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The Digital Skeptic: David Lowery Wants the Maoism Out of the Music

Stocks in this article: FB P

The problem, Lowery says, is that the Web turned out not to disintermediate the world as advertised. That is, it was supposed to rip out all the unneeded steps between musician and customer.

"It actually did the exact opposite. It 're-intermediated' the business," he said. "Musicians now face an entire new generation of middlemen, who all take monstrous cuts." He points out that Facebook (FB) now charges him to communicate with his fans on his own fan pages.

"They are putting themselves back between my band and my fans," he said. "And they are doing it all at price levels where there is no money left in the larger system to work."

The Maoist music business
Lowery can describe in detail exactly how his business mismanages the value of its products. 

"I am in the solid middle class who makes about $90,000 per year from all sources of my music live, royalties and licensing," he says. "And for us, it's a very tricky time to be in the business."

Referring to the piece I wrote last week on the peanuts Justin Timberlake made on his top record of the year, The 20/20 Experience, Lowery filled in the blanks for how the modern industry dollar gets cut up.

"If it was a so-called traditional deal," he explained, "Timberlake probably got 25% of the wholesale prices of the disc, which on 2 million units sold is roughly $9 million." For an artist of Timberlake's stature, that probably worked out to the $2.25 million range.

"But he probably spent $1 million making the album, since a typical major label act is spending about $300,000 to $350,000." Lowery says he confirmed that figure with a source at a major label.

Lowery's calculations: Since those recording costs come directly out of the $2.25 million that flowed to Timberlake's label, his net after costs is probably in the $1.25 million range. Then his managers, staff and other support people get 15% to 20%. Plus all the rest of the crazy touring and support he did. All of which is what eats up 97 to 98 cents on every dollar sold.

"That, believe it or not, is the part of the system that works," he said. Lowery says streaming services such as Spotify or Pandora pay so little that "You wind up in a kind of Maoist environment where nobody really owns anything," he said.

"Considering how lean the total spend on music is by consumers, your choices as a business become very limited," he said. "Is it really a surprise that our industry is struggling?"

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.
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