Guilt By Association Records: Where the Artists Make 100%



Why You Shouldn't Drive Into Trees

An Excerpt From The Outback Musician's Survival Guide

By Phil Circle


Why You Shouldn’t Drive Into Trees


My Dad used to love to complain about how stupid people can be. He once pointed out an example when we were driving through Ohio to go visit his brother, my Uncle John Circle, in Columbus. Pops preferred country roads to interstates, and as we approached a small town along this one U.S. highway, arrows, reflectors and flashers directed us to the right as the lanes split around a median that was indicated by a massive black and yellow, reflector-be-speckled railing. I commented on how strange that was. My Dad went on to explain how there was an ancient oak tree on that spot for many years, and when the road was put in, the town didn't want to remove the beautiful old thing, so they paved lanes around it. It wasn't long before several people were managing to drive right into it though, so the town put up warning signs--Don't Drive Into The Tree. This didn't do the trick, so they added reflectors... then flashing lights... then arrows. After years of moronic drivers slamming their cars into the poor misplaced tree, the town finally resigned itself to cutting the old oak down. Now everyone just slams into the median and no flora or fauna are harmed save the human idiots behind the wheel.


My Dad promptly jumped on this great new opportunity to point out stupidity and then, in his endearing old farmer-come-raconteur way, turned it into an anecdote on how change or the unexpected affects people, i.e. poorly. He was a student of Milton Friedman at University of Chicago. As a result, the effectiveness of his constant demonstrations of how no one understood economics spurred me to start (and not finish) a graduate degree in history and economics. Now, he had always wanted to write a book. So, as we drove winding country roads in Ohio, I told him he should write it on economics and call it "Why You Shouldn't Drive Into Trees." He never got around to it, as it wasn't long before the unexpected took him. But, in deference to Pops, I'm using his book title for this little blog on the music industry and the not-so-unexpected lack of initiative and creative response to its changing nature. People really can be stupid. Or at the very least, shortsighted.


In 1998, I was researching the effects of all the major record company buyouts going on in the industry and came across a speech that Courtney Love gave at the International Songwriters Salon about the standard record contract and how the bands got screwed. She demonstrated that an artist could easily end up owing the label money after a successful release. I was a little appalled, to say the least, and thus began my advocacy of the independent musician and tons more research.


Here's a typical example, from more recent research, of a major record contract and what it'll get you. That’s right, nothing much has changed in the standard record industry in twenty years. Scenario: You meet in a fancy office with a suit who tells you something along the line of "have a cigar, you're gonna go far, you're gonna fly high" as he slides a check for $100,000, a contract with little pink highlights on it, and a Mont Blanc Pen under your nose. You see dollar signs and a dream coming true and without doing much more than scanning the contract and nodding knowingly as if you do, you stick out your lower lip, raise your eyebrows and sign. Some niceties are exchanged as you hold the check and try not to bounce excitedly like a four year-old on bathroom break. Plans are made for recording sessions and for you to meet with your A&R person (that means artist & repertoire, if you were wondering), and you head straight to your bank to bring your account balance up to $100,050.39. Now you can pay your electric bill.


As things progress, you find out that the label controls the creative process, choosing who plays in your band, what songs you play, where you record, who the producer and engineer are. Pissed at the prospect of adding Kanye to your country tune, you go to your A&R rep, throwing a fit. He calms you down with a load of propaganda about how these things work and you're in the big game now buddy, so you'll have to play by the rules... but don't forget how lucky you are! But, I'll talk to the boss (he doesn't) and I'm on your side (he's not). Now go enjoy some of that money we "gave" you.


Here's the thing about the $100,000 they "gave" you. It's recoupable, an advance on potential future profits. With the standard 2.3% you receive from net income on your CD, you won't see another check until you've sold, get ready for it, a million copies! Once you've accomplished this, your second check will be about $38,000. For the million albums of your music sold by the label, you get only $138,000. And don't forget, this puts you in a 36% tax bracket, so if you don't have some pretty clever accounting techniques, you need to hand over nearly $50,000. You end up with $88,000 when the label walked away with somewhere around $6.5 million. Oh, did I mention they also took 50% or more from your sales of t-shirts and other similar merchandise? Oh, did I mention that they gobble up a high percentage of your mechanical royalties from radio play and online streaming? Oh, did I mention that they have the ability to sell your songs for synch licensing to whomever they please without your permission? You may end up hearing your music on a pharmaceutical ad or in a movie that sucks ass. Oh, did I mention we're talking about your music? Oh, did I mention that without the artist, the record industry would be non-existent. Guess I don’t have to, but this is what all-to-often happens in an artist’s desperate desire to “get signed”. It’s not all it’s cracked up to be. If you’re not careful, it’s far worse than being an independent scraping for money.


Time for a commercial break where I quote Hunter S. Thompson:  

The music industry is a long plastic hallway lined with vampires and sycophants... and there's a bad side, too. 


 So, why this business practice that makes you feel you're caught in Buffy, the Musical? I've looked over the question of piracy as an excuse for the major record labels to take so much and give so little. But, as it turns out, there's a great deal more evidence that allowing fans some free downloads is a very effective way to boost sales. As an artist, I'm typically delighted to find that my music is being heard. Sure, I'd prefer everyone bought my music, but how's downloading any different from when I was a kid and my friends and I would exchange albums and then record them to cassette? It really isn't. And we still bought the albums eventually... you can't de-seed pot on a cassette case. In fact, many bands have followed the example of The Grateful Dead and actually encouraged piracy (at live shows, at least). As for how it leads to sales? Here's a personal example: While on stage at a show, a reviewer (who could've gotten all my music for free as a member of the media), walked over to my merch table and said to my wife, "I feel bad, I've downloaded most of Phil's music for free from the web, let me buy some."


When we examine the question of overall sales in the record industry in this country, we finally come to real indicators of what's going on. In the ten years leading up to 2013, total U.S record sales across all genres, as reported by the Recording Industry Association of America (RIAA), had dropped from $14.5 billion down to $8.5 billion, or 41%! The previous ten years, they went up about 4%. Just between 2008 and 2009, total digital and physical music sales registered with RIAA dropped 12.3%. This includes all forms of media through which music was bought... which by the way, as of 2009, included a relatively small percentage where downloads were concerned (18% of the total).


 I suppose one question is whether a drop in sales justifies the kind of prices labels charge for music in the physical format, while their artists receive as little as 2.3%, or if there's another factor. The only immediate and legitimate issue that comes to mind though, is the aesthetic aspect of the music being released by the mainstream record industry and the fact that people have more choices now than ever, thanks partly to the internet. Put another way--now this is only conjecture--most mainstream music releases contain increasing waves of blandness. But anyone who hits a local music venue or the web can find any number of independent musicians (like myself) who sell or give away downloads and offer quality CDs of great music for a low price. I, for one, keep my retail prices down because the actual cost of each piece is ridiculously low, even when you include studio expenses. When you also consider the average person’s wages and the cost of living, there's no good reason to be pricing an item at ten times more than the total costs.


As of the end of 2015, the RIAA recorded that there was an increase in record sales nationwide. It was just shy of 1%. This may indicate that more lesser-known artists are getting heard and people are starting to pay for their music. How can we tell? We can have a look at the breakdown of where the sales happened. In 2015, 2.9% of income came from synch licensing, which more often than not uses the music of unknown artists. It’s cheaper for the movie and television producers. By the way, it pays very well for someone who’s not making millions or even hundreds of thousands. It was also up 7% from 2014, so this bodes well for us indies. Add this to the 28.8% of sales of physical media (like CDs and vinyl) and we have only a third of the total recorded music sales reported by the RIAA! 34% of sales came from digital downloads purchased for keeps. The balance of income came from digital streaming on the likes of Spotify, Pandora and YouTube. This is where you only get a penny per stream. That’s a lot of streaming! And, streaming was up 52% from 2014! This is where I see the biggest indicator of independent music being more involved in the overall reported income from the recording industry. It’s low risk for the listener to scan through unknown artists who “Sound like” someone they already enjoy. They can just add the songs to their play lists or favorites and let them pop up or look for them easily enough…and never purchase the album. One more interesting observation regarding industry sales is related to vinyl. Physical album sales were down 10% in 2015. But, vinyl sales were up 32%! This put vinyl at its highest sales level since 1988! For you kids, that’s when cassettes were on their way out and CDs were just a couple of years into their infancy.


 What really seems to be happening is that American consumers are spending less time responding to what mainstream media tells them they should buy. They are more often deciding for themselves what’s worth their time and hard earned income. And once they find something they like, they spread the word with friends. They tell their extended world through social media.


But even independent artists like myself can find that it’s a struggle to turn online or other media attention into sales. For one thing, plenty of aspiring songwriters and bands will actually give their music away at shows, in its physical album format. I very much discourage this. I've hosted many open mic nights and showcases over the years. Often times, when the bar is closing they have a whole new collection of coasters, i.e., all the free CDs that patrons were accosted with. It's one thing to offer a free download once in awhile to get your tunes out. I do this for a limited time with every new release, and with any as-yet-unlicensed recordings of cover songs. It's another thing altogether to completely devalue your music by handing it out to everyone, especially to those who could care less, or worse, to those who were willing to pay for it.


I've seen this unfortunate trend affecting whether crowds at shows buy CDs from the acts they came to see. We also may see sales for independents fall to a slow dribble when we take into account the overwhelming amount of music websites out there. There is very little to help the listener decide what's good, save their own ear. So, what do we do?


As a listener, just be picky. Don't jump on an act because they're cute, well dressed, or someone else told you to... don't grab the first candy off the rack. Look for music that truly intrigues you. Ignore the status quo. Be a unique listener, not a eunuch listener. You're just going to have to dig through the garbage a bit sometimes. And hit those “like” buttons, share what you enjoy, make playlists.


As for we songwriting types? While many people in the media are still getting all hot and bothered about all the "new" opportunities available for musicians via the internet (for the last 20 years), we're standing around wondering how to keep our livings alive when every band has a CD and a website or five, and the internet is inundated with just as much crap as the mainstream. How do we approach this ever-changing business we’re forced to be a part of in order to eat? I've inquired with some music-marketing gurus about this. One in particular stands out because of his success and what he’s done with it, how he’s turned to helping educate and inspire above all else.


This is a portion of a response I received from Derek Sivers, the founder of CD Baby. He later sold the company to Disc Makers for many millions of dollars and put the money into a trust for education. I emailed him asking for a short state-of-the-industry statement in preparation for this book of mine. Ya ready? Take it Derek…



"Yep, CD sales were never very clearly directly linked to online activity.  One of our biggest sellers never had any online promo, but sold a ton, just from people browsing CD Baby, finding it, loving it, buying it. Sometimes our biggest sellers were touring artists, sometimes online-only artists. All depends.


I agree it's hard to make a living as a musician. The music business might end up kinda like the poetry business is today. That is: there are a few who are able to be full time poets, but nobody would get into poetry for the money.


It is still possible to make a living in this environment, but it's going to come from assuming that the old school music industry can't help you in any way, and you're going to have to find your own entrepreneurial way to reach dozens then hundreds then thousands of people, one at a time. Do something so jaw-droppingly amazing that people who see or hear it tell all their friends and grow your audience organically. It'll take creativity, communication, and learning, but it can still happen."


Creativity, communication and learning…sounds like three things a musical artist comes by pretty honestly. But how much do we use them? The creativity is a given with regard to songwriting, but what about creative business ideas? The communication through art is clearly there, but how often do you let people know you’re out there with something worth saying? We have to constantly learn new approaches to our story telling and love songs and such, but how much do you research the constant, and I mean constant, changes in technology that effect creativity, communication and learning?


Let’s go back and look squarely at some more numbers. I’m an independent who doesn’t need to press thousands of copies of my CD to have a nice in-stock inventory for a while. A thousand will stick with me for a bit. Prices are such that I can easily enough get this number together in eco-wallets (no plastic jewel case and very much the standard these days) and pay 99 cents per CD. Say I spend as much as $8000 on the total production. This includes studio time with a full band, my initial 1000 CD inventory, 100 download cards, a box of stickers to last ‘til the end of days, a box or three of t-shirts in a variety of sizes, and some level of advertising in whatever form.


I plan on flipping every dollar from CD sales initially. I price the album at a reasonable and mid-market retail of $10 ($12 with shipping). For easy math, I’m going to throw out the assumptive giveaways and say I sell out my entire inventory. Now I have $10,000. I’ve recouped my initial investment that included other merchandise. I now have $2000 in profit. I spend $1000 on my next batch. I’m left with $1000. I flip the next batch at $10 a pop. I have another $10,000. I spend a grand on more, flip ‘em, buy more, flip ‘em. I’ll cut to the end of the story.


We don’t have to do this to the tune of a million sold to make $138,000. Never mind platinum sales. We don’t even need to get to aluminum, and we’ve made the same amount of money that a major record deal would get us. Literally 16,000 total sales of your self produced CD flipped in this fashion would get you there. 


Remember, this was a demonstration in math. It’s not fact but with a small number of extremely successful independent artists. Sales also break down in a far more complex fashion. The point is, a living is not that far off. I make mine. Here’s how.


For one thing, I love music from all directions. I love playing it. I love writing it. I love listening to it. I love talking about it. And yes, I love selling it. One has to eat. But, I also love teaching it. So, my most consistent week-to-week source of income is through teaching private students and small groups. Am I saying you should start teaching? Not if you wouldn’t love doing it. It wouldn’t be fair to your students. My point is, pick one thing among the many and make it your regular income pipeline. Then, everything else is gravy and can be reinvested to continue to build the many ways your rent gets paid, your car gets gassed, your table gets food, and you stop sweating the money. I find that when I worry too much about money, I just end up…worrying too much about money. When I step back and see I’m doing what I love and covering my basic needs, I’m happier. Then the most creative ideas happen, because they’re based on getting my music heard, not turning it into a product. It’s called intrinsic motivation. Make it purpose driven and you’re more likely to succeed. 


You’re also more likely to navigate with care. By being in no particular hurry to get everything done now, I find I’m far more effective. I have my music licensed through BMI for any trickle of mechanical royalties that come my way. I do nothing. I found a service that takes care of getting everything I release in there for me and monitors its use. I have my music available in every place and every form you can find. I found a service to take care of all the distribution and placement. I’ve found my songs in places I didn’t even know they could stream them. I have a deal with a label to handle synch licensing for me…and that’s it. It’s non-exclusive, so I decide whether to agree to placement of my songs in movies or T.V. and they do all the shopping for me and take their commission. I make it easy for people to find me and I give them multiple options. They can listen or buy. They can listen and buy. They can grab a free download and donate a buck, or take it for free with my thanks for enjoying it. I know someone else will hear it. A download is easier to give away than a full length physical CD, and cheaper. So, there’s your little free marketing tool. I do it a lot. It leads to more listeners. That’s why I do this music thing…to be heard. Nobody will know you have something unique if they never get to hear you.


What it comes down to is this: there has been, is now, and always will be poorly put-together music available. There’s also great music to be found. Nobody really has a solid handle on what works in the way of marketing... we just do everything we can think of  (creative communication and learning) and something always bares fruit. This is true of the mainstream as well as the independent world.  And things keep changing at a remarkable rate. CD Baby, for instance, has paid out over $250 million to artists over the years. When I first joined their site, my sales were consistent. But as their site has grown, I've become lost in the high numbers of their members. Random surfing is less likely to lead listeners to me. So now, rather than depending on them to bring me traffic, I use them as my store. Then I go put up the signs and inflatable apes to draw attention.


What worked even a few years ago may still be one approach, but you have to continue to seek out new ideas for promoting your music. Even should someone discover the biggest new thing in getting music to the world, it'll change. Only slightly more than a hundred years ago, recorded music was unavailable. Since then, we've gone from wax cylinders through five kinds of analog media into the digital age. Next, we'll be beaming tunes into our heads. Thing is, it's still going to change. Did I mention it's always going to change?


Should we handle change with surprise and fear?


No. We should take it in stride, but with an educated stride.


(Educate... Derived from the Greek "to open")


With knowledge of the past and proper application of this knowledge toward the future, people may finally stop driving into trees. 

Navigate well.