Staged performances and thoughts about the future.

Here are two things that you may want to consider when planning out your life as an artist that earns a living by staging performances (live and not).

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The unprecedented shift from multiplication to division.

If you are contemplating the future of music sales revenue, the most alarming thing about inexpensive (they actually call it “premium”) all-you-can-eat streaming models (Spotify, MOG) where music fans pay roughly $72.00 a year (for example) for endless access to all the music in the world (anytime, anywhere, anyplace), is that the $72.00 is divided by (all songs consumed times each song’s play-frequency). 

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Your digital music industry future…

Perhaps with some tweaking, here’s what current wisdom tells you:

1. Make music.
2. Give your music away; it’s your best advertisement.
3. Organize into a business entity.
4. Go on tour.
5. Build an audience.
6. Sell stuff and a bit of music when you can.
7. Go on tour again.
8. Sell even more stuff.
9. And when you stop touring, your revenue stream will slow to a crawl.

As new interactive digital products enter the marketplace (and they are), your digital future will look something like this:

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Is A&R Still Necessary In Today's Music Industry?

In the olden days, A&R was king in the music industry. Young, hip guys in street clothes found the latest “big thing” in music. The A&R rep romanced said band, persuaded them to sign an exclusive contract (which still exists today), hand-picked tracks for placement on albums released by said band, and more importantly selected which tracks from the album were to be the “singles.”

Said band’s “singles” went on to get major radio play, the radio play led to press coverage and both the press coverage and radio play led to said band’s albums selling off the shelves. It was a GREAT thing to have competent A&R reps with a “good ear” back in the hay days of the music biz when music was an art form above all else.

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The End of the Music Album as The Organizing Principle

It doesn’t seem that long ago since Radiohead did what was once unimaginable - release an album without being signed to a major record company. On the long march to digital ubiquity as the means of music delivery Radiohead avoided the tar pit that seems to be major label thinking and came out clear winners. Yes, they resorted later to releasing the album as a good old CD into regular retail distribution but they were pioneers and were soon followed with great success by Nine Inch Nails and to lesser success by many others. Both these bands had an understanding of what their fans wanted [price level choice, quality and special packaging] and both bands understood the power of the internet for marketing purposes and direct reach. [NB: Although I believe that the digital music file will rule the day, vinyl still has a role to play and I’ll get to that later.]

The most interesting part of this experiment [which at the time, I would argue it was] was not only that it was wildly successful but it laid the groundwork for what I have coined the end of the organizing principle. In other words I suggest that we are now seeing the end of the album-length work as the permenant work, the everlasting body of work that represents the pinnacle of an artists’ creativity. I am fully expecting to hear the howls of derision over this but bear with me.

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Digital Music Becomes (more) Rhizomatic: Evolutionary Traits of The Music Industry

As digital audio files continue to flow freely on the Internet, music itself mimics certain inherent characteristics of the web best understood through Gilles Deleuze and Felix Guattari’s (D&G) rhizome metaphor. In A Thousand Plateaus, D&G introduce the concept of a “rhizome” to describe a representative model that extends in all directions and has multiple entryways; since then it has most commonly been used as a metaphor to represent the Internet. Understanding digital music as rhizomatic is important because it interprets the transformations of the digital music culture as a natural progression towards rhizomatic qualities – and provides us with an insight into what might be the future of “the music industry”. A few of the defining characteristics of the rhizome are connectivity, heterogeneity, multiplicity and cartography. Music can be understood as rhizomatic when its characteristics mimic those of the rhizome; thus music becomes more rhizomatic when those characteristics are amplified. According to D&G, any point of a rhizome “can and must be connected to anything other”. So we might think of anything that blocks connectivity as a contributing factor in making something less rhizomatic. Firewalls and 404-errors are just two examples of obstacles that fulfill this role. Digital music is also subject to a large set of infringing obstacles, some of which include DRM, other restrictions due to copyright laws, and pay-only access for downloads. As we see these barriers disappear, we also see digital music becoming more rhizomatic. While highlighting the defining characteristics of the rhizome…

I’ve suggested 5 examples illustrating how music has become more rhizomatic:

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10 Predictions for Radio's Next 5 Years

Do you remember the scene in the 1951 classic A Christmas Carol, when the Ghost of Christmas Present tells Ebenezer Scrooge that, while he sees Tiny Tim’s chair empty in a corner, “these are visions of things which maybe, not things which will be.”

Here are ten predictions for Radio’s next few years - visions of things which maybe.

1. Radio will recognize that to be more attractive than other sound-alike alternatives - to retain more of its existing audience – it must count on more than habit, convenience, familiarity, ease of use, and the often-proclaimed almost-universal reach of the medium, since all those advantages are transitory. 

2. The advantage of “local” will diminish in direct proportion to the disappearance of local content on stations - and here I’m talking about the local content between the songs (the very stuff that makes the PPM meters tank). 

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Real in-store CD distribution: still working for anybody?

A musician emailed me today, asking my advice on choosing a physical distributor. He was considering paying big money to one company who promised to get it on the shelves of record stores, or another who would take a big cut, or using CD Baby’s in-store distribution (http://cdbaby.net/instore)

Here’s my advice to him.  Feel free to critique it.  I’m curious to hear any replies from people who have had success with real in-store distribution recently.

The big question is:

How many people are going into physical stores (shopping malls, etc) - looking for your CD - and are unable to buy it?

Are those people truly unable to buy your CD, and give up before looking online?

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Going Mobile – The Future Of Marketing For Musicians

Many experts say that the #1 way we will all communicate within the next 3-4 years will be thorough our mobile devices. It is no secret that the United States is far behind Europe and Asia in ease of use and advance technologies in the mobile realm but it is never too early to begin looking at a mobile strategy.

With that said I will be exploring how musicians can fully utilize using mobile technologies throughout 2009 but here is a primer. I saw Helen Keegan present in Reykjavik at the You Are In Control conference at Iceland Airwaves 2008 and I was wowed by her presentation.

Helen is a mobile marketing, advertising and media specialist working with a range of clients from media owners to brands and agencies to mobile technology companies. She has been working in mobile marketing for more than 8 years.

I asked her a few questions via email and she was generous enough to answer them for us here:

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Nobody knows the future.

Nobody knows the future.

That’s a hard but crucial lesson to learn.

If even ultimate insiders like Greenspan, Bernanke, and Paulson don’t know the future, then neither does Jim Cramer, your stockbroker, Nostradamus, nor you.

We have a human need for certainty that desperately yearns to believe that someone can turn our future from unknown to known.

Even if we logically understand that it’s impossible, we’re emotionally sucked back in and fooled again when someone important tells us with such conviction what the future will hold.

But nobody knows the future.

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Looking Ahead Into The New Music Business (aka What I Learned From Terry McBride, Again)

Terry McBride & Ariel Hyatt I had a distinct honor and privilege to be in the audience where I saw the unflappable music business icon Terry McBride of Nettwerk Music Group (Avril Lavigne, Dido, Sarah McLachlan, Barenaked Ladies), be interviewed as the keynote for the Le Recontres conference in Montreal last Thursday.

Terry was, of course, engaging, interesting, and controversial. I have long been following his career, and was moved deeply by his profile in Wired magazine in 2006 which got many music business entrepreneurs like me really thinking…

This talk was so perfect and it so succinctly summed up this point and time in the music business, I don’t think I need to insert my opinion here, I for the record agree with everything he said.  I would also like to point out that during this time of complete music business turmoil Terry McBride’s company is doing extraordinarily well.  So without further ado:  Here are some highlights from his interview, I think most traditional record industry people probably find Terry a bit on the radical side he is outwardly pro artist and anti mainstream industry mentality. It is my genuine hope that all independent artists and music business professional take a page out of Terry’s insight and apply just one nugget –

On why Nettwerk was structured the way it is:
“Artists are inherently lazy, so we had to do everything for them.”  

On the 360 deal & The Barenaked Ladies:
“To control aspect of an artist’s career of a 360 deal is a disaster. It’s not a solution. It’s a paradigm created by fear.”

Terry says he thinks he’s got his artists somewhere between 180 and a 270 deals, but he believes that a 360 deal is fraught for disaster. He talked about his experiences with Sarah McLachlan. “At first with Sarah we had a 360 deal, but as she grew, we gave her publishing back, and she owns half of her merchandise company. There is no business without the artist.”  

Barenaked Ladies started their own label called Desperation. They own the masters and publishing, and so far they’re on $10M in sales using only Nettwerk as their label and management firm – Nettwerk’s team manages all of the aspects of their career and leverages them through their own management company and connections.  

Bands are brands and emotions
Terry talked a lot about artists being both brands and emotions. Consumers attach their own life experience to every song. These songs become the fabric of the people’s lives who listen to the music. With the advent of the CD and computer, we went from pushing to pulling, and it created a change of behavior with having the “repeat” button on all CD players and listening to the same track over and over, which was something that was not possible with cassette tapes or LPs  

Music is free
Terry has always believed that music is free. Back in the 1930’s, music companies were terrified about radio and it took an act of Congress to get music played on the radio. His question is: How do you monetize free now that the fan owns the song, and the fan is part of a tribe?

Wherever there is fear, there is always opportunity
You will never change the behavior of tens of millions of teenagers, but you can monetize that behavior. If you shut down one avenue of dispersing free music another opens. Terry asks: “How many tens of millions of songs are being sent via IM?” and points out that we are so focused on suing the kids that we forget that they’ll just go around us, and I’m not about that type of negativity. Litigation is an awful thing to do.  Terry also made a great point: There are millions of hackers versus thousands of programmers.  Kids will always find a way around the system.

The consumer does not understand copyright. They never have and they never will. So, educating the consumer on “why it’s wrong” will get us nowhere.

Bury the suing paradigm and figure out how to monetize.

The new paradigm = more profits
A CD in the old paradigm of traditional printing and distribution used to cost something like this: $3 for the disc, $2 to get it on the shelf, $1 for marketing, $1 for the publishing royalty, and maybe $2 went to the artist, then you get 20% to 40% of those CDs returned on top of all of this.

In digital, there is no manufacturing, no distribution, and no return. The profit on digital is so much higher. When you go digital, you will be more powerful and more profitable.

Digital profits are currently up 300%.

Controlling intellectual property worked for between 30 and 40 years, and it does not work anymore. All of his peers disagree 100% with his philosophy. Terry thinks from their standpoint, they are right. Trying to control music is right. However, Nettwerk has another vision.  They see a lot of opportunities and they are having a lot of fun.

If a share of the profit from cable companies could go directly to artists
music industry profits would double overnight
Terry is always looking at who is making money from this and are they sharing it?  Cable companies, tool manufacturers like Apple and iPods, blank CD manufacturers — that’s where laws and litigation should be pointing their fingers. Litigation and legislation should work in the realm of business to business, but litigation should not be business to consumer.

Now kids are getting sued for something that we’ve been doing for years. I used to make mix tapes and share them.

Terry also thinks there should be a compulsory license, and if there was, the music business revenue would double overnight.

So where is the music business in 10 years?
Terry thinks music will be available everywhere. You won’t pay for it
10 years from now, music will be in the clouds. You will be able to audit one company to get all of the numbers. It’s not going to be Bell, it may be Google. Consumption of media knows no borders.

I believe the price of music has to come down. The millennium generation looks at value, and the value of music is not 99 cents a track.

Music is the connective glue between the fans and the artist.
People love artists, they love what artists stand for. They don’t love all of their songs. We need to re-evaluate free.  We need to understand that music is the connective glue between the fans and the artist.

We must ask: What causes that artist is related to? What causes is that artist supporting? What does that artist stand for? Who is this artist? Using those pieces of information, we can put ads on websites and links on websites to monetize the fans’ behaviors. Everything you do around or about needs to be directed back to a lifestyle and back to that artist.

Last Advice?
If I were a long-term investor, I’d buy servers and the buildings that all the servers are going in.  The millennium generation does not care about ownership. They go where the data is.
http://www.digitalmusicforum.com/mcbride_bio.html

And, if you have been living under a big rock and did not see the article on Terry Mcbride in Wired:
http://www.wired.com/wired/archive/14.09/nettwerk.html 

Music Industry Trends have a Lesson for Radio

Ah, how things change.

I have spent a lot of time studying the pictures in this post. The data illustrated here is not new, of course. We all know music sales are going to Hell in a proverbial handbasket.

But when you chart the data as National Geographic has done so here (from their December issue), some new insights arise which have implications for radio as well as the music business.

These charts, especially the second one, is incredibly illuminating for several reasons:

1. It shows the transitional nature of all - ALL - recorded technology that distributes music to consumers. That is, one technology shrinks as another expands, ad infinitum. Radio, too, is a technology, a very well established and popular one. The erosion we’re currently seeing in radio usage - especially among the young - is not a hiccup. It is part of a long-term trend we are only beginning to experience. The more we face competitive alternatives which substitute for radio’s core benefits, the more this trend will accelerate.

2. This chart obviously excludes music distributed for free - a.k.a. “illegally.” One can assume that the steady decline of CD sales is matched - and exceeded - by a stunning rise in off-the-chart downloads. That is, demand doesn’t go away, it just moves to something else. Being in the right place at the right time with the right revenue model is the key.

3. This chart shows the amount of time it generally takes for transformation to occur. For example, it took 16 years for CD sales to peak. If it takes as long for CD’s to disappear, then by 2015 the last CD will be sold. Radio’s erosion - and the revenue problems that result in part from this - is not going to stop. We need a model and a strategy that anticipates and exploits the future, not a head-in-the-sand public relations gimmick. We need to surf the trends, not fight them.

4. This chart shows the absurdity of relating the present state of the radio (yes, radio) industry to any time in its ancient history. For example, the birth of FM back in the late 60’s to 70’s lived in a technological environment which this chart clearly shows has completely disappeared. It’s like comparing the Jimmy Kimmel show to the Dean Martin Roast. Let’s compare apples to apples.

5. This chart shows that older technologies yield to newer technologies if the benefits those newer technologies provide substitute for and beat the ones they replace. CD’s are unambiguously better than tapes - they provide similar benefits, but do a better job of what they do. If I can get music in my car delivered in a radio-like experience from Microsoft or Slacker or whomever - and if it has broad enough distribution - then my radio listening will shift - assuming it’s music I’m looking for (and it may not be).

6. Growth and decline in this chart are “steady” in all cases, not “explosive.” It may be strongly steady, but it’s steady. Thus the best reflection of future momentum for any new technology in this space is the momentum among its early adopters. Not the crazy gadget freaks, but the next wave of users, the early adopters. So what does this mean for radio? Well, if the momentum for a new technology, say, HD radio, is slow at the onset it is not likely to accelerate with time. What you see is what you’ll get. Look at this chart and all the evidence is right there. Ah, you might say, but look at the slow growth of cassettes. Would that it could be 1980 again and we could be faced with the slim choices of that era.

7. It is clear that the horse has left the barn on tangible media for the music industry and all things digital are the immediate future. That means it’s inevitable that the music industry will make up the shortfall in music sales with licensing (including licensing revenue from radio) and (drumroll, please) advertising. And a world of music for free with advertising is functionally identical to music-oriented radio. That is, the competition is going to get much tougher, folks.

Enjoy these charts. There’s a lot to learn hidden in those numbers.

[Double-click to enlarge]

Update on April 8, 2008 by Bruce Warila

I asked Mark to revisit this post for Music Think Tank because I believe the graphs and Mark's analysis of them tells a lot.  Just to be clear, when Mark says "the competition is going to get much tougher, folks", he is referring to the radio industry.  

I believe the takeaways for artists are:

1) As Mark said - the music industry will make up the shortfall in music sales with other music-derived revenues.  However the timing, according to the historical patterns demonstrated in the graphs is important.  The last CD should be sold in the year 2015, and as CD sales decline other revenue sources will fill the void.  Unfortunately, those "other revenue sources" have not been fully sussed out; there is not one clear and simple "standard" that's emerging that everyone can gravitate toward.  The only standard that's clear to me is - everything!

2) Radio is loosing its' dominance and its' importance.  Over the next five years, someone on your team is going to have to make sure that your music is everywhere and anywhere consumers are.  There's no clear winner in the race for ears.  The radio audience is not being fractured by one big competitor; it's being split by lots of competing sources of audio entertainment (the "everything" standard applies here also).

3) "Advertising tacked onto your streams of music is functionally identical to music-oriented radio".  I would take this statement to the bank.  Don't fight advertising when consumers are opting for "free" music.

4) We are still in the early stages of a transition.  You have to have one foot in the old and one foot in the new.  It's a lot of extra work and it's going to take a few years to sort out.  However and most importantly for everyone making great music, when we reach the puffing point in the graph we are in now - you should see a corresponding rise in income.

Thanks for the post Mark.