Declaration of Independents Panel,
TAXI Road Rally 2006, Part 1
Moderated by Michael Laskow
Tony van Veen, Executive Vice President of Sales and Marketing (President, as of 1/6/07) for Disc Makers
Derek Sivers, Founder, President, and Programmer of CDBaby and HostBaby
Steve Corn, Co-founder, Big Fish Media LLC
Michael Colledge, Vice President and Senior Financial Advisor of Merrill Lynch
Good morning, guys. Steve, people think it's as easy as just building a Web page on MySpace. You gotta get them there, right?
SC: Just building it doesn't mean people are gonna come. And just because people come doesn't mean people are gonna buy. I see a ton of MySpace pages with 10,000, 100,000 friends, hundreds of thousands of plays, and they sell five downloads or they sell five albums. They all have links to CDBaby or iTunes or someplace, they link back to their band's site. You've got to rely on your own powers, your own hosting, your own site. You can't depend on corporate entities like Fox to sell your music. You have to realize that you have to work hard to bring people to your site—blogging, e-mailing, writing, advertising, everything. I blog, and I'm happy to get 200 readers, and I have 5,000 friends now.
Michael, what are the top five things that you think musicians don't do to operate their music careers as a business?
MC: That's a good question, and essentially, that was the main topic of my Driver's Ed class yesterday. But I think the main concept is that you really have to think of yourself like a business, first and foremost, because that's really what you are. As far as things that artists don't do, one of them is that they fail to take advantage of some of the tax deductions that are available to them as musicians. That takes the form of several different types. There are equipment purchases that you can deduct, the cost of demos and master recordings, certainly travel to and from the Road Rally, as well your hotel and airfare and meals and entertainment while you're here—which is 50% deductible. I think, like a good business would, keep tabs of your tax deductions. Talk to your accountant or your business managers about what's available to you.
Secondly, I think that kind of relates to the fact that is that Indie artists don't keep good enough records to substantiate those deductions. I really can't emphasize enough how important it is to really keep good records. Keep all of your receipts; keep a mileage log in your car for any travel related to music. Keep a very detailed calendar of all of your performances and time devoted to your craft, because ultimately if you are audited by the IRS, you'll have to able to really show profit intent, that you're in music to make money and make a profit, and it's not just a hobby.
Another thing that Indie artists don't do would be, like any good business would, they don't really sit down and create a budget for themselves. I know that income can be extremely variable as an Indie artist. I think it is worth the exercise of sitting down some time and really just trying to lay out what your anticipated income and expenses might be in a given month. And if it's not looking so good initially, then use that as a motivator to work harder and put yourself in the black so that you can start saving some money and putting it away and investing it. So, certainly budgeting is a big thing that would help.
Another thing is that good businesses hire good people around them, and they delegate appropriate responsibilities. I think, again, under the theme of "think like a business," at some point you may want to consider building your own personal team around you. That can take a couple different forms, depending on where you are in your career. If you're a little further along, a little more successful, then think about getting a personal manager, and that person is going to act as your COO, your chief operating officer. Your business manager would be your CFO, for instance.
Most bands can't even find a manager at this point. But, you're talking further along. Give me that last point, then I want to read you something pretty astounding from a survey I saw the other day.
MC: Number five is that I think most artists don't sit down and create a plan for themselves—a business plan, a financial plan. I think if you don't know what your ultimate goal is and what you want to shoot for, then you're not going to be as successful as you might be. And also, invest in yourself; invest in your own business; come to the Road Rally; submit your songs. You may have to spend a little bit of money, but it's worth it.
Truer words were never spoken.
Derek, I ask you this pretty much every time we do a panel together, but it's worth mentioning because your company is so wildly popular and does such a great job, yet you and I both hear this all the time, and we talk about it every time we have lunch. I meet musicians, as do you, and they say, "Yeah, I've got my music up on CDBaby. They haven't sold a lot for me." That must be like a lobster claw stuck in your throat. Let's address that issue: "They don't sell enough CDs for me."
DS: I think it was really interesting that, when I was 21 years old, I went to a workshop like this in Chicago and sat in the front row with my notebook, making notes. There was some artist up there, I forget who right now, that had gotten signed to a major label. He had been there the year before as a panelist, as an independent artist just playing around the clubs in Chicago. Now he was on a major, and he came back to tell people the difference between last year and this year. And he said, "Man, I thought getting signed would just make it all happen. But, in hindsight, getting signed was the easy part. This shit's tough. We got the record deal, they gave us the advance, but the advance was barely enough to kind of pay my mortgage for the upcoming year while I was going to be doing this full time. We're putting in these 14-hour days, going to every radio station, every record store, every interview. It's a 14-hour a day job constantly promoting, trying to get people to buy the record. The label doesn't get people to buy your record," he said. "It's still up to us to get people to buy the record. One at a time we're having to win over fans—on the street, at every show." So, he said, "This is the hard part. Sorry to disillusion you guys, but getting a record deal doesn't do a thing for you."
I'm really glad that I heard that nice and early, because it just kind of instilled in me that, even if you get signed, they're not going to do anything for you. It's all up to you still, and you've just got to get used to that and not moan about it. I think it's kind of a cool challenge, because you get your business swagger on. There are so many musicians who are confident when they're writing lyrics, writing chords, and then they record it. They decide on the arrangement they want; they decide on the kind of production, the sound—whether they want it twisted and distorted or pure, acoustic and natural. Then they put it into a CD, and they choose the artwork that they feel represents them. All of this stuff is extremely creative, and it's very self-expressive. And then they say, "Now I've got to do business," and they read a book that tells them exactly, 1-2-3, how to do business. It's like, "A press kit should look exactly like this. A cover letter should say exactly this. You should do exactly as I say." And all of a sudden all of that creativity goes away and they just kind of line up to do things the same way as everybody else.
So what I've found, both from my own experience, and then now from running CDBaby, I see the most successful artists are the ones who carry forward that swagger and creativity and have their business and marketing be a further expression of who they are, which lets you express that to your fans one at a time. You go out into the world with swagger to kind of reach all of these fans in your own marketing ways that you've come up with, in ways that you think are how you want to communicate to your fans. You'll find that it's a lot more successful than if you try to do everything by the numbers—the paint-by-numbers system—and it's a hell of a lot more successful than thinking you can just kind of sit back in your studio and hope that somebody else does it for you.
Tony, I think most musicians don't really know that much about marketing. Obviously, you and I are passionate about it; we spend most of our discussions talking about it. If the Tony van Veen Band's first CD was coming out on your own label in six weeks, what marketing steps would you be taking right now?
TV: I'd basically begin by just getting my ducks in a row. There's a limit to what you can do before your CD comes out. You know, people love to plan release parties before the CD comes out. I hear this all the time. For years I've heard multiple versions of this story where somebody knows a DJ at a radio station, and they just finished their mix of one song—most of you have been there, right?—just finished that mix, and you're in love with yourself and that song. Or, first you're in love with that song, and because of that, you're in love with yourself because you are the fucking greatest songwriter ever. And so they know this DJ and they talk to him and say, "I just wrote the greatest song ever. You wanna play it?" And the DJ says, "Oh, what the hell, I will." So, lo and behold, lightning strikes and people call and request the song, and all of a sudden—this happens—they're starting to get airplay. People are calling for it, and they're starting to get a fair amount of airplay on a local radio station. But it's getting them nowhere, because they haven't even finished mixing the rest of the songs yet. And there are no CDs in stores; there are no CDs on CDBaby; and there are no gigs planned to capitalize on the fact that lightning has struck. And so, I always tell folks, "Don't book your release party until you've got the CD in your hands." I can't tell you how many release parties have been ruined by the fact that CDs weren't done ... and not because of anything that we did. When you have to have weeklong arguments with your band mates about whether the graphic design looks OK or not, delays start happening.
So in terms of the actual promotion of the album, the tangible work, you want to wait until the CD is out. You've got to get your database in order; you've got to start making a list of stores that you're gonna want to hit up; and make a list of radio stations and contact persons you want to contact. You've got to get a list of media ready, then just start planning the number of performances, and start figuring out ways that you can really capitalize on the release of this CD. It's just planning work.
That sounds like work. Can't I get a manager to do that for me?
TV: Umm... It's the Holy Grail, right? When I was playing way back when, it was always, "Can't we get somebody to manage us?" And with the benefit of hindsight, there is nobody who has a greater stake in your success than you, and there's nobody who knows you better and is going to work harder for you than you. So, my advice is always do as much as you can yourself for as long as you can, because you're going to be the most passionate about your music. So, again, back to what I said before, you've got to make the phone calls; you've got to do the outreach. And then at some time after your notoriety starts growing, then you'll be in a much better position to get somebody to help you who can really help you, as opposed to some fan of your music or your second cousin who's trying to do you a favor. There is one exception to that, don't try to do your own legal. You need an attorney early, and you need to spend a little bit of money whenever there's anything to sign—should you be so lucky that there is something for you to sign. Get an attorney and get help on that front.
But don't use a real estate attorney who thinks they're a music attorney and they live in Indiana.
Steve, you and I were hanging out in my office a week or so ago when van Veen and I came off the road from doing a couple seminars in Chicago and Atlanta, and I was telling you how I asked the attendees in the room that day if they thought the Internet was the death knell of the major labels, and the audience applauded wildly. Your response to that was, "Hey, hand me that Billboard on your desk and let's see." You looked up some chart and you said—this is a quote because I actually had the tape recorder running—I was interviewing Steve for one of our newsletters—and you said, "Let's see. Year-to-date, overall total units, which includes digital track, album sales, everything, is 775 million units, up 23% from the previous year. Physical sales of albums are down 5%; digital tracks are up 73%. So, the Internet is not the death knell of the music business, it's the life saver of the music business. I can guarantee you that of the 398 million sold last year according to Billboard, 90% of that is major label content."
So, my question is, with three million acts on MySpace, the vast majority of which are independents, why do you think the indies are only selling 10% of the downloaded music? Because they are hypothetically on a level playing field there with the majors.
SC: They are absolutely not on a level playing field with the majors.
You challenge my authority (laughs)?
SC: Actually, Michael's not wrong, because he gave me that quote. I was teaching a business music class and I called him up to give me some ideas for the top 10 myths in the music business. One of his great statements was, "The Internet creates a level playing field is a myth of the music business." It most definitely doesn't create a level playing field. When you have an ad budget, a marketing budget... Forget the budget, you have people at a major label—or even a well-established Indie label—doing promotion, someone doing marketing, someone doing design, someone doing PR. They have more power because they have more people doing the work. And why is Indie music selling approximately 10%? It always has, and maybe it always will. I don't know. We can debate that. It's because 90% of the work being done out there is being done by major labels. They're doing ad buys; they're doing the Internet buys; they're promoting to radio; they're promoting to the record stores. It's a simple formula. If Indies did more work, they would get more sales.
And does that include DIY people versus an Indie label that's got 12 employees and a $3 million budget? There's a big difference, yet they are both called Indie labels
SC: Yeah, there really is a huge difference. Cooking Vinyl is an Indie, and they probably have—I don't know—20 people, maybe more, working for them, and they do a lot more sales than a label that has two people or one person. Ironically, though, they use the same tools out there. The tools are readily available, and most of them are pretty affordable. I think it's just a numbers game, and it's dedicating the time, which is also a big issue when you have a day job.
I was in the boat that Tony mentioned earlier. I was trying to be a film composer and holding down a day job. I would think, if I get a gig I'll take a vacation and I'll do the movie. No. You don't get the gig until you take a permanent vacation from your day gig, and you do whatever you can to then survive because you have to. It's easier said than done, and much easier when you don't have a wife and kids. But, it requires a lot of time, and that's where a lot of DIY people may not see the results they want to see because it just takes a lot of time. It is a fulltime effort.