Rockers Like Their Options by Christopher Jones
Walk down a busy city street or subway platform, and you're likely to find musicians playing for loose change. Walk into an event sponsored by a dot-com company, and you're likely to find artists performing for a more lucrative, if speculative paycheck: stock options.
Online music companies are aggressively competing to capture mind share in what will likely become one of the Net's biggest businesses. But in order to attract an audience to a new music Web site, technology, or service, these companies need to offer up some tempting bait.
"We've been getting so many cold calls, it's ridiculous," said Jeremy Welt, representative for Madonna's Maverick label. "These music sites need a way to differentiate, and are trading equity for exclusive rights to content."
Alanis Morissette and Tori Amos were two of the first musicians to cash in on the online music frenzy when they agreed to let MP3.com promote their current tour. In the deal, Amos received 22,500 shares of stock, while Morissette's management company, Atlas/Third Rail, got 658,653 shares. At Wednesday's valuation of US$37 per share, that amounts to about $800,000 and $24 million, respectively.
In return for their stock offers, Net companies expect the artists to plug their sites so they can create a mutually beneficial promotional engine.
Myplay.com, a new Redwood City, California-based company, is creating an online music service that allows fans to store music so it can be accessed from anywhere, and to share their playlists with friends. Labels and artists, in turn, get a direct connection to their fan base for marketing new songs. myplay hired rocker John Hiatt to perform at its launch party in San Francisco in exchange for an undisclosed number of shares in the company.
Myplay CEO Doug Camplejohn said his company is working with several labels and artists on promotional deals that involve both options and cash. Dreamworks Records has already signed on to provide individual tracks to myplay on an ongoing basis.
"What we're trying to do is make sure that when customers come to myplay they can get jumpstarted with artists they've heard before. The flip side of that is the benefit to artists and labels, which are programs that allow them to reach customers in a one-to-one fashion that they haven't been able to do before."
In addition to tech companies trying to swap options for tracks, other Web sites are giving artists a more substantial stake in a company to act as their online agent.
Foremost among these is Artistdirect, an LA-based company which operates online stores for a growing number of big-name bands. Marc Geiger, the company's co-founder, said that offering artists options is part of their business plan, but could not comment on the specifics of the deals.
The Global Music Network, which specializes in live broadcasts of jazz, opera, and classical music, has set aside 15 percent of the company for artists who want to sign on and help promote the site with their presence. Thus far, the company has signed up about 50 artists, festivals, and venues -- including Tito Puente, Placido Domingo, Billy Taylor, and Lou Donaldson.
Mike Lubin, chairman and CEO of GMN, said he looks for musicians who are PC and Internet literate and are interested in interacting with and educating their fans.
"The quid pro quo, of course, is that we want the artists to promote the URL and to do certain events for us, and to distribute CD-ROMs at their concerts, festivals, and venues," he said. "The second thing we want them to do is act as mentors, educators, navigators, and recommenders so that people coming into the site have guidance from these artists, plus create some affiliation with the artists, which makes us unique."
Lubin said after Placido Domingo signed up last month traffic tripled.
As the number of exclusive deals between artists and record labels wanes, both sides will see more and more opportunity for online promotions.
"Right now, with all the sites that are opening up, artists are starting to understand they can have an a la carte approach [to marketing and promotion]," said Camplejohn.
"Record labels are realizing that the Internet is not going to go away, but the real question that looms is how is this model going to evolve? The good news is they're sitting on some tremendous assets ... and at the end of the day I think they'll make more money than they've ever made before, as [will] the artists."
Fans who can't get a ticket to see Bruce Springsteen play in their local football stadium or convention hall just might get another chance to catch him -- say, at the next Microsoft or RealNetwork's bash.