TheCapitalClinic

Lefsetz, who is an astute observer of the music scene, had a great Friday rant about the problem of the music industry today, It’s the Money. Here are some quoted take-aways in the inimitable Lefsetz style:

1. That's how this business got fucked up…We want our money and we want it NOW!
2..If [you’re not willing to leave money on the table], you're not a member of the new team, but just a money-grubbing player on the old one.
3. if you're a new band, and you want money, up front, hire one of the usual suspects and … you're gonna have a very short run.
4. So what do the manager and agent SAY? TAKE THE MONEY! Go on tour, make that endorsement deal, IT'S GOOD FOR YOUR CAREER! But how often is it? Not as frequently as the manager and agent say it is. Most times, it's about the money. But they don't care,
5. It's not only the record labels who are ensconced in the old world. It's the entire music business infrastructure. Don't blame the labels for forsaking artist development, the lawyers, managers and agents JUST AREN'T INTERESTED IN IT!
6. If you want to have a long career, you've got to think of your audience first. And that's the fan, not the label or the promoter. What's going to enhance your relationship with the FAN! Good music at a fair price. Same deal with concert tickets.
7. Music? Music's free. If you don't know this, you're not in this business. So, don't charge more than the fan is willing to pay! Whether it be by Radiohead's tip jar model, or building the album into the price of the ticket or just GIVING THE MUSIC AWAY! The public expects everything to be available for next to nothing, so don't insult him by trying to put up walls preventing him from what he knows is available!
8. There's very little career management anymore. Very little strategizing. Everybody's on the take, and their advice is tainted.
9. The new generation will not run the business this way, will not sell out to the highest bidder.
10. Are you gonna take all the bread up front now or invest in YOUR future? The choice is yours.

So how do musicians translate Lefsetz’s pungent observations about Money into a concrete business model?

Whether we are in the pre or post-digital era, you cannot suspend some business basics. Economics 101 tells us that a sustainable business model requires two things to make MONEY:

Step 1. A discrete system in which (i) the return on “capital” exceeds (ii) the cost of “capital.” [NB: we have seen that “capital” has many dimensions – social, cultural, tangible; but in essence you have to get more out of it than you put into it - or you’re dead.]
Step 2. After achieving Step 1, the velocity of “capital” [the turnover of your inventory] must achieve critical mass [i.e., reach a self-perpetuating plateau].

Huh? What the hell do we mean by all that? We’re just here to make and enjoy music. It’s not the money. [Brother, IT’S THE MONEY!]

Putting aside some the B-school jargon [I never attended B-school myself, but I have been involved in too many businesses to think about for decades], you need to have a money box ("strategic business unit"/SBU) in which you get more output than input [step 1 above]; and you have to have enough of these boxes to support the box-making exercise [step 2 above]. To get down to the practical brass tacks of all this, here are some specific steps in "box-making" that Artists and their trusted Facilitators could take to make money - or you’re dead]:

Step 1. Aggregate your inventory in a centralized “music bank” but optimize “music discovery” in a decentralized environment [i.e. find the “heads within the heads” being the flip-side of the “tails within tails” in the “long tail” of a digital economy] so that more stuff comes out of the box than you put into it.
Step 2. Use an IT platform and a combined (a) machine-driven search algorithm and (b) human filters to leverage word-of-mouth communication to achieve viral growth - so that you have as many boxes as possible in your personal network to support your music-making and your art [or get another job].

Huh? What the hell do we mean by all that? Fagedaboudit, just play around with the Fuzz Mixtape and you’ll see.