SoundCloud Licensing Negotiations, Band Merch and One Direction on Spotify News, August 9, 2015

SoundCloud Licensing Negotiations, Band Merch and One Direction on Spotify News, August 9, 2015

Industry experts speculated that SoundCloud’s battle to become a legitimate service might be its demise. Also, statistics showed why the $20 t-shirt is a merch necessity for artists in the current marketplace. And One Direction’s Spotify-centric release campaign suggested streaming services can be profitable for artists.


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SoundCloud Hitting Major Snags with Label Negotiations


Sources close to SoundCloud’s monetization strategy said that the music service could be in hot water. Digital Music News reported that ngoing licensing discussions with record labels and publishers have turned sour, particularly with Universal Music Group (UMG) and Sony Music Group.


With both Sony and Universal threatening sizable lawsuits, a source divulged, “I really don’t think [co-founders] Alex [Ljung] and Eric {Wahlforss] are having fun anymore … In some ways it’s looking a little bit like what happened to Grooveshark.”


Although SoundCloud has recently been attempting to follow copyright laws by seeking proper licensing, it still has a history of offering unlicensed content from major artists.


Rumors also recently indicated that the UMG higher ups at Vivendi were thinking about getting rid of chief executive Lucian Grainge due to the continued declining revenue of UMG’s catalog at Spotify, YouTube and SoundCloud. This issue has added fuel to the contention in the SoundCloud negotiations. The controversy led to UMG digital executive Rob Wells losing his position. A source close to the situation at UMG explained, “Grainge fired Wells, but made the case for [internal] stability instead of chaos … But he also made assurances that the free problem would be solved.”


Grainge attacked Grooveshark’s no-licensing policies and won. However, SoundCLoud is still thriving in spite of a lack of contracts in place from major labels. Still, its livelihood is dependent on a great deal of outside funding. And some of the major funders have started to back away because of the ongoing battle with labels. Another source told Digital Music News, “This isn’t a group [of investors] that’s used to losing money, but they don’t know what to do at this point … If they put more money in, it goes straight to Universal. Either that or paying lawyers … In the end, [the majors] could kill SoundCloud if they don’t get their way. They want to pick the winners and losers, and SoundCloud is looking like a loser.”


Could a $20 T-Shirt Be the Key to Financial Security for Bands?


Merchandise sales are important to all artists, but especially those that are new and emerging, suggested Bryan Rindfuss of the San Antonio Current. While profits from streaming services and the vinyl revival might be bringing in big money or major label and mainstream artists like Rihanna, Jack White and James Murphy, other bands and artists need to focus on building up their businesses through many different revenue streams beyond just music sales.


According to Rindfuss, just selling a $20 t-shirt could provide a musician with revenue that could at the very offset recording and touring costs. Popular since the early 20th Century, the t-shirt has remained a “huge economic mover” despite changes in the economy. And in 2008, Americans were still spending about $40 billion per year on what is termed “decorated apparel,” which includes band t-shirts.


A screen-printed shirt offers the most cost-effective solution for artists trying to stock their merch tables, according to the article, because of its simplicity and the low production cost. Silkscreen uses less ink, and Mike Garcia, a local silk screener and local music promoter in San Antonio explained, “… that’s why you’ll see a lot of band t-shirts that are one color, super simple drawings.”


Jerrid Morris, leader of the young, local Texas band El Campo used Alamo-inspired t-shirts to fund its latest album. He admitted that t-shirt sales “worked way better than we thought they would … I’ve always been a proponent of having a visually appealing shirt because it does well. We got this one [and] sold out really quickly. That was the bulk of the money that allowed us to put out the record.”


Other bands across the country have had similar experiences after adding t-shirts to their merch table. However, many musicians are reluctant to charge $20, as they feel the price is too high and will not lead to sales to fans. However, Morris stated, “People will pay that … It’s easier to market something tangible, even if they’re not going to use it. It’s just a giant poster.”


D.T. Buffkin, a writer for the San Antonio Current and also a band leader provided a detailed look into his finances. He pressed 300 records for his debut album, and he estimated, “All told with shipping, with color labels and a single black and white insert, it ran about $2,300 … Once you break all the math down, I think it worked out to where each record cost me about $7.80. Selling them for $15, I’m still making almost 100 percent profit.”


Still, he added t-shirts to the mix. He spent $870 for 100 American Apparel shirts — $8.70 each. Even though the per-unit profit on the album ended up being more than the shirt, a lot more goes into vinyl, including time invested in writing and recording, cost of recording and mastering, etc.


Buffkin acknowledged that capital is a rarity for most new and emerging artists: “The issue to have the $2,300 in the first place is always difficult for musicians usually unless your mom is paying for it or something like that … The hardest part is having your money up front and then making it back slowly.”


As musicians evolve and grow and graduate from DIY into the small independent label realm, the t-shirt becomes slightly less important. Texas Is Funny label head Scott Andreu said that the t-shirt sale for an online label is less helpful: “We sell them a lot when we table somewhere for the label … But it’s not something we get a lot of online orders for, though we do get a lot of online orders for music. It’s important to branding, but it hasn’t been a thing we’ve put a lot of importance on.”


However, one more level up, the t-shirt is important again. When artists enter a 360 label deal, for example, t-shirts can help fill in major gaps. According to Andreu, “If you’re a label that does 360 deals, not only are you putting the money up front for the music, you’re also putting money up front for all the merchandise … Every time a band sells a t-shirt on the road, you’re getting back the money that you spend plus profit.”


One Direction’s Latest Single Thriving on Spotify


One Direction’s latest single, “Drag Me Down” has taken over the Spotify’s Global Top 50 chart since its release on July 31 and garnered almost five million plays in the first day and $33,250, a Spotify record. And it is still not available on YouTube or any other sites. Music Business Worldwide noted that its popularity on Spotify is in part due to the new marketing campaign behind it; the band directed fans directly to the single on Spotify on their social media channels on its first day out.


The band’s marketing team, including Modest! Management and Syco/Sony orchestrated one of the first Spotify-led day one streaming campaign and carefully watched YouTube activity, taking down any illegal posts of the song when they appeared. Spotify also promoted the track worldwide with a banner ad, playlisting support and regular posts on social media.


Spotify figures indicate that “Drag Me Down” is earning about $21,700 per day and brought in $152,000 in the first week, with a total of 21 million streams. This put it ahead of Mark Ronson’s “Uptown Funk!,” the most-streamed song in the UK and U.S. markets in the first half of 2015. It peaked at 15.4 million streams back in January.


“Drag Me Down” was released to international music singles charts on August 7. More than 1.1 million of its 3.1 million daily streams on Spotify are in the U.S. 

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