MUBUTV Music Business Insider Podcast Episode Transcript
[Don Passman]
Ritch Esra: Don, thank you so much for joining us. We really appreciate it.
Don Passman: Hey, it’s a pleasure!
Ritch Esra: I want to start with you at the beginning of your career. You started your legal career as a tax attorney, and I’m just curious: what motivated you to become a music business attorney, specifically one that represents songwriters, artists, and musicians?
Don Passman: Well, I always loved music since the time I was little. I played music. I played the accordion as my first instrument, weird as that sounds. I was also around the music business because my stepfather was a disc jockey, so I was around the business side of it as well. I always loved listening to music as well as playing it. I played in bands when I was in college and law school, and so I was always around it but it came very clear I wasn’t going to make a living as a musician. I pretty much gave it up and, treating it like one of those childhood fantasies, decided I was going to be a serious tax lawyer, took a lot of tax in law school. When I looked for a summer clerkship, I saw this sign that said: Entertainment Law for one of the firms. I said, Ooh, I never heard of that! That sounds like everything I always wanted put together! I was intrigued enough by it, but I took a job with a tax firm that said they always wanted to go into the entertainment business. It turned out that they didn’t. They also stuck me into corporate security, possibly one of the worst years of my life. And so I quickly decided I needed to change it. I took a class at USC on the music business taught by two lawyers. It was everything I wanted; it was all fun and it was great. In fact, it was a class I ended up teaching later. Then I changed firms, got into music, and -- have loved it ever since.
Ritch Esra: Wow. That’s so exciting. What year was that that you got into music?
Don Passman: 1972.
Ritch Esra: Wow, okay. An interesting time in music. That was kind of the period when the whole corporate element of major labels was being formed, WEA was being formed the year or two before… Corporations recognized the power of youth in that particular era as far as record business went. Albums were the leading form of music.
Don Passman: Yes, vinyl albums at the time. That was just the beginning.
Ritch Esra: Yeah, absolutely.
Eric Knight: Hey, Don. This is Eric. Thank you for joining us. We are so honored and privileged to have you on here. I wanted to ask you: in 1991, you literally wrote the book All You Need to Know About the Music Business that has become the industry standard and what some have called a “bible” for artists, songwriters, musicians, music business professionals, as well as music business students everywhere, all that have been using the 10th Edition that have just come out since it was published. What inspired you to write the book originally?
Don Passman: Well, first of all, thanks for the nice words, Eric.
Eric Knight: Oh, you’re welcome. (laughs)
Don Passman: It actually came out of a class at USC that I taught, the one that I took with those lawyers that I eventually ended up teaching. After I taught it for about the third year, I certainly realized that my class notes, the outline for the course, were a book. At the time, there was really only one music business book out there and it was really hard to read. I’m a lawyer and I have trouble understanding all of it. I thought, Look. There’s a need for a really simple, easy to understand overview of the music business for people who are getting started and want to know how to do it. There was really no guide on how to get there and one of the things that comes easy to me in life is that I can take something very complicated and explain it in simple words once I understand it. I really wrote All You Need to Know About the Music Business for people who don’t like to read. Musicians are oriented to their ears as opposed to their eyes anyway. So there’s big print, lots of pictures… and it’s written for people who don’t have any technical background. It’s written just in a very simple, sort of straightforward, sort of style that I thought was essential for musicians to understand and make smart choices about their careers.
Ritch Esra: I mean, yeah, you certainly did. I have a first edition of the book you’ve signed.
Eric Knight: Yeah, we both do. Not signed mine, but…
Ritch Esra: (laughs) I remember coming to your office where Amoeba is now and you signing it for me. I remember when it came out in the 90s, and that was such an interesting time in the business because CDs were 4-5 years old at the time. It was a whole different business, and I think one of the most fascinating aspects of your book - being an educator myself and using your book in my classes over the years - is that, like you said, one of your true gifts as a writer is that you are able to take these really complicated elements and distill them down to where people can really understand with your analogies and your references and examples… complex permutations of the business and calculations of royalties and so forth, and really make sense of it. You have evolved the book over the years and I’m curious. You recently just released the Tenth Edition of the book, and I think it’s fair to say, Don, that this is your most radical and comprehensive update of your book since you published it. I’m curious: what facilitated such a dramatic update for you for this particular edition?
Don Passman: Well, the streaming phenomenon has completely changed the ecosystem of the music business. I mean, radically changed! It doesn’t sound like it on the surface. It sounds like, Okay, just another way to deliver music. But let me just talk a little bit about it and then I can tell you why the Tenth Edition of All You Need to Know About the Music Business was the most radical change. Ever since the music business started - we’re talking way back in the 1800s - it was always monetized by selling something, whether that was sheet music for your piano or it was piano rolls, whether it was wax cylinders… it was always who sold an object. It didn’t matter to the creator whether the object was played once or a thousand times or never played. The creator got the same amount of money for each sale because that was that. Today, sales have become less and less relevant. Streaming is over 80% of the business in the U.S. according to the most recent RIAA report. That means that in streaming, the way it’s monetized is completely different. What happens in streaming is that the services every month collect a certain amount of money; they collect their subscription money and their advertising money. That goes into a pot. Then the pot gets divided based on how many plays each song got. So if your song got 1,000 plays out of 10,000 total plays from everybody’s songs, you’d get 10% of the money. Right? Well, that doesn’t sound like a difference but let me drill down and show why I think it is. First of all, there’s a finite pool of money each month; there’s going to be an X amount of dollars. It doesn’t matter whether there’s an artist who brings records for people into a store to buy their records, which could be a lot more money that month because it’s a big release, it doesn’t matter. It’s going to be the same amount of money. So the game is: how much do I get and how much do you get? And for the first time in history, the more I get means the less you get. So there’s only so much of the pie to go around, and the competition in this now is for listens as opposed to sales. The marketing has completely changed because people are trying to figure out how to get people to listen more. Also, when I went to a record store, I could buy more than one record and then in fact a big seller would draw in people and then I might buy somebody else’s record I hadn’t planned on buying. But when I listen, I can only listen to one song at a time, and when I’m listening to your song, I’m not listening to somebody’s else’s. So, therefore, it’s a completely different calculus in terms of How do we market? How do we monetize? How do we change it around? The book, All You Need to Know About the Music Business, took a massive rewrite to restructure and show how this works, even things that were simple that you might not even think about, like in a chapter where the CD Royalty was the first thing there. Well, now it’s stuck in the back. (laughs)
Eric Knight: Right. Right.
Don Passman: Because that’s becoming completely irrelevant. It’s also changing the way that artists deliver products. Albums may be disappearing. People want to deliver much more than an album’s worth at the same time, particularly in the rap and hip hop world. Or they may want to deliver only one or two tracks at a time and spread it out. So the whole industry is evolving and if there is a challenge to try to corral it. It took 4 years instead of the usual 3 to update this book just because -
Eric Knight: Oh.
Don Passman: It was such a moving target and so much more complicated.
Eric Knight: Yeah, that was my next question was how long did it take you to do this rewrite? I could imagine it had to have been massive.
Don Passman: It took about 4 years!
Eric Knight: Wow.
Don Passman: Normally I’d expect 3 years between editions.
Eric Knight: Wow.
Don Passman: But never before have we had that much of a radical change.
Eric Knight: Right.
Don Passman: And it kept changing while I was writing it so (laughs) I felt I’d have a handle on it and then it would slip out and turn around and nip me.
Ritch Esra: Don, let me ask you. Based on that, what you’re saying and the extensiveness of the rewrite, what kind of feedback have you gotten from people who are using it, especially using it as a teaching text? I mean, you did the update, I believe, in October? It was released in October-November? What’s been the feedback so far that you’ve received?
Don Passman: Well, the feedback has been good, particularly compared to the feedback I was getting before then, saying: “You know, my students are kind of getting impatient with your book.” (laughs)
Eric Knight: (laughs)
Don Passman: I said, “You know, I don’t blame them.”
Eric Knight: (laughs)
Don Passman: It was an embarrassing update. (laughs)
Eric Knight: Right.
Don Passman: I said, “All I can do is say ‘Hang on until the next update comes out.’” But so far, the feedback has been positive. People think that it lays it out clearly.
Eric Knight: That’s fantastic. I wanted to ask you: there are now several foreign versions of your book as well. How does that work? Do you apply the laws of the country to the text?
Don Passman: Yes is the answer, but I don’t do it myself because I’m not an expert on those laws. I have co-authors in the U.K. and I have a co-author in Germany. I did a Canadian edition also with a co-author that I thought was great but the publisher didn’t. Unfortunately, we haven’t updated that one. Basically, I do it with a co-writer in that territory.
Eric Knight: Are they attorneys themselves that are familiar with the laws?
Don Passman: Yeah.
Eric Knight: Okay. Gotcha.
Don Passman: Yes.
Ritch Esra: Don, you just spoke extensively about the reason why you took 4 years to develop the new edition which is the Tenth Edition of your book. I’m curious: the move from, I guess, what I like to call the “copy model” to an “access model” or streaming, it’s been one of the most revolutionary changes in the music business. It’s my theory that with any revolution, not only do you see a change of habits but you also, on a deeper level, you see a shift in values. One of the big challenges of the music business in a streaming world is going to be this war between the value of paid subscription vs. popular reach. I’m curious. What are your thoughts on this issue and how do you see this playing out?
Don Passman: Are you talking about YouTube, for example, and the idea that it's free? Or are you talking about something different?
Ritch Esra: No, I’m talking about free streaming services. I mean, Spotify is a free-tier, YouTube is also a free-tier, and in your book, you talk about how YouTube may not be seen as a streaming service but it’s the biggest one of them all.
Don Passman: Correct. Well, those are two different things, YouTube and Spotify’s unpaid service. Let me explain a little bit about them: Spotify’s service is not available on mobile devices, so it’s relatively small in comparison to the impact that it has, whereas YouTube is available on mobile devices. It is, inarguably, one of the bigger problems in the music business we have today. YouTube exists because of a quirk in the copyright law which I don’t know if you want me to get into detail about it or just give you the 40,000-foot view.
Eric Knight: Sure! By all means, go ahead.
Ritch Esra: No, please go ahead!
Eric Knight: That would be great for our audience.
Don Passman: Okay. There’s something called the Digital Millennium Copyright Act, and it builds in something called a Safe Harbor, none of which sounds like it means anything to you because I haven’t explained it yet. So, let me explain: Let’s suppose you own a newstand down on the corner and you sell magazines and newspapers to whoever walks by. You sell a TIME Magazine, and in that TIME Magazine is an article that has a copyright infringement in it. One of the things you can’t do under the Copyright Law is distribute an infringing copyright material. So you have violated the Copyright Law if you own the newstand. You distributed copyright infringement. Nobody enforces that and nobody would intend to. So when the Digital Millennium Copyright Act was being enacted, which was a while ago now, the digital service providers like YouTube came in and said, “What a minute. We have big ends of pieces and materials floating in our system. We’re like the newstand. You can’t hold us responsible for some yahoo that posts an infringing piece of material unless we get a notice saying, ‘Hey, this is infringing,’ in which case we have to take it down. Then, if we don’t take it down, it’s infringing material.”
Eric Knight: Right.
Don Passman: That sounded great on paper. What happened, though, is that YouTube users started posting all kinds of songs without the consent of the record label and they would send notices and say, “Take them down.” YouTube would say, “No problem,” and take them down. Then the next day, three more people would post it. So we had this whack-a-mole game where they were sending out literally thousands of notices a day. YouTubers were taking them down, the users were putting them back up and YouTube came in and said, “We’ll tell you what, guys. Keep doing this and get paid 0, or you can make a deal with us and let us do this the way we want to do it and we’ll pay you the same percentage that the other digital service providers are paying you.” So the companies all chose to do that. However, two things. 1: YouTube is the only one who gives a free service on mobile, so they are directly competing with the paid services like Spotify and Apple on mobile, and mobile is where most of the music is being consumed. 2: YouTube’s advertising base, particularly the way they compute it when it comes to allocating to a particular product, is much much less than you’re ever going to get from a subscription. I believe, but I’m not 100% sure, it’s less than the paid ads that go through Spotify but that may not be true. The difference is that it’s a much bigger scale, and so YouTube is delivering essentially for free what the other services are charging for, and if you're all cost-conscious as a lot of kids are, they’re all going to get their music through YouTube as opposed to through the paid service.
Ritch Esra: Okay.
Eric Knight: Don, let me ask you. Do you feel that the music industry is in a healthy place today?
Don Passman: I think it’s getting to a healthy place. It is certainly healthier than it was. It’s at a double digit growth, but to give you a comparison, it is only about 60% of what it was in 1999 which was the peak of the recorded music industry.
Eric Knight: Right.
Ritch Esra: Interesting. Do you believe that we ultimately will surpass that?
Don Passman: I do! I will tell you why: I think we’ll surpass it because in the days when people went to record stores, most people stopped buying music in their early twenties. Also, they don’t listen to music much after that. Some did; some of us music freaks did. But for most people, their interest faded away. Today, we can monetize music to people of all ages. You’ve got old people that want to listen to songs from their youth, you’ve got little preteens that are too young for radio that want to listen to kiddie songs, and then you have everyone else in between. We have a much bigger potential audience. Number two, in the heyday of the music business, we had the average consumer spend somewhere between $40 and $50 a year on CDs. Today, if you’re getting $7 a month from someone and the headline price is $10 a month for a subscription (but with discounts and family plans, it comes an average of $7 per subscriber) that’s $80 a year. We’re way, way ahead of what we were getting from people in the heyday of the music business on a per head basis. So, given the fact that there’s a wider range of people listening, people who have never gone to a record store when they existed, and given the fact we’re getting more money from them, I think we’re going to be bigger than we’ve ever been.
Eric Knight: Interesting.
Ritch Esra: Yeah. It’s interesting hearing you say that, Don because one of the points I remember so distinctly reading in an interview with you was your whole point about this particular aspect of growth but the fact that so much of music services today are coming to you bundled form the phone company or something else like a cable system, and that margins (the final royalty rates that they are paying you) are being squeezed. Is this something that you see continuing?
Don Passman: Oh, yes. I think that can be a real challenge to the music industry. I would not be surprised to see a day when you pay X dollars a month and you get your music and you get your Netflix-type streaming service, and you get your cable television and everything in one bundle. When it comes to that, the music industry is by far the smallest of all those industries. I worry about our clout and our ability to get enough of the pie to make it worthwhile. I don’t think we’re there yet, I think that it’s going to take some time, but I do see that as a potential challenge down the road.
Ritch Esra: Yeah, I definitely do too because when you're bundling all of those things together… It’s interesting you bring that up because on the opposite side with streaming, I see the same issue. It hasn’t emerged yet with the streaming services on video. There’s no one that’s bundled together a cable system together for all of the streaming services where you can get Netflix, and you can get Hulu, and you can get all of these things in one system. They’re all a la carte. Everything in that world is a la carte that you have to subscribe to individually. I guess much like Apple and Spotify and Deezer and Tidal and all the other streaming services are individual as well. It’s interesting/
Don Passman: Well, there’s one serious distinction between Apple, Tidal, Deezer, Spotify and Hulu, Netflix, Amazon. The difference is that the music services all have the same product as opposed to -
Ritch Esra: Right.
Don Passman: Must see-type shows on Amazon or must see-type shows on Netflix.
Eric Knight: Right.
Don Passman: They distinguish themselves by having this kind of product as where in the music business, that hasn’t worked. There were a couple of attempts of exclusivity that didn’t work well.
Eric Knight: Right.
Don Passman: If anything, it drove people to the pirate sites because they were angry they couldn’t get the music.
Ritch & Eric: Exactly. Yes.
Don Passman: So, I don’t think they’re completely analogous, but at the same time, it’s interesting, as you’d said.
Ritch Esra: Yeah. You know, Don, so much of our audience that listens to our program, they’re up and coming artists. One of the things I noticed - and I’m curious if you’ve felt the same way - is that so many times we hear about artists needing to do this, this, this, and this. It’s a far greater list of accomplishments that they need to be achieving, a far greater list of things they need to be doing… From your point of view, do you think artists need to be doing a lot more work on their career before they can attract a label, a major or an independent? Is that your experience today in terms of the deals you’re doing?
Don Passman: Absolutely. I think that the record companies now want to see data. They want to see some fire. They want to see some movement. They want to see that you’ve got social media. They want to see that your Soundcloud numbers are going up. They want to see some sort of a buzz or following, and it’s up to the artist to develop that. It’s kind of interesting. The days of record executives plucking someone’s obscure talent out of a coffee shop and turning them into James Taylor… Those days are very rare if they even exist anymore. It’s becoming much more of a data-driven business, and therefore, the artists have to start creating their own data in order to get a label interested.
Ritch Esra: Yeah, I very much agree with that. It’s funny because the era you were just describing and talking about, it’s what I used to call, in that previous time, it was much more of a faith-based business. An executive like Clive Davis or Ahmet Ertegun or Barry Gordy had faith in their own abilities to identify talent, would select talent, but yet the reality is that, you well know, is that wide for every hundred artists that a record company signed, 10-15 of them would be successful. But they were so successful monetarily that it made it possible for the other 80-85 to have careers and to make records. My understanding is that that percentage of signing of talent today has gone down. It’s not even at 15% anymore for a myriad of reasons: because we have so many more options and because making a record and bringing it to market isn’t the challenge today. Getting people's attention to listen to your music is the real challenge. And so you don’t need a label as much as you once did. Are you finding, in terms of your work, more and more artists perhaps not wanting to go the traditional route of getting a label to release their music and wanting to do deals with perhaps other entities, or is that just not happening?
Don Passman: I think all of the above is happening, and I think that’s what makes this such an interesting time, but it’s a really smart observation on your part. The barrier to entry to getting your records in the marketplace used to be the golden keys of the kingdom held only by the labels.
Eric Knight: Right.
Don Passman: Namely radio, namely placement in the stores, getting all the cost of shipping manufacturing, all these things were not something you could afford to do on your own. So the labels really were the gatekeepers. Now, anybody can get their music out. You can go to TuneCore and have music on every streaming service within a matter of minutes. The problem is: everybody can do that, and there’s multi millions of pieces of music out there. So the game is how do you get people to notice it?
Eric Knight: Right.
Don Passman: How do you get to break through the noise? And it depends on the genre you’re in. If you’re a niche artist with a cult following, a label may not make sense for you because you get a much bigger piece of the pie doing it yourself and marketing yourself. If you want to be a worldwide mega star with clout in territories, the labels bring a lot of value. Besides parts in the obvious ones like marketing imoney, they have huge amounts of data. They have relationships with the digital service providers. They’re maybe able to get you on the front page of Spotify which you can never do on your own. And then in between are the independent labels. They still take a chance on artists they just like because their investment is much smaller. Although even they, I believe, look at the data and want to see something going on. So that’s another way artists go and develop.
Eric Knight: Don, I wanted to ask you. At what point does an artist or when do you think an artist needs a music attorney?
Don Passman: When you have a contract to sign. Anything you’re going to sign, you should have a music lawyer look at it because you can be giving away longterm rights and not understanding what you’re doing -
Eric Knight: Right.
Don Passman: And tying yourself up for a very long period of time. I’m not talking about a contract to play a gig at a local club -
Eric Knight: Right.
Don Passman: But if you are going to be signing away your recording rights or your publishing rights or making a deal with a record producer or a deal with a manager… Anything of that verdict has that long term consequence, you should have a lawyer look at it.
Eric Knight: Absolutely.
Ritch Esra: On that note, Don, what kinds of qualities, or what specific attributes or specific elements, should an artist or a songwriter be looking for in a music attorney that they’re wanting to hire to represent them?
Don Passman: Well, I think two things. The first one may be obvious but you want to check around on reputation and make sure you’ve got somebody who’s at least competent, if not really good, at what they’re doing because that’s number one, over and above number two, which is going to be their bedside manner. There are people with phenomenal bedside manners that are not the greatest lawyers and vice-versa; they’re great lawyers that you would not want to have to spend more than three minutes with because of their personalities. So, you want to hit the sweet spot -- First of all, make sure that you’ve got somebody competent. Then it’s just a matter of personality and chemistry. You want somebody that’s going to take you seriously, that will take your calls, that will spend time with you, and you can check on that through checking other clients that they have and just talking to them and saying, “Do they return your calls?” “Do they get their work done on time?” There are great lawyers that are just too busy to take care of you and there are great lawyers who are flakes and just don’t bother. There are people who you just need to know will take you seriously and treat you with respect and get your work done in a timely fashion, but it’s chemistry. You need to make sure that they explain things in a way that you can understand them, that you feel comfortable with them, and that you know they will be looking out for you.
Ritch Esra: Okay. You know, Don, many new artists today -- It’s my experience that they don’t realize often that when they’re signing a recording contract, either to a major label or to a significant number of independent labels, that they’re signing what’s known as a 360 deal. For our audience, can you explain what exactly that means for them today, and what are your personal thoughts on 360 deals for new artists?
Don Passman: I hate the 360 concept for new artists but let me explain what it is and then you’ll probably understand why. First of all, historically, here’s how it came about: When the music business crashed after 1999, the record companies suddenly were not very profitable, and they began to go into a panic mode. There was rampant piracy, there was no new technology to save them that was on the horizon and it didn’t show up for quite a few years later (looking back historically) and so they came up with the following concept. They said, “Look. We’re the only ones who spend significant money to build an artist’s career,” which is true. They said, “We spend more than anybody else, and because we’ve put this money in and they built a career, the artists then go out and they can make money touring. They can make money from their songwriting. They can make money from merchandise, meaning posters and T-shirts with their name on it. They can do endorsements and commercials, and it’s all because we took the risk and spent the money to do it. Therefore, we should share these other sources of income. Because we’re the ones putting out such an investment, we should have a percentage of your songwriting. We should have a percentage of your touring. We should have a percentage of your merchandise and your endorsements and your sponsorships and commercials.” Nobopdy on the artist’s side liked this but the reality was that if you wanted a record deal, especially in those days, you had to give it up. Since then, the percentages dropped. If you have enough bargaining clout, you can get it down to relatively minimal amounts but you need a lot of clout, and not every label will do that. So the 360 rights are here to stay even though the historical reason for them may or may not exist currently because they’ve been able to do it and some labels are more aggressive than others.
[commercial break]
Ritch Esra: Are there examples where a label -- for example with a superstar artist that’s going from one label to another. Are there examples where it will just strictly be a recording contract rather than involving other aspects of the artist’s career or is that just sort of history?
Don Passman: Well, again, it depends on the label. If you’re a 900 pound gorilla, you’re probably not going to pay any 360 rights. Otherwise, it just depends on the age old question of leverage. For some labels, it’s more of a religious issue than others but if they want somebody bad enough, pretty much everything is negotiable these days.
Ritch Esra: Interesting. Okay. On that note, let me ask you: do you find that the willingness of labels in regards to these kinds of deals is more flexible today with new artists or is it, as you say, is it all just a matter of your clout as an artist, like how many people want you or who wants you or how many labels are interested?
Don Passman: I’m sorry, are you talking about the 360 rights or are you talking about deals in general?
Ritch Esra: I’m talking about 360 deals, meaning if an artist comes to a label that - let’s say a major label - wants, they’ve been doing this independently or on a small independent. They’ve built up a significant touring base. They have that going for them going in with the big deal. Now they’re with a major or they’re negotiating with a major. Can they say, “Look. We have a lot of clout in this area. We’ve built this up for the last 5, 6, 7 years. We don’t want to give XYZ percentage because this is something we built on our own.” Is that leverage that a new artist can use in that situation on a 360 to lower the rate?
Don Passman: Yes, for sure.
Ritch Esra: Okay.
Don Passman: The more hound snapping at the door, the better deal you will make.
Eric Knight: Yeah. Okay. Don, another area in the music industry that has dramatically shifted within the last decade or so for artists and bands at all levels of their career is the economic value of live performance. Given this, are artists and their managers looking closely today at the expense deductions by concert promoters?
Don Passman: Oh, yes, but the game with concert promoters has been settled down for quite a while. Originally, they played all kinds of games, particularly when there are a bunch of little independent promoters. When they got rolled out and there’s really two major players in the U.S., being AEG and LiveNation.
Eric Knight: Right.
Don Passman: The games became much less. You have to be sophisticated, you have to know what games you’re going to play, but they’re much more straightforward about it now. They’ll just build in the kind of charges they want to take as opposed to hiding them or surprising you here and there.
Ritch Esra: It’s interesting to hear you say that. I guess in relation to that point you just made, is it your experience, Don, that artists today are more educated, are more knowledgeable on the business side of their career than in previous eras?
Don Passman: That’s a really good question. I mean, the reason I wrote All You Need to Know About the Music Business was because I wanted to get artists more educated than they’d ever had a chance to be in the past because it was a sort of voodoo, black box that nobody wanted to shine a light in before. And I thought that was just wrong on every level. The answer, though, is that it depends on the artist. Look, I’ve had clients who are incredibly sophisticated with business and I’ve had clients who don’t have any interest in business whatsoever. In fact, the idea/topic bores them, turns them off, makes them run the other way.So I think it very much depends on the personality of who’s dealing with it. The reality is, even the ones who are really good in business, that’s not the best use of their time. The best use of their time is to be creative and entertaining and doing the thing they’re genius with and the things they’re most passionate about. An artist who’s interested in their career is something that’s a delight for me because I feel much better feeling like they really understand what they're getting into, what the deal looks like, what it means, and so forth. That’s better than someone who’s just, “Yeah, I don’t want to be bothered. Don’t tell me about it. Tell me where to sign.” And I have all kinds.
Ritch Esra: You know, it’s funny. Listening to you, I’m thinking this is something that I think applies much more so to new artists, where I think -- Like you were just saying with the purpose of writing your book and the inspiration for it, new artists I find today, as an educator, should be more knowledgeable because 1) they don’t have the leverage, 2) most brand new unknown artists don’t have the sophistication of management or representation at that point in their careers where if they don’t know the basics, they often get into situations that are very damaging long term. We can talk for hours about situations that go back decades. I mean, whether it was Springsteen signing deals he shouldn’t have or Billy Joel or many many others because - or Elton John - I mean, his classic one with the publisher where they said yes to something that, I guess if they had a little more knowledge that they perhaps wouldn’t have done that. So it’s just interesting. Do you find that - you don’t have to name the names - but do you find the ones who have no interest and bore them completely, are those more experienced artists who have good representation to handle that or brand new people? Or is it both?
Don Passman: It’s both. It’s just personality. I mean, some people like business; some people don't. I happen to like business and creative and in fact, what I love about what I do is that I get to speak both languages. There’s always tension between the two, and it’s existed ever since art and commerce existed because you can’t have a business if you don’t have art to sell, and you can’t have an artist create if they can’t make a living.
Eric Knight: Don, can you speak to the wider diversity of deals transacting today for artists and bands than in previous eras? Publishing owner, masters, label services like Kobalt and AWAL?
Don Passman: Sure. There's a lot more opportunities to get your music out there than there’s ever been in the past. Places like AWAL allow you to put your music out yourself. On a very basic level, TuneCore will put it on the streaming services and you have to do your own marketing. Places like AWAL will do some marketing for you whether you have to pay for it yourself or they’ll advance depending on the deal and depends on their appetite for it and whether they believe in it. There are certainly opportunities, particularly for a classic artist who has somewhat of a built-in base but not likely to get on the radio to get their music out to one of these companies, get some marketing behind it, and sell a decent amount of product or get people to listen to a decent amount of product.
Ritch Esra: Don, are artist deals with labels and publishers easier or more difficult for you today as an attorney than they were in previous eras?
Don Passman: Well, they’re actually easier in some ways but they’re always difficult as well. The things that are difficult are the same. The things that are easier was that, and this will be surprising, the contracts have actually gotten simpler over the years.
Ritch Esra: Oh, okay.
Don Passman: There used to be what the computation of royalties in a record deal was very complicated with packaging deductions and free goods and all kinds of weird places they would steal back. They’ve switched over and now are just pretty much the percentage of the record company’s receipts. Way simpler, way more straightforward. The publishing deals have gotten a bit less complex because they used to be split into pieces of a songwriter royalty and a separate co publishing deal with different deductions. Now it’s just one contract and all they do is change the percentage so you get a much bigger piece of the publishing.
Ritch Esra: Okay. Let me ask you, Don, what's new with artist royalties, especially for streaming? Is there more transparency today than in the past on this front in your experience or no?
Don Passman: Well, there's more transparency in the relationship between the artist and the label because it’s just a percentage of what the label gets. The complexity is under the hood. The complexity is the reports that the label gets from the streaming service with literally billions of lines of data, and how that’s computed in whether you’re actually getting your share of it, that isn’t necessarily as easy to figure out or as transparent, not even because they’re hiding the ball so much as it’s just enormously complex and requires an awful lot of deep digging and value. The label, of course, their interest is just to get most from the digital service provider but that’s different from how it gets divided up once it’s inside the label based on the dara.
Ritch Esra: Yeah, I remember hearing a very interesting conversation that Troy Carter gave. He had an interview at Medium last year and he said one of the most interesting problems that he encountered when he went to work for Spotify was he said, “We provided an unbelievable amount of data to artists, to labels, to managers,” and he said, “The problem we encountered with this” and you sort of reminded me of this fact when you gave your last answer is that, he said, “Most people in the business did not know how to interpret the data.” And he said, “And the ones that did know how to interpret it didn’t know how to make the right decisions based on the data that they were being given.” So, I mean, this seems like -- when a Troy Carter at that level is talking about labels and publishers and managers saying this, it seems like the complexity that you’re referring to, seems to be a deeper problem than perhaps any of us realize in terms of computing royalty rates.
Don Passman: Interesting. Well, I hadn’t heard that but it makes logical sense. It sounds like he was also not just talking about how the royalties are computed but how do you read the marketing data and know how to maximize your artist’s career.
Ritch Esra: Yeah, exactly, and when I was at Spotify, he said, “We put lots of time, money, energy, human resources into developing these kinds of data systems that tried to provide analytics for artists and bands and for labels to give them supporting services on what we were giving them.” And he said unfortunately, it’s like it became so sophisticated or so complex that people didn’t seem to have any kind of basis or reasoning to understand how to interpret the data, and he said the few who did didn’t know how to make the right decisions. So, it’s interesting. If you’re interested, go on YouTube and put in the word Medium. You’ll go to all the Medium videos, and look up the one on Troy Carter. I think you would find it very interesting in that regard because he addresses this issue in talking about data and what its role is in the business because this is what everybody is talking about. You know, data, data! Everybody needs data! But it’s like if you don’t have an understanding of what the data is, I don’t know how it serves you in terms of your career or as a business.
Don Passman: Yeah, that sounds like a really good suggestion. Thank you.
Ritch Esra: Sure!
Eric Knight: Don, the MMA - and for our listeners it is not Mixed Martial Arts - the Music Modernization Act is the first dramatic change in copyright law in a few decades. This is a two-parter. 1) What are the most important points for songwriters to be aware of? And 2) does the new edition of your book address the most important aspects of the MMA?
Don Passman: So, first of all, -- yes, MMA does have sort of a cage match vibe to it.
(laughter from Ritch, Eric, & Don)
Don Passman: In the way that it came about. Secondly, there’s a whole section on the MMA in my book that talks about all the different aspects of it because it is significant. 3) It is not as significant to a new songwriter as you might think but it is very helpful. Do you want me to talk a little bit about what it is?
Eric Knight: Absolutely.
Ritch Esra: Absolutely, yes.
Don Passman: Alright. So, here’s the history of how it came about: The digital service providers were having a very difficult time figuring out which songwriters or music publishers; for people who don’t know the difference, a music publisher is the person who owns a song as opposed to a master or the actual songwriter’s work that could be recorded by several different people, and the publisher controls those rights and pays the songwriter. So, the digital service providers were having a hard time finding out who the publishers were and who owned all the songs they were streaming, and it was easy with the major publishers; they were down the hall. It was not so easy with the little obscure songs here and there and obscure publishers that might be hard to find, situations where rights were owned by different territories, those situations where songs were owned by more than one person and some of the publishers were hard to locate… big mess. So they did what any warm-blooded person in the business would do; they just kept the money instead of paying anybody. That didn’t go over well, and when people found out about it, they filed a number of lawsuits against them for copyright infringement saying they didn’t have licenses, which they didn’t, and they didn’t pay the owners, which they didn't, and those cases were very serious because copyright infringement carries pretty severe penalties including the $25,000 per infringement, and when you’re talking about millions of songs, that adds up pretty quickly. So all of a sudden, the digital service providers had a reason to figure out how to solve this problem that coincided nicely with the music industry that had a reason to move the money out of the digital service provider’s hands and into theirs. So what came out of the MMA was essentially an organization that’s still being set up that will collect all the digital mechanical royalties, all the royalties from the digital services. I say “mechanicals” because there are two different kinds of royalties that the digital service providers pay. One is a performance royalty which is the same thing radios pay to play a song on the radio; you’re performing it. The other is a mechanical, which I won’t get into too much detail but just say that for them to reproduce it on their servers, and for a user to reproduce it on the cache of their device requires a different license from a performance license which is called a mechanical. So, the performance licenses they were already getting were simple, but the mechanical licenses where the ones they had to go chase multiple users around. So the MMA sets up in one place, and the digital service providers, they all move the mechanical royalties to this one place, and once they do that, they are no longer guilty of copyright infringement. They can do what’s -- in essence, what we call a “blanket license,” which means we can license every song that’s ever been created by only paying one fee over to the society. The society then has publishers coming to them and saying, “This is my song. This is my song.” And they sort it out and then pay the publishers their percentage of the money that comes in. If not all the money is claimed, which will happen because not all the publishers show up, that gets out and that gets held back for a few years and then it gets distributed proportionately to publishers who did claim it. So it’s a very nice little system that solves two problems: 1) the digital service providers no longer have to be copyright infringed or run around doing -- literally hundreds of thousands of licenses. 2) The songwriters now know that the money is going “here” and as long as your song is being performed and you file a claim, you get paid.
Ritch Esra: You know, Don, a big point of contention in MMA was the establishment of black box money. Can you tell us what it is and if you see the rules around its distribution changing as we move to a more online, digital landscape?
Don Passman: Well, I interestingly did tell you what black box music is; I just didn’t name it. (laughs)
Ritch Esra: Ah, okay.
Don Passman: “Black box” is when money that’s leftover from people who don’t claim a piece of the pie. In other words, if there were songs in there that were played that nobody’s filed a claim with the society, that’s a black box money because they’ll only payout to the people who came in and said, “Hey, this is my song. Pay me.” So there are going to be songs there that nobody files a claim for. Either there’s an advertense or they don’t know any better or it could be in dispute but that’s a different set of issues, but there is money left over. So the rule is they hold it for three years and then proportionately pay it out to the people who did file claims. So whatever is left over gets paid out if it’s not claimed in three years.
Eric Knight: Okay. Don, music publishers in the U.S. are in the midst of having their consent decrees evaluated by Congress. If publishers come to directly negotiate those rights, how do you feel it will affect the global market?
Don Passman: Well, the consent decree negotiation would actually be kind of the opposite. The consent decree negotiation works like this: ASCAP and BMI both have consent decrees because there is a worry that they were going to be such monopolies, they were going to strangle other businesses. In other words, if they got to a radio station and said, “I decided not to license you, you’re out of business” that gives you too much leverage and you’re a monopoly, arguably.
Eric Knight: Right.
Don Passman: That’s how it came about historucally., So the consent decree says, “Hey, you have to license your users. Anyone who wants a license, you have to give them one. You can argue how much they get paid, and you can go to a rate court and argue about it, but you have to give the license.” Well, that obviously takes a huge amount of bargaining power away from the organizations. So there’s a move to try and get rid of the consent decree which would allow ASCAP and BMI to literally go in and say, “We’ll shut you down if you don’t give us a license and give them more clout in the marketplace.” Whether that happens or not, I don’t know. There have been some recent changes to it that, under the Copyright Law, set up different rules that are much more favorable to the performing rights societies than they have ever been in the past. It’s not clear that there’s going to be a move to do away with them/
Ritch Esra: It’s interesting because Irving Azoff’s organization, a fairly new performing rights organization, won some -- significant battles against broadcasters in this particular arena, didn’t they?
Don Passman: They did! There are two organizations. One is Irving’s, it’s called GMR, and the other is called SESAC, that internationally are staying too small to be subject to the consent decree. If they’re under 10% of the market, the government doesn’t consider them a big enough force, which gives them the ability to go out and say, “You can’t use my music.” And they both signed up sort of must-have songwriters so they have the clout to go in and negotiate. The deals they make are not public. Their argument would be that we have more clout so we get the better deal, but nobody knows that for sure.
Ritch Esra: You know, consent decrees, in terms of ASCAP and BMI, do they specifically pertain only to terrestrial radio, or to streaming services?
Don Passman: No. They pertain to every license that they give, not just terrestrial radio. So it’s in parts. It’s in television, it’s nightclubs, it’s stores -
Eric Knight: Stores, retail stores. Yeah.
Don Passman: Yes. All of the above.
Eric Knight: Interesting.
Ritch Esra: You know, sort of a side note to this: you’ve said that traditional terrestrial radio will become much more hyper localized than in the past, but that it will also be widely challenged. Can you elaborate on this?
Don Passman: Sure. The theory goes like this: radio’s sweet spot is for kids 16-24 years old, and if you think about it, the radio stations are not in the music business; they’re in the advertising business. What they want to go over their airways is what’s going to appeal to an advertising group for which advertisers will pay the most amounts of money. I don’t mean to sound crass because obviously some of them do love music, but they’re also making sure that they’re in business and keeping listeners in that range. Well, with Spotify, we’re starting to get kids listening to music when they are much younger, and listening to Spotify (and preteens). And what happens when they grow up into that sweet spot? Are they still going to listen to the radio? Maybe. Maybe not. Radio playlists are now becoming radio. The curation seems to be moving away from the radio stations toward the playlists. And I think radio will be very challenged and the things they can offer that nobody else can is if they become hypervocal.
Ritch Esra: Yeah, what's interesting about it is that - and I ask you this question because I’ve been teaching students since ‘86 and then I took a break but in 2002 on a more consistent basis - what I find is that some of the students I’m teaching are usually between the ages of 18 and 24, and none of them, not one of them, listens to radio anymore. Traditional radio! They listen to music in a myriad of other sources, but traditional, terrestrial radio is just not part of it. Not at this point in their life. So to me, it’s almost like it’s a generational question as well in terms of the evolution of people and certain generations in terms of what they will and won’t do and what their habits are.
Don Passman: Interesting. I’m not surprised by that but I haven’t heard it, and it certainly makes sense. I mean, I think kids don’t even get their driver’s license now and most of the music on terrestrial radio is in cars. So I think that might be part of it as well.
Ritch Esra: Yeah. Plus, the fact that radio is not the only game in town. I mean, there was a time when it was the only game in town, and even major markets like L.A. had 5 or 6 big, big radio stations in multiple formats. But now you have this endless choice of music, endless choice of options and platforms and devices and websites and blogs and different places where you can listen to music and different outlets for it. So it just seems like it’s a different consciousness today regarding this particular issue that I think is going to affect the broadcast industry, especially in the next 5-10 years.
Don Passman: I think you’re right.
Eric Knight: Don, we wanted to ask you: besides your great book, All You Need to Know About the Music Business, are there any other books or films that have really resonated with you professionally speaking that you can recommend to our audience?
Don Passman: Well, the honest truth is I don’t actually read them anymore so I’m not sure I could. I know there are some good books out there. I think Emily White is coming out with a book, a how-to in the music business. I think Emily is talented. She helped me with the section on new artists so that might be a good resource, but I don’t know if it’s out yet. Otherwise, I’m honestly not as familiar with them.
Eric Knight: Or any films that might inspire our audience that you might suggest to watch?
Don Passman: A Star is Born.
Eric Knight: Okay.
Ritch & Don: (laughs)
Eric Knight: The first version or the second version?
Don Passman: Oh, that’s a good one. That’s a really good one.
Eric Knight: Also, Don, to follow up with my next question: what advice can you offer our listeners who are wanting to pursue a career as an artist or a musician in the music industry?
Don Passman: I think you’ve got to follow your passion. I think that nobody has been really successful unless they are passionate about what they do,a dn one of the things I do as a hobby is study the commonalities of really successful people in every area of life.
Eric Knight: Hmm.
Don Passman: One thing I think they all have in common is this incredible determination to get to their goal no matter what gets thrown in their way. If it’s a brick wall, they’ll take it apart one brick at a time or go around it. They get discouraged, they get knocked down, they get rejected, they get back up and keep going. And I think that's the number one quality that separates the winners from the losers.
Ritch Esra: Yeah, that they have to really, really want it. Don, on a personal note, what keeps you motivated and passionate in your career at this point moving forward? What is it about -- is it music or is it industry or is it the people or the relationships that keeps you going? I mean, you're at the top of your profession and you have been for decades, so what is it that keeps you moving forward?
Don Passman: I really love what I do. I like being with creative people. I like being intellectually challenged. I like the way things are changing and getting interesting and I love being able to do things that are never done before, which I have been blessed with some clients who have given me the clout to do that. I'm always fascinated by whatever new thing is coming along, and I just like combining creativity and business.
Ritch Esra: You know, it’s been said that the next evolution, or revolution, of the business isn’t going to be a format or a better device or a better platform, but it’s going to be about a different kind or a better experience, whether that’s the role of AI - artificial intelligence - coming into music or virtual reality. Do you have any thoughts in terms of what you’re seeing from your side? I mean, you’re on the front lines with so many different types of companies and deals. What are your thoughts on that?
Don Passman: Well, I think those -- first of all, I think there’s a lot of statistics that millennials are more interested in experiences than stuff, unlike a generation before where everyone wanted to acquire things. They’re less interested in that and more interested in the experience. That’s why things like Coachella are such a great success; it’s not just the concert, it’s a whole experience, lifestyle-type mood.
Ritch Esra: Right.
Don Passman: There are certainly people trying to do that in virtual reality and on Augmented Reality. I don’t think the tech is quite there yet to do it, but I would not be surprised if you don’t have, for example, a virtual concert with a million people around the world tuning in to some kind of virtual reality.
Ritch Esra: Yeah. Very much so. There’s another question that I want to ask you about, which is -- and it comes into… and I know you must have confronted this, and you probably will continue to confront this. It’s something that’s relatively new to this particular era, and that is the whole idea of holograms. From a music business point of view, it’s the idea that an artist literally has to ask themselves -- Paul McCartney must be discussing with his family, “Do I want my image, my career, my music, to continue after I die or do I not want that?” And I’m asking this because we’ve seen the thing with Tupac that happened at Coachella. We’ve now seen Buddy Holly and Roy Orbison. Now we have this tour of Whiteny Houston going out, and it’s just the idea that people are willing to pay money to see an artist that is no longer there. I understand that the next one that’s going to be doing this is the Amy Winehouse experience, and I’m just curious as to what your thoughts are on this legal standpoint and have any clients come to you with questions about this, saying, “Yes, I want to do this.” or, “No, I want you to specifically make it legally that I can’t be put into a hologram by my family after I’m gone.”
Don Passman: I haven’t seen the latter. I’ve certainly had clients approached about it. I don’t have any who have actually done it. I think that the technology is still relatively new and I think it’s going to evolve. It’s a very interesting area but I don’t have a lot of experience with it, and I’m not sure anybody does because it’s still pretty new.
Ritch Esra: Yeah, and it’s controversial too. On one hand, somebody was saying that this tour they’re doing with Whitney Houston uses real musicians but you have an artist who will never be in a bad mood, will never be hoarse, will never be off-key -
Don Passman: Tired.
Ritch Esra: Never be tired, and it will be a great show every single night. The musicians will just be there to follow it. So, I don’t know, there’s something very removed from the original spirit of what an artist’s audience connection is all about in that, and yet, we see more and more people willing to embrace this as an experience they are willing to pay money and time and commitment for. It’s a fascinating area to me in more areas than just a hologram, but for the reasons that we’re talking about.
Don Passman: I agree.
Eric Knight: And another question too, do you see that as something being built into contracts in the future? I know that technology is not there, but do you see that as something that might even be built in from the contracts from record companies or, you know, what have you?
Don Passman: Oh, don’t give them any ideas.
Ritch & Eric: (laughs)
Ritch Esra: Okay. Don, you know, I want to ask you: what advice would you offer our listeners who are wanting to pursue a career as a music attorney today who are interested in that side of the business? What advice would you have for them?
Don Passman: Well, first of all, I would say go to the best law school you can get into and get the best grades you can because that will be the best choice. It’s a little difficult to get in as a music lawyer. There's a catch-22.
Ritch Esra: Yeah.
Don Passman: Everybody wants somebody with two years of experience and nobody wants to train anybody. So it’s a little tricky. Going to a label or a publishing company as a way to start is a really good choice because they will usually train you, but the most important thing is to just get in the game. Meet people. It’s a relatively small business. It’s based on relationships as I think you mentioned earlier, and it’s just a matter of pushing on the door and knocking hard enough until somebody opens it.
Ritch Esra: Okay. Alright, because a lot of students talk to me about -- they want to go to law school. They want to learn. And Jay Cooper once said something interesting to me. He said, “When you graduate from law school and you are now an official attorney, it’s usually to become a good music attorney or,” I think the term he used is, “really knowledgeable.” He says, “It takes between, depending on the person, anywhere between 5 and 7 years to really become immersed in music business law and everything you need to know about that particular aspect of the business.
Don Passman: That’s probably a pretty good time frame. I mean, I think you can get pretty competent in about 4 years, but I think to really feel like you’ve got a great hand on it, it’s a pretty good time frame.
Ritch Esra: Don, I want to thank you so much for doing this. I really, really appreciate it. I’m honored you would do this and -
Eric Knight: Yeah, we’re both very honored.
Ritch Esra: Very, very honored you would do this, and it’s fantastic talking with you. So, thank you again.
Don Passman: Well, thanks, Ritch and thank you, Eric. It’s a pleasure!
Copyright © 2012–2023 MUBUTV Media. All Rights Reserved.