Thanks to technology and Internet-enabled services, more music is being purchased, more music is being heard, and artists are getting paid. But the traditional music industry measures success using a bygone standard, leading to a lopsided perspective of how artists can achieve success in this day and age. And in our view, this leads to an undervaluing of the broad, actual advantages of the Internet — and innovative services using the Internet as a platform — in rewarding artists for their creativity.

The old system, although creaky and not perfect, worked well enough, but technology created scale in a way that was never imagined. The system is now broken but sadly, when these issues are discussed on Capitol Hill, there is no voice or representative for the millions of artists in the US that are now the new music industry.

Part One: Summary from the EFF

Richard Esguerra (of the EFF), writes that “the new services catering to musicians are struggling to tell their side of the story — a story that turns out to be substantially more optimistic and instructive.”, against the negative spin of the old music industry, which only looks to CD sales in its argumentation.

Richard summarizes a series by Jeff Price, CEO of TuneCore, an exemplar of that ‘new music industry’, who penned a six-part series:

* The State of The Music Industry & the Delegitimization of Artists

The key ideas from the series are the following:

* U.S. music purchases overall are up year-to-year, while album sales are down. In other words, artists are making more money, while the labels are making less.

* Price presents some insightful back-of-the-napkin math comparing (a) an artist’s take from selling and distributing CDs with a label, to (b) an artist’s take from selling songs and albums online: “By selling just two songs on iTunes for $1.98, the artist makes the same amount of money as if a $16.98 full length CD was bought. An artist sells one digital album for $9.99 and makes 500% more than a signed band.”

* The traditional music industry insists on measuring artist success via album sales, which harms artists that are nonetheless popular, interesting, relevant, and profitable.

* Outdated copyright and trademark laws can actually impede independently successful artists from capitalizing on all available opportunities.”

Richard concludes:

From the story that Jeff Price is telling, updating the laws to help artists take advantage of new opportunities would provide far more value without also threatening free speech, damaging the technical underpinnings of the Internet, and limiting innovation.

Part Two: Quotes from Jeff Price

* Based on what we have been hearing, most have no idea that music purchases are up over 50% from 2006 to 2009. (figures here)

Jeff Price expands: “To summarize: In the four years of 2006 to 2009, music purchases increased from a record starting point of 1 billion purchases to the new record point of 1.5 billion music purchases. These specific figures do not include the sales and other income streams.”

And these stats DO NOT EVEN INCLUDE: “any “purchases” generated via subscription based streaming services like Rhapsody and Mog are not included. Neither is revenue generated from Digital Millennium Copyright Act compliant streams (non-terrestrial based plays via satellite radio, Pandora, LastFM, Jango, 8Tracks, Slacker etc.). Nor do they include most band selling direct-to-fan sales, bundling of music with merchandise (i.e buy the t-shirt, get a free album, buy Guitar Hero and get the Soundgarden album), on-line drop card redemption, sales of tracks for game play in Rock Band, ad revenue generated via YouTube and other streaming video sites, traditional public performance royalties, gig income, “pay what you want” donations to the band for music, stem sales, synchronization licenses, ringtone sales (these are listed separately by Nielsen), publishing royalties, fan club subscriptions and a lot more. ”

Jeff also explains WHY artists are now making more, here are the economics of digital income, compared to the old copyright regime:

“Let me provide context. The financial food chain of the music industry used to be as follows. A distributor sells a CD to a retail store for a wholesale price (let’s say $10). The retail store marks the CD up to $16.98 and make $6.98. The distributor takes a “distribution fee” of 20% of the wholesale price (in this case $2) and passes the remaining $8 back to the label.

A band signed to a major label could expect to earn a band royalty rate of $1.40 – $1.70 per full length CD sold. This band royalty was paid through to the artist if they had “recouped” the band royalty fronted to them by the label (i.e. an “advance”) – most do not recoup.

Compare this to self-distribution to iTunes though TuneCore: an artist makes $7 for each album sold at $9.99 and $0.70 for each song sold at $0.99. By selling just two songs on iTunes for $1.98, the artist makes the same amount of money as if a $16.98 full length CD was bought. An artist sells one digital album for $9.99 and makes 500% more than a signed band. The price may have dropped for the music consumer but with self-distribution the artist makes more money.”

Part Three: Jeff Price Responds to Reader Questions