All You Need to Know About the Music Business: Eleventh Edition - Hardcover

Über die Autorin bzw. den Autor

Donald S. Passman practices law in Los Angeles, California and has specialized in the music business for over forty years, primarily representing artists. The Harvard Law grad is the author of All You Need to Know About the Music Business and has received numerous industry recognitions.   

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Chapter 1: First Steps 1 First Steps STATE OF THE UNION
Welcome to the eleventh edition.

And for you Spinal Tap fans, “This one goes to Eleven” (if you have no idea what the hell I’m talking about, Google it).

I have lots of new goodies for you since we last got together, such as the dominance of streaming, why artists have more power than ever in history, the emergence of music created by artificial intelligence (some argue that’s been going on since the beginning of stoner rock), how TikTok has majorly rocked the music world (and whether that’s good or bad), the recent mega-sales of music catalogs, music in Web3/metaverse/NFTs, and of course updated numbers and practices.

Piracy slaughtered the music business in the 2000s, as U.S. music revenues plummeted from their high of $14.6 billion in 1999 to half of that, and they stayed stagnant or steadily declined for sixteen years. But thanks to streaming, we’re now booming, having hit an all-time high of $15.9 billion in 2022, and still growing healthily. Streaming is clearly the savior, but in the process, it changed the music biz more radically in the last few years than at any other time in its history.

Let me explain:

First, of course, there was a massive change in how music is delivered. Since the 1890s, music has been monetized by selling something: wax cylinders, piano rolls, shellac records, vinyl records, cassettes, CDs, and cheesy merchandise (well, I guess we’re still doing that). Today, the business is no longer based primarily on sales of physical goods (though they still exist), but rather on Spotify, Apple Music, TikTok, Amazon Music, YouTube, and similar services.

Second, this change goes WAY beyond the way you get your music.

Consider this:

1. 1. In the past, when record sales were the mainstay of the recorded music business, you could go to a record store and buy two or three records at a time. Today, you can only stream one song at a time. That may not seem like a big deal, but…
2. 2. In the days of physical goods, an artist was paid the same money for each record sold, regardless of whether a buyer listened to it a thousand times or never took it out of the shrink-wrap and used it as a doorstop. But today, the more listens you have, the more money you make (I’ll explain how later). However…
3. 3. In the old days, if my records sold big numbers, it didn’t make any difference to the number of sales you had. Your fans would buy your albums, and my fans would buy mine. In fact, if you had a big seller, it would bring a lot of people into record stores, and that increased the chances of selling my records. But in the streaming world, that’s no longer true. For reasons we’ll discuss later, the more listens you get, the less money I make. A truly radical change.

Streaming has delivered us from the jaws of despair. As I said a minute ago, we beat the industry’s 1999 revenue record when we hit $15.9 billion in 2022, and that’s really awesome except for the pesky little fact that in 1999 gasoline was $1.68 per gallon. But even adjusting for inflation, I predict the industry is going to be bigger than it’s ever been in history. Why?

In 1999, the historical peak of the music biz, an average CD buyer spent about $40 to $50 per year on CDs; let’s call it $45. Today, with subscriptions priced at $10 per month, the average per-subscriber fee is about $7 (because of student and family discounts). So let’s use $7 per month, which means a music fan spends about $84 per year. The $45 in 1999 is worth about $72 today (according to my deep research of two minutes to find a chart on the Internet), so at $84 in today’s dollars, we’re already ahead of the $72 equivalent for CD purchases that we got from fans in the good ol’ days. On top of that, the number of subscribers is growing all over the world. And subscription fees are going up.

But wait… there’s more! In the heyday of the music biz, the average CD buyer stopped going to record stores (or even listening to much music) in their early twenties. Today, people of all ages subscribe to streaming services (oldsters listen to classic rock or Frank Sinatra, and toddlers want stuff like “Baby Shark,” a song that can mercilessly eat your brain). Which means streaming is not only generating more money per user (the $84 vs. $72 in the above example), but it’s also bringing in a wider range of consumers than ever before. How can the industry not be bigger than ever?

This digital revolution also allows artists to get their music directly to fans without a record label being a gatekeeper. That levels the playing field and gives more power to artists, who can generate a substantial buzz on their own, then decide if they even need a record company. We’ll talk about all that in detail.

And that’s just a taste of what’s waiting for you inside the tent.

So step right up, folks. No need to push, there’s room for everyone, as we explore how the music business is shifting around like a Rubik’s cube. Hang on to your hats, glasses, and small children.
OPEN UP AND SAY “AHHH”
For many years I taught a class on the music business at the University of Southern California Law School’s Advanced Professional Program. The class was for lawyers, accountants, record and film company executives, managers, agents, and bartenders who wanted to manage groups. Anyway, at the beginning of one of these courses a friend of mine came up to me. She was an executive at a film studio and was taking the class to understand the music biz as it relates to films. She said, “I’m here to open up the top of my head and have you pour in the music business.”

I loved that mental picture (because there’s a lot of stuff I’d love to learn that way), and it spurred me to develop a painless way of infusing you with the extensive materials in this book. So if you’ll sit back, relax, and open up your mind, I’ll pour in all you need to know about the music business (and a little more for good measure).
HOW I GOT STARTED
I really love what I do. I’ve been practicing music law for over forty years, and I represent recording artists, songwriters, producers, music publishers, film music composers, industry executives, record companies, film companies, and other assorted mutants that populate the biz.

I got into this gig on purpose, because I’ve always loved creative arts. My first showbiz experience was in grade school, performing magic tricks for assemblies. I also started playing accordion in grade school. (I used to play a mean accordion; everyone applauded when I shook the bellows on “Lady of Spain.” I gave it up because I found it impossible to romance a girl while wearing an accordion.) In high school, I graduated from accordion to guitar, and in college at the University of Texas, I played lead guitar in a band called Oedipus and the Mothers. While I was with Oedipus, we recorded a demo that I tried to sell to our family friend, Snuff Garrett (more about him later). Snuff, a powerful record producer, very kindly took the time to meet with me. That meeting was a major turning point in my life. Snuff listened to the record, smiled, and said, “Don… go to law school.”

So I took Snuff’s advice and went to Harvard Law School. While I was there, I played lead guitar with a band called the Rhythm Method. But it was quickly becoming clear that my ability to be in the music business and eat regularly lay along the business path. When I graduated, I first did tax planning for entertainers. Tax law, like intricate puzzles, was a lot of fun,...