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07/26/2013

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CD Baby CEO Tracy Maddux Knows What it Means to Do It Yourself

When Tracy Maddux—a passionate fan of live music—joined CD Baby, he decided he needed to see a show by each of the new employees he worked with. Nearly everyone at CD Baby plays music. It meant ...

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Publicist
Tyler Volkmar
(812) 961-3723

Who Can Crack the Black Box of Revenue for Independent Musicians? CD Baby Pro is the Revenue Stream Bridge to Tomorrow

When you think of CD Baby what do you think of? If you haven’t been paying attention the last few years, you might think they just ship or distribute CDs for independent artists. Or you might have a vague sense that they also get them into iTunes and other digital stores. You might have heard that they offer band website hosting and a popular Facebook page application for bands.  They do all of those things. But in recent months they have cracked one of the toughest challenges for musicians: publishing.

“If you know the music business, you know a lot of the money has always been in publishing,” says Kevin Breuner, director of marketing at CD Baby, and a veteran touring artist with Smalltown Poets. “Recording has been a side show. The people that own the publishing catalogs are the fat cats. Artists need a bigger piece of that.” While the recorded music business has taken a nosedive over the past decade, music publishing revenues have grown substantially. One report shows that, by 2015, publishing and sync revenue will be over $1.7 billion higher than 2005.

However, collecting publishing royalties for music is tough to do effectively under the best of circumstances. For independent artists, it’s even tougher. They have to understand the difference between a performing rights organization (PRO), such as BMI and ASCAP, and a publisher. They have to distinguish performance royalties from mechanical royalties. They have to know that royalties are collected differently in the U.S. versus in the rest of the world thanks to different laws. And they have to navigate variations for digital versus terrestrial royalties. On top of all of that, royalty collection agencies worldwide will not deal with individual artists, only publishing aggregators that represent large catalogs of music.

CD Baby continues expansion of its services to artists with CD Baby Pro, which affiliates them with BMI or ASCAP (whichever they prefer), registers their songs with collection agencies in over 100 countries and territories, and—through a partnership with Songtrust—collects all available publishing royalties on their behalf.

“This money is going into the ‘black box,’” explains CD Baby CEO Tracy Maddux, who found out that more than two thirds of CD Baby artists were not registered with a PRO. “After a couple of years this uncollected money is dispersed on a pro rata basis to the most commercially successful artists. The PROs cannot pay artists they do not know about. This is the next big hairy problem we decided to solve for our artists.”

As the world has become more digital, there are both new music revenue streams that have emerged and easier access to those more diverse streams. “It’s just a problem that needed to be solved,” says Breuner. “Also, there is an evolution in how international royalties are being collected. Everything used to run through a complicated sub-publishing network, which further clouds the transparency of payment. Over the course of the last several years, Songtrust has built relationships worldwide so payment is quicker and in some cases higher. Even after our cut for administration.”

While at first glance, it may appear that CD Baby is replicating an offering that TuneCore – a digital distributor for independent artists – launched first, there are significant differences between the two publishing collection services. First, TuneCore built a network of sub-publishers in each territory. In TuneCore’s case, more parties need to get paid before the songwriters and performers get their cut, each sub-publisher sets their own percentage rates for collection, and, as a result, there is less transparency in an already opaque transaction. CD Baby’s partner Songtrust (a division of Downtown Music Publishing, which manages the song copyrights of such diverse artists as John Lennon & Yoko Ono, The Kinks, Mötley Crüe, Seal, Hans Zimmer, Carla Bruni, Ellie Goulding, Neon Trees, and One Direction) works directly with each foreign society, with no middlemen and fewer bites out of the artists’ revenue. The other difference between the two companies’ publishing collection services is traction.

“We’ve been able to do in a handful of months what took TuneCore two years to do,” says Maddux. “We’ve read that they registered 12,000 songwriters in two years. We’ve already signed up 6,000 songwriters in the first three months and at this pace, we’ll exceed 12,000 in the first six months of CD Baby Pro.”

Collecting money from publishing is inherently a slow process. This makes it tricky for anyone other than early adopters to understand the payoff of signing up for CD Baby Pro. But in another 12 to 18 months, CD Baby expects to see another jump in sign ups. They are already seeing that happen with their sync-licensing offering with partner Rumblefish, in which CD Baby artists can collect revenue when someone uses their music in homemade YouTube videos or through professionally-produced, commercial film and TV.

“There is an overall shift in how artists think about the way they make money from music,” explains Breuner. “When CD Baby started it was real simple: I made CDs and sold them at a show or online. That and t-shirts was all there was. Now all these additional revenue streams have opened up and it’s not just about records and release cycles. It’s about a catalog. If you register them correctly, your compositions pay you again and again over a lifetime.”