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E-merging Labels - Next Generation Music Labels
I'm going to be on a panel in a few days at the Bandwidth Conference in SF and I'm just beginning to collect my notes on business models that may work for labels (or some derivative model) in this rapidly changing industry. I'll apologize in advance as this post will be more of a stream of consciousness than an organized blog. If you have any comments or ideas, or simply think these ideas are idiotic, please let me know. I'd rather look like a knucklehead in cyber-space than in front of the microphone.
Nonetheless, here are a couple of bullet points to start the discussion:
1) MAKE MONEY AROUND THE MUSIC: It is critical that ANY company that wants to participate in the music industry needs to have a revenue model that goes beyond just selling music - perhaps a model that is focused on SELLING AROUND THE MUSIC makes more sense. At the macro level, while the global recording industry was approx. $31B in 2005 (and declining rapidly), tickets and merchandise represent a $25B market; licensing and publishing is approximately $12B. In a world where most artists claim that they never made money selling music anyway (since most of the dough is made on the road), it seems that there needs to be a model that addresses these critical trends. Figuring out ways to participate in live performance, merch, and licensing is critically important providing that as a label, you are doing your fair share of the work.
2) USE TECHNOLOGY: Technology should be a key enabler to monitor performance and results of market data and spending. Data aggregation in real-time would be of great value to artists and labels when making decisions to invest in particular marketing plans. Equally important is using technology to provide total transparency in reporting back to the artists. Take a recent example of Crossfade, signed to Colombia - apparently, it has taken two years for the band to find out how much they have made. Imagine opening up your Schwab or E*Trade account and a note pops up and says, "Log in again in two years and we'll tell you how much your stock portfolio is worth..."
3) PARTNER WITH THE ARTISTS: Make joint decisions on marketing and business decisions and leave total creative control with the artists - they're the artists after all, right? Sure, everyone needs guidance from time to time based on recipes that have worked successfully in the past. However, new models will depart from the scenario whereby the labels control all of the decisions leaving artists as "victims" when decisions are made without their consent or input. Artists know their fans and spend time communicating with them - shouldn't they be consulted on how to best reach them?
4) FIND THE RIGHT PARTNER AND SET EXPECTATIONS ACCORDINGLY: I think labels need to also be thinking about the types of artists that they want to work with that goes beyond the question, "Do I like the music?" I think the right question is, "Can I work with this artist to take them to the next level of their career?" Do they have a strong work ethic? Are they willing to promote themselves and tap into various marketing channels on their own? Obviously, finding artists that think creatively and can act like true entrepreneurs gets everybody's creative juices flowing and can yield incredible results. It's not JUST the label that does all of the work now... collaborate, collaborate, collaborate.
5) YOU DON'T HAVE TO SPEND MONEY TO BE SUCCESSFUL: As a corollary to the last point, if you first work with the band to define "success," you can set budgets accordingly. Bands that are expecting major label marketing plans should NOT even think about joining an indie - it just doesn't make sense. Having said that, there are numerous examples of bands that have been able to rise without large budgets. Online marketing can be extremely effective and low-cost means to get the word out. As I see it, there are 5 primary online marketing strategies:
a) Blogs
b) Podcasts
c) Vodcasts or viral video
d) Brute-force guerrila marketing
d) Widgets
More on this later, but food for thought...
6) DON'T BE AFRAID TO GIVE AWAY THE MUSIC: While I believe that value can be created (or lost) simply by how the seller positions the product, music that is shared/given away can have tremendous promotional value. If a song or video goes viral (like OK Go's treadmill video), an artist has a chance to get huge in ways that even the largest marketing budget couldn't attain. I would even argue that some demographic groups actually turn away in disgust when they are force-fed advertisements about a particular band. Many kids only think something is cool if they were the first ones to discover it via friends or other discovery means. Gone are the days of radio being the only way to discover music.
7) TEST THE MARKET FIRST: Unlike the old days where it was virtually impossible to test the effectiveness of marketing plans before it was too late (i.e. dollars were spent and were not effective). Via the web, it's possible to get initial feedback on releases, re-mixes, colors, whatever before going out with a full-blown spend. This is where micro-communities that are often created around bands can be extremely useful.
OK - I'm running out of steam, but if anyone has any comments or needs further clarification, please let me know.
Nonetheless, here are a couple of bullet points to start the discussion:
1) MAKE MONEY AROUND THE MUSIC: It is critical that ANY company that wants to participate in the music industry needs to have a revenue model that goes beyond just selling music - perhaps a model that is focused on SELLING AROUND THE MUSIC makes more sense. At the macro level, while the global recording industry was approx. $31B in 2005 (and declining rapidly), tickets and merchandise represent a $25B market; licensing and publishing is approximately $12B. In a world where most artists claim that they never made money selling music anyway (since most of the dough is made on the road), it seems that there needs to be a model that addresses these critical trends. Figuring out ways to participate in live performance, merch, and licensing is critically important providing that as a label, you are doing your fair share of the work.
2) USE TECHNOLOGY: Technology should be a key enabler to monitor performance and results of market data and spending. Data aggregation in real-time would be of great value to artists and labels when making decisions to invest in particular marketing plans. Equally important is using technology to provide total transparency in reporting back to the artists. Take a recent example of Crossfade, signed to Colombia - apparently, it has taken two years for the band to find out how much they have made. Imagine opening up your Schwab or E*Trade account and a note pops up and says, "Log in again in two years and we'll tell you how much your stock portfolio is worth..."
3) PARTNER WITH THE ARTISTS: Make joint decisions on marketing and business decisions and leave total creative control with the artists - they're the artists after all, right? Sure, everyone needs guidance from time to time based on recipes that have worked successfully in the past. However, new models will depart from the scenario whereby the labels control all of the decisions leaving artists as "victims" when decisions are made without their consent or input. Artists know their fans and spend time communicating with them - shouldn't they be consulted on how to best reach them?
4) FIND THE RIGHT PARTNER AND SET EXPECTATIONS ACCORDINGLY: I think labels need to also be thinking about the types of artists that they want to work with that goes beyond the question, "Do I like the music?" I think the right question is, "Can I work with this artist to take them to the next level of their career?" Do they have a strong work ethic? Are they willing to promote themselves and tap into various marketing channels on their own? Obviously, finding artists that think creatively and can act like true entrepreneurs gets everybody's creative juices flowing and can yield incredible results. It's not JUST the label that does all of the work now... collaborate, collaborate, collaborate.
5) YOU DON'T HAVE TO SPEND MONEY TO BE SUCCESSFUL: As a corollary to the last point, if you first work with the band to define "success," you can set budgets accordingly. Bands that are expecting major label marketing plans should NOT even think about joining an indie - it just doesn't make sense. Having said that, there are numerous examples of bands that have been able to rise without large budgets. Online marketing can be extremely effective and low-cost means to get the word out. As I see it, there are 5 primary online marketing strategies:
a) Blogs
b) Podcasts
c) Vodcasts or viral video
d) Brute-force guerrila marketing
d) Widgets
More on this later, but food for thought...
6) DON'T BE AFRAID TO GIVE AWAY THE MUSIC: While I believe that value can be created (or lost) simply by how the seller positions the product, music that is shared/given away can have tremendous promotional value. If a song or video goes viral (like OK Go's treadmill video), an artist has a chance to get huge in ways that even the largest marketing budget couldn't attain. I would even argue that some demographic groups actually turn away in disgust when they are force-fed advertisements about a particular band. Many kids only think something is cool if they were the first ones to discover it via friends or other discovery means. Gone are the days of radio being the only way to discover music.
7) TEST THE MARKET FIRST: Unlike the old days where it was virtually impossible to test the effectiveness of marketing plans before it was too late (i.e. dollars were spent and were not effective). Via the web, it's possible to get initial feedback on releases, re-mixes, colors, whatever before going out with a full-blown spend. This is where micro-communities that are often created around bands can be extremely useful.
OK - I'm running out of steam, but if anyone has any comments or needs further clarification, please let me know.
Comments
I was just blogging with Mibu Wolf and I was thinking about Artists needing revenue sources to provide more stability than at present. Right now, Artists are trying to balance on a precariou and uneven "two-legged stool", being (1) first leg - trying mightily to sell their works (songs and/or cd's) in any way they can, physical sales, online downloads [sometimes conbining paid downloads with other revenue tie-ins and free downloads as a marketing vehicle] and (2) second leg - performing music (gigs/touring/festivals, tutoring) generally coupled with merch sales.
The problem with this two-legged stool is that the revenue is evanescent and uneven, and that's why the stool more often than not just falls over.
What the Artists need is a third leg in the revenue stool that provides the needed balance to the other two wildly variable and problematic revenue streams. What is that "third leg"?
I contend that a promise third leg could be a DIY ad-revenue model to provide an incremental revenue source for those who know how to work the web and use technology and third party partners and supporters, such as Fans or sites like Fuzz to provide the energy and platform to permit such "third party" revenue sources to reach meaningful levels.
Why should Artists have an edge in getting ad-revenues over other bloggers or web-participants who are trying to do the same? Answer: real "music" content. What is missing is an effective way to organize the "non-music" content so that Artists can get sufficient traction such that third party ad-revenues are meaningful. There are ways to make this happen, but that will take us away from the main thrust of this blog.
Suffice it to summarize - I think you need a three-legged revenue stool to survive in the music business of the future. Beyond the "traditional" revenues sources, selling music and performing music, you need "third party" revenues such as online ad-revenue sharing.
Consider the time before the internet, how many bands would have licked boots to have their music played on the radio?
Today with the net, every band in the world has that option.
The INTERNET is the NEW RADIO and that would make each person who sits behind a computer the program director for their very own station!
I think bands should really open up to this source for promotion as being a miracle and to run with it. To me it's that simple. The more you give, the more your going to get. It's like free chips and salsa.
Customers love it and in the end it makes them thirsty and drives them to spend on drinks. To me that's marketing on the simplest level with the highest success rate.
As far as the selling of hard music, I believe that at some point the rapid decline of sells will be leveled out and will represent the really hardcore music geeks like myself who just have to have that record or picture disc.