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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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