Music Business and Trend-Mongering

The best part of this instructional video is that James Brown is dancing to James Brown music. What else is he going to dance to?

via Pathway To Unknown Worlds

Some succinct thoughts in this interview from the guitar player in Radiohead who is not named Jonny Greenwood or Thom Yorke. Ed makes two good points in here, when talking about the physical release of In Rainbows. My paraphrase:

A) consumers are set in their ways, and if you are not making your product available in all formats (and stores) you are limiting your pool of potential consumers (as well as leaving money on the table). It’s a great point, and something artists need to consider on a large scale (whether to release digital only vs physical and digital) as well on a micro level (releasing music to 3rd party streaming retailers with lower pay rates, vs releasing only to higher paying permanent download options like iTunes and Amazonmp3).

B) artists need an “equitable, fair, and balanced relationship” with whomever they decide to work with to help them market and sell their music. This goes for labels, or any other artists service based company. As Ed says, many label deals are “an analog model in a digital era.”

Watch the full interview here, courtesy of paidcontent.co.uk

I feel like I owe an apology for the lack of activity on my blog lately. While I’ve been better about keeping up with Twitter, I’ve definitely let the posts slip here. A resolution of mine for 2010 is to get back on the horse and get the posting schedule back on track. Not that it is any excuse, but I’ve been particularly busy with creating content in a couple of other ways. Here’s what I have been up to over the past few months.

I’ve written two new marketing courses that are enrolling now for Berkleemusic’s next term, starting January 11th. As I have mentioned on this blog before, Online Music Marketing with Topspin (co-authored by Topspin’s Shamal Ranasinghe) will teach you how to use Topspin’s unique marketing, management, and content distribution platform to help you market and retail direct to your fans. In the course, students will develop the in-depth marketing expertise necessary to properly execute a successful sales and marketing campaign using Topspin. You can watch some videos of Topspin’s CEO Ian Rogers and myself talking about online marketing and the course here.

I also just finished a second online music marketing course called Online Music Marketing: Campaign Strategies, Social Media, and Digital Distribution. This course covers some key areas that all marketers need to focus on, such as social media marketing, effective use of data to direct you campaigns, what partners you should be aware of, and much more. By the end you’ll have a fully timed, integrated, and optimized online marketing plan that you can use to generate interest in your music, acquire new fans, and sell your music online. It’s a great companion course to Music Marketing: Press, Promotion, Distribution, and Retail, with a greater focus on the online side of marketing.

Finally, the companion book to Music Marketing: Press, Promotion, Distribution, and Retail is done and available. The book contains additional interviews and content which complements the online course of the same name. I’m giving away a free chapter and selling the book on a discount here if you’d like to check it out.

That’s all from me. I wish you the best in 2010!

Here’s a video of me talking about the new Online Music Marketing: Campaign Strategies, Social Media, and Digital Distribution course:

Don Passman is an entertainment lawyer who has represented some musical titans, including R.E.M.,Tom Waits, Tina Turner, Quincy Jones, Green Day, Bonnie Raitt and many more. He’s also an author who has written one of the most thorough and practical guides to understanding the music industry. All You Need To Know About The Music Business is now in its 7th edition, and I had the good fortune of connecting with Don to discuss his thoughts on 360 deals, direct to fan options, file sharing, and the current state of the music business.

Congratulations on your revised and updated book! What do you see as being the most significant changes in the record business since the book first came out twenty years ago?

Well, there’s no more vinyl…[laughs]. In the record biz the changes have been profound. The record companies have gone from being incredibly powerful players to still powerful, but not nearly as much as they were. The biggest change is of course piracy, which devastated record company revenue. The record business has gone through such a hard period because it is difficult to compete with free. The record companies have been blamed for being asleep at the switch. They could have probably done more than they really did–although there wasn’t much anybody could do even with a rear view in the mirror.

Speaking of revenue, the 360 deals are certainly a way for labels to engage in other revenue streams, but are 360 deals a good option for artists? Is that something that an artist should be interested in if they are going to be signing to a label?

Whether they are interested in it or not, if they’re going to sign with a major or even an independent, they will have to make one of these deals as none of these companies will sign them without it. The labels are essentially trying to position themselves as branding companies, and are saying that they are not just a record company; i.e. we’re people that are investing in your career, we’re going to help you build your brand, and when you get benefits from that brand we should share in them.

This seems like a contradiction to me. The majors have downsized over the past few years, they have fewer resources, yet they are promising more with the 360 deals. Can they deliver?

No. In fact, they quit making promises a while ago. They started out by saying they would give you more attention, that they would give you a better record deal if you gave them 360 rights. They wanted the 360 rights to hedge their bet. That’s all gone. Now it’s just a record deal that looks pretty much like a stand-alone.

Are you saying that if you provide a label with the rights to merchandising, touring, or publishing there is no guarantee they will provide any marketing support to help increase these sources of revenue?

Correct. There are two kinds of 360 rights, active and passive. Some of the labels are actually taking the merchandising rights to manufacture and exploit, some the publishing rights, and others are just taking a part of income–meaning that you make your own deals for a piece of the pie. In the situations where they have a merchandising company, they are of course going to give you those services. They’ll do the manufacturing, the distribution, and the marketing. If they have a passive interest, however, they’re not really going to do anything.

That sounds like a pretty tough deal for artists. In the past, the only possible option was to work with a major label to get worldwide distribution, marketing support, tour support and more. Do you think that now is a good time for artists to be working with independent labels, which might be less constrained by the concept of multiple rights deals?

Well, the independent labels have gotten just as aggressive as the majors in terms of 360 rights. So you don’t actually get much comfort by going to an indie label. You may make a better deal, but they are still going to want the 360 rights as well.

Do you think it would make sense for a developing artist to switch their focus away from labels and instead try to market and sell themselves with the help of partners like an indie PR firm, a low-cost online distributor, or another artist service-based company?

It depends on what kind of artist you are. Nobody that is mainstream and wants to sell a multi- million release has done it yet without a label behind. That may change. But that is where we are today, Nov. 2nd. If you are an indie artist that has a niche market and a cult following, and you are content to stay there, then you can do just fine without a label. You can sell directly to your fans, you will know who they are, and you will have control of your marketing database. Anywhere in between, the answer is a little bit trickier. You’re better off economically on a per unit basis doing it yourself, because you can make so much more if you keep the 360 rights. But the question is: Will you sell enough going through a label to make up the difference? This is of course unknowable. It is easy to sign up on MySpace, use Tunecore, or have someone distribute your music digitally (or even do physical distribution). The problem is everyone can do that too. There’s no barrier to entry, and there are four million bands in MySpace. How do you break through the noise? That is essentially what record companies help you do.

France is adopting the so-called ‘three-strikes’ law, where Internet users could face a suspension of their services for sharing files. Britain might go the same way. Do you think that this is an effective way to fight file sharing?

It is certainly better than what we have right now. Presently, there is no consequence to infringers, really—there have been consequences for a few people here and there, but for the most part file sharing is rampant. So, I’m in favor of anything that makes piracy more difficult. But I also think it has to be coupled with something that people actually want, which we haven’t done a good job of providing yet. And by the way, that is not completely the industry’s fault. A lot of it is technological. There are limits to what [the record companies] can deliver today.

Do you think that technology will develop to the point where piracy might stop being an issue? I am thinking of the new Spotify model, where the idea is for premium users to pay a subscription to effectively have “anytime, anywhere” music with the inclusion of a smartphone app. It seems to me that offering a legal and more convenient option for fans to get music might be a better route than cutting off their Internet service.

Yes, if we offer something people really want. In that case, I think we can ‘conscript’ the pirates. There will always be piracy. Every business, from grocery stores to anybody else has some kind of theft. But it is minimal. In music, it is rampant. If we come up with something that is easy to use and readily accessible and cross-platform, I think we’ll have something that people will really want and should be able to monetize. It could be very good for new bands, because people who would never buy at a record store may now be willing to pay for music.

As traditional CD sales drop, are new income sources—such as video streaming services and the like—showing promise as alternatives to recorded music sales?

Well, none of that means much now. The revenues from videos are relatively modest when spread out, at least on an ad-supported model, because videos haven’t worked very well. It is hard to tie advertisers to a specific video and the advertisers are not willing to pay much for it anyway. This may change, but at the moment such revenue has not amounted to much. The same applies to cell phones. In the future, more things will be possible, but as yet there are relatively few options.

After years of contention, rights holders and commercial webcasters have agreed on pricing terms for online music streams; the prices will stay in place until at least 2014. In the updated edition of your book, you refer to the Copyright Royalty Board and this recent agreement. How does this change the playing field for consumers and artists?

It doesn’t change anything for consumers and artists. It really has to do with an alternative break in the statutory rate for webcasters, who were complaining that it was so expensive they couldn’t do it. So they came up with a private settlement, affordable to most, that makes the cost a bit less. So I think it would help consumers in the sense that there would hopefully be more services available that would cheaper. But otherwise, it’s not a direct impact.

In the new edition of your book, you also talk about P&D and ‘upstream’ deals. Could you discuss some of the options independent labels have if they chose to join forces with major distributors and labels?

A P&D deal works fine except that it is very risky and you are taking the risk of the manufacturing and the returns coming back. It can be expensive, but when it works you make far more per record. The upstream deals are deals that kick-in after a certain critical mass [of sales] is reached. Then, you no longer have a P&D deal, but a profit sharing deal. You are not taking any financial risk, and the major label takes over the cost of marketing, promotion, and so forth. Again, you make less, but presumably they take it to another level. Some of these deals have worked pretty well, but a lot of them haven’t, so it is not clear where the advantage lies. You may be better off or not. Just keep the P&D deal, and if it really works then your label will have more leverage to go out and make a better arrangement with the distributor.

At what point should an independent label think about a P&D deal? What should they have going before they even consider a P&D?

Product… [laughs]. You can make a P&D deal at any time. You just need to know that you are taking a pretty big risk with it. Maybe that’s all you can get, because nobody will give you any money, so they’ll only press and distribute the records. But that’s probably the deal you will end up having to make to get things going at the beginning, when you have no kind of track record or buzz.

If you’ve been following my blog, you might be aware that I am a fan of artists and managers A) starting off by doing what they can themselves to help market and sell their own music, and B) seeking out partnerships with companies that can help them to do more than they are able to do themselves, for a fair price, and C) building up, communicating, and monetizing their own list in a meaningful way, using best practices with direct-to-fan marketing. I think direct-to-fan not only has the potential of generating more margin for artists now, but if done properly, DTF (direct-to-fan) can also help to ensure that artists are building a passionate base for the future. It’s not the only marketing segment that matters, but it is a segment that all musicians and managers should be paying close attention to, and integrating into their other traditional marketing and sales campaigns.

I’ve been working with Shamal, Gary, Ian, Adam and others at Topspin for the past 8 months or so creating a course dedicated to outlining the best practices that folks should be aware of in terms of online DTF (and traditional) marketing, and how Topspin’s software can be used to help facilitate these best practices. I’ve had the good fortune of not only taking a look inside Topspin’s platform to analyze their key features – a content management system that hosts your media assets, a fan management system that collects, organizes, and analyzes fan data, detailed reporting features, e-mail management system, widget creation and viral tracking, and more – but also to see the best practices and real data that Topspin has generated from the 150+ campaigns they have run over the past couple of years. While every marketing and sales campaign is different, this course presents folks with a unique opportunity to “look behind the curtain” to see exactly what has worked for some bands, how they set up their offers, the income they generated from these offers, and how they went about acquiring new fans. I think it’s helpful information.

I sat down with Ian here at Berklee in August to do a quick overview of the course, which turned into a bit of an online marketing clinic. Below is one of the clips from our conversation. To see them all, click here.

Online Music Marketing with Topspin is enrolling now, and begins on January 11th. If you are interested in learning more about the course, feel free to connect with one of our Admissions Advisors at 1.866.BERKLEE (US) or 617.747.2146 (International).

Tom Friedman, author and foreign-affairs columnist for the New York Times, doesn’t write much about music. But his piece “The New Untouchables” is a column well worth reading for those looking for a way forward in the music business. It may sound obvious, but the truth is that many of the fundamental techniques used for success in the “non-music” business world are the same techniques that can be applied to folks looking for success in the “music” business world.

Check this out, from Friedman’s piece:

A Washington lawyer friend recently told me about layoffs at his firm. I asked him who was getting axed. He said it was interesting: lawyers who were used to just showing up and having work handed to them were the first to go because with the bursting of the credit bubble, that flow of work just isn’t there. But those who have the ability to imagine new services, new opportunities and new ways to recruit work were being retained. They are the new untouchables.

Those who are waiting for this recession to end so someone can again hand them work could have a long wait. Those with the imagination to make themselves untouchables — to invent smarter ways to do old jobs, energy-saving ways to provide new services, new ways to attract old customers or new ways to combine existing technologies — will thrive.

It’s not hard to see the connection between lawyers and musicians, here, is it? Imagining new opportunities, new ways to recruit work, and inventing smarter ways to do old jobs is a great plan off attack for business folks AND musicians.

Bruce Houghton from Hypebot initiated a great discussion on his blog a few weeks back about his ideas that “there have always been skills beyond just making music that, if not required, certainly made success more likely.” It’s an opinion that I share, too.

I definitely would not frame any musician in the “untouchable” camp (brands are only as good as the trust their fans have in them), but generating leverage by doing as much as you can yourself (with the help of a good team, if possible), analyzing data to do it smarter, and figuring out ways to creatively attract new fans is great advice for any musician interested in building a more sustainable career.

It’s likely that you’ve heard of Jonathan Coulton. Profiled by NPR and the New York Times, Coulton has been a full time independent musician since he quit his computer programming gig in 2005. After initiating an ambitious project of releasing a new song a week, Coulton started to gain momentum, making what he described as “a reasonable middle-class living” — between $3,000 and $5,000 a month — by selling CDs and digital downloads of his work on his own site and iTunes.

Coulton is prolific in his conversations with his fans online, spending time each day personally answering every email he receives. While his direct to fan approach to sales and marketing includes a partnership with CD Baby (who warehouse and ship his physical CD, as well as get his music to the online retailers like iTunes and Amazon), Coulton’s most lucrative source of income is selling online from his Website.

Check out an audio interview that Scott Kirsner, author of the new book, Fans, Friends & Followers, did with Jonathan Coulton. Interesting ideas on communicating with fans, how Jonathan is using Creative Commons, his primary sources of revenue, his trepidation about signing to a label, and more.

Pay particular attention to Coulton’s recipe for success:

• Solo artist = low overhead when touring
• Records in a home studio = low production costs
• Distributes most of his music digitally = no co-op fees at retail, lower distribution fee
• Fosters a direct connection to his fans = fans are more emotionally involved in what he does
• Few middlemen involved in the chain = most of his income is his alone

Check out the audio interview here:

Anyone that has been following music business trends for the past few years is likely familiar with the high profile direct to fan campaigns (campaigns that focus on the monetization of an artist’s fan base directly) that Nine Inch Nails, Radiohead, Imogen Heap, and others have been involved with recently. As Mike Masnick put it in his 2009 NARM Keynote, the recipe for effective direct to fan campaigns can be boiled down to: Connecting with Fans (CwF) + Providing a Reason to Buy (RtB) = $$$. Makes sense, right? The difficulties arise when you consider that there are 5 million bands on MySpace, all of which are vying for the consumer’s attention. It’s easy for NIN and Radiohead to connect with fans, the skeptics’ note, as they have had years of major label support and hundreds of thousands of existing followers to work with. How can a developing artist in this climate differentiate themselves from all the other bands out there?

The answer can be slightly more nuanced than Masnick’s formula above, and to me, is based on a four key elements: 1) setting up an effective offer page on your site that is tailored to your marketing goals and where you are in your marketing cycle, 2) expanding your digital touch points through creative fan acquisition techniques, 3) integrating your online and offline marketing towards the same goal, and lastly, 4) once you’ve created your groundswell of support and fans, integrating effective 3rd party digital and physical marketing, sales, and distribution (such as Tunecore) outlets into the mix. Let’s illustrate these elements with two examples.

Example 1: Fanfarlo

Creating an Effective Offer Page Tailored to Acquisition

Although they were supported by NME in their hometown of London (who have called their release “a carefully orchestrated treat”), and have some high profile fans in the members of Sigur Rós, Fanfarlo found that they were having a tough time breaking into the US market. Fanfarlo’s music is undeniably great (aside: the first step, of course, in any marketing campaign is to have great music. Without this, any DTF marketing campaign will fail), and as such, the plan for breaking Fanfarlo relied a lot on getting as many folks to experience their music as possible, with the end goal of gaining enough interest to pack the Mercury Lounge in NYC (300 capacity).

The band initiated their acquisition-based campaign by looking at what assets and connections they could leverage. Fanfarlo developed a low-cost video, dug up some unreleased tracks, and recorded new acoustic versions. Of particular note, the band’s management reached out to Sigur Rós, who agreed to mention Fanfarlo in one of their emails to their fans.

Prior to any outreach from Sigur Rós, the band knew it was crucial for them to create an offer on their site that would make their music as accessible as possible, while at the same time create a degree of urgency. Again, as monetization was not the driving force behind their campaign at this stage in their marketing process, Fanfarlo decided the best course of action for building up their base was to provide curious potential fans with the opportunity to purchase their record for $1.00 (for a limited time), in exchange for an email address (which provided the band with permission to engage with these fans directly at a later date). They band adjusted their site accordingly, employing best practices with SEO and Web IA, and created an offer page dedicated to highlighting their music and making it easy to purchase via one click off the offer page. This was the result:

Along with the redesigned offer page on their site, the band adjusted all of their social media pages (visibility on MySpace, Wikipedia, Facebook, Last.fm, iLike, YouTube) with appropriate offer copy/images, and links to the offer on their proper site. Once all the backend was done and Fanfarlo was ready for the traffic, Sigur Rós hyped the band in an email to their fans and Fanfarlo essentially had an “offer you can’t refuse” waiting for them. In exchange, the band built up their email list, created a viral buzz on their new record, and not only had enough interest to pack the Mercury Lounge in NYC, they had to upgrade to the larger Bowery Ballroom!

Example 2: The Lights Out

Expanding Your Digital Touch Points through Social Media & Integrating Your Online and Offline Marketing

All marketing campaigns are different, and not everyone has the luxury of having support from major bands like Sigur Rós. But no matter where you are at in your career, core marketing principals hold true, particularly when it comes to effectively using social media to engage your fans and building up your base. The best example of social media campaigns are creative ideas that leverage the viral nature of social media to engage fans and effect change in not only the digital world, but in a band’s physical campaign as well (which of course is still incredibly important to any overall marketing campaign).

The Lights Out is a Boston-based band working to raise their hometown visibility and acquire new fans to positively impact their touring base throughout the Northeast. On the heels of an oppressive heat wave in Boston in mid August, the band initiated a Slush Puppie “flash mob” online marketing campaign. The band found the appropriate location for the event via polling their Twitter followers:

Once the location was chosen, the band set up a Facebook event, which allowed them to update the status of the Slush Mob, get an idea on who was coming, and communicate directly with those that expressed interest.

The band then set up a Twitter hashtag (#), which organized all messaging around the event into a single live channel on Twitter search. The hashtag use also had the all-important added benefit of becoming a “viral generator” for the event, piquing the interest of the band’s follower’s fans, and influencing activity at a level outside of what the band could do with their fanbase directly.

Once the existing fans were engaged in the event, Boston-based bloggers picked up on it, the market’s alternative weekly featured info on the event, and popular Boston-based event and social media Twitterers did the same.

The band continued Tweeting from the event and after, and shared photos of the turnout using Twitpic:

So, what did all this mean to the band’s stated goal of raising their visibility and acquiring new fans?

The data:

• 20% increase in unique web site visitors

• 24 times increase in daily twitter followers

• 3,352 impressions from media coverage

• 66,160 impressions from Tweets and Retweets

• 195 impressions from Twitpics

• Approximate Total: 70,000 impressions

New fans also direct-messaged the band, telling them how much they enjoyed the idea/their music and expressing interest in attending future gigs. And because this social media campaign included an offline component, new fans were able to bond with the band in a more personal way.

Again, all marketing campaigns are different, and should be employed in a way that focuses on the strengths and opportunities of the respective band. The specific tools will certainly continue to change as we move forward, but the principle of determining your core goal and engaging / developing your fan base to reach this goal will not. What’s particularly exciting to me is that artists have the option to market and distribute their music directly, with less gatekeeper involvement, than ever before. We’re in the early stages of direct to fan campaigns, but I think it is undeniable that there is a tremendous amount of growth potential in the segment – and is an area that artists, managers and others (forward thinking, artist-serviced based companies, for example) have to look at very closely.

Clay Shirky is the former vice-president of the New York chapter of the Electronic Frontier Foundation, and an expert on the social and economic effects of Internet technologies. This TED presentation on the Social Web is a much watch for anyone involved in media or marketing.

“The choice is not if this is the media environment we want to operate in. The question is now ‘how can we make the best use of this media?’ – even though it means changing the way we have always done it.”

Via Dave Allen @pampelmoose

Interesting report released this week by Will Page, chief economist at PRS for Music, the UK’s performance rights organization. The entire report can downloaded here, but the details, in a nutshell:

* The value of the recorded music biz fell 6%
* The value of the live music industry in the UK increased 13%
* Licensing revenues from labels increased 7%
* Other publishing revenues increased 7%
* Digital music grew by almost 50% in 2008, with physical declining by roughly 10%

“Ultimately we’re going from a market which lots of revenue came from one very big source,” said Will Page, “to one where we’re generating many different sources of revenue, some will be big some will be small – but they will all matter more going forward.”

Not all the information is rosy for developing artists. As highlighted by Glenn Peoples from Billboard, in both digital sales and live music, there is a growing income disparity. “This growing inequality between heritage acts and the rest of the pack mirrors a separate trend identified in digital music,” wrote PRS, “where more choice led to a widening gap between the hits and niches.” Popular, older artists are demanding higher ticket prices. The growth of secondary ticketing services – their revenue is included in the study – has fueled the growth in ticket prices. But mid-tier artists, those who cannot raise prices seemingly at will, are a cause for “real concern.” The same can be said for sponsorship and advertising dollars, which often are titled in favor of the most popular artists. In effect, advertising agencies now act as a gatekeeper that benefits the select few who pass through.