This interview was first published in April, 2010.

Jim Donio is the President of NARM – The National Association of Recording Merchandisers — and has been with the company for 25 years.  Prior to joining up with NARM, Jim worked for a non-profit trade association in the computer industry.

Jim talked about NARM’s mission and how the organization works with and for artists. He also shared his views on how the music industry has changed since the digital shift and delivered some advice for artists about taking charge of their own careers.

Music Consultant:

Jim, thanks for taking the time to speak to me today. Please tell me a little bit about the organization, the mission statement and what you do.

JD:

The organization is designed to provide a nexus for commerce and content. It’s the only trade group that does that in the music business. There are fairly homogenous trade groups that focus on different aspects of the industry – be it creative, be it independent, be it the technology, etc. – but NARM is unique in that we bring together as our members the trading partners that build the business and advance the business together from the standpoint of getting the content, working together to promote it, market it, get it together, etc. and be that conduit with the entities that have the direct-facing relationships with consumers.  Our members are everything from small, independent physical stores, to online stores to mobile stores to the largest corporate entities such as iTunes and Best Buy, Target, etc. That’s on the retail and service side. And then on the supplier side, we have the four major music companies, many of the highest profile independent music companies and individual members. We have students, we have artists, we have managers, lawyers, etc. It’s a pretty diverse community of the music business, and we focus our resources and efforts around the operational issues that help businesses to execute more efficiently and focus on data and consumer intelligence; we gather information to help people make more informed business decisions, learn more about their consumers, put market intelligence to work for them as well. We have events. We do webinars and salon events, which are a combination of networking and educational events. Then we do a large annual convention which is coming up from May 14^th-15^th in Chicago at the Hilton, next month. One of the more compelling components of this convention is that we have something called the Music Business Crash Course. It is taught by Rich Bengloff, who is the head of the American Association for Independent Music, and he’s also a professor at Fordham University in New York.

Music Consultant:

And my former co-worker at Elektra. He’s a bright guy.

JD:

He does the course, pulls together a faculty of some of the foremost names in the independent music business, and we do a day and a half intense course, which covers the economics of the business, new delivery models, outsourcing, promotion, marketing, has some keynote presenters and provides an opportunity for a lot of dialogue and meeting and greeting and getting a sense of, if you’re just getting into this business, what you need to know, and if you’ve been in it for a while and you’re finding yourself lost in all the changes, how you can work your appropriate focus with these new tools. If you’re feeling a bit lost you may need a refresher. We bring together also some new companies in the space. So this is of particular interest to students and artists, and we offer a fairly outlandish $29 registration fee for a day and a half course, which is unheard of for artists and students. If you participate, we throw in a membership to NARM for the year, which is worth $25. So, effectively, you’re paying $4 for this day and a half course. It makes a statement from NARM’s position that new artists, students, people who are learning more about the business are the future of the business, and we want to do what we can to help them learn what they need to learn and make the contacts they need to make to advance in the business. If you’re a company, small label, manager, attorney, someone that is an accountant, it’s $99. I think that’s still a steal for what we’re offering.

Music Consultant:

How is NARM sustained? It’s educational and a force that lobbies for these various constituents you’ve just mentioned, but is this by government grants or by dues?

JD:

It’s a non-profit organization. It’s not owned. I’m the president, but I don’t own it. It’s not a for-profit entity that is owned by any one person or persons. We have a volunteer board that is comprised of executives from the resale and wholesale sides of the business. We have annual dues that are paid either by an individual, if it’s an individual person or a company. It’s a sliding scale of dues for the companies that is based on their sales volume. We have ten different categories of dues. We also have events and charge registration fees for the various events we do. Many of the smaller events are free to members as a member service, but we invite non-members to register and pay a fee and sample what NARM does, so hopefully they will consider joining the association. That’s how the association is sustained.

Music Consultant:

Tell me about how as the business has gone through the obvious digital shift, what did you lobby for before there was – let’s be honest and call it – a crisis? What are the central issues you’re lobbying for at this point in the face of outrageous piracy and as the retail side of this business is undergoing some massive changes?

JD:

The entire infrastructure of the music business has transformed in the past ten or eleven years, and what we’ve done is continued to have the association reflect the industry. Today, our board consists of more “traditional” retail entities, but also includes companies like iTunes, Amazon, Nokia and Verizon. We’ve adjusted our representation and our profile in accordance with that. We have brought on someone like Bill Wilson, who came to us from Atlantic Records and from a career that spanned a variety of technology companies as well as labels to be our director of digital strategies and business development. So one of the key underpinnings of his work here at NARM and our “advocacy” for the future of this business is a creation of a working group called the “Digital Think Tank,” which has grown from literally a handful of companies six-eight months ago to about 40 companies. These companies are coming together and trading companies. So it’s not homogeneous – it’s not just the retail companies and the service companies – it’s the retail companies and their label supplier companies and technology partners to work on three pillars of the business:  operational standards; metrics and data visualization; product innovation and product development. Bringing people to the table in these areas is designed to help the business perform better ultimately through coming up with ways in which we can come up with common operational procedures and standards, and it probably will not come as a surprise to you that even in this day and even with all these technological advances that have come about, there are databases and systems that still can’t talk to each other and measurements that still don’t coincide. We’re working very hard, and it may not be the sexiest aspect of the business, but it is a foundation for the future of this business to reach a point where the business is growing and going in a very positive direction. Having said this, we still find ourselves in a revenue situation where 65% of the recorded music revenue is still physical and 35% is digital. With that in mind we’re still keeping balls in the air and looking at ways in which there can be alternative strategies for the physical marketplace. There’s still a sizable marketplace, although smaller than it had been, but still sizable for the CD, and for other physical manifestations of music and other forms of entertainment. So we’re working on programs around giving music as a gift, the deluxe product for the super fan and other new physical manifestations that can come out and provide an affordable and exciting way for people to purchase their music in a physical form if that’s what they want. NARM is very much now about finding equilibrium for these various delivery methods, because we don’t see a point in the foreseeable future where its’ going to be 100% zero. We still think there’s going to be a period of time in the coming years where we’re going to be dealing with a physical and a digital and mobile marketplace.

Music Consultant:

I think there will always be a marketplace – and certainly not for all products – for special products that actually have a place in someone’s hand rather than on someone’s hard drive. I agree with you.

Are you lobbying for different causes at government to petition for funds or help at protecting copyright? Who are you lobbying for?

JD:

Not so much that. We have been consistently supportive in those areas, and we’re certainly not leading those kinds of efforts. The Recording Industry Association of America (RIAA) in Washington, D.C. has been at the forefront of that. But we’ve been consistently very supportive both on the physical and the online piracy side of things. We can’t forget that even in a marketplace where the sales of physical product have declined, there’s still a significant physical piracy business. And I call it a business because it’s in many ways an organized criminal business where there are warehouses that are set up with devices to rip off CDs and sell them on street corners and at flea markets.

Music Consultant:

In China, they probably rival the legal businesses.

JD:

Or exceed it in some cases. We’ve worked very closely with RIAA where we’ve had retail members testify and act as unofficial agents in their cities to flag and notify RIAA when they see suspicious sales of products. We’ve been very supportive and very involved in that side of the business. In terms of lobbying, I participate with a group of CEOs of all the various music industry trade groups where we’ve traveled to Washington, D.C. on any one of a number of occasion and have visited members of Congress and members of the Senate and talked about the implications of piracy not just in the U.S. but literally as a worldwide crisis. When people look at what the impact of that is and write it off as just being a drop in the bucket for a superstar entertainer, they’re not thinking about the fact that it trickles down to the clerk in a retail store or the warehouse worker who is packing and shipping boxes. Regardless of the level or the stake that person has, it’s stealing something that is having a deleterious impact on someone’s livelihood. Whether they are at the top of the food chain or a different level of that spectrum, there’s still an impact, and it is stealing. No one would ever consider walking into a store and just saying, “I really like those shoes so I think I should just have them because they’re there.” That same psychology should apply to music in whatever form it’s being provided in.

Music Consultant:

It’s interesting. I’m not torn about it and recognize it’s theft but I’m also guilty on it on a number of occasions, to be quite frank. I don’t pay for music like I should, but what’s of greater concern for me than just music, and I can’t substantiate this now on this conversation, but I’m told that America’s number one export to the world is intellectual property, and all intellectual property as bandwidth gets greater or on equal footing depending on file size can be traded like music. So we are in fact, music being one of the most fluid of the properties right now because of the way it was set up damaging a whole number of businesses.  Has anyone come up with a decent idea that might fix this issue that you’ve heard recently?

JD:

In the UK they passed a piece of legislation that is designed to partner with the ISPs in the country.

Music Consultant:

Is that a three-strikes rule?

JD:

Yes. Something along those lines.  It’s called the Digital Economy Bill.  That’s certainly a direction that I think is being explored. I know it’s being explored here as well, because that’s where all the activity is focused. If there can be some partnership there to identify people who are engaging in this activity, there can be some beneficial outcome of that. But there are certainly differing points of view on this topic.

Music Consultant:

I’ll wrap it up kind of quick. Is there anything you can advise given the changing marketplace? You have a very unique vantage point on the industry as a whole.

JD:

Here’s what I would say. I’ve spoken to a lot of groups of students who are artists as well as students at NYU and at a number of colleges. One of the strong messages that I’ve put out to that audience is that as creative and as talented as you might be, there was a moment in time when you could focus on that and the business would sort of take care of itself, and you could perhaps rely on others to do for you. We’re no longer living in that world. There’s been a complete paradigm shift, so that if you’re a creative person and a person that creates intellectual property today, you need to understand the business as well as the creative, perhaps never more so than today. You need to be in a position to have all the information you need about the business aspect of what you are doing and make a decision about whether this is a career for you and something you expect to be your sole livelihood, or is it something you just enjoy doing and that you’re going to do on the side, or is it something that is merely a hobby? You need to make a conscious decision. If you’re going to be a working musician, a working songwriter, a working artist, you need to have a very intense internal discussion with yourself and make sure you understand and have a complete command of the legal implications, licensing implications. It’s so much more complicated today that you can’t afford to ignore that and not understand those things. Just to tie it back to this course we do, it has attracted over the number of years we’ve done it a lot of artists and small artist-owned labels who really until they step into this environment and have an opportunity to engage with folks who have been in this place and been in this space really don’t have as clear a sense of the magnitude of this as they should. That’s a service and a role that we hope to continue to fulfill.

To learn more about Jim and NARM visit the NARM website.