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Interview w/ Peter DiCola, Future of Music Coalition
By Margee Fagelson
(more articles from this author)
2001-01-03
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Peter DiCola is a graduate student in economics and law at the University of Michigan pursuing a Ph.D. and a J.D. Prior to his current studies, he spent a year booking independent rock and jazz musicians at the Terrace Club in Princeton, NJ. He also worked for two years in the fields of organizational design and statistical survey research at Mercer Management Consulting. Contact Peter DiCola at pcdicola@yahoo.com.

[M] What kind of law do you want to practice?

[P] I'm not planning to practice law, at least not exclusively. I plan, or hope, to be an academic, at the moment. I want to do research in the fields of economics and law – or the intersection thereof. So, a lot of the stuff I'm interested in with economics has a lot of legal implications. For instance, the market for recorded music has a lot of ties to intellectual property law.

[M] No way, really?

[P] Yeah, it turns out… (laughs)

[M] So is that where you're…

[P] That's one way the two can intersect. People are always asking me what do law and economics have to do with each other? People who are familiar with either discipline, they understand what the connections are, but when other people ask what are the connections, how could those two relate to each other, music is a nice example. So, yeah, that's one thing I'm interested in.

[M] So is that how you got involved in this crazy mess?

[P] Not exactly. I used to book music back at school. [Princeton] There's a club there that – instead of spending its money on alcohol – spends its money on music. Upperclassmen belong to these co-ed clubs at Princeton; it's a whole complicated system that takes far too long to explain, really. Basically, people chip in this money and there's a cook who cooks your food, and then there's a social budget. And the social budget is huge and this one place isn't the beer-guzzling type of place that the others are, they had all this money to spend on bands. So it's sort of the metropolitan scene as far as Princeton goes, it's like the best you can do. So there's this huge budget to book bands and that's what I did for a year, which is the greatest job in the world 'cuz you have all this money and you just give it to bands. You're not charging at the door, so the fans love you. And the bands love you because you're just giving them a check that's like five times more than they would make anywhere else, unless they were somewhere huge.

[M] I did that in England, actually. The beer distributors sponsored it and all the band had to do was mention the beer's name. It was really fun.

[P] Oh yeah, it's great! I just had to pick whomever I wanted and one of the first phone calls I get was from Suzanne McCarthy. She's with Flower Booking —and she books Jenny – or at least she used to, I don't even know anymore. And really, one of the first calls I got was, "Oh yeah, Liquorice is playing, so do you want to have them?" I had been a Tsunami fan since I was in high school so I was like, "Yeah! Do I?"

So then I met Jenny. That was the first time I met her and then it turned out that we had this friend in common…this guy who was a few classes ahead of me at Princeton – Matthew Robb – who used to work at the radio station there and was then working at the art museum in Princeton. He is and was good friends with her, back in the day, during the early years of Simple Machines [Jenny Toomey and Kristin Thomson's late, great indie label.]. So, I hung out with her a couple of times because of Matt. Then Tsunami actually came to play for the first time at the Terrace Club. So it was over that year that we sort of got to know each other a bit.

I got involved because I sort of stumbled upon The Machine on Insound and saw that she was doing this with Kristin [Thomson, FMC]. It was just this spring that I noticed what they were up to. I sort of had it in the back of my mind, when I quit consulting that I would do some more activist work since I hadn't done anything much since – well, I did a little bit of it in college – I worked on some campaigns and things like that but I hadn't done anything non-profit, cause-oriented stuff. I was interested in doing that just in general and I sort of realized that this artist advocacy cause was one that I was particularly interested in. So, I just emailed Jenny to volunteer, and figured that I'd maybe lick some stamps or something, you know? Or maybe distribute some flyers. I assumed that Jenny had all these people to help her – like an army of people way smarter than me to help her and do research and get it ready to talk to congressmen and such. So it turns out there are some people like that, but not exactly an army. So I got more involved than I ever expected within a couple weeks.

[M] Was that a good thing?

[P] Oh, it was definitely a good thing. I was sitting around this summer, unemployed, waiting to start school, you know…just enjoying myself. But after about a month of that, of just sitting around reading, and listening to music… I got a little bit antsy, eventually. So it was the beginning of July/end of June that I got involved. And it was perfect. It was great! I was writing some articles about economic type things. My first article was about recorded music as a public good [archived at www.insound.com/machine], which is a concept from economics that I went back and did a touch of research on and I had this idea that was sort of how to explain the sort of phenomenon of Napster and everything, economically. So that worked really well and we got a good response to that. The idea was that I was going to keep writing articles and doing research. Since then, we've had more ideas about longer-term research projects.

From the beginning, I sort of wanted to continue helping – even once I was in school – but I didn't realize at first how compatible the two would be, but now that I'm here and I realize how rich the economic issues are in music tech and in artist compensation, it really hit me that not only is it just something that makes sense to do on the side but is just sort of fits in with the main program. That's been nice, because I don't feel like there's this huge conflict with my time or anything like that. It's not like any time I spend on Future of Music is taking away from my academic experience. It's really complementary, which I didn't see right away.

Although I did think right away – I mean my focus in economics is labor economics. I'm concerned about any issues relating to the welfare of workers, working people. So, that's just the general philosophical matter. This to me is a labor economics issue, first and foremost. It's about artists being compensated for the work that they do. They are the beginning of all of this. They're the point, they're the focus, they're the reason the market exists. I think that there should be all sorts of jobs available for people with other skills that want to be part of the industry, of course. I'm not saying that artists have this supreme reign. But I do feel that they deserve to be compensated fairly and they just haven't been, historically. Or most of them haven't been, historically, I guess some of them have been compensated quite well. You know what I'm saying, here.

[M] I'm down with that.

[P] I said that to Jenny in one of our first conversations…that I think this is a labor economics issue more than anything. It's about a workforce.

[M] I think that's brilliant.

[P] Thanks, I don't know about that… It's funny…that's what Jenny said. Regardless, I really think it's true. There are a lot of issues, here. Sort of the beautiful thing economically is the market problem, the problem about the good that they're producing, the idea of recorded music being the main good that they produce, especially with independent artists, obviously… 90% of their revenue or something comes from recorded music, cuz tours are generally sort of a break-even proposition for indie bands. Which is something I saw in my experience, booking shows. Often the shows that they do at Princeton would be… I had a lot of bands say to me, "If we hadn't had this show, we couldn't have financed this tour."

So people who think you make a lot of money from tours and selling t-shirts, like that's a big myth. I knew that firsthand and that was part of the first message that I was hearing from Jenny was that, " Hey, wait a minute. If the recorded music evaporates, then most of the revenue is going to go away."

That's the big chunk. That's the driver of how people make a living off this and support themselves at all or are able to pay for their equipment, they need to replace or whatever it is. Wherever the money's going. That's the biggest chunk of it. So there's this problem with the good being that the price is approaching zero as time goes forward, right? It happens every day with each person who decides that instead of purchasing it, they're going to get stuff for free. Granted, not everyone who uses Napster is someone who's doing that, but as long as there are an increasing number of people who are doing that, who are actually substituting the free music for paid music, independent artists are losing money.

[M] I think that a lot of the people taking free music would be otherwise getting free music or not buying much of it, anyway.

[P] It's a complicated function. There's actually a… I mean, it's a complicated function…It's actually…what's tough is that when people talk about this, they're trying to talk about it in one-dimensional space – plus or minus on a number line. And that's not really the case. You've got a lot of variables working. You're really sort of in multi-dimensional space and you can't control for everything and so you don't know what these people would have done. And you also have to start with something more primary like a concept of fairness. You know, given that these people are listening to it, whether they would have or not, given a different price, what are the ethics of what they're doing now that there is this price, given that the price is zero and they're taking some benefit from what the artist did, is it really true that the artist doesn't deserve any money because at a different price, the artist wouldn't have gotten anything either? That doesn't actually make sense. You have to split those cases up and account for all these different variables.

So, I think it's a really complicated question but I really do think that a) you might want to have a different ethical standard for what deserves to be compensated, maybe not based on these counter-factuals and b) there are some people who, instead of buying something, say, "Okay, I'm just going to download it." So their cost of sampling music just decreased. Now, the other thing is that actually may be a good thing that they're sampling more. Whatever, there are all sorts of feedback effects to people listening to more music, and that can benefit people down the road. So not only do you need this controlling for different prices, but you need to control for time and then you have these positive feedback mechanisms that if people are buying a bigger quantity of music today, then they may be buying an even bigger quantity of music tomorrow. There may be this exponential effect on what they buy and the revenue stream for the industry from that person. So, it's really complicated – the model that you need should capture at least those aspects. This is just talking off the top of my head.

[M] That's okay. That's all any of us can do right now, isn't it?

[P] I think artists should get more than they're getting…you know, the money due to them is more than zero.

[M] That's a good point.

[P] I have a notion as to what the effect is. It can't be less than zero, right? And it probably isn't exactly zero. So it's got to be more than zero. So we know the direction of the effect that needs to happen. Artists need to make more of this money.

[M] Off the top of your head, in a perfect world, let's say that free music five years from now, has proven to not to devalue, for the sake of argument. I know that there are arguments posited that this generation of music listeners will only know it as free. My generation knew it as maybe $6 for an album and now it's $20 for a CD. Or $20 for an album, because it's so hard to find vinyl.

[P] Yeah, I did a touch of informal research about that as well, and wrote an article, interviewing some teenagers and they definitely do begin to have a concept that, 'Why shouldn't we just not pay for it?' They're sort of caught in the middle. There are some of them that are going to think that. There are some of them that are going to understand that it's fair for artists to get some money for their work.

But to answer your question, 'What would it look like?' There are a lot of models that can get you to the result you want. Economically speaking, I would never want to commit to a means to a certain end, since what we're doing here is welfare evaluation: are the artists being fairly compensated? That's a discussion of the result, but it isn't a discussion of how the market mechanism is going to work.

I think that there are a lot of different opportunities that take advantage of market forces to benefit artists, as opposed to leaving them out. I do think that the current, unfettered market really hurts them. I think that facing an oligopoly in the music industry and facing other conditions and facing this public good problem…I think that a market left unfettered is really going to hurt artists in a lot of different ways.

So there needs to be corrections to those. There needs to be a system that doesn't have those problems. But there are lots of systems that don't have those problems. I think that any model where there's a market determining which artists deserve to get compensated more has an important feature. Any artist who lots of people want to listen to should probably get compensated more than artists that not very many people want to listen to. That seems relatively fair and there should be some aspect of that. Then I think that every aspect of the value chain should be open to competition, unless there's a really good reason why it shouldn't. I tend to be really suspicious of arguments to that effect. I think there should be competition in terms of file format; I think there should be competition in terms of ISPs; I think there should be competition in terms of who's collecting royalties for all these artists….

[M] I was going to get to that.

[P] There should be competition everywhere because consolidation of power at any point in the value chain means that one company can just suck all the value out. You want to avoid that problem. That's the oligopoly problem. Then you need to correct for this public good problem. You need to get people to pay musicians and the support employees in the industry. You need to get people to transfer money from the listeners to those people. People are able to consume music now -- if they wish -- without contributing any value to the system. You can just get it for free, and economically, that's inefficient because people aren't paying for the marginal benefit they are receiving. So, you need to find a way to do that and typically this is the hardest problem in economics – or one of the very hardest – how do you do that in a fair way that reflects any kind of market mechanism.

In an ideal world what you could do is you could calculate how much benefit each person gets from the music they're taking and then, they'd pay that much. But that's an impossible thing to measure. It's a philosophical artifact, you can't actually do that and so it's really hard to do. And this argument comes up again and again. It's the same problem that means cities don't know how many parks they should have, because people don't pay for parks, the city just guesses what number of parks we should have. The national government and a country decide how much national defense it should buy. Even though people get a benefit from it, people wouldn't pay for it if it were just up to them. And if taxes weren't mandatory, people wouldn't pay them. It's a problem like that, an incredibly difficult problem.

I guess that's a dodgy answer but I think that you have to look at a number of difficult models. This is where research comes in. It's going to take some work to figure out what the best solution is, and no one's got it yet. I haven't heard a fully specified solution that's been verified.

[M] Have you heard some that are on the right track?

[P] I think there's one standard promising example – the subscription model – where people would pay based on convenience. They'd pay ten or five or fifteen dollars a month, and an appropriate amount of that money goes to artists, based on the number of downloads or the number of megabytes per download…that seems like a fair model if you could get the consumers to go for it, if the convenience is really worth that much, that would make sense. The model where there is a peer-to-peer network and 45% of the revenue goes to artists and 45% goes to the companies and 10% goes to the actual people who are sharing the music so you avoid this free-rider problem. That might work. This model where you take money from the hardware manufacturers, like the CD-R manufacturers and the CD burner people and the computer manufacturers or whoever, and get some of that hardware revenue stream and then distribute that to artists, like they do in Germany. That model might make sense. I think that's hard to implement, but any of these could make sense because they're based on market mechanisms; people who buy that hardware are probably the people who listen to music. It's some sort of proxy for what you wish you could measure.

[M] How do they do it in Germany?

[P] I think in Germany there is a tax on the CD manufacturers. I guess there's a big case now, they're suing Hewlett Packard who makes some sort of device and there's a tax …I'm just speaking anecdotally here. The idea is – I'm making up numbers – when you buy a CD player and it costs $150, three dollars of that goes to some pool that goes to artists. We have it in the US, as well – the AHRA – the Audio Home Recording Act royalties go to artists, theoretically, even though it's a pittance. The idea is that CD manufacturers only exist because musicians are making CDs , for the most part, some of that revenue should go back to artists. So you could just expand on that idea, enforce it better, and base it on something other than Soundscan data and actually distribute it across the whole spectrum of artists, not just the major label artists and you could make that work. That is Whitney Broussard's [attorney, Selverne, Mandlebaum and Mintz] model, at least one he's talked about. It has a market component to it. It sounds like it could work; it's got problems as well, though. Those are three good ones that I'm thinking about. Off the top of my head, those are the three that appeal to me. The micro-payment model could work. That has some nice economic properties to it, as well. I don't really understand how to implement that but there are people who defend that one pretty adamantly.

[M] What do you think of the Fairtunes [virtual tip jar] model?

[P] I think that's the most dangerous and economically non-intuitive idea out there. I wrote two articles about that. I interviewed Matt [Goyer, fairtunes.com] and I gave him his forum and then I wrote an article where I gave five reasons why – economically – this is exactly backwards. People don't have any incentive to actually do it. The incentive just doesn't work out.

[M] Okay, what if it's not the only model, but at least…

[P] I think that it's dangerous to give anyone the idea that artists are getting some revenue from tips. You can make it one leg of a table, but then that leg is sawed three-quarters of the way through and if someone walks by and brushes by it, it will knock the whole table over.

[M] So, what if it's just a napkin on the table?

[P] I don't feel like that's how that works. Look at a waiter. The law is that you can be paid less than minimum wage if you're a waiter, because you get tips. The same thing could happen to artists. Artists would be liable, whenever anyone was saying, 'Hey, you know the total comp of artists is really low.' Someone could say, "That's because they get tips and don't report it: they're getting checks from Fairtunes."

I think it puts musicians in an economically and culturally dangerous point. I'm being extra-reactionary here. I'm giving the strongest case I could because no one else is saying this. But I think that it's really dangerous. Culturally, I don't know of any profession that gets tips that is among the highest paid professions. This isn't a future of high-paying, respected professional jobs. These are low-wage service jobs.

[M] What about Frederick Fekkai?

[P] How many hairdressers are really that famous?

[M] Fair enough, I'm just trying to be equally reactionary.

[P] I really think it's a bad idea.

[M] I've seen lots of discussion threads against it and I always thought it was the napkin on the table. Now I see why people would react so strongly. Noah Stone [director, Artists Against Piracy] and I got into a huge fight about it, actually.

[P] You just have to lay it all out. Economically, it doesn't work. Culturally, it's dangerous. Do you know what I mean? If I didn't think it had such cultural danger, I'd say, "Fine. Go ahead and do it." But I think it could actually do damage, so I think it's worth talking about why it could do damage.

We'll see what happens. I mean, it's an experiment. We'll see what they do, but the other thing here is that there are so many other people behind the scenes – besides the artist – that just get ignored. And because there's no market system here, it's just a system of transfer payments; it's not a market. The people behind the scenes – the songwriters, the producers, everyone who's not the name artist – get under-compensated, or not compensated at all. You leave it up to the artist to pay them and obviously it's in the artist's interest to not pay them quite as much as maybe they're worth.

This is just how incentives play out in the economy. You give people the power to give artists all this money. You give fans the power to decide who gets compensated for what, then they give it to all the artists and the artists have too much power to decide how much all the support people get, instead of the support people getting a market wage.

So it certainly wouldn't work as the whole model, and then as this extra model, I just feel like it's distracting. "In the future it'll be like Fairtunes." I've heard people say that – intelligent journalists who get respected have said this. And it's just so wrong. It's not even plausible that this would generate even 1/100 of a percent to compensate artists for all the work that they do. It just isn't getting there.

[M] Okay, let's talk about the Coalition. Can you, in your own words, divide up everybody's unofficial duties?

[P] Jenny [Toomey] is in charge of everything. I think that ideally she would be doing some research and some speaking – public speaking – and some political work or testifying to congress or to the copyright office. Ideally, I think that Jenny would be out there, doing that stuff. Then Michael [Bracy] is obviously the political arm and then Walter [McDonough]… I see Walter's area as legal research, thinking about what policies we want to advocate, legally, in terms of the copyright office and in terms of congressional rulings and things like that. Brian [Zisk] knows a lot about economics and a lot about technology, which is good because he's just focused on the idea that we want to find a market solution and that we want to find a solution that embraces technology and knows how to use it. Brian is best equipped to think about that. You don't want to try to choke the system. You don't want to try to shut Napster down because – as I think you were hinting at before – you could just generate a ton of revenue by developing all these music fans, who listen to a lot of music, Kristin [Thomson]'s role is to write articles and do some research and she does some support work and helping Jenny with all the editing with the machine. And my job is to do research as well.

[M] Are there any other organizations out there who are doing similar or the same thing? Do you guys feel there is an absolute void?

[P] No, not to my knowledge. I don' think anyone else has a thinktank organization model in the activist sense, that it's not just the political/activist part, that it's actually doing the research as well. You know, no. I don't know anyone who is specifically doing anything like that. I think there are broader organizations that are great and are interested in thinking these issues through, but they're maybe bigger … You know the EFF's [Electronic Frontier Foundation] concerns are very large and music tech is just one of their many concerns. I also think what we're doing sort of has an overlap with what they're thinking about.

[M] This isn't really your territory but I'm asking everybody anyway. What do you think about Artists Against Piracy and the Recording Artists Coalition?

[P] I feel like that's an important voice, but I think that everyone needs to recognize that big name artists are just small portion of the market we're talking about. It's important to think holistically about what an artist is and who a musician is and what their working situation is really like. And I think you want to think not about the superstars, but you want to think about the median musician in the income spectrum. So I feel like their voice is important, but of course because they have a ton of money, they're going to get a disproportionate amount of attention, based on the number of people. What's really nice about that is that sometimes they'll talk about the independent artists and try to take up the cause, but I don't feel like that's as effective as an organization for independent artists, working for independent artists and being in contact with independent artists. Those are different things. I don't think they're incompatible things. Obviously, we want to work with them as much as we can and I'm sure that – on a lot of issues – we'll have some things in common.

I also have a problem with the term 'piracy.' The problem is that, as a culture, we devalue the work of musicians. Every single person in America is responsible for this knot to some extent. Then, in effect, no one is really responsible. You can't pin it on one person or one group of people. Culturally, we just don't feel that musicians deserve to make very much money.

[M] Let's talk about the policy conference. Will you be there?

[P] I will be there. It's my first week of class! I'm just going to listen. I'm there to listen and meet some people in person, including Brian and Walter. I think it's going to be really overwhelming… to meet all these people and see all this stuff and there;s so many panelists coming.

[M] Whom are you looking forward to?

[P] I really can't wait to meet Kristen Hersh and to hear what she has to say. I love it that she went out and tried some different models and tried to take things into her own hands. She's going to be really interesting to hear. I'm excited to hear Jim Griffin [Evolab, Cherry Lane Digital] and Whitney Broussard speak, and to hear what Brian and Walter have to say. I'm going to be interested in what Michael and Jenny have to say, as well. I think that the technological stuff is going to be really interesting; since that's the stuff I know the least about.

[M] Who do you think should attend this conference?

[P] I think that any independent music label owner should be there -- if at all possible -- and I know for a lot of people, it's not going to be. I feel like if you're in the business of trying to protect the economic value of artists and to accentuate the value of those artists as much as you can, then I think you need to be thinking about these issues. This is the future of your economic model.

[M] Or the future of music, as it were.

[P] The future of your business. That's something you need to be thinking about, especially if you're a label owner. But even the musicians – I think that musicians should know about this stuff, as well, so I think it's important that they come. And then I hope that enough people in the music industry, the business community, come. I think it's important for them to know what models are going to be good in the long term. I hope that most people are convinced and I like to think that they are that what's good for artists in the long run, will be good for the music business in the long run. Now, for a long time, I feel they've been acting against that – that we can just churn through artists and spit them out and we'll be fine, because there will be more artists. Hopefully there will be something to be said for creating a system that benefits everyone in some sustainable way.

Linkography

Artists Against Piracy - www.artistsagainstpiracy.com
Cherry Lane Digital - www.cherrylane.com
EFF - www.eff.org
Evolab - www.evolab.com
Fairtunes - www.fairtunes.com
Flower Booking - www.flowerbooking.com
FMC - www.futureofmusic.org
Napster - www.napster.com
The Machine - www.insound.com/machine

Related MusicDish e-Journal Articles:
» Interview w/ Kristin Thomson, Future of Music Coalition (2001-01-03)
» Interview w/ Walter F. McDonough, Future of Music Coalition (2001-01-03)
» Interview w/ Jenny Toomey, Future of Music Coalition (2001-01-03)
» Interview w/ Michael Bracy, Future of Music Coalition (2001-01-03)
» Interview w/ Brian Zisk, Future of Music Coalition (2001-01-03)


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