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How Technology Has Impacted The Music Business

David Pomeranz, Technology has impacted the music business

With David Pomeranz, Multi-Platinum Award-Winning Songwriter and Recording Artist

Technology Has Impacted The Music Business

Since the Industrial Revolution, technology has inexorably upended old business models with new ones, across all industries.  Inventions – such as the steam engine, telephone, radio, television, automobiles, airplanes, personal computers, the Internet, mobile phones and, most recently, smartphones – have changed our personal and professional lives tremendously.  Steve’s guest, David Pomeranz, is an award winning songwriter and recording artist who witnessed one such change firsthand – technology’s powerful impact on the music business. David talks about how the Internet and audio streaming, among other things, have changed the marketing, promotion, distribution, revenue model, and daily lives of everyone in the music industry.

David Pomeranz – Award Winning Songwriter And Recording Artist

While you likely have not heard of David Pomeranz, he just so happens to be a multi-platinum award winning songwriter and recording artist, and that’s no easy feat.  David’s projects have earned him 22 platinum and 18 gold albums, selling over 40 million records worldwide.  Through his musical journey, he has collaborated with artists such as Missy Elliott, the late, great Freddie Mercury, Barry Manilow, Kenny Rogers, Bette Midler, and even the Muppets have sung his tunes.  His work has also been featured on movie soundtracks such as Big, featuring Tom Hanks, and HBO’s hit show, The Leftovers.  David’s been in the music business since 1971, and is uniquely qualified to walk us through how technology has upended the music business.

And, just in case his last name had you wondering, David happens to be Steve’s cousin.  So if you have an aspiring star in the family or are just plain curious, you’ll want to listen closely to see how you can succeed in the today’s music industry.

In The Early Days, Record Royalties And Payments Were Straightforward

When asked about the evolution of the music business, David takes us back to the early 70s, when he got his first record deal in a time when they had hard records.  Remember vinyl?  Glorious records that you could buy in stores, and hold admiringly often also for their carefully curated cover art.  Back then, the royalty system was very clear on every record and everyone knew exactly how much they’d make for every record sold.  For example, the songwriter got paid a set share (measured in pennies, of course), the singer got a set amount per record, and so on.  So if an album sold for $15, everyone associated with royalties on the record knew exactly how much they’d make based on how many songs they had on the album, the number of albums sold, and other clear measures.  David says, it was a very simple system… until the digital revolution happened!

With Songs Going Digital, Technology Upended Music’s Business Model

In the mid-80s, songs shifted from analog – a medium that could not be easily copied and transferred – to digital (CD, MP3, streaming audio, etc.) where one could easily copy and share individual songs.  And consumers found it more convenient, and cheaper, to download the individual songs they liked than pay for the entire album. As David puts it, the bottom line was that audio content moved from the realm of physical copy to digital bits and bytes, almost like how the credit card phenomenon cut back on payment with hard cash.  And that technological shift had a major impact on the music industry.

Moreover, in its digital format, music suddenly became available on multiple platforms, on multiple online stores and websites, and on mobile apps.  This ubiquity made royalty collection a more complicated accounting operation.  So, as opposed to cutting a disc and selling it through record stores, artists now have to promote their songs at many different venues and many different platforms – of which the iTunes store is but one.

Digital Audio Has Led To Reduced Royalties

When Steve wondered if the pennies still come in from every play, like in the old days, David said they do, but they are smaller.  For instance, online music platforms like Rhapsody, Spotify and Pandora license bushels of songs or baskets of songs from publishers, and then pay a tiny percentage of the whole to each songwriter and singer, which works out to a smaller sum.

How Does New Talent Break Through?

Steve, who plays a mean guitar himself, asks David how new talent might break through and make money as a musician in this brave new music world where technology has so strongly impacted music’s old business model? Especially when anybody with access to the Internet can showcase their talent for free on sites such as YouTube, and be a star in their own right?

In response, David says times have changed.  Back in the 1920s and 30s, the performer was king. You went to see the likes of Frank Sinatra and Judy Garland in concert, and bought their records almost as souvenirs to remember the great concert you saw.  Then the Beatles came along, and things flipped – to where their records made so much money that now the album was king, and artists started to tour or do concerts to support record sales.

And now it’s flipping back again.  So David’s advice to today’s young artists, such as Steve’s singer-songwriter daughter, is to tour and do concerts.  It’s about getting your name out there, to rise above all the clutter of YouTube wannabes, so people get to know you and buy your music.  In fact, the focus on concerts is so strong that the record companies themselves have gotten into the concert promotion business because they know that they’re not selling records like they used to.

Not the New One… I Wanna Hear The Song I Already Know And Love

Steve also wants David’s take on the concert-goer’s experience.  While artists go on tour to promote a new album, most concert-goers don’t go to hear new music, but to hear the songs they already know and love.  So smart artists, David opines, should start with familiar hits, warm up the audience, then mix in their new songs. And, he says, it behooves every artist to bring along their albums and sell their merchandise at each venue.  David says this from his own experience, where fans in places such as the Philippines line up to do a meet-and-greet, and have their CDs signed by him for hours after the concert.  So there are ways for an artist to make money aside from relying on shrinking record store sales, but they’ve got to work a lot harder now and be open to traveling all over the world.

In wrapping up, Steve asks his cousin if he gets paid when someone samples something from his recording.  The answer – yes, provided his content is licensed through a proper publisher.  If someone writes a new song but wants to take a little section of someone else’s song to loop it, repeat it or write a new song on top of it.  The person who wrote or produced the original recording does get money and a percentage from the new song’s income.

So technology has profoundly impacted the music business and upended its straightforward old business model.  Today’s artists have it easier in some ways because they can showcase their talents to the world by uploading their songs with the click of a button. But, for that convenience, they have to contend with hundreds of thousands like them, and have to work harder to rise above the clutter.

Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital.  Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions.  Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances.  The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.

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Steve Pomeranz: My next guest is a multi-platinum award-winning songwriter and recording artist.  His projects have earned him 22 platinum and 18 gold albums, selling over 40 million records worldwide.  He’s collaborated with many artists like Missy Elliott, the late, great Freddie Mercury, Barry Manilow, Kenny Rogers, Bette Midler.  And even the Muppets have sung his tunes.  His work has been on soundtracks like “Big” featuring Tom Hanks and, most recently, HBO’s hit show, The Leftovers.  So now that you know that I’m not just talking to anyone, I’d like to officially welcome David Pomeranz to the show.  Yes, David Pomeranz.  Fun fact, David is actually my cousin. I’ve invited him to share with us some of his experiences and give us some behind the scenes look at today’s music business.  If you have an aspiring star in the family or are just plain curious, you’ll want to listen closely.  Dave, hey, welcome to the show.

David Pomeranz: Hey, Steven, nice to talk to you.

Steve Pomeranz: Nice to talk to you too.

David Pomeranz: But Steven, we’re cousins, but you never call.

Steve Pomeranz: [LAUGH] I write though, I do write.

David Pomeranz: Yes, you do.  [LAUGH] It’s lovely to speak to you, my friend.

Steve Pomeranz: So you’ve been in the music business for a couple of years.  I remember your first album in the 70s and loved that album so much.  You’re a great songwriter.

David Pomeranz: Thank you.

Steve Pomeranz: But the business has changed a little bit since those years.  Tell us about the evolution of the music business.

David Pomeranz: Mm, well, it’s been interesting.  And I think anyone you talk to will have a different bunch of things to say.  But my experience is that, well, of course, when I started, in the 70s, you had hard records.  There were actually record stores, and you could buy them in stores, and the royalty system was very, very clear as to every record.  The songwriter got paid x pennies, and for the recording, the singer got paid, blah blah blah.  So, if an album sold for $15, you knew (depending on how many songs on an album) that each of those people got royalties for, how much you would make.  It was very simple, and there are entities that collect royalties for artists and for songwriters.  The ones that collect for songwriters are called publishers, which is a very interesting story.  But anyway, the bottom line is it was a very simple system.  And then came along…cue the “Jaws” theme…

Steve Pomeranz: Yeah.

David Pomeranz: …Came along the digital revolution.  And the demise of record stores; nobody needed to buy those hard vinyl things.  And then, eventually, fewer and fewer people needed to buy CDs.  And now there are downloads and something called streaming and things.  But the bottom line is that the content, it’s almost like the credit card phenomenon with money.  There’s no more money.  It’s hard to find cash.  [LAUGH]

Steve Pomeranz: Yeah, yeah, right.

David Pomeranz: You go on an airline and they say, “well, sorry, we don’t take cash for your sandwich, only credit card”.  So, it’s a little like that.  It’s a credit system, and it doesn’t necessarily include any hard materials, CD, record.  So, that that has been the most major change.  So, it’s an accounting operation really, and it’s how many venues, how many places can you put your record or your song?  Itunes is one place, it’s like a little online store basically.  But there are many others that exist.  And, so, the trick is to find the different platforms on which you could put your song or recording.  It’s like an old-time store.

Steve Pomeranz: Well, do the pennies still come in like the old CDs you mentioned?  You still getting pennies from every play?

David Pomeranz: Yes, they do.  Yes, they do.  They are smaller.  For instance, what I know about—and I don’t know a lot about this, by the way—there are those who are much more experienced in it.  Things like Rhapsody and Spotify and places like that.

Steve Pomeranz: Pandora.

David Pomeranz: Pandora, they will play your songs, but they seem to license bushels of songs or baskets of songs from publishers.  And then they pay percentages of whatever they pay for the whole to each songwriter and singer.  And it’s a smaller sum.

Steve Pomeranz: Actually, a thought that I hadn’t thought about for so many years just popped into my mind when you were talking about royalty checks and the like.  There was a time, years and years ago, when I was a professional musician, and I was writing guitar books for Columbia Publications.  And you were recording, I think, for Columbia because one day, I saw a royalty check.  And I got your royalty check instead of my check for writing guitar books.  And your check was much bigger.  I just wanted to let you know.

David Pomeranz: [LAUGH] Wow.

Steve Pomeranz: I was going to change my name.  But, yeah, so that was kind of an interesting little side.  So, getting back to this idea of, I actually have my own singer-songwriter in the family.  My daughter is traveling and writing and publishing and the like.  And it’s always this question about how is she going to make money in this brave new world when actually everybody has access to putting up something on YouTube?  Everybody can be a musician, can be a star in their own right now.  How does a true talent actually break through?

David Pomeranz: Well, it’s a fascinating question.  First of all, I do want to say that you’re a great guitar player.

Steve Pomeranz: Thank you.

David Pomeranz: And ladies and gentlemen, he’s still playing the guitar and that’s maybe a time for another show.

Steve Pomeranz: [LAUGH]

David Pomeranz: We’ll discuss that.  It’s an interesting time.  I’ll say one thing that it’s an interesting context to put it all in.  Back in the 1920s and 30s, the performer was king.  You got Al Jolson and Fanny Brice and then later on others that were, they were the point.  The point, you go see them in concert—Sinatra, Judy Garland. And the records that they made were… it’s almost souvenirs for their concerts or their appearances.  So, you go to the store to get them, but it was thought of as something you would buy to remember the great concert you saw or the great appearance.  And then The Beatles came along and that whole era came along and it flipped.  And the recording started to make so much money that artists started to tour or do concerts to support the sales of the album.

Steve Pomeranz: I remember that.

David Pomeranz: Yes, right, that’s what we grew up with and which is a complete flip of what it was.  So, the album was king and the concerts support it and promote it.  The album, which we buy and everyone made a lot of money, and now it’s flipping back.  And, so, the way for a writer or a performer to make money, whether they’re brand new or old school, been around, is to tour and to do concerts.  And, in fact, the record companies have gotten into the concert promotion business because they know that they’re not selling like they used to.  So, now they’re getting a percentage of the artists’ tours.

Steve Pomeranz: Now, before you go on, it brought another idea to my mind.  When artists would tour to promote a new album, you would go to the concert and you’d hear this new music.  And you didn’t really go to the concert to hear the new music.

David Pomeranz: Right, true.

Steve Pomeranz: It’s kind of frustrating, right?  So, a smart artist would put the old music and the new music in.  But a lot of times, they didn’t do that and that was kind of a disappointing experience.  But continue on.

David Pomeranz: Right, to hear something, I don’t want to hear that new song.  I want to hear the one I know, right?

Steve Pomeranz: Right, exactly.

David Pomeranz: Right, but to answer your question, I think every artist, now, it behooves any artist to show up somewhere and sell your merchandise.  You bring along your albums to the concert.  And even when you see the big guys, Bon Jovi is touring, their merchandise income is enormous, and it’s happening right on site.  And if they sign the CD, my gosh, it’s so much more.  I’m very successful with my records in places like the Philippines.  When I go to the Philippines, I play in huge arenas and do these meet-and-greets and signing for hours afterward.  And can charge more—I don’t charge to harm anybody—but I charge more because I’m there, and I’m signing it and they appreciate it and like that.  So, there are ways for an artist to make money that’s not the standard way of going to the record store.

Steve Pomeranz: Yeah, so you guys have to work a lot harder now.  You’re traveling all over the world.

David Pomeranz: Sure, yes, I do, I do, I do.

Steve Pomeranz: As a matter of fact, you’re traveling to Boca Raton in a couple of weeks.  You’ll be at the Boca Black Box Center for the Arts.  How did I do, did I work that in?

David Pomeranz: Very good.  It’s not as far as the Philippines, and I’m pleased about that.

Steve Pomeranz: [LAUGH] It’s July 22 at 8:00 PM, it’s “Up Close and Personal with David Pomeranz.”  So, David, who have you basically worked with?  What artists, I know I mentioned a few at the beginning of the segment, but I know you had some big hits with Barry Manilow.  Just take us through some of that a little bit.

David Pomeranz: Sure, well, I wrote number one hits for Manilow, “Tryin’ to Get the Feeling Again” and one called “The Old Songs.”  “Tryin’ to Get the Feeling Again,” I wrote on my own.  “The Old Songs” I wrote with a guy called Buddy K who wrote a lot of wonderful hit songs.  And I’ve written for, my goodness, Cliff Richard was a big kind of UK icon.  Boy, it’s all escaping me now, hello.  The Muppets and Freddie Mercury and John Denver and even recently, Missy Elliot who sampled one of my recordings.

Steve Pomeranz: Yeah, let me ask you about that.  So, when someone samples something from your recording, you get paid for that?

David Pomeranz: Yes.

Steve Pomeranz: Okay, cool.

David Pomeranz: Very well.  Very well.  If it’s licensed properly through a proper publisher, and they want to use a piece of a guy’s recording over which to write, some people don’t know what they do.  They write a new song, they take a little section of something, and they loop it or repeat it through the song, and then write a new song on top of it.  The person who wrote or produced that little recording that they use does get money and it’s a percentage of the songwriting income.

Steve Pomeranz: You must love that, right, because now you’ve got-

David Pomeranz: [CROSSTALK] I do, what’s not to like?

Steve Pomeranz: Exactly, you get a check.  What was it Sammy Cahn said?  You know that story with Sammy Cahn when they asked him what comes first the music or the words, what does he say?

David Pomeranz: He says the phone call.

Steve Pomeranz: The phone call and then the check.

David Pomeranz: A phone call, I get an assignment.

Steve Pomeranz: [LAUGH]

David Pomeranz: So, anyway, the night of the 23rd of July at the Boca Black Box, I’ll be doing a lot of the songs that people know me for.  I’ll be doing a couple of new ones.  Not too many, sorry, you don’t have to worry about it.

Steve Pomeranz: Okay.

David Pomeranz: No, but anyway, but it’ll be really lovely.  I sang the theme to “Perfect Strangers” back in the 90s…“Standing tall, on the wings of my dream”…that thing. So, I’ll be doing that and kind of a potpourri of all of the things I’ve been involved with.  I’ve written shows for Broadway;  Kathy Lee Gifford and I had a show on Broadway in 2012.  And I had things on the West End of London, etcetera.  So, it’s going to be a musical kind of a grouping of many things that I’ve done.  I’ll be doing my selections for my “Little Tramp” show, which is about Charlie Chaplin.  I do that as a one-man show, etcetera.  Anyway, it’s going to be a very warm, it’s called “Up Close and Personal.

Steve Pomeranz: It’s a Saturday night, I think you said July 23rd but I think you meant the 22nd, right?

David Pomeranz: Did I, goodness, I certainly did.

Steve Pomeranz: That’s okay, I caught you.  So, Boca Black Box Center for the Arts.  In Boca Raton, of course, July 22 at 8 PM, “Up Close and Personal with David Pomeranz.”  Dave, thank you so much for spending some time with me.

David Pomeranz: You’re great.

Steve Pomeranz: I’m going to call you more.

David Pomeranz: You’re my man.

Steve Pomeranz: [LAUGH]

David Pomeranz: You are so welcome.  Thank you, sweetie.  Bye, bye, take care.