One of the online sales techniques I’ve been advocating in my online courses is for artists to create different physical and digital products and make them available on their own site at tiered price points. The idea is that you can offer something for all of your fans – the hard core fans might be interested in something from you that is a little more personalized and rare, and newer fans might be able to get something from you that wont break the bank. All the while you have the ability to offer something that cannot be purchased at traditional retail, which makes the experience of purchasing off of your site more rewarding for your fans. Here’s an example from the Yim Yames site:

Determining what you offer – and at what price point – is an art that takes into account a number of factors. For example, if the goal of your campaign is to expose your music to as many folks as possible, you’ll want to price some of your items lower and take a lower margin per unit. You’ll also want to take into account what unique items your specific psychographic would respond to the best. If you’ve determined that one of the psychographic traits your community shares with you is a love for vegetarian food, you might want to create a downloadable PDF vegetarian cookbook for your fans as a value add (similar to what Jonsi and Alex did for their fans).

Another important factor in creating an effective product and pricing plan is to use data to determine what options might create the best result for you; which brings me to the point of my post.

John Grubber turned me onto a fantastic post written a few weeks ago by Craig Mod, describing how he and Ashley Rawlings used the fundraising website Kickstarter to self publish a book by generating $24,000 in 30 days. The entire post is well worth reading, and although Craig and Ashley’s goal was to generate funding for their book, I think there’s a lot of similarities between his execution on Kickstarter and the execution of a successful music-focused DTF sales campaign on your own site.

Once Craig and Ashley had determined the overall goal of their campaign – to sell enough books to generate a return substantial enough to further expand their existing or similar publishing endeavors – their next step was to figure out what their strategy would be for the pledge tier offerings. WIth Kickstarter, people pledge a pre-determined amount of money towards a project on a tiered basis, and get something tangible in return, once the project is funded. Kickstarter’s tiered pledge functionality is not dissimilar to what a musician would offer for sale on their own site to their fans.

What was really interesting to me about what Craig and Ashley did for their book project was that they looked at the top 30 grossing Kickstarter campaign to determine the most successful tiers of pledges. This provided Craig with data that he could use, in his words, to “look for a balance between number of pledges and overall percentage contribution of funds.” Take a look at his graph below:

Chris’ analysis of this data is spot in, and I’d like to quote his thoughts from his blog, here:

This data is, of course, hardly perfect (for example, not every project I looked at used the same tiers). But it’s good enough to give us a sense of what price ranges people are comfortable with.

The $50 tier dominates, bringing in almost 25% of all earning. Surprisingly, $100 is a not too distant second at 16%. $25 brings in a healthy chunk too, but the overwhelming conclusion from this data is that people don’t mind paying $50 or more for a project they love.

It’s also worth contemplating going well beyond $100 into the $250 and $500 tiers: they scored relatively high pledging rates compared to other expensive tiers.

The lower tiers — less than $25 — are so statistically insignificant (barely bringing in a combined 5% of all pledges) that I recommend avoiding them. Of course this depends on your project — perhaps there’s a very good reason for a $5 tier. More importantly, this data shows that people like paying $25.

Having too many tiers is very likely to put off supporters. I’ve seen projects with dozens of tiers. Please don’t do this. People want to give you money. Don’t place them in a paradox of choice scenario! Keep it simple. I’d say that anything more than five realistic tiers is too many.

The overall results that Craig outlines above are generally similar for musicians who offer a range of products at tiered pricing levels on their own site. While I do think that offerings of less than $25 do make sense for most musicians, Craig’s overall idea of not providing too many low cost items make sense. For example, I’ve spoken to a number of my students and other artists that are interested in offering $1.00 singles off of their site. While this is possible to do, providing a lower revenue option like that tends to incentivize potential curious fans downward, as opposed to incentivizing folks to purchase a higher priced option.

Based on the data that Craig obtained from past Kickstarter campaigns, he created the following pledge tiers:

Lastly, Craig and Ashley engaged in a wonderful online promotional campaign that focused on their permission based social medial digital touchpoints, as well as key design blogs and magazine sites that were completely in target with their psychographic and demographic. They focused their messaging campaign using Twitter and Facebook (their messaging was relevant and minimal, too), as well as their own mailing list.
Craig and Ashley had build up an extensive mailing list of design and art world over the past 6 years, which they leveraged nicely. Take a look at the timing of their targeted email campaigns, and the results:

Example of the artwork that was used for the email:

Perhaps most impressive was Craig’s outreach strategy to the blogs that he felt were a laser shot target for what he was doing with this project, and his method of communication to them. He was not focused on quantity of external outreach – he was more interested in the quality of the blogs he did focus on. Again, this is fundamental marketing strategy that all artists could use to their benefit. Again, in Craig’s words:

“I’m writing to blogs that I’ve been reading for years, so for me, referencing older posts of theirs and personalizing these emails is trivial, and fun. Whatever you do, don’t send scattershot emails to media outlets. Be thoughtful. The goal is to appeal to editors and public voices of communities that may have an interest in your work, not spam every big-name blog. A single post from the right blog is 1000% more useful than ten posts from high-traffic but off-topic blogs. You want engaged users, not just eyeballs!”

Here’s his PR results on the project:

While we’re not talking apples to apples between what Craig and Ashley did with their book campaign and an online DTF music campaign, many of the best practices that Craig and Ashely employed in this campaign, from the data analysis they used, to their communication techniques are exactly what independent musicians should be focused on when they engage in online direct to fan sales and marketing campaigns.

I recently had the pleasure of chatting with Hypebot’s Kyle Bylin (@kbylin) about online music marketing and my Berkleemusic Topspin online course. The interview originally ran on Hypebot in two parts, both of which are below.

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Kyle Bylin: Over the course of the last ten weeks, I’ve had the pleasure of taking Online Music Marketing with Topspin through Berkleemusic with Mike King (@atomzooey) as my instructor. Though, to be sure, I’m likely to a biased opinion of the course — for some reasons I can account for and others that I’m not as obvious to – I have to honestly say that I’ve thoroughly enjoyed the class and have thus far gained deeper understanding of online music marketing. Being that much of my work consists of exploring the more ‘theoretical constructs’ of the music industries, it has been great to gain actionable insights into the landscape before us.

I have had nothing but a positive experience with the online course, and although I do encourage you to take my perspective with as many grains of salt as you’d like, in my humble opinion Berkleemusic and Topspin have come together, synthesized a wealth of information, and made it accessible to people across various backgrounds, goals, and experience, which is no easy task. That said I do believe that the course achieves this very difficult task of both communicating this knowledge and making it so that it’s relevant and actionable to musicians, business people, and even minor media theorists like myself.

Since the semester is winding down and starting up again on April 5, and no doubt many you probably have questions regarding the course and about Topspin in general, it felt appropriate to speak with Mike King and open up the dialog on this subject. If anyone has more specific questions about the course for Mike or myself, please post them in the comments, and we’ll both do our best to respond. In the meantime though, do enjoy this interview with Mike (after the jump), and I hope, like I anticipate — that it’s of great interest to you.

For those of you who may not be familiar, Mike (@atomzooey) is Associate Director of Marketing at Berkleemusic, Berklee College of Music’s online school and author of Music Marketing: Press, Promotion, Distribution, and Retail, which you can get a free chapter of here.

Mike, one of the things we talked quite a bit about is ‘the curse of knowledge,’ which is, as brothers Chip and Dan Heath of Made to Stick have explained it, what happens when we know something, and it becomes hard for us to imagine not knowing it. In co-authoring a course like this one, how does ‘the curse of knowledge’ come into play, why is it so easy to take for granted what we know, and how did you overcome it, without oversimplifying the course material?

Mike King: That’s a good question. I’ve been working at Berkleemusic for seven years and teaching here for the past three, and it’s been really interesting to see the change in perspective from students. Early on, I’d see a certain percentage of students that were more focused on the old business model, like how to get on commercial radio, what do they have to do to get a record deal, how do they get coverage in Rolling Stone, and so on. I do think it’s based on what folks have grown up with and what they know. Back in the day, there were limited options for visibility; it was primarily TV or radio, and the record label was the necessary vehicle for getting this visibility. In a way, from an outside perspective, I can see that it is somewhat comforting to break up music marketing in these easy to understand segments, but the reality is that the options that worked for years—such as retail visibility via a co-op campaign, a national radio campaign, and print advertising—are not really viable options for most artists.

Over the past year or so, I have seen fewer and fewer students coming into the online classes focused on moving their career forward via those old school methods. There are folks out there— like Ian Rogers, Dave Allen, Jed Carlson, Mike Masnick, Seth Godin, Gary Vaynerchuk, Hugh McLeod, Dave Kusek, Patrick Faucher, Bruce Houghton, and yourself—driving home the fact that there are new and alternative ways to advance your career, which has really helped to enlighten a large subset of artists.

In terms of the Topspin course, I start off by presenting a sort of a “state of the union” of the record / music industry and let the facts speak on their own. For example, the top seven physical chain retailers accounted for 44% of music sales in 2008, and the fact is it’s getting harder and harder for the labels to work with these outlets. Last year, Circuit City—which was the 9th largest music retailer in 2008—ceased operations and Virgin Megastore began closing all of their U.S. stores. Borders (the 6th largest retailer of music) has cut back in-store floor space by 30% to 7% of total floor space. Transworld has been hemorrhaging money, too. Similar changes have occurred throughout other segments of the traditional music industry, too.

I don’t assume too much in terms of what folks know or what they don’t. I’m more interested in talking about facts and data, and presenting a toolset that musicians and managers can use to acquire more fans, create an optimized Website with an effective offer page, determine what the proper offerings should be for your specific tribe, and create an overall online sales and marketing plan that works for a student’s particular situation.

Out of ignorance, or maybe just plain excitement, some people in the marketing advice business tend to write off traditional institutions, in favor of the shiny new things that the Internet has come to offer, whereas you’ve taken a stand — even written a book I hear — empathizing the importance of the roles that they still play. Why is it crucial to have a dynamic marketing mix, on- and offline, and how does a platform like Topspin play into this equation?

Mike King: I think you have to engage in all marketing activities that apply to you. I have students that are at completely different stages in their careers, students that are focused on completely different genres, and students that are touring consistently and those who are not. It’s not right to tell someone to focus exclusively on digital if that person is selling CDs consistently on the road or if that person is creating music for a genre or psychographic that still wants CDs. For example, I’ve been working with a fantastic children’s music band called Debbie and Friends, and once you look at the demographic and psychographic of her fans (and the parents of those fans!), you can see why some traditional options — like the creation of CDs — make sense for her.

Certainly touring and a solid merch plan, both traditional marketing initiatives, make sense to engage in. And there are still examples of developing bands that have emerged from indie physical retail. Physical retail and distribution are much more convoluted than online retail and distribution from a process standpoint, primarily due to co-op and the returns process. But again, I think that retail still makes sense for a subset of artists at a certain stage of their career. Of course distribution follows marketing and it does not make sense to look for a distribution deal prior to demand for your product, but if there is demand and you are not fulfilling it, I think you are leaving money on the table.

I think it comes down to the fact that the Internet has provided much more choice and an opportunity for musicians to participate in the process where in the past they might have been left out. But I don’t think it’s a best practice to completely omit physical marketing from your overall campaign strategy if you are at the right stage in your career for it, or if your psychographic dictates that you engage with them in that way.

In terms of Topspin, I think the major benefit of the software in terms of creating a dynamic mix of online and offline strategies is multifaceted. First, there’s rich data pulled in from a number of sources right into the platform. You can see in real time what folks are saying about you on blogs and on Twitter, and engage with these folks immediately. You can see spikes in activity on Last.fm, Facebook, and MySpace, and use that information in whatever way you want to help focus and direct your campaign. You can also see how your fanbase is interacting with your content, both in terms of sales from your site, as well as with any widgets that you have released in the wild. From a physical standpoint, I think the data that you gather from Topspin can help you to more effectively nurture the artist/fan relationship, too. For example, you can sort your list of fans in any number of different ways, including by geography or by rank in terms of sales. So as an example, if my band is touring in San Francisco, I can sort my fans by those that live in the area, and then cut that list into those that have purchased from me in the past. I could then provide these super fans with free tickets to the show, or any other value-add to help nurture the relationship. Also, because all of the Topspin widgets are trackable, you can also set up content sharing contests, and reward your core influencers with something of value, or encourage them to take their online support offline per market. It’s a really robust and customizable tool, and Topspin supports creativity with its use.

More importantly, what segments of an artist’s marketing strategy doesn’t Topspin replace? And, why do you think it’s important to clarify that Topspin isn’t — at least not anytime soon — the music marketing equivalent of the Ronco Showtime Rotisserie Oven, you don’t just “Set it, and forget it!!” There will be countless hours (still) spent thinking, planning, testing, succeeding, failing, and trying the process all over again — with the exception that, for the most part, your efforts will be contained under one umbrella — that’s driven by data.

Mike King: I think Topspin is not a cure-all for the industry, nor is it the only tool that you should be using to put together an effective marketing campaign. There is no doubt in my mind that it is a great tool, and will benefit artists tremendously. But I think anyone who claims that they you can use their service to “set it and forget it,” as you say, is being disingenuous. There are truly so many variables and outlets that you need to think about and keep track of when you pull off your marketing campaign. For example, one thing that Topspin doesn’t do is distribute to third party online retail outlets like iTunes. Certainly the best practice for artists is to direct fans to their own site where they can provide tiered product offerings that are specifically geared to their fanbase, but the fact is that many fans are set in their ways and will continue to only look for you on iTunes or wherever else they routinely shop for music. I interviewed Derek Sivers for my book awhile back, and he had a really succinct thought on this topic: “There are millions of people who get all of their music from Rhapsody. If they search for you on Rhapsody, and you’re not there, they’ll forget you and move on. Same with eMusic. Same with iTunes. Same with Napster, etc. So make sure you’re available on all of these services. You are not hurting your iTunes sales by being on Rhapsody; you are only adding to your income.” I think this is accurate, and extends to direct-to-fan sales as well. While an artist’s sales margin can certainly be greater when selling direct to fan, the volume of sales an artist can see from established third-party outlets can outpace DTF sales, particularly for established artists. I would not recommend directing folks to a third party retailer from your site, but at the same point, you’d likely be losing sales if you do not have your music available on third party retail sites.

You also mention data in your question. Topspin is tremendous with data and analytics, but it’s not the only tool you should be using, in my opinion. Google Analytics is a fantastic tool for musicians (and Topspin integrates with it well). I also think Duncan Freeman is doing some really interesting things with Band Metrics, and there are dozens of other tools out there that help with analyzing other verticals like Twitter. I think that Topspin is a fantastic tool, but not the only tool you should consider.

Now, to maintain a certain degree of objectivity here and, at the same time, address an issue that’s sure to be brought up in the comments, I have to talk about the price tag on the course. It’s rather expensive. Blah, Blah, musicians don’t have that much money. But, to frame this differently, as put forth by Randy Pausch in The Last Lecture, “Brick walls are there for a reason. They give us a chance to show how badly we want something.” Why do you think there are there brick walls, like this and others, surrounding Topspin Media? What purpose do they serve? Are they there for a reason?

Mike King: I really think the course can be considered an investment in your future. I don’t see it as all that different than an artist investing in a new guitar or amp to improve their sound, or investing in Pro Tools to produce their music themselves. Along with super-serving your existing fanbase, a big part of direct-to-fan marketing is to use certain tools and techniques to acquire new fans that you can continue to communicate with for years to come. I don’t think it is unrealistic to think that the course is an expense that musicians can recoup down the line.

The course is three months long, and over that period we’re doing a dozen hour-long chats covering all aspects of online marketing in near real time, on top of the extensive written content and multimedia content. To be honest, the course would make a 250 page book if I was to print it all out, and it took about a year to write. The course was written by myself and Shamal, with input from multiple people at Topspin, including Ian, Gary Brotman (who runs the artist services side of Topspin), Adam Bates (who is the Director of Marketing and R&D), and many others. Also, I’m inviting many of the Topspin folks to our weekly video/audio chats, so you have the opportunity to interact on a one-on-one basis with them (and me) directly. I’ve also got a ton of media throughout the course, including exclusive videos with Ian, Adam, Peter Brambl, and Shamal covering general best marketing practices as well as presenting an in-depth view of everything you need to know about the software.

Plus, I’ve also got some top-notch instructors teaching the course, like Jason Feinberg, Jason Kadlec, and Jeff Straw, who are all living online music marketing and Topspin everyday. They are incredible resources. Lastly, there is no other course out there that teaches this stuff. I feel really proud of the content that we’ve created, and I legitimately feel it’s beneficial for all artists/managers that want to understand Topspin in-depth, and gain a professional level understanding of online marketing. In terms of the criteria that Topspin has set up for artists to use their software directly, I’m probably not the best person to ask. It’s public knowledge that Topspin’s business plan is fundamentally different than other services, which charge artists a fee, no matter how many sales they generate using their software. Topspin only makes money when the artist does.

From what I understand, part of the reason for the brick walls surrounding Topspin Media is to ensure that “best practices” are being used. For the most part, because of how radically they are intertwined with the degree of success that one might hope for when using the service. It’s sort of a “preventative measure.” To ‘prevent’ people who don’t know ‘best practices’ from using the service, from not getting the results they were expecting, and from getting upset with the service because it didn’t work like they thought it would. Why are best practices so important? How have you integrated them into the course material? And, why do they have such an impact on results?

Mike King: Certainly with any service—be it ReverbNation, Topspin, Nimbit, Bandcamp, or any others—it’s in everyone’s best interest that folks are properly trained on using the software, as well as properly trained on overall best marketing practices. You don’t want folks out there unhappy with the service when, in reality, it was a lack of understanding of marketing principles and best practices that is the core reason they are not seeing growth in their acquisition or sales numbers. All these services are just tools, basically, and like any tool, if you are not using it properly your results will not be fantastic. The course is filled with best practices, from proper optimization techniques to help with search visibility (which along with direct traffic is usually one of the highest converting areas), to ways you can help identify your psychographic, best practices with third party social media outlets and other acquisition focused techniques. We also go in-depth on forecasting models designed to help you estimate how much income you might see from your digital touch points.

As a side note, there are real numbers and strategies presented in this course from several artists that have been kind enough to provide a look under the hood of their campaign. So when we talk about best practices with landing pages and offer pages, or when we talk about the importance of upselling, we can see exactly what other bands have done, and what the results were. I think it’s very helpful to take this information out of the theoretical and bring it all into real life, which we do in most all of the lessons throughout the course. Overall, I think the course helps to provide a road map for best practices in one of the only growth areas in marketing, and in terms of results, because Topspin has been so open with sharing their data, you can see exactly what happens when best practices are not followed, too.

This, of course, brings up another important question… How would an artist or their manager for that matter, know if they are at the point in their career where an investment like this is justifiable. When you have conversations like this, as I imagine you have—countless times—what do you tell people? How do you go about determining if they would benefit from TopSpin Media, and whether or not they are capable of taking things to the next level?

Mike King: On the core level, I think you shouldn’t be marketing yourself unless there is a demand for what you do. This also goes back to your question on integrating physical and digital marketing. Let’s look at live events as an example. If you are playing in your local area, and you are not gaining traction, folks are not blown away by your show, there is little momentum with the fans, and your permission-based sign up list is not growing, then it probably makes sense to hit the woodshed and work on your music first. Topspin will not make your music good, and without amazing music and a killer live show, it does not make sense to spend the money on a marketing campaign. There are millions of bands out there, and your your music has to connect with folks in a way that 99% of the music out there does not. Once you start generating a real following, have demand for your product, and you can effectively identify your psychographic—this is when you should start marketing yourself. So I think you have to look at what is happening with your music and the response to it. Start small with your marketing efforts and, as you grow, think how a tool like Topspin or others can help amplify your existing efforts. Marketing tools are good at amplifying your efforts, but you have to have something there to work with first.

To sort of cap this off, what has your experience been like teaching a course like this for the first time? What are some of the biggest challenges you had to overcome—beyond “the curse of knowledge”—in writing this course? And, now that you and the other teachers have seen students interact with and learn the material, what are some of the realizations you’ve had, in trying to make your insights are as actionable as possible for everyone in the course?

Mike King: Writing and teaching this course has been deeply fulfilling for me. I was just at SXSW and met up with some of my students down there, including LJ Scott, Anthony Erickson from a band called Fulton Reed, and Susie Codd. We’re in week eleven in the course, and these folks are putting the best practices to use right now, and it’s just amazing to see the stuff we have been talking about for three months being implemented in a way that positively effects these musicians. I think all of us are looking for the way forward in the new music business landscape, and I feel grateful to present real information to artists, based on data and real world examples, that actually helps musicians to navigate their careers in a positive way.

In terms of challenges, some of this stuff is not easy to grasp the first time through. I’ve created flash animations, use videos, and have some audio in the course to help explain some of the more difficult concepts we discuss, such as the product pricing and forecasting documents that we go through. It was also challenging to present everything in a way that folks who are less familiar with the concepts could easily understand it, while also presenting the material in a dynamic way for students who are more advanced. Also, Topspin is developing new initiatives so quickly, that it has been challenging to keep up with them! The great part about the online course is that I can update this information on the fly—it is a living, breathing entity that I can adjust as necessary as new features are released by Topspin, as new third party entities are unveiled, and as some of the best practices that exist today change tomorrow. It’s definitely been interesting to see how the students have interacted with the material that we have written, and I’m sure we’ll make some adjustments based on the feedback.

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

Ed O'Brien

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).

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:

Love this idea! Quick recordings with an immediate payout for fans over the course of one week. I’d subscribe to this effort for my favorite artists…

Via Pitchfork:

“When most of us have extra spare time on our hands, we end up zoning out in front of “Daisy of Love” reruns or rereading Watchmen for the billionth time. Beck, on the other hand, challenges himself to record cover versions of entire albums as quickly as possible. Different strokes, I guess.

Over the next month, Beck will be overhauling his website, and one of the features will be something called Record Club, in which Beck ropes in various musician friends to record an entire album in a day. For the purposes of scrappy immediacy, nobody will rehearse or arrange anything beforehand.

After that day of furious recording, Beck will slowly let the record out into the world via his website (as well as the websites of the other musicians involved), uploading a new song once a week. He’ll kick this party off with The Velvet Underground and Nico. That’s an ambitious start! Will Beck attempt the Nico vocal parts himself? We’ll find out!

Future Record Clubs will involve friends-of-Beck like Devendra Banhart, MGMT, Jamie Lidell, and producer Nigel Godrich. Here’s hoping they give 8Ball & MJG’s In Our Lifetime a shot.”

Dear Steven Van Zandt,

I just read your interview in CNN, and I wanted to offer an alternative view to your thoughts, particularly related to this quote: “The reason nobody wants to talk about it is because it mostly sucks! Who are we kidding here? Nobody’s buying records? Because they suck!”

You also suggest that if bands learned more cover songs and listened to more “great records” (i.e. classic records) the record industry would be saved, which I think it is a slightly myopic view of what is happening in the business. I think you are missing two key points:

1. THERE IS AN AMAZING AMOUNT OF GREAT MUSIC OUT THERE, but I think you are looking in the wrong places for it. I suggest you take a look at eMusic – the largest online retailer for independent music. Find an artist you like, look at recommendations by eMusic and other consumers, and you can easily fall down the rabbit hole for hours experimenting with new, and in many cases, amazing music you have never heard before. Like Psych Rock? Check out Wooden Shjips. Sign up for newsletters from forward thinking physical retailers like Other Music, a store run by music geniuses who can connect the music dots between Grizzly Bear and Erlend Øye in three steps or less. And of course there are dozens of music blogs, from aggregators like the Hype Machine, live music session and editorial blogs like Daytrotter, old school outlets like Pitchforkmedia, and a million in between. Not to mention the myriad of online radio stations that are not hamstrung by the tight-playlists the consolidated commercial radio business has given us over the past 10 years. Widen your net, Steven, and you’ll find tons of music that will knock your socks off.

2. THE OLD MODEL OF A PHYSICAL RECORD-BASED MUSIC ECONOMY IS DEAD. It is not coming back. Dead. Dead. Dead. You can have a million bands covering “Working on a Dream” for a million years and you will not bring traditional physical record sales anywhere close to where they were at their height in 2000. The infrastructure has shifted forever. Some details you should consider:

Less Outlets for Traditional Music: Tower Records shut down their U.S. operation in 2006; Circuit City (9th largest music retailer in 2008) ceased operations in 2009; Virgin Megastore announced in 2009 that they will close all of their U.S. stores; Borders (the 6th largest retailer of music) has cut back their in-store floor space by 30% to 7% of their total floor space; and Transworld closed 101 stores in 2008, after losing $69 million dollars, including a 24% drop in total sales during the nine weeks leading up to the end of the year – traditionally the best music retail time of year. Taken together, there are simply less outlets and less floor space available to the labels to merchandise and sell their music. It is not a matter of buyers not taking in records because “they suck.” The space that had existed for music is now filled with DVDs and other media, or is gone.

Consolidated Commercial Radio is Ineffective: The number of artists that terrestrial radio “breaks,” in terms of converting radio play to mechanical royalty sales is smaller with each passing year. Although radio is still the primary method that folks hear about new music (49% of consumers list radio as the #1 way they find new music, according to a 2008 Edison Media Research survey), radio is quickly losing ground to the Internet, with 25% of consumers hearing about new music online.

The Replacement Cycle: Technological innovations have been shaping how, where, and when folks listen to (and purchase) music for years, beginning with improved production processes with vinyl, and then moving onto 8-track, cassette, CD, and finally digital music. Along the way, major labels have been able to monetize these technological innovations through a process called the replacement cycle – basically a repackaging of existing content in the newest format.

With consumers being able to convert files to digital themselves from existing CDs (not to mention sharing digital files for free online), the labels have been unable to find a way to monetize this format shift effectively. The end of the replacement cycle, coupled with the complete decentralization of the industry brought on by the Internet and the change in consumer habits, makes for a very tough time for the record business.

I know it’s a tough to find new music, particularly when you are on tour. Perhaps you don’t have regular access to the Internet. But I assure you; the issue is not that that music sucks. Spend some time doing your research on finding new bands, find some tastemakers you can depend on to turn you onto new music. The old industry that you grew up with is gone; but the phoenix is rising from the ashes with new models and new revenue streams. Whatever you do, please don’t blame what is happening on a lack of good music – it really makes you sound out of touch.

Mike

“Talking gross numbers that come directly to the band, we have made more money already than we have on the last record in four years,” said Mathieu Drouin, the band’s co-manager.

Great piece in the L.A. Times today on Metric. The band is forgoing a traditional record deal and focusing on alternative income sources and direct to fan sales and marketing techniques for their most recent release “Fantasties.” Direct to fan has been a proven model for megastars like Radiohead and Trent Reznor, and it’s encouraging to see a “middle class” musician (Metric’s 2005 release “Live It Out,” sold 45,000 copies) having success using a similar template.

Some takeaways from the effort:

1) Without the distribution fee and record royalties that a major label and distributor would charge, Metric is able to net $.77 per iTunes track as opposed to something closer to the $.22 per track a label would pay (this figure includes international downloads, which could pay the artist more than the US standard of $.70 per track by going direct)
2) As distribution follows marketing, Metric has hooked up with Topspin to handle the online direct to fan marketing and sales efforts. Take a look at their Website, here. Fantastic way to leverage “free” to acquire names for the mailing list, they have an active blog area, and most importantly, they are engaging in variable product and pricing which everyone from the hard core fan to the curious potential fan can engage in. Again, because the band is selling direct, their profit margin is much higher. Metric sold out of an initial allotment of 500 deluxe packages in 48 hours, said Drouin, who estimated a profit of $13 to $15 per unit. “We can never offer a fan that much value at that price if we had to go through a record company, distributor and a retailer. We cut out three rungs.”
3) The band made the entire record available for free as a stream a month before release, creating widgets that could be embedded in fans Websites (provided by Topspin). Folks were able to become familiar with the new record, they liked what they heard, and they paid for the record when it was released commercially. This is the “emotional connection” theory in action.
4) The band worked with independent distributor Redeye for the physical CD. Because Metric has a track record and had analytics that proved people were into the record, Redeye had an easier time shipping the record to physical independent record stores.
5) Canada supports the arts. The Foundation to Assist Canadian Talent on Recordings provided the band with $50,000 to cover recording costs, as well as a smaller federal grant.

Major labels are traditionally known for A) financing, B) marketing, C) distribution. I think Metric is a great example of a band that not only accomplishing all of these things outside of the traditional model, but is making more money because of it. Check out a cool Elliott Smith cover by the band: