For Austin rockers Spoon, 2007 was a breakthrough year — but not because they sold a lot of records. Ga Ga Ga Ga Ga, their album on the indie label Merge, garnered more radio play than any disc in their 15-year history and earned them an appearance on Saturday Night Live. So far the disc has moved just over 250,000 copies, according to Nielsen SoundScan — about half of what Spoon's manager, Ben Dickey, believes it would have sold even five years ago. "But as far as the band is concerned, the record is a hit," says Dickey.
The reason? CD sales are no longer the yardstick the band uses. While hip-hop and pop artists ranging from Jay-Z to Britney Spears have long used recordings to sell every- thing from perfume to liquor, rockers are only just starting to think of album sales as a component — rather than the sum of — the commercial equation. Spoon have been actively licensing their music for use in films, television shows and a Jaguar commercial, making money, gaining exposure and moving up from clubs to 3,000-seat venues.
Album sales are down 25 percent since 2000, leading to widespread predictions of the record business' demise. But smart artists and managers are finding new ways to reach fans and make money. "For some bands we represent, there's more licensing income than record sales," says Carol Sue Baker, whose Ocean Park Music Group has been connecting independent artists with music supervisors for movies, TV and advertising agencies since the early 1990s.
Baker recently paired Robert Plant and Alison Krauss' "Killing the Blues" with the TV ad for American Living, Ralph Lauren's new clothing line for JC Penney. Baker won't reveal what it means in dollars for the artists, the songwriter and Rounder Records, but it is at least a six-figure pot.
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While up-and-coming bands may find most of their licensing offers in the $2,500 range, established bands can make much more: from $30,000 at the high end for TV shows to $100,000 for movies and $250,000 for commercials. To introduce last year's Sky Blue Sky, Wilco licensed six of the album's songs to Volkswagen for ads. And the veteran duo They Might Be Giants, who have been releasing recordings on their own for the last six years, made a deal with Dunkin' Donuts for around $1 million to create original music for over two dozen spots, according to industry sources.
Perhaps no band has been more aggressive — or creative — with its licensing than OK Go. When the group treadmilled its way to YouTube stardom in 2006 with the no-budget video for "Here It Goes Again," it was having the kind of careermaking hit that bands dream about, just as the commercial record industry was tanking. So OK Go manager Jamie Kitman sought licensing opportunities for the group — making deals for its music to be used in everything from TV commercials and video games to corporate seminars and cable TV "bumpers" (the music that's used to come in or out of a program). Kitman estimates that when all the uses are tallied, OK Go will have granted more than 200 licenses and made old-fashioned hit-record money. "The accepted wisdom now is that no one is selling records," Kitman says. "So how do you keep the wheels on the bus? There's a person in my office who spends half her time fielding licensing queries."
Ian Montone, whose Monotone Management handles the White Stripes, Vampire Weekend, the Shins, M.I.A. and the Raconteurs, says his bands no longer make most of their money on CD sales. "A lot of artists are looking toward touring and merchandising sales at shows, because that market is still vibrant if you grow it methodically," he says. The Shins have licensed songs for use in commercials for McDonald's and Zune. Still, Montone says the Shins turn down 90 percent of the licensing deals they're offered. So why McDonald's? "Why not?" says Montone. "They have kids and want to own houses."
By comparison, the White Stripes have focused on touring and coming up with creative merch: The band sells limited-edition CD singles on the road, as well as unique posters created for each show. "We do that because it's something special for the fans, but it's also a way to make money," Montone says. "I think you're going to see artists doing more direct-to-consumer sales." The Stripes have already been able to reapportion the record-company pie to their advantage: The band owns its masters and strikes distribution deals with the major record companies on an album-by-album basis.
Those kinds of partnering relationships are also being sought by the major record companies, who are offering artists better money if they sign deals that include more than just recording rights. Generally referred to as "360 deals" because they seek to cover every facet of an artist's career, including publishing, touring, merchandising and licensing, the new deals are a way for record companies to hedge their bets in a declining record market and to recast themselves as music — rather than just recording — companies.
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One of the savviest labels is Fueled by Ramen, which boasts Fall Out Boy, Panic at the Disco, Paramore and Cute Is What We Aim For. "A lot of people hear about 360 deals and think it's a land grab, but when you own the content, there are so many interesting things you can do," says John Janick, who started the label in 1996 while going to college in Gainesville, Florida.
Unlike conventional labels, Fueled by Ramen, which has a partnership with Atlantic Records, does everything in-house: from building Websites that sell merchandise and recordings to producing the T-shirts it sells at chains like Hot Topic. In fact, Fueled by Ramen uses T-shirts to introduce fans to new music — both Panic at the Disco and Paramore placed tags on shirts with PIN codes that enabled buyers to download advance singles at home. "We're creating a culture for each artist," Janick says. "Obviously everyone is still looking for new ways to monetize recordings, but our company is growing into many other areas, and that's great."
Few bands have been as successful at taking control of their careers by combining touring and online merchandising as Gov't Mule. The heavy-touring jam band offers recordings of every live show on its Mule Tracks site. Generally selling sets for $13 per concert, the band has sold nearly 1.5 million songs — grossing more than $600,000 from the site since it launched in 2004. "We definitely make more money from downloads than record sales," says Stefani Scamardo, the band's manager. "It's not a record company we're depending on — it's our site that we're in control of."
Of Montreal have appeared in a commercial for T-Mobile, composed music for Subway and licensed their tunes for Outback Steakhouse and Nasdaq ads. "When I first started Of Montreal, I probably would have been hesitant to do a commercial for Outback," says the band's songwriter, Kevin Barnes. "In the indie world, there's a holdover from the punk movement that any commercial endeavor will taint your art. But if you care about the band, you won't begrudge us a living."
TV and film licensing fees have begun to come down as music supervisors use hungry unsigned bands from sources like MySpace. Insiders say $2,000 to $2,500 is a common fee for baby bands. Even the soundtrack to Juno offered fees in that range. (Contributors saw a payday only because the album has sold so well.) "Over the years, everyone has gotten smarter," says Lyle Hysen, who runs Bank Robber Music, which represents artists and labels for film and TV licensing, recently matching artists like Tortoise and the Come Ons with ads for Vaseline and Hardee's. "Music supervisors know that if you turn down $10,000 for a car commercial, some other band is going to take it."
Video games can also offer a lot of exposure — Steve Schnur, executive for music and marketing at Electronic Arts, estimates that inclusion in best-selling games like Madden NFL and FIFA can translate into a billion plays for a song. "When I started working here seven years ago," Schnur says, "I had to convince music publishers and labels to let us license music, but I never had to convince the artists because so many of them are gamers." These days, EA receives up to 5,000 submissions for the 30 or so spots on its Madden games. Fees are comparable to those paid for TV and film, but the exposure, which Schnur says has been valuable to bands like Franz Ferdinand and Avenged Sevenfold, can lead to new fans.
Cliff Burnstein, co-owner of the management firm QPrime — which represents Metallica and the Red Hot Chili Peppers, as well as smaller acts like Silversun Pickups — says the old major-label model is fading fast. "That's definitely over," he says, noting that Silversun Pickups, on the indie label Dangerbird, have licensed several songs for TV and do well on the road. "Silversun Pickups make a decent living," he says, but adds that he wonders whether most musicians can put the time and energy into negotiating the changing landscape — or if they even should. "It's hard enough to write a decent song," Burnstein says. "That's still the talent I'm looking for."
To view photos of musicians and other deals they are making, click here [1].