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Panel Members: John Rudolph, Chairman, Elias Arts; Jeff Freundlich, COO, Wired Whirled Music; Brian McNelis, Sr.Vice President of Music and Soundtracks, Lakeshore Entertainment.

Moderator: Michael Laskow

Succeeding in the New Music Industry
(Left to Right) John Rudolph, Jeff Freundlich, Michael Laskow, and Brian McNelis are all smiles after they wrapped up their Keynote Interview at TAXI’s Road Rally, 2015.

You guys asked me during an episode of TAXI TV to not do a celebrity interview for the keynote this year. You said, "We want to learn. So forget the celebrity - get some smart people up here." And I think I've got three incredibly smart people up here today.

First, we've got Mr. Brian McNelis. Brian's been in the music industry for 30 years. He started his career working at indie record labels Metal Blade and Cleopatra. He's now a music supervisor and the Senior Vice President of Music and Soundtracks at Lakeshore Entertainment. Brian has worked on films like Napoleon Dynamite, The Age of Adeline, Walk of Shame—which I think is a highly underrated movie. I've seen it like three times and laugh every time—The Backup Plan, Gone, Underworld, The Lincoln Lawyer, and many, many more. Ladies and gentlemen, please give it up for Mr. Brian McNelis. [applause]

Next, we have Mr. John Rudolph. John founded Music Analytics, he's the Chairman of Elias Arts, on the board of advisors of Rumblefish, and was the CEO of Bug Music, and a publisher at Hitco. He's also been a board member of the National Music Publishers Association and the Harry Fox Agency. He is currently with Seimer and Associates, which is a leading Mergers & Acquisitions advisory firm and venture fund that specializes in tech and intellectual property. Ladies adies and gentlemen, please give me a hand in welcoming Mr. John Rudolph. [applause]

And finally, we've got an old friend of mine, TAXI's, and the Road Rally's, Mr. Jeff Freundlich. Jeff is a songwriter, producer, and music publisher with so much music in TV shows—both as a composer and a publisher—major and independent films, and advertising campaigns, that I can't even begin to name them or we'd be here until sundown. He's the co-founder and Chief Operating Officer of Wild Whirled Music, Muzik Headz, and is the Executive Producer of Fervor Records. Jeff has signed countless TAXI members over the years. I get several emails a week from him telling me about placements he's had for them. Ladies and gentlemen, please join me in welcoming Mr. Jeff Freundlich. [applause]

Welcome to you all, and thank you for taking time out of your busy schedules.

On one hand, it feels like things in the music industry are bleak today, because artists and record labels can barely sell records; songwriters are making far less from mechanicals on record sales; downloads are shrinking because of streaming; streaming pays a pittance, and sync fees have shrunk precipitously over the last five years.

On the other hand, the future could be brighter for songwriters, artists, and composers, because it's relatively inexpensive to get into the game; the industry now licenses a ton of music from independents—thanks in part, if I may be so immodest, to TAXI's game-changing efforts beginning back in 1992. There is an ever-expanding list of cable and satellite channels, streaming channels, mobile apps, websites, and other forms of media that all need and use music.

So I picked each of you for this interview because you are all highly accomplished in different aspects of the industry. So starting with John, what is your take on the current and future state of the industry? Is it bleak, or is it bright?
John Rudolph: I think there are multiple aspects to it, and the most difficult, frankly, to get your heads around—and because it's hard for me, and I'm kind of living it on a day-to-day basis—is really the big macro stuff. The things you hear about, and the current issue du jour is the 100% licensing idea. You know, fractured rights, why people don't want that to happen. From your standpoint, that might actually bring leverage back to songwriters on some level.

“It’s really important to ask, ‘Well, how am I going to change and adapt, and find ways to add value every single day and get ahead of the curve? How am I going to do something different?’”

-Jeff Freundlich

Can you explain what it is just so they know?
Not to get too down in the weeds for everybody, but essentially what the concern is, in particular among the major publishers, is that there's an idea that one publisher and/or songwriter can find all the co-writers and co-publishers that may be participating in a particular composition when they issue a license. So if Brian issued a license for $5, and I normally would have issued that license for $500, then he can actually do that, and there's concern in particular that the digital companies—the DSP, the digital service providers that we all know—will force, or could lever that to undercut the rest of the industry.

On the other hand, what's interesting about that is then you are not necessarily following convention, meaning the licensing leverage is back on some level. One guy can't dictate a price and hold up the whole process. So you've got to weigh it.

On the other hand, it's exactly what you said [Michael], access is more available than ever, in my opinion, and that's including the advertising world as well. I know we've talked about TV a little bit today, but the advertising world in particular, especially with Elias Arts, I see a lot of that, and you're seeing it. I mean, live fees have come down; you're seeing more entrants, more people playing, being able to go direct to get involved. So while I think it's a great time to be an independent songwriter/composer/artist and/or producer, there are macro challenges that are going on that could come into play. There are a lot of things happening, so am I bullish on where things are and where they're going? I am. I think that you're going to see a lot of technical evolutions that happen in different phases over the next, say, one, three, and five years that really bring a lot of power to the individual creator, and that's where I like to spend my time now. And when we ran Bug, we were very individual/creator-focused, so I'm bullish.

Brian, the same question for you from the supervisor and film studio perspective. Bleak or bright?
Brian McNelis: It's a complicated landscape. I think right now is a dark moment. I think that this moment right now is very challenging for all the reasons that you listed [in your introduction]. We're living in the era of 15 years of optional payment for the consumption of music. And the majority of music is consumed illegally, slathered with advertising and driven by search engines. You know, it's hard for me to look at the current landscape without looking at it in the top-down macro of an environment that has allowed piracy to be the number one form of consumption for over 15 years. That creates downward pressure throughout the entire ecosystem that affects everybody. And it's not just music at this point. Talking with friends who are film producers even five years ago they were like, "Ah, you guys with music. You just did it wrong." And now they're feeling it. And they're like, "So, you guys, what do we do here?" So, as the film people are kind of coming on board now and understanding the downward economic pressure that comes from consumption without compensation, the TV guys—traditional broadcast TV, even though it's over satellite, or cable or whatever—they're like, "Oh, we make content and we give it away for free. It's monetized by advertising. What are you guys complaining about?" And now, TV is starting to feel that, because everything is being delivered over IP. So once everything hits Internet distribution, everything is fair game for consumption without compensation. Whether it's disrupting a transactional model from downloads and iTunes, you know, a lot of people have said that streaming is the solution to piracy. Well, what happens when piracy is streaming, right? Nobody has really thought that through. So, if the Pirate Bay is the alternative to iTunes, what happens when there is a pirated alternative to Spotify? No, streaming isn't really the solution to piracy, if piracy is streaming. And this is what's really affecting broadcast and television.

So anyway, it's a longwinded way to say that we have a great deal of downward pressure on the economics that's affecting the entire ecosystem. And until we kind of get that right, we don't really know what your work is worth. Because whatever your work is worth today, it is certainly less than it would be worth if we weren't living in a legitimized black market of consumption without compensation that ripples across music, film, and television.

So I think it's a dark moment, and I'm insanely encouraged to see all you people in here [at the Road Rally], because you are the people that will make the difference. You are the people on your Facebook page, on your Twitter feed, in your social media, in your day-to-day interactions who will say, "This is wrong. We need to support anti-piracy bills; we need to support something like SOPA." We need to support the people who are taking care of your constitutionally granted rights in copyright for the protection of your work. And it's not okay to have your work monetized against your consent and without compensation. You are the people that will make the difference going into the next era! And I believe that you will, and I am optimistic that in 10 years—I hope that it's 10 years—that we're on the other side of this. It may be a two-generation issue. I feel that the millennials and the current generation who have grown up never having paid for music because of YouTube and the Pirate Bay, I think it will be their children, perhaps, that will go, "This is uncool. We value a cultural economy." Because right now there's a large segment of the population that… And I don't think that they are bad people that they don't value a cultural economy, I just think that they just don't understand. I think that they don't understand that you can't get something for nothing forever, and how those economics work. And I think that you are the people who will help make that change.

So overall, I'm optimistic, and I think that there is a lot of opportunity in the digital landscape, that if we can fix some of these problems that it will restore fairness and an equanimity to the playing field.

And the last thing that I am going to say is that I really do believe that the Internet has democratized this process. Look at you, look at this room. The Internet is a wonderful, powerful tool that should be enabling more creative people to make a living at higher standards than previously available, because there is no friction in that environment. In the old-school record industry supply-side economics of getting records out, and whatever were the number one factors that affected us negatively. We don't have that friction anymore, okay? Like somebody sees a song on a TV show, they can buy it on their iPhone® immediately; they can also get it from the Pirate Bay.

So as we've eliminated the friction in distribution, [but] we've eliminated the compensation for that consumption as well. If we can fix that, then I believe we have a strikingly new, vibrant, robust middle class of creative working musicians and songwriters. And I believe that we'll have a new creative renaissance which will give rise to all kinds of fabulous new music that I don't think that we've seen in maybe 10 or 15 years, because we're on a retro treadmill where the initiative to truly have an Return On Investment in place to develop new and exciting music in a true cultural economy that rewards your labor and creativity does not exist right now. But if we can fix that, and you are the people to fix it, I think it'll be awesome! [applause]

“While I think it’s a great time to be an independent songwriter/composer/artist and/or producer, there are macro challenges that are going on that could come into play.”

-John Rudolph

Ironically, you just mentioned middle class. I got interviewed by Newsweek way back when—probably prior to 2000, maybe in the mid-'90s—about the future of the music industry. And I used the phrase musician middle class maybe for the first time in the history of man, and I mentioned that I thought it would all go to streaming someday when the pipes could handle it and processors could handle it, and that musicians would get paid a penny a spin for their music. And I got so much hate mail because of the penny-per-spin thing. I think people would love to be getting that penny-per-spin now.
Brian: They would. Absolutely.

They'd be making at least a middle-class income from that if they were good enough to get played.
Brian: There's nothing wrong with streaming. You know, there's a lot of dissent about Spotify and Pandora. And I'm one of those people who has a very loud dissent of Spotify and Pandora. But I want to be clear, there's nothing wrong with streaming as a technological distribution mechanism. All too often in these conversations, people who are working against your rights want to conflate what is a technological distribution mechanism with a self-serving corporate business model that undercuts your value and your labor. What we are arguing against is not a technology or company or distribution mechanism, we are arguing against economic exploitation. You are human beings, you need food, you need shelter, you're raising kids, you've got a mortgage to pay. It's your labor, it's your bills, it's your life. If you don't stand up for what is rightfully yours in your labor, than you'll get rolled over. Like you can go back, there's a reason why the phrase being railroaded has a negative connotation. So today you're being Spotified, okay?

Jeff, last night at the top of the escalator in the mezzanine, I was talking to TAXI members and talking about this very topic, about how fees have dropped. Hell, I know music supervisors that used to have three or four shows, and they're now driving Uber cars to make ends meet, because their fees have dropped so much. And these guys said, "Look, a bunch of us have been talking about holding…drawing a line in the sand. We won't take less than this!" And I said, "That's noble, that's wonderful and needs to be done." Sadly, there are a million in people standing in line behind them that will do it for nothing.
Jeff Freundlich: It's tough. I do not control the market. I do not control the market, right? So I have to make personal choices for the business or for our writers, and I have to sleep at night feeling good about what we're doing for our writers. I know, at least on the library side, there are a lot of libraries that have said, "We're not going to pay any money up front for you to create your work, and you're just going to give it to us," and our fees have gotten squashed. For me personally, I can't go to sleep at night. It's kind of like what Brian was saying. I'd rather pay you something, even if it's insulting. If you are creating value, then you deserve some kind of value for that value. And I have just found that when you kind of give, you get back like a hundredfold, right? So what happens is people become more emotionally invested, they do better work, they do more of it for you, they trust you, and maybe they go out on a limb for you a little bit more later on.

“We’re living in the era of 15 years of optional payment for the consumption of music.”

-Brian McNelis

I mean, it's really tough. We've seen on the library side fees go way, way down. You know, 10 years ago we'd do blankets for a TV show and they would pay us like a nice chunk of change to use the entire library, right? Everybody wins. We've got money to go pay songwriters and composers to create content, and there's enough left over to pay the electricity bill. Now networks have the ultimate libraries. They're doing gratis deals, so there's no upfront money. And then some libraries are giving 25% of the publishing on a retitle to the production company. So it's like, well, I don't want to do that. I'm not interested.

Look, if we were on this panel 120 years ago and we were all saddle makers and leather workers, we'd say, "Oh crap. The car industry is coming up and what are we going to do?" Everybody rode horses back then! The world is changing faster now than it did back then. There's more transparency, people learn faster, things move at a greater change of pace, and you kind of have to make a choice.

I listen to what Brian is saying and I agree wholeheartedly, and I think that part of what you have to do is say, "Yes, I'm gonna back these things that are gonna make a difference in the industry." And I think the other side of it is you have to ask, "Well, am I going to where the water is flowing, or am I waiting for the water to flow to me?" And the definition of insanity is doing the same thing over and over and expecting a different result, right? So it's really important to ask, "Well, how am I going to change and adapt, and how am I going to continue to find ways to add value every single day and get ahead of the curve? How am I going to do something different?"

And, you know, there's that scene in some Monty Python movie. Like the guy on the stage says, "We are all individuals." And then everybody in the audience goes, "We are all individuals." You know, if you do the same thing that everybody else is doing, you are going to lose.
Words of wisdom.

Don't miss Part Two of this Keynote Interview in next month's TAXI Transmitter!