Chiaramente controcorrente la loro policy di non perseguire chi condivide files degli artisti che stampano sulle loro etichette:
“Let’s give away the ProTools files on MySpace. Vocals, guitars, drums, and bass. We’ll let the fans make their own mixes.” The room falls quiet. Musicians usually record their instruments and vocals on separate tracks; the producer and mixer combine those tracks into a finished product. McBride wants to make the individual files available so that amateur DJs can use them like Lego bricks to create something all their own. The record industry likes control. McBride is proposing unfettered chaos.
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“The labels were never in the business of selling music,” says David Kusek, vice president of Boston’s Berklee College of Music and coauthor of The Future of Music. “They were in the business of selling plastic discs.”
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Musicians generally make very little from the sale of their records. The costs of production, marketing, and promotion are charged against sales, and even if they go multiplatinum and cover those costs, their cut of any extra revenue is usually less than 10 percent. On top of this, the labels typically retain the copyrights to the recordings, which allows them to profit from the musicians’ catalogs indefinitely.
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“The future of the business isn’t selling records,” McBride says. “It’s in selling music, in every form imaginable.” And by establishing a series of so-called artist-run labels, McBride is creating the next-gen music company. “We become the management company, the publishing company, and the record company rolled into one,” McBride says. “We take our 20 percent cut of the whole pie. “More important, he says, the new model frees him and his artists from the overgrown bureaucracy of the music industry, and that means more money for everyone. He can book tours, sell ringtones, peddle songs to advertising agencies and, yes, give away free downloads without any of the complex, multiparty negotiations that once gummed up the works. “It used to take months to sell a frickin’ ringtone to Bell Canada,” McBride says. “With BNL, one phone call gets the job done.”
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McBride’s success will depend on what he calls “collapsed copyright.” Nettwerk will represent artists like BNL, but the bands will record under their own labels and retain ownership of all their intellectual property, an anomaly in the industry. The bands, in turn, can expect to earn considerably more money – say, $5 to $6 from the sale of each CD instead of the standard dollar or two.
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Nettwerk is also poised to take advantage of the significant changes in music marketing wrought by social networking sites like MySpace. Radio, and the labels that provide tunes for radio playlists, are no longer the gatekeepers to stardom. Some of the most promising new bands, like Arctic Monkeys and Arcade Fire, owe their success to online word of mouth and grassroots marketing. Nettwerk has tapped this phenomenon to the fullest, offering prizes to people who sell a certain number of CDs to friends and using software to keep close tabs on its extensive network of volunteer marketers, formerly known as fans.
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“The old system kept us from imagining what a music product could be,” McBride says. “Now we can really start to have fun.”
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Eventually McBride would like to pioneer another source of revenue with even greater potential: P2P networks. Earlier this year, he sparked a music industry uproar when he announced he would pay the legal defense for a Texas man being sued for piracy by the Recording Industry Association of America. “The lawsuits are hurting my bands,” he says. “If you could monetize the peer-to-peer networks, everyone would make more money.”
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In May, President Bush signed into law a revision of the tax code that will make it easier to sell intellectual property as a stock, with profits being taxed at the same lower rate as other capital gains. “Once we have access to all the intellectual property, we’re going to offer shares in individual artists and take in equity investments,” McBride says. “Eventually, a major band could be its own public company.” The key, he adds, sounding like an overzealous investment banker, is that the value of a band would be measured like a stock and would receive capitalization in expectation of future earnings. “At that point, even a band selling 100,000 units a year becomes profitable,” McBride says.
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In 2005, Ingenious Media launched Ingenious Music, which operates more like a VC firm than a label, running several equity funds that invest in bands, managers, and small labels. “We’re not interested in making a record company; we’re making a music company,” says Duncan Reid, the firm’s commercial director. Like Nettwerk, Ingenious wants a slice of every pie, not just the increasingly small morsels from CD sales.
