Who controls the music industry

interviewMusic industry and Spotify: "The world will no longer be the same as it used to be"

Capital: Mr. Niedecken, do you use music streaming?

WOLFGANG NIEDECKEN: I am an avowed caveman when it comes to listening to music. I don't have music on my phone. I need a CD with a cover and a booklet, something to touch. When we go on tour with BAP, I take a pile of CDs with me so that I can finally hear them in peace.

FRANK BRIEGMANN: Wolfgang, you're not alone. There are still many of your kind out there.

Mr. Jaehn, you grew up with streaming. Do you even have a CD shelf left?

FELIX JAEHN: No, I hardly own any CDs, maybe 20. My generation grew up digital from the start. It was even more than a year ago that I bought a music download from iTunes. Streaming is a lot easier. There is a much wider range of options and it's very easy to access. You pay 10 euros a month and get all the music in the world.

Streaming has turned the music world upside down in the past ten years. Before that, the record industry was spoiled for success for a long time. Mr. Briegmann, how did you experience this time?

BRIEGMANN: Back then, the music market was larger in terms of sales than it is today, but smaller in terms of the number of players. We developed a project with an artist, then we went into the promotion: The goal was heavy rotation on music channels such as Viva and MTV, then an appearance on “Wetten, dass ..?” And a presence on the radio. That was the end of the subject. I remember conversations about whether we would have ten percent growth next year or twelve. Sometimes they let it go and shot videos for a few million dollars for Michael Jackson or Madonna. Everything seemed possible then.

NIEDECKEN: In the beginning we were with BAP at a small label called Eigelstein. They had a representative who ran through all the left bookstores in Cologne with a sample case. It actually worked, we sold 4,000 records in the first year. But we all had other jobs or were studying. Our bass player worked at the tax office, he had to be back on the mat on Monday morning after we had played through the whole weekend. And before that, he had to unload our borrowed Ford Transit at dawn.

BRIEGMANN (laughs): Why did he even have to do that?

NIEDECKEN: We all got involved, but it was the bass player who walked into the tax office with panda eyes that morning. Soon we didn't want to just play in the Cologne area, because otherwise we would be burnt in our own juice. We asked our label to distribute our albums properly. But the sale of Eigelstein was a disaster, they didn't want that. In 1981 we ended up at EMI. We stayed there for 33 years - until EMI was taken over by Universal.

Like EMI, the entire music industry was hit by digitization early on. Suddenly there were songs for free on Internet exchange sites like Napster, and CD sales plummeted. Were you afraid that you would not survive this disruption?

BRIEGMANN: Don't be afraid, but there was already great tension. Between 2001 and 2012, our sales fell - in some cases by more than 15 percent a year. Yesterday we still had a working business model and suddenly people were downloading music from illegal internet platforms. The mindset was: Music is now available for free, why should I pay for it? On the podium I was greeted like someone about to die - according to the motto: Nice that you made it to us again!

NIEDECKEN: At EMI, we didn't really realize the decline at first. It was like the story of the frog in the water, which is slowly heated without the frog noticing. At some point, however, we realized that the world is no longer what it used to be. Let me give you a numerical example: If we are in
We put an album out in the 90s and it went to number one on the charts, we knew we'd sell 500,000 to a million of it. Today, 50,000 to 100,000 are enough for first place because far fewer CDs are bought.

Mr. Jaehn, are you glad that you did not have to go through these times of crisis?

JAEHN: No matter what time you make music, you have to come to terms with the circumstances. In any case, I am glad that we have a functioning payment system today and that so much music is being listened to. Of course, I benefited from streaming.

BRIEGMANN: The turning point for our industry was when we accepted that consumers are sometimes only interested in a single song and no longer necessarily want to own music. Then we said, we are now also licensing our catalogs to digital players, as long as they allow our artists to participate fairly. That was definitely a risk. But the industry has always agreed on one point: music cannot be given for free. In order to be able to enforce this against other platforms such as YouTube, politicians must create fair framework conditions.

How has the music market changed due to digital distribution channels and streaming platforms like Spotify?

JAEHN: The internet has made a lot of things faster. In music too. Spotify has the New Music Friday list every Friday. This is an important playlist in every country, and it is closely monitored by the record companies. Spotify can analyze how high the skip rates are, i.e. when a song is clicked on. Also how often it is liked and put into playlists. I can see if the fans like my song or if it fails the statistics. So I already have direct feedback one day after the release.

KIEDECKEN: When people get to hear your song.

JAEHN: Yes, to get into a New Music Friday playlist, I need the record company push. That is essential. She can also run campaigns, adverts and social media. The listener decides whether a song will also be a hit.

BRIEGMANN: Although it wasn't much different in the past ...

NIEDECKEN: When a new BAP album was released earlier, the important DJs were sampled on the radio stations. They took the thing home, listened to it and decided what to show on their show. That was a completely different number.

BRIEGMANN: Yes, yes, but in the end, for us as a music company, it's still about making an artist known and making sure that you can listen to his music and buy it. Hit parades used to be decisive for the introduction of new music. Today it also runs through various new music playlists. The tools are different, but the principle is the same. It is important for us that we now have more platforms through which we bring our music to the consumer. And in Germany, physical dealers also play a major role. In this country we still make around half of our sales with CDs and vinyl.

"I am not a functionary, I am an artist"

Mr. Niedecken, do you know how many fans you have on Facebook?

NIEDECKEN: I would find out quickly. That's always under it ...

BRIEGMANN: I think you have around 100,000 fans.

Not bad - it's 97,000.

NIEDECKEN: We use Facebook extensively. We try to make the page as individual as possible, with our humor.

Are you also interested in the business behind music?

NIEDECKEN: I'm not a functionary, I'm an artist. We have a wonderful kitchen table management team at home. Thank god my wife takes care of everything that has to do with numbers.

JAEHN: I'm interested in the economic side. I want to know what is happening to my music. Of course, I also have a team for this. My parents, who are both business graduates, are also important advisors. At the very beginning my father helped me a lot. Someone had offered me a 15-year contract - for a ridiculous advance payment, with wild clauses and under US law. Fortunately, my dad slipped in and said: Felix, you're selling half your life right now!

Why do digital musicians like Felix Jaehn still need a record company?

BRIEGMANN: Artists like Felix Jaehn and Wolfgang Niedecken have this special gift. You create music that people love. Our job then is to help them get their music to consumers. We take care of media and sales partners, marketing and PR and of course billing, for example with the streaming platforms. This gives the artists time that they can then invest in their creative work.

JAEHN: Of course, the barriers to entry in the industry have become lower. All you need is a midi keyboard, a laptop and the right software. Then you can produce. An hour later the music can be published on the Internet. An hour later you can send them to 100 bloggers and hope that they will share the songs with their community. But if you want to reach the next level, at some point you need a professional partner.

Never thought about giving it a try without a music company like Universal?

JAEHN: That was never an option for me. If you look at the top 100 singles charts, at least 90 of them are under contract with a major. The job of the labels is not just sales, but also helping to develop the artist. It's exciting for me to get feedback from experts at my record company in different countries.

Do you agree that a large part of the proceeds from your songs on the streaming platforms should go to Universal?

JAEHN: The discussion about the distribution of the proceeds is already underway. Of course, the deals between the record company and the artist have to be adapted to today's revenue models. Because the investments have shifted. There used to be the 360-degree deals in which the artists assigned all of their rights. These are less common in my environment these days. In the end, it also depends on what the artist wants. Some think it's great to surrender their live rights completely in order to get a higher advance payment.

BRIEGMANN: As in all times, it's a question of the individual deal. It's about the questions: Who is investing what? Who puts what in? Who bears which risk? And who gets what share for it? The fairy tale of the enslaved artists that some spread is absurd. My experience is: Artists usually have a very good sense of what is realistic.

Nevertheless, one reads again and again about disputes over the distribution of the proceeds. Isn't it true that the labels have much lower costs thanks to digital distribution?

BRIEGMANN: In practice this argument is very rare. It's always about individual agreements with the artists and, much more often, about the question of the equivalent. What kind of support does the artist get? How big is the campaign, what marketing and sales power does the label have? How high is the investment in his career? One percentage point more participation is of no use to an artist if he later feels insufficiently supported.

"I want to know what happens to my music"

Mr. Niedecken, do you think that you are being adequately involved in the streaming boom?

NIEDECKEN: The streaming numbers don't have a big impact on us. We're an album band, and albums are usually not streamed, just individual songs. We live from the sale of physical sound carriers and from live concerts. Our fans appreciate a nice booklet. They think to themselves: The guys tried hard with the album, so let's hear what they did. If the album is good, people come to the concerts and hope that we can play some of the new album. If it's not that good, they hope we play our old songs.

Her colleagues like Taylor Swift or Die Toten Hosen have temporarily boycotted the streaming providers - in protest against the fact that their music is being devalued. Do you understand that?

JAEHN: At that time it looked as if Apple wanted to offer its service for free. Taylor Swift had campaigned against this. When Apple Music gave in, it came back. I think everyone benefited in the end. Of course, Taylor Swift can make a statement with her public impact. But it's not my role to go to Spotify and say, you're paying us too little. The negotiations between the platforms and us artists must be conducted by Universal.

NIEDECKEN: That's how I see it. I'm glad our record label takes care of things like that. I don't have the capacity for that.

More and more powerful providers are emerging for streaming services. Spotify is planning to go public, Amazon is rolling out the market with its music offering. Does that have any consequences for the artists?

JAEHN: I hope not. It would probably be different if a provider achieved a monopoly. Then he could control what music people are listening to.

BRIEGMANN: It is important for us that there are many platforms and healthy competition. That's why we have just signed a license deal with Facebook as the first music company. The Spotify IPO will bring new money into the system. I see that as positive, because I assume that the company will use it to further improve its platform and open up new markets.

And what about Amazon and Apple? These are financially strong corporations who can also afford to cross-subsidize their music offerings ...

BRIEGMANN: I also very much welcome the involvement of Amazon and Apple. It's like this: Music is a jump-start for new technologies. Would the iPod have existed without it? Hardly likely. And music use also plays a central role in the new voice control systems such as Alexa or the HomePod.

Do you actually watch how your artists perform every day?

BRIEGMANN: Yes, of course! I look at the data every morning on my computer in the office or on my cell phone. I need to know what's going on on all platforms and in different countries.

Mr. Niedecken, does all of the data that you get via the platforms influence how you make your music?

NIEDECKEN: I would never follow what algorithms tell me - according to the motto: It works, I'll do it too. For me the term adaptation is a terrible thing. Because that means that I give up what I actually am.

JAEHN: I'll look at the data. But I try not to let that influence me. For a new video we are now planning an intro of ten, 15 seconds, in which I say something and get the song across. This is something special for me because as a producer I am otherwise not heard with my voice. Of course, there is concern that such an intro will trigger higher bounce rates. But we do it anyway.

First German number one hit in the US charts since 1989: "Cheerleader" by Felix Jaehn

After three years in business, your first CD is coming. Is streaming no longer enough for you?

JAEHN: We also discussed for a long time whether people would even listen to an album by an electronic artist. But it was really important for me to make an album to give people a different insight into my work. And when it comes to albums, CDs are something special for many fans who consume music on Spotify every day. A CD with a booklet and photos is also a souvenir, almost a merchandising product. With it, the fans can hold something personal about me in their hands.

To conclude, let's look ahead. Do you think the music industry has now achieved digital transformation?

BRIEGMANN: Our industry is really far in terms of digitization. In 2004 we had one percent digital sales, today we have around 50 percent in Germany. The market has been growing again for five years. But the changes around us continue. The digital transformation is not something that has been achieved at some point, but a process that requires constant readiness for change.

Mr. Niedecken, Mr. Jaehn, what will your job look like in five years?