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Donald Passman Talks New Edition of ‘All You Need to Know About the Music Business,’ and What’s Next

On November 14, veteran music attorney Donald Passman will receive the Cedars Sinai Board of Governors 2019 Visionary Award. The award is a fitting one, not just for the work the lawyer/author has done on behalf of the hospital, but for his groundbreaking 1991 book “All You Need to Know About the Music Business,” the 10th edition of which is out this week on Simon & Schuster. Passman estimates the book has sold a half million copies in its various iterations over that time.

Needless to say, there has been a mind-boggling array of changes in the music business over the past 28 years. When the book first came out, the big issues of the day were the 25% packaging deduction for the newly emerging CD format, as well as discussions about the now lost-in-the-dustbins-of-history DAT (Digital Audio Tape), DCC (Digital Compact Cassette) and CDV (Compact Disc Video).

“I wanted to write a breezy, informal book that was easy for musicians to understand,” he says. Not intended as a textbook, “All You Need” has nevertheless become a fixture at college entertainment law departments as well as a must-read for any aspiring music industry execs.

“It had to be revised every three years because the industry was constantly changing,” says Passman. “I never thought it would be as radical as it has been, but the numbers certainly needed to be updated every few years.”

The new iteration took four years rather than the usual three because it represents streaming’s full takeover of the music industry, which Passman has been tracking since at least 2012’s Eighth Edition, when digital delivery represented 50% of the business (which included downloads at the time).

“The music industry has changed so profoundly, the whole structure has been transformed,” he says. “The shift from physical to digital is the most radical thing that has happened since the first edition. It’s the [first] time music has been monetized without selling something — a wax cylinder, sheet music, a 78 [rpm disc], a vinyl album, a cassette, a CD, a digital file. Moving to streaming means a move away from a single transaction to the amount of times you’ve listened to a track. It affects everything, from the kind of recording contracts artists are offered to what constitutes an album, which these days is mostly a playlist. The line between sales and marketing has completely blurred with these streaming services.”

The advent of streaming has made Passman bullish on the record business, although he is concerned at the prospect of music becoming a utility that gets charged to a phone or Internet bill.

“The idea of bundling music with other products is a little scary,” he says. “You’re in danger of being squeezed by a much more powerful player when it comes to distributing your content, and how much money is being allocated to it.”

For that reason, Passman is a supporter of Spotify – whose mostly-music model puts it up against multi-media players like Apple, Amazon and Google. “I feel they’re good for the record business,” he says. “Their biggest challenge is they don’t have another business supporting them. The more outlets, the more subscribers, the better we’re going to be.”

Other major seismic shifts included the introduction of SoundScan (Second Edition 1994), the Digital Performance Right and Sound Recording Act (Third Edition 1997), the arrival of Napster and the Digital Millennium Copyright Act [DMCA] (Fourth Edition, 2000) and the emergence of so-called “360 deals” (Fifth Edition, 2003).

Issues that continue to hang over the music industry include chart methodology, and the adherence to CD and album equivalent units in a world measured increasingly in streams.

“The problem with pure stream numbers is that they’re misleading,” says Passman, who points to the need to give more weight to streams that originate at paid subscription services. “We have to decide on the metric, whether it’s money generated or, like radio, just total popular reach.”

Another area which has changed over the years is the live concert business – which has gone from a regional local network of promoters to an industry largely controlled in the U.S. by two national companies, Live Nation and AEG. Passman enlists CAA’s Rob Light and Marc Geiger to help him update that section.

“The artists have become much more sophisticated about what the deal should look like, the splits,” says Passman. “These big companies can now collateralize their losses, so the guarantees have become much larger. But they’re 900-pound gorillas, so they can be tough to negotiate with.”

One of the biggest changes is how royalties are calculated. “Streaming has made that aspect really simple and transparent now,” he says. “It used to be incredibly complicated, making a 15% royalty into a 10% one.”

Looking ahead to what might go into the 11 th edition of the book in 2023 or so, Passman sees a future for terrestrial radio in localization (“though they will be incredibly challenged”) and major labels for their global reach and worldwide data, but believes physical product will only survive as a niche market, much as vinyl is today. “Cars don’t even come with CD players now,” he notes.

Looking at the bigger issues that will be impacting the industry in the coming years, Passman says, “Any time a new technology comes along, the artists are paid less than they should be in the beginning. That grace period lasts a lot longer than it should. The idea of delivering music on demand is here to stay. There won’t be too much radical change over the next four years, but a maturing of this business, and as artist deals come up, they will get paid better.

“The hardest part now is that the barrier of entry in the music industry has become so low, anybody can do this,” he concludes. “The problem is getting heard above the noise.”

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