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February 22 2011

22:30

4 Insights on the Future of the Music Industry

The music industry is still in tremendous turmoil. Yet it is also full of the kind of discussions needed to remake and rebuild the industry.

Fostering those conversations is the purpose of the revamped New Music Seminar (NMS), the most recent edition of which took place last week in Los Angeles. The conference focused on the music industry's evolving economic models and gave artists a look at the future of the business -- from do-it-yourself (DIY) outfits up to the major labels. Tom Silverman founded it 30 years ago as "a new kind of grassroots music industry gathering for disenfranchised music business upstarts," according to the NMS website. (You can hear more from Silverman in Mark Glaser's Q&A with him previously on MediaShift.)

I spoke with panelists, industry veterans, and aspiring artists at the conference. Here are a few points that were on most everyone's minds:

1. No single product defines the industry.

For decades the single song was the music industry's core product. Then for a few more decades the album reigned. The industry was well suited to meeting these consumer preferences because the profit margins were significant and selling more of anything in a single transaction is generally good business.

Endless choice has altered consumer behavior significantly. But with this change comes an opportunity to market substantially more products to fans. As album sales have declined, the industry now profits from a complex puzzle of revenue sources: merchandise, video, high-fidelity audio, karaoke tracks, song stems, artist access, and many other diversified offerings.

Today, there is no magic formula that works for all artists. Knowing what fan's preferences are and offering up tiers of products seems to be the winning equation.

2. Don't believe the hype.

Every year or two, a core trend is over-hyped and eventually disappoints. For years, it was ringtones. Likewise, DIY and direct-to-fan have proven to be more complicated and less successful than expected. And the bottom fell out on music-based videogame sales, culminating this month in the shuttering of the Guitar Hero franchise.

The newest hot trend is cloud-based music services. In Silverman's keynote (as well as his MediaShift interview), the founder of NMS and Tommy Boy Records made it clear that he didn't believe these services will revolutionize the industry, as many are predicting.

The numbers just don't add up, he said. Currently, online CD sales are only down three percent from last year. Physical CDs still count for 76 percent of album sales. Clearly, people are not abandoning music ownership just yet.

An interesting fact Silverman pointed out is that music storage is actually cheaper than the bandwidth to stream it. This isn't a consumer-facing factor as cloud services typically don't charge based on consumption. But it may have a long-term impact on the financials of ownership vs. access: Unless the cost of bandwidth drops, cloud-based streaming services will struggle to compete on price with digital music sales.

3. It's all about the music, after all.

What the past few years have shown is that technology and clever business models mean nothing without music people care about. In his NMS introduction, longtime artist manager Peter Malkin reprised this video, which lists the plethora of tools that enable musicians to run their enterprise. The point of the list is to show that there are a tremendous amount of tech platforms, but none of them really matter if the music isn't any good. Here's his presentation at NMS:

I spoke to Malkin after his presentation, and he expanded on this point, saying that a great live show is still the most important tool in an artist's arsenal. A strong musical foundation is key no matter what tools one chooses to use, he said.

4. New opportunities for artists at every level.

A number of companies announced new product lines at NMS, many of which cater to artists interested in offering goods and services directly to their fans. It used to be only the biggest acts who had the resources needed to pitch niche products.

> ZMX Music launched their direct-to-fan sheet music service at NMS, allowing smaller artists to enter America's $600 million sheet music industry. They cater to artists that do not have deals with the major publishers (e.g. Hal Leonard) and wish to sell their sheet music directly to fans. The non-exclusive service evenly splits revenue with the artists and offers embeddable widgets that allow for direct sales across many platforms.

> Topspin, considered the direct-to-fan leader for high-end artists, announced the launch of a self-serve model aimed at bands earlier in their career. A monthly fee of $9.99 and 15 percent of sales gives any artist access to serious marketing and sales tools.

> GigsWiz offers a ticketing system that encourages artists to actively sell tickets to shows rather than simply informing their fans of them. By sharing revenue, the service creates an incentive for artists to get even more involved in their show promotion.

> JamBase has expanded their service, allowing fans to connect via Facebook and be alerted when their favorite artists are playing local shows.

Other companies had launch announcements and platform upgrades, including Mozes and SoundExchange.

Just remember, as Malkin pointed out, these tools are only as useful as the music they power and the personal connections they are used to enhance.

Photo by Caesar Sebastian via Flickr.

Jason Feinberg is vice president, direct to consumer marketing for Concord Music Group. He is responsible for digital and physical direct-to-fan solutions for CMG's frontline and catalog including the Rounder, Fantasy and Stax labels. Recent campaigns include Paul Simon, Allison Krauss, Paul McCartney, Elvis Costello, Carole King/James Taylor, and Crowded House. Follow Jason on Twitter @otmg

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October 14 2010

17:28

10 Truths About the Modern Music Business

I've been covering the digital music business for MediaShift for more than 18 months, and in that time I've chronicled new services and examined key trends and news. Below is a look at 10 things that I've come to believe are true about the modern music business.

1. The "DIY Revolution" has Been Relatively Ineffective

Although going it on your own was all the rage in 2009, reality has shown that the majority of artists still need a team around them to reach any substantial level of awareness, sales, and revenue. However, this team doesn't necessarily need to resemble the traditional record label department structure. For many artists, surrounding themselves with a few tech-savvy friends and some seed money can generate the momentum necessary to fuel a moderate indie career. To reach far and wide enough to live off of one's art, the task list is simply too long to tackle alone. In reality, DIY can work just fine if you modernize the traditional definition of the term.

2. Tech Can Replace/Enhance Some Functions

Technology has removed many barriers and allowed almost anyone to play the game. It has also removed the need for some of the team members that have always been needed. Recording, mixing and mastering music can be done faster and cheaper than ever before. Distributing the output digitally is near instant and inexpensive. Anyone can create digital tools that collect email addresses, stream music, sell tickets, and engage with fans. Just remember that with technology, "build it and they will come" is pure fantasy.

3. Direct-to-Fan is Valuable When Executed Properly

Even with all the hype, direct-to-fan (D2F) has proven itself as a valuable strategy when implemented correctly. D2F, when viewed as a set of best practices, can supplement list Screen shot 2010-10-13 at 9.58.02 PM.pnggrowth, sell high-margin offerings, and give artists a chance to engage their biggest supporters in innovative ways. However, the idea that D2F is simply creating a Topspin account and building a splash page is a myth -- proper D2F involves content and offer curation, a well-planned timeline, some existing reach, and savvy marketing both online and off.

4. The Aggregator Market Has Solidified

Very little has changed in this area over the past couple years. With a few clear leaders emerging, artists have no problem getting their content to the marketplace. Other than some simple distinguishing features, most digital aggregators provide an identical core service: Get your music on iTunes, Amazon, and many other digital storefronts. Tunecore, CDBaby, IODA, Reverbnation, and a few others have effectively cornered the market.

5. Marketing Tools Have Diversified

The emergence of multiple tiers of artists has also allowed products to follow suit. Companies that offer similar products are finding their own market niches by catering to specific classes of artists (hobbyist, middle-class, established, legacy, etc.). The distinction between services is often based on feature sets, and that typically correlates to price. We'll see this trend continue as the tiers further solidify and the realities of what different artists can spend (and need) come to light.

6. Facebook Gaining on Email

Traditionally, email has been the Holy Grail of communicating with fans, but as social media and SMS adoption grows, Facebook and text messages are giving email serious competition. Many bands are turning to Facebook as their core communication channel; for many types of audiences this makes perfect sense -- Facebook allows for standard communication but also offers sales, research, and data collection opportunities in one location. By owning the entire ecosystem, Facebook makes the call-to-action process much simpler.

7. The Official Site is Critical (Again)

I'd argue this has always held true, but most artists in most genres have begun to truly grasp the importance of an official site. Official sites allow levels of control that are unrivaled by any other platform. Artists can have full control over sales, data capture, and fan engagement on their own site, whereas other platforms such as MySpace and Facebook have limitations in these areas. However, some artists are keeping it simple and can implement those core functions on even the most simple of platforms; the benefit here is little to no cost and minimal administration and maintenance. The right strategy is to understand the value of different platforms, and find the right mix based on audience and needs.

8. Physical Fulfillment is Still a Logistical Puzzle

The hardest logistical part of running an artist's business is physical fulfillment. This is an area that has always been tough and it's only become marginally easier through new services and technology. There are a number of ways to fulfill physical goods -- do it yourself, find willing partners, use an established fulfillment house, or sign a formal distribution deal. These each have their pros and cons, but ultimately it comes down to the complexity of the offerings and the quantity of business a band is doing. No matter what method, someone must be managing the process at all times; with so many moving parts (manufacturing, delivery, shipping, stock levels, customer service, etc.) fulfillment management can be a full-time job.

9. The Value of Mobile and Apps is Still Cloudy

The music space in mobile is still somewhat like the Wild West. Their are certain sectors Screen shot 2010-10-13 at 9.59.56 PM.pngthat are entering adulthood -- SMS marketing for example, where Mozes has become the clear leader. However, other areas are far from fully formed. Music apps for mobile phones are plentiful, but they rarely generate acceptable levels of revenue. One thing has become clear -- for almost all artists, charging for a music app is the wrong business model; give it away for free and utilize in-app purchases.

10. Monitoring Tools: A Race to The Top

There is no excuse to not know what events and metrics surround an artist or release. There are so many analytics platforms that the challenge is figuring out exactly which data is important to the current state of a project, and then finding the easiest way to aggregate the information. Check out RockDex, Next Big Sound, BandMetrics, Radian6, and BuzzDeck to see the range of platforms and services. Although they cater to different audiences, they are all racing to determine the ultimate set of useful data and develop the most effective ways of interpreting and displaying it. The real challenge is then telling the user what to do next.

*****

What truths have you discovered about the modern music business? Please share them in the comments.

Jason Feinberg is vice president, direct to consumer marketing for Concord Music Group. He is responsible for digital and physical direct-to-fan solutions for CMG's frontline and catalog including the Rounder, Fantasy and Stax labels. Recent campaigns include Paul McCartney, Elvis Costello, Ray Charles, Carole King/James Taylor, and Crowded House. Follow Jason on Twitter @otmg

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August 13 2010

15:52

December 16 2009

22:30

The Year in Digital Music and Predictions for 2010

As 2009 comes to a close, and the music industry shifts focus to 2010, it's worth looking back at some of the noteworthy events of the past 12 months. This is also the right time to look ahead and predict what will happen next year.

For some in the business, this year brought trouble after trouble; for others, 2009 was a time for growing revenue, relevance and positioning. Whichever end of the spectrum you are on, there have been few dull moments for digital music this year. And next year promises even more change and growth.

Innovation and Acquisitions Abound

A number of high-profile acquisitions in recent months have shifted the digital music landscape.

Apple's recent purchase of streaming/download service Lala has sparked much speculation. Articles from the New York Times, PC World, and Apple Insider have discussed possible reasons for the purchase, and most tend to focus on the creation of an Apple-powered music streaming platform.
Lala

Unlike iTunes, Lala allows users to stream music they own from the web, effectively creating an anything/anywhere platform. It would give users the ability to listen to music via the web and mobile phones without having to download the content to different devices. There's still a scramble for a sustainable streaming model, and Apple wants in.

This is interesting on its own, as it adds a dimension to music consumption that is basically the opposite of how iTunes was built from day one. But this is only one part of why industry players are talking; everyone loves drama, and this story has plenty.

Just one month prior to Apple's acquisition, Lala made headlines as one of the key partners in the new Google Music service. Lala, along with a number of other partners, now powers streaming music search results through Google. When a user searches for music on the search engine, the option to stream the song (as well as purchase, get lyrics, and find tour dates) appears at the top of the results. With Apple's buyout of the company, people are left to wonder what may come of this service.

MySpace was also busy on the acquisition front, recently absorbing two music streaming services, iLike and imeem. Each of these companies had built a solid user base, but had not found the profitability investors expected. A buyout wasn't a surprise. Speculation abounds here as well: Both of these companies offer enhancements to what MySpace currently provides, but they do not bring anything particularly new or unique to the table.

iLike

That said, these deals are not without their own drama. iLike has powered Facebook's most popular music service for years, so this acquisition creates an interesting relationship between MySpace and Facebook. There are many other music applications on Facebook, so this development probably won't be significantly disruptive.

The same can't be said for imeem. It built its massive user base by allowing fans to create streaming playlists and embed them across the web. Bloggers and others relied on these players, as did web technologies such as twt.fm, which allowed users to easily tweet a link to an imeem-powered streaming track.

These services immediately broke last week when, without warning, MySpace completely pulled the plug on the imeem service. All traffic to the imeem.com domain now points to MySpace Music, and all backend access to the site (via its APIs) is turned off. This has created unhappy fans, bloggers, and developers.

Is innovation flourishing, or is the herd thinning out? These were only some of the more high-profile acquisitions this year. Expect to see more in 2010.

Direct-To-Consumer Continues Ascent

Another important trend this year was the continued emergence of a hyper-charged direct-to-consumer business model. Companies such as Topspin, Audiolife, Nimbit, and Reverb Nation are enabling artists to interact with -- and sell to -- their audiences in many new ways. I wrote about this topic in a MediaShift article earlier in the year.

The idea of direct-to-fan goes back decades. Massive value can be created when an artist engages their audience directly. This has been demonstrated for years at concert merchandise booths, and online in the form of things such as newsletters and e-commerce using PayPal.

Nimbit The difference, and the reason this topic is on people's minds, is that technology has quickly propelled the D2C marketplace both downward and forward. Direct-to-fan has always worked well for large bands, or for artists with momentum. Now, small artists -- if, and only if, they are creative and good -- have the tools to recreate this revenue stream at their level. It doesn't mean every garage band can quit their day jobs, but it does mean more artists have new opportunities to make a living.

Forecasting, marketing, commerce, distribution, customer service, analytics, and deep fan engagement are all now available to artists at any stage of their career. This year saw some highly innovative and often successful campaigns run by emerging artists. In 2010, more artists will embrace this model, which means a lot of noise and competition. It will be more of a challenge for the brilliant acts to shine through.

What Else is Next

A few more thoughts about the year ahead:

  • 2010 will be the year of analytics. Digital marketing and sales departments have been cobbling together metrics for years. Many things are trackable, but it's often impossible to access the data or find the means to implement structured analysis. Platforms such as Next Big Sound, RockDex and BandMetrics are looking to fill this need. As APIs and data sources continue to open up, these services will get better and better.
  • The conversation about an ISP tax for unlimited downloads will continue. The big players working to combat piracy will continue to focus on this.
  • Spotify is still gearing up for a U.S. launch, but in light of imeem's troubles, the ad-supported streaming model is under further scrutiny. There are fundamental differences in their ad structures, but ad-supported is ad-supported.
  • I am curious to see where advertising on Twitter. The Huffington Post has one idea, trying to sell ads into feeds.

There are many more things on the horizon. I'd love to hear your thoughts on the state of the digital music industry, and what's next.

Jason Feinberg is the president and founder of On Target Media Group, a music industry online marketing and promotion company. He is responsible for business development, formulation and management of online marketing campaigns, and media relations with over 1,000 websites and media outlets. The company has served clients including Warner Bros. Records, Universal Music Enterprises, EMI, Concord Music Group, Roadrunner Records, and others with an artist roster that includes Har Mar Superstar, Flipper, George Thorogood, Steve Vai, Robben Ford, Chick Corea, and many more. You can follow Jason on Twitter @otmg

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