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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
Jeff Freundlich (left) and John Rudolph (center) listen intently as Lakshore Entertainment's Sr. Vice President of Music, Brian McNelis makes a great point during the Keynote Interview at TAXI's Road Rally 2015.

The first section of Part 2 is the continuation of a discussion about how fees for everybody in the music industry are dropping: from composers, to music libraries, to music supervisors …

John: Michael, can I just say one thing? It was interesting, because the way music supervision started—it was really just a couple of guys, right? Joel Sill and Bud Carr. These guys made hundreds of thousands of dollars per film as the [music] supervisor, they were regarded as being as being as important as the editor or anything else in the process, right? Forrest Gump was a great example. If it weren’t for the music in Forrest Gump, I mean, what would the story be? But one of the things that happened—and you just have to accept the realities of it—is that [new] people are coming [up] and there is always somebody who wants to do it, right? We live in a creative arts business, so as a result of that there are people who are willing to do it for free.

So this inevitable cycle that’s going to happen that it is the economics part meets art is always going to be there. But I will say this, from the Pop side there are still people that blow my mind, that nothing released, have three songs, and they’re getting signed for $500,000 deals up to a million. It happened yesterday, it’s happening every day, okay? So for everybody in this room there is hope for that, if that’s what you’re striving for. The opportunity to just get a little bit into the game is what is so exciting now, and that wasn’t there before. I know of 10 people that have made real money—a living—on YouTube, for example. We can hate it; we can hate everything you want about it, but no label would have ever signed them in the past, no publishing company would have ever signed them. But they took the bull by the horns themselves, and they did it.

Jeff: Can I just add to that? I think the people [who will be successful] do things with intent and have a plan and don’t treat this like a hobby, but say like, “What is my plan of business? How much money am I going to invest in what I do?” This industry has never been easy—it’s never been easy to write a hit song. So you have to do this because you’re passionate about it and you’re hungry for it, and you do need to be competitive about it, and you need to network and get in people’s faces. If you want to write a hit song for Rihanna, go start hanging out with Rihanna’s people. I don’t know how to do that, that’s not what I do. But that’s what you need to do to go do that, you know? If you want a publishing deal, well, you need to start schmoozing with the men and women that are those dealmakers and rainmakers.

And with the Internet, the beauty is that you can get like 80% of this information online now, right? When I was growing up I was a huge Beatles fan, but I had to stay up and wait until Paul McCartney was on The Late Late Show to talk about what it was like being in the Beatles. Now I can go and find 35 interviews on Paul McCartney immediately. You can do this for music. All the information is there, you have to take the initiative and say, “Okay, here’s the landscape. Where do I fit in the landscape?”

“The opportunity to just get a little bit into the game is what is so exciting now, and that wasn’t there before.”

-John Rudolph

The education is there, and then you need to go start networking with all these people at TAXI. Honestly, it’s weird. Some people come up to me in the bathroom. Like please don’t come up to me in the bathroom, it’s kind of like awkward. [laughter] But this is your chance to really start picking people’s brains. Use this weekend to figure out where you fit in, or where you want to fit in? Because, you can still make money! Our revenues have gone up like 17% a year for the last eight years. So there is still money to be made in this industry. It just might not be in the way you think.

You know what I love about the people in this room sitting in this room sitting behind me? They’re the doers. You can be a dreamer; you can start with a dream; but you’ve got to be a doer. And you’ve got to persevere and you’ve got to have a plan. You know me, I’ve been preaching that stuff for 23 years now. The reason I just worked since Labor Day, 80 hours a week without a single day off and killed myself, is because of the people sitting behind me today. They got on planes from China, Brazil, New Zealand, all over the world, to come to this event. These are the 1% of the 1%. [applause] And they will learn stuff like you guys are giving them, and they will go home and use that stuff. And it makes me incredibly proud!
John, Can you please tell our audience what micro-syncs are?
Ok. First of all, a micro-sync—the way I think about it—is essentially a synchronization use in almost a nonlinear format-type. In film, TV, and advertising, that’s a traditional kind of sync. In a micro-sync, basically what you’re doing is … I’ll give you like the hardest-core example: You do a deal with somebody like a Rumblefish, who is aggregating this micro-sync market, and then you use Animoto or anything like that, which lets you add music to a video from your phone or whatever device you choose, then you push a button and it publishes up. It might go up to your Facebook page; it might go up to YouTube; it might go to all those different places. Well, in that transaction, when you put that music in there, there is actually a license that is a blanket license—just like in the old days you would have with a TV show, potentially—where your track goes in, that license is kicking in, and then when it goes up, it’s like being published. So you’re getting paid, and it might be just pennies initially. But you’re getting paid when that transaction happens on the sync in grandma’s video at the soccer game. And then when it gets published up, if for some reason something crazy happens in that video and it turns into some viral video, you’re going to get paid as well as a songwriter at that time, right?

So it’s kind of a new way to think. In a micro-sync, what you want is distribution across every single app that’s going to essentially create a synchronization use on the user-generated content level. There’s also kind of the hybrid between tradition synchronization and this kind of micro-sync use. And again, that could be in apps, videogames, user-generated content, all kinds of things. So that might be for a corporate video, or it might be for a wedding video. It could even be a bigger use. As an example, it could be for a Smirnoff commercial and they are doing an online video or whatever it is…

So it ranges from grandma and the soccer game up to a national TV campaign.
That’s right. But you’ve got to have that technology layer that’s going in to push it out.

We’ve had episodes of TAXI TV with members’ music in them that get blocked on YouTube because the member singed up for micro-syncs after the music was used on the show. Are there any pitfalls musicians should watch out for when they sign up with Rumblefish or any of the other purveyors, and they check a box allowing micro-syncs?
Two really things you have to do. One is you have to make sure the setting is correct. This is real practical knowledge. You need to make sure that the setting, whether you’re doing it yourself, which has become more and more prevalent as YouTube and others opened up. The bad side of that is, how are you going to manage a hundred platforms? So you have to make the decision whether it’s worth paying somebody a percentage to do that for you. The second piece—particularly on YouTube—is that it is really important to make sure that your song is registered with whatever society (PRO) you choose. Because there is a mechanism essentially that you are not going to get paid any performance monies if that isn’t registered correctly. It may be registered on the YouTube CMS system that says, “Here’s the split,” and you’re like, “Yeah, that’s the split.” But if that hasn’t been verified against a PRO, then it’s not going to click in, and they have nobody to pay. They don’t know how to make that connection; all they know is you are the one that wrote it.

So you could have 100 million views and not get a penny, because they don’t know where to send the penny.
Super-important that the second that it’s up that you get it, because you don’t get retro. So if there are 100 million views, and if you take care of your business at 99 million views, you just lost the other 99 million.

Great answer. OK, so this is for all three of you, and I want to have Brian lead off on this. Many of the TV networks and TV production companies are building their own in-house catalogs. Again, not to pat myself on the back, but years ago I remember having a discussion with one of the more advanced TAXI members saying, “TAXI is really perfectly positioned to go build private in-house catalogs for networks.” And he was reluctant, because he said, “I don’t want my stuff stuck in one place.” That was his argument; he’s a smart guy and I respect him. But it’s happened; it is happening faster. As we are sitting here, somebody is probably putting pen to paper and doing one of those deals. That means in many cases that the network or the production company wants 100% of the publishing, because they want more money and they want to build an asset. They are not stupid about this stuff anymore. They will turn around and say to an existing library, “Hey, we want 100% of the publishing. You’ve still got the writer’s share, you go talk to your writers and work out a deal with them.” And we all know that the writer’s share is sacrosanct; nobody should be touching that. And that’s a very slippery slope and a dangerous future for the people behind me in this room.

So eventually there could be so little income left for songwriters and composers, they’d have no impetus to make music anymore. This practice could kill off a large chunk of the library business. How quickly is this happening, how much do we have to fear, how bad do you guys think it is? Brian, would you please lead off?
Brian: Well, I think the good news in that is that there is always this conversation where we talk about evolving technology and changing markets, like the buggy whips and the car, right? In the example of music, it’s kind of a fallacy, because for that analogy to be true with music, buggy whips would still be used, but people wouldn’t be paying for them. You know, there’s a difference between transitioning from one technology to another, so the golden age of Hollywood ended, and it gave rise to similar jobs in television. I think in this particular case it’s kind of like that transition. Like if we are moving the same skillset to a different area, then it’s just kind of a migration in the evolution of an industry, right? So if people are writing right now for music libraries and each television network, each production company, are building their own music libraries, well, that’s still an opportunity. Instead of going to the music library, you’re going directly to the person running the in-house music library at the film studio or whatever.

At Lakeshore, we have a very small boutique, in-house music library that is kind of a hybrid. You know, I don’t go out and have people do cues. I don’t want 30 or 50 second stuff; I don’t want minute and a half stuff. We did a deal with somebody to buy a catalog of that type of stuff, but we really haven’t used it a lot. But what we really do have and we do use a lot is something I call our music supervisor’s toolbox. It’s real artists, real records, real music that serves the purpose of doing a 30-second needle drop when somebody’s walking into a restaurant or rolling through a car radio and our producers say, “We don’t want to take the time or spend the money to go looking for stuff. Why don’t we have stuff in-house that we can do that with?”

So the good news of that, from my perspective, is like I go out to Jeff for a lot of stuff. It’s not like my in-house music library is competing against what Jeff does, because he’s got a much broader reach. We have a very small library that helps our producers in a very kind of narrowband. I don’t want to be in the production-library business; I don’t want to do that. I think that the networks and TV shows are kind of struggling with this as well, and I think it comes from a different place. I don’t know that the networks and TV shows and other people really have an overwhelming desire to be in the music production business or the music library business.

“If people are writing right now for music libraries and each television network, each production company, are building their own music libraries, well, that’s still an opportunity.”

-Brian McNelis

I think it kind of stems from that other dirty little secret that we all know about, which is retitling. You know, retitling, pre-Internet era, guys who wrote cues would write a cue and then would deliver it to five different TV shows under five different names, because the producers want to have a rights buyout on it. And in that era, when you deliver that same cue to five different TV shows, there was no tracking system.

So if I have a cue that works for one TV show that works for five others, I just retitle it; the producers get to register themselves as 100% of the publisher; I’m still the writer on the five different retitles of something. And I think that what’s happening with this digital fingerprinting and stuff like TuneSat, it’s starting to unravel, that people are now going like, “Well, wait a minute. It seems like the same piece of music is in five places with five different publishers, and it appears to be the same piece of music.” And I think that if you are on the music production side of a television network or Netflix or Amazon or whatever, I think that you’re gonna look at that and go, “We don’t really want to get caught up in that. It’s probably just better if we start owning the music that’s being submitted to us, and we put it into a library so that it’s a cleaner value chain.”

I think the opportunities are still there, and I actually think it might be better for songwriters for the fact that it’s a lot easier to retitle one piece five times, whereas if a piece of music needs to be created five times uniquely, that’s more work for the songwriter and the film producers.

So, you don’t think the desire to have in-house-owned music libraries by studios, networks, and production companies is mostly motivated by profit?
Honestly, I think it’s more from an administrative perspective. I think that people want to do shows, lock them off as a unit, walk away from it and it is what it is. If you’re downstream on the PRO side, somebody else is figuring that out. Maybe I’m wrong, but from what I’ve experienced—and my friends who work in that world—it just seems to be more kind of an administrative kind of problem that people don’t really want to deal with. And it’s just cleaner to try and keep everything as a single body of work.

John: Except when they start offering that library to other shows outside of their own company.

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