie bands for retail distribution nationally, often through major record companies. Flash forward to the present. Now, every one has, for good and bad, worldwide distribution over the Internet, but not necessarily access to retail record store distribution. But we’re not all successful recording artists are we? That isn’t the only answer is it?  Record labels are still needed to help break acts worldwide and for funding and promotion. This is a very difficult set of tasks to do independently, especiallly on worldwide basis.

In the 80s co-publishing became the norm. Joint ownership of copyrights and sharing ½ of the publisher’s share of income, in addition to the writer’s share became the new standard that still applies in music publishing to-day for artists tht write their own material. Previously assigning 100% of the copyright to the publisher and receiving only the writer’s share of income, that is, 50% of net receipts, was the industry standard.

In the 80s there were 7 major record companies- not 4 as there are now and there were at least 7 so-called major independents- including A&M, Chrysalis, Island, Virgin etc..

Also significantly the Copyright Act was amended to remove the compulsory mechanical licence and the statutory cap of 2 cents per song under five minutes playing time which had been in force since 1924. Moral rights were substantially amended.

2. The 1990s –Remember grunge?

Nirvana changed the music business sonically. Hair bands were history and metal went underground. Rap/hip hop became the pre-dominant youth music and so called “boy” and “girl” bands were very popular and able to sell many millions of records. As a result, the average age of recording artists dropped significantly. Many signings were with artists who were minors. So called new country came and went in and out of style. So did celtic music and new age.

On the business side there was more separation of recording, publishing and merchandising rights and income. Why? Because each income stream had its own ablitiy to be profitable. The record industry as we know it in the hard sound carrier configuration form, that is cds, peaked in 1998. With more profit, major labels tended to sign artists directly. The deals started to address royalties for new technologies.

The record industry was accused of greed because it charged “too much” for cds. Cds cost pennies to produce consumers argued and they sell for up to $22.98 S.R.L.P.. Besides, they argued, I only want the one “good” song on the record. A rhetorical question: Is the record industry really any more greedy than the oil and gas industry, or any other profit based industry?

Record companies were also critciized for being too slow to offer legitimate downloads and embrace new technologies. The result was that consumers got price reductions and tracks on demand.

The Copyright Act was amended to include among other things, two new categories of rights and potential income streams: neighbouring rights and blank tape levies.

3. 2000 to the Present

The state the record industry is in today reminds me of the Chinese curse “May you live in interesting times”. These are interesting times indeed.

Quote: The Globe & Mail: October 26, 2005:

Quote: DailBreeze.com, Corey Levitan, October 14, 2005

It’s a sobering reality- double digit decline annually in the Canadian record industry since 2002. The record industry has gone from being worth 1.4 billion dollars annually to approximately 750 million dollars annually. But where there is crisis, there is opportunity.

Just as technology creates problems and opportunities, it can solve problems and take away opportunities. For example, the rise of the Internet has resulted in the continuing decline of retail record stores. In Canada A&A Records and Sam the Record Man, were both national retail record chains. A&A does not exist and Sam’s has been reduced to two flagship stores.  But ringtones, DVDs and legal downloads are now part of the music industry equation. Together they have helped slow the double digit decline of record sales in the record industry.

What are some of the other current trends in the music business?

1.Media convergence –its here. For example, ringtones, downloads of music, videos, the merger of computers and tv, movies, videos and cameras on cellphones etc.

Artists’ talents and the demands on them also reflect this convergence. It has become commonplace to have an artist who can sing, write songs, perform, dance, act, record and self produce, play an instrument, script a video, etc.

2. The computer revoution, the digital era, is here. It is not just in the music business but worldwide throughout all society and the change is exponential.

3. Not surprisingly, re-structuring and the merging of record companies continues.

4.The artist as a brand that partners with third parties for licensing opportunities, endorsements, sponsorships, commercial tie-ins, touring, ringtones, publishers, record labels etc is a major trend. It is no longer generally frowned upon to partner in such a way and has actually become a necessary part of the business.

5. Good management is more important than ever for musicians because of the increasing complexity of the business.

6.Bill C-60 is introduced in order to implement Canada’s WIPO treaty obligations in the digital era. Proposed amendments include: Moral rights in performers performances, the making available right among other amendments

IV THE FUTURE, SOME PREDICTIONS – Dangerous, but fun

In some ways I believe we are in a 20 year cycle. The year 2005 resembles 1985. The indie ethos rules. DYI, except in the ‘80s it was indie labels not “indie”viduals that ruled.  But 1985 is not 2005. The future is now.

1. The music business will keep getting more complicated. My book, Musicians and the Law in Canada, is graphically illustrative. It was over 200 pages in its first edtition in 1985, over 400 pages in 1992 and is over 600 pages in its third edition which was published in the year 2000.The good news is that there are more resources, courses, schools, books, and on-line teaching aids than ever before, to enable musicians to become educated about the music business.

2.Nothing short of exceptional will do in this increasingly competitive and global world. You are now competing with the best internationally, not just local, or even national artists. The music business has always been international, but is even more so now in the Internet era. Because of this, the world will continue to shrink and the music and record market will continue to fragment.

3.It has always been the case that very few can succeed in Canada alone and have a sustainable career. The reality is that wordwide success requires a skilled team in all aspects of the business: live, recording, pubishing, merchandising, and legal, accounting and management. The cream rises to the top. Talent rules. The music business, the record industry and the world, needs great musical artists. Canada has some of the most successful artists in the world today and I believe Canada will continue to be competitive because of its talent, diversity and quality music, production and education.

4.Don’t underestimate the power of a song. For example, speaking to a music publisher after 9/11, the question arose, what value does our music have in times like these? I said “What is the first thing we do when these things happen? We rally around our national symbols. What are we singing? The national anthem. What is it? A song.” If the world is annilhilated and we survive, there will still be melodies that remain after the multi-media carriers disintegrate. And poetry song lyrics and stories too.

5.Be an artist. Pay attention to your art and craft from the mixes to the artwork, posters, website, throughout the whole process, everything. There is still and will always be tension between art and commerce. Do it because you love it.

6.Rampant consumerism is often facilitated by the Interent. “We want it now, for what we want to pay, or we’ll pay nothing”. Such consumerism is not always right and it can              be down right amoral. The Internet experience can be like going to the corner store, finding that  the door is unlocked and helping yourself. Soon there is nothing left in the      store.This attitude has immense consequences for our global society, not just music which is in the vanguard because it is so portable. See CRIA study. You cannot sustain a society or a business model on such practices.

7. What is the future of music? “Music like water.” It has been predicted that music will be paid for like hydro, or water utility.  The Future of Music by David Kusek and Gerd Leonhard. But don’t get fooled by cyber babble. What so many are actually talking about is the distribution of music, or the business of music, not music itself. The basics have and will continue to apply: music is melody, rhythm and harmony. Concentrate on writing the best music you can, the best lyricss to go with your music, creating the best recordings and doing great live performances. This is the essence of the music business.

8.We in the music business and cultural industries generally, live and die by the Copyright Act. The right to own, reproduce, distribute and control the manufacure of copyright protected works versus the consumer’s right to access to such works is a continuing balancing act. This has been true ever since the days of the printing press through to piano player roles through to cds and dvds and is true in the Internet era.

Despite the Internet and predictions of the futurists, copyright laws will not go away soon, nor will contract law. These basic legal foundations will subsist and their principles will continue to apply. Witness the RIAA and CRIA lawsuits against file sharing and the rise and fall of Napster and Grokster. Besides, what is the alternative? What is the better system? No rights? No remuneration?

There must be a balance of consumer access, copyright protection and respective remuneration and the dividing line will constantly evolve due to public demand, demands of the marketplace and technological and legal evolution. Copyright reform will continue to be a priority,not only for the music business, but for businesses that are intellectual property related and which continue to ever increasingly contribute to western industrial nations’ gross domestic products and employment. (Quote: “Stealing The U.S. Economy, Brett Pulley, Forbes, November 8, 2005.)

9. The truth is is often a shade of gray, not black and white. It’s not so simple as record company “bad”, artist “good”, a bias amongst some consumers. The answer lies in balancing the competing interests of record companies, artists, the music business and consumers generally. For a truly viable music business we need viable record companies and talented artists. Record companies are and will be an important part of the equation into the future although not necessarily in the same form as they exist to-day.

10. There will be music and a music business. If you have ever watched a TV show or a film or played a video game without music, you will know what I mean. People want and need music. The future of the world without music is not as livable. Or as Neitsche said “Life without music would not be worth living”.  In fact, I believe music will be more and more ubiquitous and is integral in our future society.

IV CONCLUSION

I bought my first single, a Beatle’s song at age 9. My son is about to turn 9. He is far more excited by the fact that I as a lawyer represent composers of video game music than he is by the fact that my firm represents artists such as Avril Lavigne. Just as my generation was the TV generation and my parent’s was that of the radio, my son’s generation is that of the computer and video game. I think this is a glimpse of the future.

No one can really predict the future with absolute certainty. Ultimately, the future is in your hands. You the “indie”pendents the “indie”vidualists. As futurist Allan Kay has said “The best way to predict the future is to invent it”.

Copyright, Paul Sanderson, 2005.