Universal Takes Over MP3.com - Immediately Slash Artist Pay 80%

By Richard Menta- 9/28/01

Ernesto Cortazar is one of MP3.com most downloaded artists who last June celebrated reaching the seven million mark in total downloads from the site. Putting that number of singles in the hands of listeners normally makes you a multi-platinum artist, but these singles aren't sold in record stores and since the gold/platinum mechanism is a sales designation of the traditional music industry, it doesn't count.



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Fortunately, Cortazar did make some direct change off of his success in the form of MP3.com's Payback for Playback (P4P) service. Currently, average Payback for Playback earnings runs between 2.5 to 3 cents a click or $25-$30 per 1,000 clicks. If you do the math, seven million downloads brought in between $175,000 to $210,000 to Cortazar on just the clicks alone. Add in program bonuses and you have to admit that he is getting a lot of milage from the program. Last month alone Ernesto Cortazar earned $8,576.54.

Payback for Playback was started a while back when MP3.com had $300 million in cash holdings in the bank and figured they could afford to kickback about a million dollars a month back to the artists through a free program. It was good business to reward those who supplied the content that made you a business in the first place. Granted, not all artists on the site do as well as Cortazar in the program, some barely cover the $20 a month fee MP3.com imposed as of last April to help feed the reward pool. Still, it offered an opportunity for those generating solid traffic to make something for their efforts, even if the returns were modest.

As of October 1st that is about to change as MP3.com's new owner, Vivendi Universal, takes control of the company. Vivendi Universal sent a note to MP3.com artists that effective Oct 1st it is going to lower the rates MP3.com pays its artists in the Payback for Playback program, slashing the incentive to half-a-penny per click, an 80% decrease. The $20 fee remains intact. It has to, Vivendi Universal cut off the $1 million a month.

This means an artist has to generate five to six times more traffic just to make the same money they did in September. 4,000 downloads a month will be required just to pay for the $20 a month membership. It also means that the program itself may collapse as those who don't cover the monthly fee drop out. For top earners like Ernesto Cortazar to earn even a fraction of what they once did, dozens of artists will have to fail to make the minimum downloads while still participating in the program. Common sense will preclude them from staying and as they leave, the money pool vanishes. If you think about it, Vivendi Universal has just turned the Payback for Playback program into a pyramid scheme.

With a new boss comes new rules. Here the new boss is a member of the traditional record industry that has a history of sharing as little of the returns as possible with the artist. Compare this with a site like EMusic (also recently acquired by Vivendi Universal) who offer a generous 50/50 split with artists and you can see the difference between old and new economy math. In the old economy, the company gets the lion's share of all revenue generated, the artist is little more than an employee. If the artist doesn't like it, tough.

Yes, MP3.com no longer has $300 million in the bank, but most of that went to pay off legal settlements to the big five record labels of which Vivendi Universal got 53.4 million. Furthermore, those lawsuits served to stimulate a land-grab of other digital rights claims that have put further stress on MP3.com. Those moves stripped MP3.com of much of its fiscal value, weakening it for a relatively cheap takeover.

Now that Vivendi Universal owns MP3.com, they have inherited the legal maelstrom they helped wrought and must write the checks to the lawyers defending the company they once sued. Guess where much of the money originally set-aside for the Payback for Playback service is now going?

Mind you the Payback for Playback already had its flaws. Artists like Linkin Park and Ernesto Cortazar have figured out how to make that much money only thanks to some aggressive self promotion in a program that was less than altruistic. It takes considerable effort for a band to make just a fraction of what these top MP3.com artists pull in. As Salon's Janelle Brown pointed out about the program in her illuminating article last November Whoring for Downloads:

But the program has also intensified competition between bands jostling for those dollars. On MP3.com, bands are no longer just musicians; instead, they are becoming viciously cutthroat entrepreneurs. Each band strives to come up with the most novel way to drive traffic to their music and make it into the Top 40 charts. There are plenty of artists who are simply doing good, traditional marketing and promotion; but there are also unique ideas like porn videos and sexy come-ons, a proliferation of "download trading" and "download clubs," artist plagiarism and a variety of other tricks that smack of snake-oil salesmanship more than they do of pure artistry.

From a distance, the download traffic at MP3.com looks like a new kind of radio payola, writ for the digital age. This time, however, it's artist- rather than label-driven: It's the poor downtrodden artists who are now taking advantage of the system, and of each other, instead of letting fat-cat record companies take control of them. Like eBay entrepreneurs selling auction success kits or spammers selling DIY e-mail marketing kits, MP3.com's savvy bands are simply taking advantage of a system that's finally giving them a leg up.

Or, to be more cynical, they are learning that success on the Net simply requires a new kind of hucksterism, and that the quality of their music has little to do with making money.

That said, how does the average MP3.com artists feel about the change in the program rules - a program now completely fed by the $20 monthly fee meaning the artists themselves, not company revenues, supply the cash awards? Here are the titles of some of the strings posted by artists on the site's message board about the new P4P plan:

The most interesting posting titled "Those Poor Auction Winners" lists a cross section of bands who represent what a typical artist redeems from the service far better than the likes of Ernesto Cortazar (only a few have made in total program earnings what Cortazar pulled last month alone). We reproduced the list below, it shows what each artist earned on the old plan and what they can expect to earn on the new one. For some it is the difference between having extra money to buy that new basic van for touring or fixing the old wreck. Of course, that is assuming the program survives which it probably won't.

The Illusion Earnings
Total Plays Overall 264,343
Total Payback for Playback* $13,310.07
With the new pay out amount it would be $1321.72

efesar Earnings
Total Plays Overall 72,223
Total Payback for Playback* $1,715.65
With the new pay out amount it would be $361.12

Scary Valentine Earnings
Total Plays Overall 328,274
Total Payback for Playback* $7,666.50
With the new pay out amount it would be $1641.37

Aural Divine Earnings
Total Plays Overall 151,827
Total Payback for Playback* $4,365.54
With the new pay out amount it would be $759.14

Willard E. Love Earnings
Total Plays Overall 206
Total Payback for Playback* $6.61
With the new pay out amount it would be $1.03

Aura the Source of Trance Earnings
Total Plays Overall 339,303
Total Payback for Playback* $6,685.33
With the new pay out amount it would be $1696.52

Digital Explosion Earnings
Total Plays Overall 665,623
Total Payback for Playback* $17,658.72
With the new pay out amount it would be $3328.16

Mike Scanlan Earnings
Total Plays Overall 116
Total Payback for Playback* $1.44
With the new pay out amount it would be $.58

Jungle Logic Earnings
Total Plays Overall 49,331
Total Payback for Playback* $1,588.76
With the new pay out amount it would be $246.66

DJ Weapon X Earnings
Total Plays Overall 6,709
Total Payback for Playback* $161.34
With the new pay out amount it would be $33.55

Nathan Profitt Earnings
Total Plays Overall 368,918
Total Payback for Playback* $9,610.91
With the new pay out amount it would be $1844.59

Dajvo Earnings
Total Plays Overall 24,871
Total Payback for Playback* $751.26
With the new pay out amount it would be $124.36

Xanitra Earnings
Total Plays Overall 14,166
Total Payback for Playback* $312.32
With the new pay out amount it would be $70.83

Jordan Hayes Earnings
Total Plays Overall 59
Total Payback for Playback* $2.27
With the new pay out amount it would be $ 0.30

Chemiztry Earnings
Total Plays Overall 336,375
Total Payback for Playback* $6,681.03
With the new pay out amount it would be $1681.88

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