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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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February 02 2010

20:24

Email is Far From Dead

For years, the digerati have been declaring the end of email as a useful tool.

Back in 2003, experts said RSS feeds would spell the death of the inbox. In 2007, Wired and CNET said younger generations were using IM, Facebook and MySpace instead of email. More recently, PC Magazine's John Dvorak proclaimed "9 Reasons E-mail is Dead," and The Wall Street Journal told us "Why Email No Longer Rules."

The prognosticators point to the annoyances of spam; the difficulties of getting mass messages through corporate firewalls (and of having them stripped of HTML or graphics); and the fact that overflowing inboxes are causing people to pay less attention to email.

It's true that media companies -- and isn't every company now a media company? -- need to pay attention to important social platforms such as Twitter and Facebook. But they shouldn't underestimate the power of a well-crafted subject line that lands in front of an email subscriber.

Let me give some examples from my own experience, and also provide some data to help bolster my case that email is alive and well.

Don't Underestimate the Email Newsletter

A business associate recently suggested we not devote too much energy to a client's email strategy because people are "overloaded with email." But within four weeks of launch, more than five percent of the client's website visitors had signed up to receive email communications. The list continues to grow at a fast clip, and I consider the people on it to be among of the site's most loyal following.

Another recent example came when a representative from a potential sponsor for MediaShift expressed interest in banner ads, but told me they were really keen to learn about opportunities in our email newsletter. They found email to be the most effective means of communicating, according to the representative.

"Email is probably the single most effective marketing communications platform available
to publishers today, especially since it already has a high penetration level," Chris Sturk, managing editor for the publishing consultancy Mequoda Group, said via email.

For a publisher, email ads, which by law require a user's permission and are thus more targeted than many other advertising formats, tend to garner a much higher fee on a per-user basis than web ads. They also allow for a level of design and linguistic craft that can be impossible to achieve on social platforms like Twitter and Facebook.

I have consistently seen spikes in traffic to websites in the hours and days after email newsletters are sent out. Email allows you to keep messages on your servers, and not have to trust the security and delivery of the social network you're sending them through. You can use the data related to open rates (the percentage of those receiving an email who actually open it), clickthroughs from links and bouncebacks (when an email address is no longer valid, for example), and not have to be as concerned with whether your information is secure. Users' privacy can be better protected with email, as well.

"In business communication with customers, oftentimes a private channel is desired, especially when pertaining to the exchange of money," Sturk said. "Email has this privacy, while social media is mainly public."

The aggregate numbers, too, show that email is not in decline. The Journal story cited data that found the number of email users grew 21 percent, to 276.9 million people, across the U.S, several European countries, Australia and Brazil from August 2008 to August 2009. Sturk said delivery rates and open rates, meanwhile, remain relatively stable.

Social Networks Make Email More Efficient

emailVs.jpg

True, Twitter and Facebook and some social bookmarking and sharing sites are climbing up the rankings when it comes to referring traffic to websites. But surveys conducted by the marketing research company Marketing Sherpa find that users of social media consider them venues for personal communication, while 75 percent prefer that companies communicate with them via email.

Social media users, in fact, may use email more heavily than others, according to Marketing Sherpa editor Sean Donahue. "Just look at LinkedIn or Facebook -- how do you set up an account?" he said. "With an email address. How do you receive your notifications from those services? Through your email."

Social networks, as well as other tools like wikis and document sharing services, may also have made emailing more efficient. Collaborators can now more easily find out a project's status and access documents as needed without having to send and receive emails for every update.

Email may not have the buzz, but it still has a lot of power. If you're in the communication business, you ignore it at your peril. Email should still be in your mix if you're looking to reach your users in a way that makes them comfortable, lets them communicate with you, and also brings you business benefits.

Dorian Benkoil is the sales manager at MediaShift and SVP at Teeming Media, a strategic media consultancy focused on helping digital media content identify and meet business objectives. He has devised strategies, business models and training programs for websites, social media, blog networks, events companies, startups, publications and TV shows. He hosts the TV program "Naked Media: The Business of Media, Uncovered" (NakedMedia.org), blogs at MediaFlect.com and http://dorianbenkoil.tumblr.com/, and Tweets @dbenk.

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