Oct 31

Nat Torkington

Nat Torkington

Netlabels, Branding, Wet Fish, and The $0 Song

My brother-in-law pointed me to Rope Swing Cities, his netlabel. These indie grassroots online music labels are everywhere, and are datapoints for a transformation in the music world. In the words of my brother-in-law, "almost no one is making money in electronic music anymore, except for going and playing places." There was an excess of music production, beyond the ability of traditional labels to distribute it to listeners, so these new labels sprang up to fill the need.

They succeed because they make everyone happy. Listeners get music for free, of course. Artists get to have their music distributed in high-quality versions with good metadata, album covers, etc. rather than crappy low-fi rips with no guarantee their name is on it. But most of all, artists and the labels build brands. The music sells the artist's live shows (if they have any), and the quality of the music found and distributed by the netlabel builds the reputation of the person behind the netlabel. And netlabels are starting to launch careers--there are a few artists, in particular a guy named Pheek who has become fairly big in the last year or two, who came entirely from netlabel releases.

This reminds me of when I saw Cory Doctorow giving a history of the music industry to Mike Caren at the first Web 2.0 conference. In the beginning (said Cory) were performers, who didn't need perfect technique so long as they had charisma to carry their live shows. When recording was invented, performers complained that the recording technology captured all their technical flaws and none of their charisma, and the infernal devices would put them out of business. Recordings created a new class of musician, people who sounded great on vinyl/tape/CD even if they had the stage presence of a wet fish and their live shows sucked. Now we see the value of a recorded piece of music heading to zero and that same class of hot picking wet fish is complaining because increasingly the only way to make money out of music is to perform live (which they suck at, remember).

I don't think it's news, though, that only a few people ever made a ton of money out of recording. It's a system that benefited a few at the expense of the many. Take Bela Fleck, my own favourite musician. He's won a ton of Grammy awards, and been nominated for awards in more categories than any other musician. But, as he told USA Today, concerts reflect 70% of the band's income, records 20% and merchandising 10%. Even a Grammy-winning album can take a decade or more to pay back the studio's advance and put a penny in the artist's pocket. And how many win Grammies each year? (I was at the Portland show the USA Today article writes about, by the way--it came just before OSCON, fantastic timing!)

It may be my intellectual version of "if all you have is a hammer, every problem looks like a nail", but I think the netlabel phenomenon (and the $0 effect of easy-to-use personal copying) is a lot like open source. Both build brand (aka "reputation" in open source). Both stripped value out of the low end of their industries, removing value from simply having "product". They're pushing the value elsewhere, and forcing the creative types to find new business models.

Touring is like being a consultant: it's software/music as service. You get paid for the hours you work. If you stop working, you stop being paid. This has implications if it's your career, for example you have to charge more than your cost of living so you can save for retirement or quiet periods. Fame and technical skills are fleeting. Disco musicians learned the need to be stronger than one fad in the early 1980s, much the same as Java programmers learned in 2001 the need to be stronger than one technology.

The great thing about software as product, from the creator's point of view, is that you can write the software once and sell it again and again, earning money disproportionate to your development costs (of course, you're now spending money on marketing). The software industry's reaction to the difficulty of selling product is "software as service": instead of buying software on a CD that works forever, much as music on a CD works forever, they're moving to a model where you buy monthly/annual subscriptions to web applications like Writely and backpack. These you can write once and sell repeatedly, without the physical production costs of pressed CDs and with the added bonus that customers keep paying you, year after year.

What's the music industry's version of this? I think it's the DRM-enabled subscription abominations like Rhapsody and Napster. Music listeners hate subscription services for the same reason software users do--you don't want the RIAA to repossess your CD collection any more than you want your Great American (or Kiwi or British or ...) Novel to disappear when you change online word-processor services. In the online world, there's agitation for data portability. I should be able to get my data out of a web app and move it to another. This means I can save it on my hard disk (preventing repossession) and web apps must compete with one another for my business. In the music world there's no competition between Rhapsody and Napster--if I switch services, I lose all the music I "bought"--the way there's competition between gmail and hotmail. See, web app subscription services are an alternative to "buy version 1.0, then a year later pay again for version 2.0" software models. Music subscription sites want you to pay for version 1.0, the next year pay again to keep listening to that track you already paid for.

Of course, once you talk about reforming the music industry's business models and doing away with traditional hit-maker labels, you end up harumphing "long tail" and you rapidly sound like you've been to Battelle's house for joints after midnight. No old school software company liked the open source and Internet changes, but the software industry is bigger and better for them. Is there a bigger and better future for the music industry? We're not out of bong territority yet, but the netlabels are a promising glimpse at what could be.

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Comments: 9

  Anonymous Coward [10.31.05 06:20 PM]

I think music services like Rhapsody and Napster are more like Blockbuster or Netflix. You are just renting the music from them; it is not actually your property, so it cannot be "repossessed". Though I completely understand why a lot of people do not enjoy these services as much as I do. People want to own a small amount of music a take it everywhere and never let it expire. However, I would rather have access to a ton of music and be able to play in the place I am the most. Just like Blockbuster or Netflix I would not watch as many movies if I had to purchase a DVD or a theater ticket for everyone of them.

That being said, I also see Nat's point about fear of online software services. If I were to loose my data by canceling my subscription, that would be a scary thing. The service has to gaurantee that the data generated or imported is always owned by the user and can be retreivied in a format that the user can extract or reuse somwhere else. Which is completly reasonable with today's technology.

  stefan [11.01.05 12:19 AM]

Running my own netlabel *and* being a PHP developer involved in open source software, I like the link you create between open source and music. One of the reasons for starting a netlabel was the fact that I knew for a fact that there was so much good music out there by artists that didn't really care about the money but just wanted to *share* it, that I wanted to facilitate that. And one of the reasons why I like open source is that same willingness to share.

Saturday, the tenth release will be available and I know it will be heavily downloaded, and people will like it. I've got a small niche, but those that like the music, are happy, the artists are happy, and I am happy.

However, we must not forget that payment can also help. I like, for instance, the setup of En:peg (, where you pay a small amount of money ($2 per release) to download the music. It's a small enough amount to not stop people from downloading it, and enough to ensure that the label covers his hosting cost and the artist can also get some money from his music. Such micropayment-setups should not be forgotten when talking about online music and netlabels. Much better than iTunes, Napster or other similar systems, and definitely much fairer towards the artist.

  Julian Bond [11.01.05 12:26 AM]

Check out This band just got to #1 in the UK charts and currently at #2 with no recording contract and driven purely by internet word of mouth.

Think back as well to '76 to about '84 and the rise of punk, white label private pressing and independent record labels. We're recapitulating the same process but higher up the spiral. The barrier to entry has never been so low. But simultaneously the barrier to getting attention has never been so high. Both for record companies trying to push the next big thing to the top of the short head, and the independent artist trying not to drown in the noise of the long tail.

Oh, and iTMS, Napster, Rhapsody, Fairpla, Playsforsure, Sony, SunComm, etc, etc, etc,
*Just Say No To DRM*, m'kay?

  Marcus [11.01.05 12:44 AM]

Excellent insights. If the electronic frontier seems to diminish the importance of the record label, they may dig in their heels, against their better interest.

I'm currently working with a lot of traditional independent record labels to help them with the legal work needed to promote their music to podcasters. Most labels, even the large ones, see the progress of technology as a friend, especially in its disruption of corporate broadcast strongholds. But the long tail thing is worrisome.

It's not easy to be in a band, tour, and hold down a day job. I hope that the increasing amount of content producers measures naturally against a consumer base that is widened by democratic access to media.

In 1992, independent record labels had only a 6% market share. Today they own more than 25%. Let's keep up the good work.

  Jen [11.01.05 09:02 AM]

Marcus, Writely is actually free since we're in beta right now, and a basic service level will continue to be free even beyond beta. So one nice aspect of software as Web services is that you can get some value completely free of charge, and only pay if you see the value in doing so!

  gnat [11.01.05 09:22 AM]

Stefan, your point on payment is a good one. I forgot to mention that a lot of netlabels sell pressed CDs (with high-quality printed covers), sell t-shirts, etc. to cover the distribution costs. Micropayments (pennies per download) and small payments (dollar or two per download) are another price point. Now there are these choices in the marketplace for how much you pay and what you get for it, it's going to be fun watching where the equilibria are struck. Will $1/download remain a good point, or will the perceived value of a download drop to zero? Will it vary with genre? Age? We definitely live in interesting times.

  gnat [11.01.05 09:24 AM]

Jen, good point. And I think Writely is one of the best web apps I've seen because it doesn't create a proprietary data format or lock up the documents you create: if you switch to HTML view, you can copy'n'paste your documents out. You can even export to Word and OpenOffice formats. Writely's a model for the way web apps should behave.

  maria [02.20.07 12:38 PM]

My brother-in-law pointed me to Rope Swing Cities, his netlabel. These indie grassroots online music labels are everywhere, and are datapoints for a transformation in the music world. In the words of my brother-in-law, "almost no one is making money in electronic music anymore, except for going and playing places." There was an excess of music production, beyond the ability of traditional labels to distribute it to listeners, so these new labels sprang up to fill the need. [02.20.07 12:44 PM]

Uitstekende analyse over virtuele muziekabels die gerespecteerde brands worden en die voor "the long tail" aan minder gekende bands business weten te generen in de vorm van optredens.

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