AudioMicro read about how the record labels are trying to bring to market an advertising based streaming music service .   It seems that the advertising based content model just won’t die.  What a total racket the ad based model music model it.  Here’s how it works - your content is listened to and becomes a part of the user experience on someone’s website, and ads are slapped all over the site by sponsors using affiliate ad net works.  Of the monies delivered to the website for running the ads in front of their audience, you get just a little portion of the pie - likely less than 5%.  That’s right, a measly 5%.  The website keeps a portion, the affiliate marketing / ad network keeps a portion of it, the record label keeps a portion and you get suck with a nickel on ever dollar instead of 50 cents on the dollar with micro stock music and royalty free music sites like AudioMicro.

What’s an ever bigger killer to the independent musician is that it takes the muscle of these major labels to get you into the proposed, highly speculative, music maffia advertising network, as only artists signed to the majors will make their way into syndication.  It sounds pretty much like it would head straight down the path of the broadcast radio industry (if it ever even makes it’s way to market) - closed doors, payola, and under attack by other digital content delivery networks (in this case, Pandora, Slacker, Last.fm, imeem, iLike and the rest).  Let’s not get ahead of ourselves, if the idea has been in development for 4 years already, as these sources suggest, we predict it will never see the light of day; however, it would be nice to see at least one web 2.0 record label sponsored idea make it to market, regardless of its impact.

AudioMicro located a fabulous breakdown of the market shares of the major music industry record labels.  We’ve input the information below this post.  The breakdown is helpful when analyzing the present state of the music industry and where it may be headed.  It seems the Universal Music Group (UMG) has the dominant presence in this space with nearly 1/3 of all major label music revenues.

The only individually publically traded music company, Warner Music Group, traded on the NYSE under the ticker WMG, has a present market capitalization of around $1.32 billion at the time of this post, with FY 2007 revenues of $3.4 billion and a 12.31.07 cash balance of a mere $160 million.  Extrapolating WMG as 18% of the market in 2006 from the source cited above, and assuming that 18% has remained steady into 2008, the overall music market, in terms of the dollars it would cost to embark on a total corporate takeover of the entire market and all of the assets contained therein, would be in the neighborhood of $7.3 billion.

Now let’s give it a 20% takeover premium that we know the shareholders would eventually agree to in a Microsoft / Yahoo / Microhoo style proxy battle, and that’s still only $8.8 billion to own every major record label in the world.  This analysis assumes (and of course exist in a vacuum / perfect world) that the labels were all public companies, which is certainly not the case (nor will it ever be the case).  If anything, WMG will go private in the near future.  Nevertheless, let’s just imagine the possibilty of taking over the entire music industry (or at least the majority of the industry) for a mere $8.8 billion.  Now $8.8 billion is a heck of a lot of money to most people, but to a corporate giant like Google, Microsoft, or a large media comglomerate like Rupert Murdoch’s News Corporation (with over $3 billion in cash) it really would not be difficult to put this deal together either through either an all cash purchase or a cash / stock combo.

It’s interesting to see how the music industry pales in comparison to the larger media / tech world, though it’s certainly much sexier than all the rest.  Here is the market share break down cited at the beginning of this post:

These 5 questions seem to be the most commonly asked by those new to AudioMicro’s platform:

1.  Question: How can you call yourselves “Royalty Free” if the artist receives a 50% royalty?

Answer: Royalty-free is a confusing term. It actually doesn’t apply to the content provider/artist - it applies to the content purchaser. The basic definition - “Royalty-free media is acquired for a ‘one time only’ fee and gives the purchaser right to use the content according to the terms agreed upon, with no license fees being paid for further use.” So the purchaser buys the music, pays a one time fee, and the artist who created the purchased music receives 50% of the sale.

2.  Question: Is the music I upload to AudioMicro exclusive? What if I need to remove my music from AudioMicro? Does AudioMicro own the music on the site?

Answer - No, the content provided to AudioMicro is always non-exclusive, meaning you can do whatever else you want with the music at any time. You can sell it on 100 other websites and license it to TV shows while it exists on AudioMicro. You can actually chose to make your music exclusive to AudioMicro, and if you specify that for any given song, you will receive 60% of a sale rather than the standard 50%.

You can remove your music from AudioMicro for any reason, at any time. Simply let us know and we’ll remove it from the site.

And lastly, YOU always retain full ownership of the publishing and copyright of the music you upload to AudioMicro.

3.  Question: Why should I sell my music for such low prices when I’ve made hundreds/thousands of dollars licensing my music to TV shows?

Answer: Simply put, by putting your music on AudioMicro you’re opening it up to an entirely new customer base, the YouTube Crowd. TV shows will continue to pay top dollar for music, never even thinking of going to a site like AudioMicro. But amateur filmmakers and website designers will always come to AudioMicro for content. By making your music available to everyone, you really get the best of both worlds.

Please check out the June 6th blog below for a more detailed answer to this question.

4.  Question: How do I upload a bunch of songs at once?

Answer: Using an FTP Client.  You can request access to our new FTP ingestion system. On your profile page, under “quick links” there is a link to “request FTP.” Click that and we will send you an email with instructions to set it all up. If you prefer not to use the FTP system, don’t forget there’s a multi-file upload link on the upload page as well.

5.  Question: If my music is used on TV, will I receive performance royalties?

Answer: Yes! As long as you are affiliated with a Performing Right Organization (PRO). We have licenses with BMI and ASCAP, which are the PRO’s in the United States. PRS is the PRO for the U.K. Every country has it’s own PRO. Even if you’re affiliated with a foreign PRO, ASCAP and BMI have deals with them allowing them to collect your royalties, pay them to your PRO, and your PRO will pay you. So regardless of who you’re affiliated with, you’ll still get your performance royalties if your music is used in a public medium.

AudioMicro read about Record Label EMI suing social network Hi5 and video distribution platform VideoEgg over the weekend. Records labels suing websites has become a common thing these days and we all need to accept the fact that the labels have the upper hand in the situation. They are just trying to protect thier IP. If you read the comments on that TechCrunch post, you will see that despite the fact that everyone likes to make fun of attorneys and point fingers that litigious folks when a lawsuit is filed, it’s simply a fact of life in the music business that if you steal music, you are liable for prosecution and the larger a company you are that continues to broadcast or facilitate the broadcast or distribution of music that’s not appropriately licensed, you may find yourself shelling out cash to your attorney and having a tough time defending your position against the deep pocketed labels. It’s just not a good idea for a social network like Hi5, Bebo, Facebook, MySpace, etc. to allow it’s users to post videos without the appropriate sync licenses secured. This TechCruch stirred up a great deal of comments, particularly for such a simple, editorial post. Video creators can purchase sync licenses for one dollar per minute at AudioMicro and then they, as well as the platforms that desitrubute thier videos - including, but not limited to YouTube, Hi5, MySpace, Bebo, Revver, and Daily motion won’t get sued. These sorts of legal actions by the record labels, which will not stop but are easy to criticze (as we are all programmed to hate lawyers), validate the micro stock music sync and performance licensing market. It’s exciting to see the micro stock sync and performance licensing market come to fruition right before our eyes.

The buyer / customer side of the commerical music licensing market breaks down as follows:
1. The Existing Commericial Music Licensing Market - a $3 billion market according to the Wall Street Journal in July 2007. Fun insert here - according to AudioMicro’s own internal number crunching, that it’s a $3.4 billion market
2. The Expansion of the Market Due to New Customers that were previously in the following groups:
A. Pirates / Theieves who steal music to sync with videos and broadcast without licenses
B. People who were priced out of the Rights Managed and Royalty Free Market because $1,000 to $25 per tracks is too expensive / not democratic pricing and negotiating usage is a huge hassle / time suck
3. Growth in the overall audio market as the overall video and online video markets continue to growth and proliferate the following areas:
A online video - YouTube, Revver, DailyMotion, Hulu, etc.
B film - including features, short films, etc.
C TV - both episodes, shows, & commercials
D Radio - both internet radio, satellite radio, and traditional
E mobile - video, ring tones, ring backs, etc.
F SMS, instant messaging, and text messaging
G podcasting
H amateur videos, home videos
I Corporate - e.g. Powerpoints, Google Docs, and SlideRocket presentations
J Websites incporating audio to engage visitors - e.g. most fashion sites already incorporate audio in the shopping experience - it’s like elevator music at “The GAP”

As one begins to segment the market and look and the growth potential, which is undeniably in an uptrend, the micro stock music market begins to look more and more attractive as it becomes clear that a market leader will emerge and rule this space within the next 3 to 5 years. AudioMicro aims to be that market leader.

With micro payment, artists may think they are underselling themselves; however, the reality is that with micro payment, you are actually opening up your library to an entirely new group of content purchaser that never before would ever think about paying for a sync license - the YouTube crowd. As video continues to proliferate the internet, as internet video quality continues to improve (we can now watch HD videos and audio on free sites like Pluggedin) and video proliferates every website and blog, it’s obvious that audio becomes increasingly important in the equation. The importance of Audio is easy to overlook, but just try watching a movie without any sound, or try watching a video with only dialogue and no background music, sound effects, or other audio-visual goodness. It’s much less stimulating, if not totally unbearable. Without Audio, Video would be a dull boring and arguably meaningless mess. Licensing your content on AudioMicro opens up your portfolio to an entirely new audience, and and entirely new customer base. The market for online audio is going to continue to grow well into the foreseable future. Even bloggin softwares, including WordPress are incorporating one click audio (and video) insert options into all blog posts. Will bloggers be stealing (pirating) content or legally licensing in through a micro payment desination like AudioMicro. We believe that 90% of folks will “play by the rules” and do the right thing and purchase an AudioMicro subscription or credit package in order to properly secure the sync license required to add the meaningful, important, crucial audio content to their editorial and commercial projects, both online and offline.

I’m a successful songwriter/composer who recently found out about AudioMicro, and became so enamored with the concept that I now am their Artist Recruiting Manager. In the past few weeks I’ve been talking to a lot of fellow musicians about AudioMicro, and the micro stock platform in general. There seems to be some mixed feelings and some misunderstandings about how artists fit into the whole micro stock picture.

For those who aren’t fully aware of the concept, micro stock simply means that the content (in this case audio/music) is crowd sourced - meaning ANYONE can submit content - and it’s sold for prices starting at $1 (in this case it’s $1 per minute of music). A few of my composer friends who make some decent money selling tracks for $30 or so in the royalty free space feel that micro stocking audio is going to devalue their music. It’s an understandable point of view, but in my humble opinion, a limited perspective.

See, whenever and wherever anything is sold, there is always the option of spending money on the high-end, or brand name version of the product, or the “generic” version of the product. If you use laundry detergent as an example, there is usually a few dollar difference between Tide and the generic brand, even though the ingredients are EXACTLY the same and we actually feel - sometimes better in the case of crowd sourced content.  Both brands make money and flourish because there will always be a market for both. Some people want to spend more money for the flashy brand, and some just want something that works regardless of the name or package. Sure you may make $30 or more by selling your music on a royalty free basis, but can it hurt you to open your “product” up to a consumer base that would rather spend less than that? Not at all in my opinion. People will still pay $30 for your music in that world just as fast people will spend a few bucks for your music in the micro stock world. You’re basically just opening up your customer base (the millions that can’t and won’t license audio for $30 a track) and creating new ways to make money by doing it. Not to mention the “theives” out there who only steal music — they’d also gladly pay $1 or 2 for music — it’s the same principle that has made iTunes so successful and has made people forget about scouring the internet for free music.

And above all, its risk free! At least take a handful of your tracks that haven’t ever earned a penny, and stick it up on this site. If you don’t like the way it works, just request to take em down. The artist has 100% ownership of their content and can remove it at any time.

In addition, AudioMicro offers the best damn royalty rate i’ve ever seen - 50% of every track sold.  As AudioMicro takes off, artists will be in position to make more money than ever before. When this site becomes the one-stop shop for stock audio, its not far fetched to think that many an artist could easily be making hundreds or even thousands of dollars a month, just in micro stock.

I can see how this will be the wave of the future, and as much as some musicians will resist the change, its the natural progression of things. Check out what has happened in the photography world and you’ll be amazed at how easy it is to find content, and how easy it is to make money from your art. Micro stock opens up opportunities for artists that never existed before, and makes it so much easier for those who need to place music in their visual medium. It’s the perfect give and take for both sides - its about as democratic as it gets. I see it as having your cake and eating it too - continue to sell some of your music for as much as you can. Take advantage of the high end and also upon up your content to an entirely new class of customer with micro stock. But while you’re plcaing tracks directly with high end customers you can put the rest of your stuff here on AudioMicro and make some extra money on the side and get a feel for the ease in which the micro stock concept works - for everyones benefit. We see some folks making over $100k per year in royalties in the micro stock photo realm and there’s no reason why this can’t be the case in the music space, which is actually a larger market than photos. It will just take some time for the concept to take off, but being there ahead of the curve will give you a huge advantage.

Thats my two cents. I’ve looked at other stock music sites, and AudioMicro is by far the most artist friendly, easiest to navigate, and the music upload process is a breeze. Not to mention that other sites offer only a measly 20% royalty rate or the ones that want you to “share your content for free” under a creative commons license or some other format. I applaud AudioMicro for seeing the future and trying to make sure that artists out there are well aware of the new market shift ahead of the curve and we encourage artists to jump on board and take advantage of the revolution rather than being resistant and scared of it.

Sincerely,

Gideon Black, Artist Recruiting Manager
www.audiomicro.com
Los Angeles, CA
Phone: (818) 849-6396
Fax: (320) 451-3838
Cell: (310) 428-6983

We learned of this information from an interview for a former US Performing Rights Organization (PRO) employee. Although we cannot prove it’s actually true at this point in time (our internal audit staff is busy tying down the numbers), we are confident that it’s at least directionally correct (i.e. 70% to 90% really).   Let’s be clear about one thing - we love PRO and we think they should have even greater authorities in the digital era, which we can address in later posts.  But the point of this post is that most PRO artist pay dies and never receive royalties.  Artists should be aware that by becoming a member of a PRO, you are not going to magically (or automatically) receive a broadcast royalty check in your mail box.  In a world where anyone with a computer can create and record and distribute their own content, becoming an accepted member of these organizations is not such a big deal.  Actually, being rejected is pretty much impossibe.  There are no prerequisits to joining a PRO (other than being alive and living on planet earth) so be careful to note that just because they will accept your annual membership dues does not mean you will automatically become a part of the broadcast royalty gravy train - you need to get your content placed, in order to kickstart that process, and AudioMicro is the perfect outlet for making that happen.  AudioMicro would like to turn you onto the idea of licensing your content through our uniform pricing model, meaning “all customers are created equally”.  The model is coined “democratic” because it treats all customers and artists the equally, regardless of the size of the outlet and the content itself.  We do not discriminate but rather facilitate your content licensing needs.  In addition, we pay the highest royalty rate in the micro stock music industry here at audiomicro so we hope you will feel welcome and trust that we have your best interests in mind - both artists and customers alike.   

Absolutely…Some of the top names in micro stock photography pull in over $100,000 per year in royalty checks from micro stock distribution. These are real numbers. Micro Stock is a numbers game, which means that as you build up a larger archive online, your royalties will increase over time. The quality of you content has a great deal to do with it as well, but if you create quality content and you create it in volume, the size of you checks will grow and you can use your micro stock success to launch your recording deal with a major label after showing the success you have had on the microstock arena.

Rights Managed Licensing is on the decline. Royalty Free Licensing is stabilizing (aka “not growing”). Ad supported Licensing models (aka the YouTube way) are proving unmonetizable / unprofitable as well as distracting to viewers in addition to not providing royalties to the content creators / providers among other copyright infringement issues. A new buzz is around CPM / Pay Per Use Licensing. We like to call this new form of licensing “same product, different packaging, everybody gets screwed”. With CPM licensing, a user of content (let’s say a photography, video, or audio clips) pays a fee every time the content is viewed/heard. What ends up happening is that the publisher pays more for the content, the content creator gets a smaller royalty for their work (as the CPM facilitator takes a hefty cut of the action) and the customer is “eternally billed” and tracked for their usage of the content. The truth is that Micro Stock is the future of content licensing. Micro Stock creates entirely new content from new artists, the content is nearly identical to the high end “professional” rights managed content, it gives customers a simple, easy to understand, general use commercial license with no additional billings, and it pays a nice, healthy royalty to it’s content creators. Micro Stock is powerful, it’s taken down an entire $6 billion public company and made it into a $2 billion company. Micro stock is on pace to double in terms of it’s popularity / growth / quantity of content licensed in this manner, over the next 5 years. Micro Stock is here to stay!

Lot’s of people are asking this question so it’s become important that we put it down in writing.? FY 2008 YTD has seen the decline of traditional media companies in terms of revenue growth, earnings growth (or declines), and gross margin percentages.? Traditional media companies include the Disney’s Time Warner’s, News Corp’s, Viacom’s, CBS Corps’, as well as companies like Barry Diller’s Interactive Corp (IAC), which at the present moment is being broken up into separate entities with the online business (as well as the others, including lending and ticket sales to name a few) spinning off into their own separate public entities.? In total, we read that there will be 3 entities created out of the present IAC.? On to the point of this post….This is a highly competitive space and over the long run, while revenues experience slow or no growth, CEO’s and CFO’s turn to drastic measures such as layoffs, restructurings, and costs-cutting considerations.? This (Costs Cutting Considerations) is where AudioMicro comes into the picture.? How can the media companies produce identical content with a reduction in production expenses?? There are many answers to this query; however, the one which AudioMicro answers is that by purchasing micro stock music and sound effects, one can reduce the stock music and sound effects budget by an estimated 50% minimum, and the reality is that the costs could even be reduced as much as 99%, demonstrating the power of micro stock / micro payment licensing to shrink existing rights managed and royalty free? music licensing markets.

Sit down on the couch, turn on your favorite sitcom or TV drama, CLOSE YOUR EYES, and listen. As you LISTEN (not watch) the episode, what do you hear? The continual music cues, stock music clip, production elements, and sound effects all throughout every show on every channel of the television. That’s just the TV example. On average, a show on network television spends $2.5 million per season per show on stock music and sound effects….simply put, it’s a $3 billion market opportunity in need of microstockitization.

AudioMicro just returned from the NAB Show in Las Vegas this past weekend.? Our research from the show confirms out expressed beliefs that the commercial stock photographer market is nearly identical to the commercial music licensing market and that the future growth of this industry lies in the real of micro stock / micro payment.? There are a handful of companies at the high end (Rights Managed) end licensing stock music to films and television for $1,000 or often much more, and there are a handful of nice royalty free CDs collections with thousands of stock music tracks and sound effects available on a per DC basis.? I sound like I’m describing the stock photography industry don’t I?? Although with slightly different customers.? This visit to NAB confirmed the notion that micro stock, a phenomenon that has taken control of the photo industry, will ultimately rise to the challenge and take on the high end licensors with it’s crowd sourced ingestion cycle and simple pricing model and end user licensing.? Time will tell…this industry will certainly be fun to watch over the next 5 to 10.

We read about Sellaband raising $5 million in venture capital money today.? Quite an accomplishment.? They have a very unique business model for promoting artists whereby the “crowd” donates cash, actually $10 a peice in real cold hard cash, to the band of their preference and once the band has 5,000 donations, or $50,000 in donations, the cash is pooled together and the $50,000 is used to produce a limited run of an album.? We are impressed.? This is quite a profound and creative business model and it will take the pain out of capital raising begging at the doorsteps of record companies for a deal.? Sellaband’s business model is yet another example of crowd sourcing content (in this case, money, votes, and reviews) and using the power of the crowd to outperform that which would traditionally be accomplished by a smaller group of individuals, like a bunch of grumpy old record execs.? Right on….AudioMicro wishes Sellaband much continued success.

Tons of media outlets are reporting on MySpace’s joint venture with the big music distributors called “MySpace Music”. This is all fine and dandy and great PR spin. However, the real news is that although it’s nice that MySpace is playing nice in the sandbox with the big boys (Warner Brothers Music, EMI, Universal, BMI, Sony Music, etc.) by sending them a fat royalty check for all of the unauthorized music that folks have been listening to on user’s MySpace pages over the years, this does little, if anything, to help young, emerging artists garner a royalty check. AudioMicro has a better solution…post your content on AudioMicro.com and license it through our general commerical use license and we’ll send you a check (actually, it’s a Paypal) wire, every month. No need to go banging down the doors of the big record labels trying to get an audition or your demo played like the rest of the crowd. Once you can show them your songs have been licensed many times to willing content purchasers, you’ll be more likely to land that big deal you deserve. At least you’re not giving it away like a lot of sites - including MySpace prior to the point at which the aforementioned deal was signed.