Friday, May 6, 2011

Your Music Is Your Marketing

Here's an excerpt from Chapter 4 of Music 3.0: A Survival Guide For Making Music In The Internet Age. It's about how your music has changed from being your primary product to your primary marketing device. At least when you're starting, you've got to be willing to give your music away, because a funny thing happens in this new age we're living in; the more you give away, the more it sells.
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"The major marketing tool for the M30 artist is the music itself. It’s no longer the major product that the artist has to sell, although it still is a product, so has to be used differently and thought of differently as a result.
Perhaps recorded music was never the product we were led to believe it was. In the M1.0 and M1.5 days of vinyl records and CDs, the round plastic piece (the container that held the music) was the product. The artist never made money when a song was played on the radio (the songwriter always did, although the artist might soon get their due depending on the status of current legislation), and the artist only made a small percentage (10 to 15% of wholesale on average) of CD or vinyl sales. The artist made the most money on concert tickets and merchandise while touring.  There was a cost involved in the manufacturing of the the container that transported the music (physical material costs, artwork, etc.) that had to be recouped as well as the production costs of the music. But if you look at music in terms of the advertising world, you see music in a different light.
If you’re selling a soap product for instance, the production for a commercial to broadcast on television or the radio is a trivial cost. It’s the total ad buy (the agency purchasing the radio or television time for the sponsor) where most money is spent.  Even then, it’s considered part of the marketing budget of the product, which might be about 3% of total sales.
In M30, if you consider the music production costs as part of the marketing budget in the same way as a national product, it takes on a whole new meaning.
Since the music is considered the major marketing tool for an artist, it should be considered a free product, a giveaway, an enticement. Give it away on your website, place it on the Torrents for P2P, let your fans freely distribute it. It’s all OK. Since most millennial’s feel that music should be free and have lived in a culture where that’s mostly so, don’t fight it. Go with the flow! Just as it was during the last 60 years, the real money in the music business is made elsewhere anyway.
Plus, just because you’re giving it away doesn’t mean that you can’t charge for it either at the same time or sometime in the future. There are numerous cases where sales have actually decreased for an artist’s iTunes tracks when the free tracks have been eliminated.
One is Corey Smith. After 6 years, Corey’s has built his gross revenue to about $4.2 million and free music has been the basic building block of his tribe. You can buy his tracks on iTunes (he’s sold over 400,000 so far), but when his management experimented by taking the free tracks down from his website, his iTunes sales actually went down as well!  The free music allows potential fans to try Corey out. If they email and ask for a song that’s not available for free, he just emails it back to them. He’s tending his tribe!
Of course, you can charge for your music with box sets, compilations, special editions and other value-added offerings. But the initial releases for an artist on any level (except for the already-established star) must be free to build a buzz."

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Wednesday, May 4, 2011

Music Revenue To Grow 60% In The Future?

Despite the official numbers by industry associations like the RIAA and the IFPI that show the music industry now has essentially a flat growth, there are still those that have extremely rosy predictions for the future.

In a recent article in the Telegraph, independent telecoms analyst Ovum forecasted what seems to be some unbelievable growth the music industry. According to the article,
"Ovum forecasts that globally, revenues from music subscription services will increase at a compound annual growth rate of more than 60 per cent from 2011 to 2015, as consumers recognise the benefits of being able to access millions of streamed songs for the price of a CD every month rather than owning individual downloads. Subscription growth will also be driven by technology giants Apple and Google which are expected to launch cloud-based digital music subscription services this year."
60%??? Now considering that the growth in the US in 2010 was only 3%, this prediction seems more than a tad optimistic. Okay, how do they figure? More from the article.
"Subscription music services are set to be a key driver of the boost to digital revenues, according to Ovum, an independent telecoms analyst. However, the music industry is not believed to maximising digital music revenues because of the amount of free music available online, including free internet radio services such as Pandora in the US.

Ovum analyst Mark Little said: “Digital music will experience what might appear to be healthy growth over the next five years, but there is a danger that this could mask the fact that the industry is not maximising revenue potential.

“There is too much free music available in the digital economy and not just the illegal kind. Free Internet radio such as Pandora or Grooveshark, and freemium on-demand music services such as Spotify, are offering free music without maximising advertising or premium subscription revenues for themselves or the industry.”
Too much free music? So how do they propose that all that free music be turned into paid music? As I stated in many blogs previously, I believe that the future of the music industry is predicated on micro- and even nano-transactions, where bank transaction fees fall by the wayside and music costs in the pennies rather than $.69 or $.99. The technology does exist, but it has to be widespread and common before that happens, but there's no sign of that yet.

In the end, I see growth as well, but 60% would be a pleasant shock. I wouldn't bet my band on it.
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You should follow me on Twitter for daily news and updates on production and the music business.

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Tuesday, May 3, 2011

10 Creative Rules Of Thumb

Here are some great tips on how to stay creative from the Marketing Essentials International blog, but I seem to remember seeing them on Seth Godin's or Derek Sivers' blog as well. Regardless of who created the list, it's still pretty good advice.

Top 10 Creative Rules of Thumb:

1. The best way to get great ideas is to get lots of ideas and throw the bad ones away.

2. Create ideas that are 15 minutes ahead of their time…not light years ahead.

3. Always look for a second right answer.

4. If at first you don’t succeed, take a break.

5. Write down your ideas before you forget them.

6. If everyone says you are wrong, you’re one step ahead. If everyone laughs at you, you’re two steps ahead.

7. The answer to your problem “pre-exists.” You need to ask the right question to reveal the answer.

8. When you ask a dumb question, you get a smart answer.

9. Never solve a problem from its original perspective.

10. Visualize your problem as solved before solving it.

I especially like #10. Sometimes "making your own reality" is the best tip of all. Try it sometime. It works.
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Help support this blog. Any purchases made through our Amazon links help support this website with no cost to you.
You should follow me on Twitter for daily news and updates on production and the music business.

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Monday, May 2, 2011

The Real Power Behind The Music Business

I had an interesting discussion with a group of readers at the recent ASCAP Expo in Hollywood over the weekend that kind of opened my eyes a little. I thought that most young artists were of the DIY mindset, but there's still a sizable contingent that believes that being on a major label is still the way to score in the music business.

Their opinion changed when I described the real power behind the throne of the music business, which brings us to today's post. It's an excerpt from my Music 3.0 guidebook regarding who actually pulls the strings of the music business. Be forewarned, it's not who you think it might be.
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Although it may not be readily apparent, Wall Street and Madison Avenue indirectly control the remaining M2.5 music industry through their tremendous influence on the financial bottom line of record labels, record stores, concert promotion, radio, and television. If you’re owned by a publicly traded conglomerate (as all major labels, major concert promoters, and radio and television stations are), then you’re in the business of selling stock, not servicing the consumer. What that means is that nothing matters more than quarterly earnings. To keep those earnings as high as possible, Wall Street turns to Madison Avenue to devise the best marketing strategy for keeping the profits high. Madison Avenue (in the form of the major advertising agencies) can bring in the big ad dollars, but only under certain content conditions (like programming that is tailored around the advertising), and the process repeats itself over and over. The advertising industry (Madison Avenue), not the music industry, therefore drives the music cycle in the United States.

In M2.5, it’s all about passing focus-group tests, which have separated listeners into the distinct demographic groups that advertisers are then able to tell stock analysts they have micromarketed their products to. As a result, radio, television, and live performances are no longer about aggregating and entertaining large audiences, but rather just a group of market niches. The bright side to this fact is that there’s one heck of an opportunity opening up for folks who don’t get hung up on trying to sell advertising.

Wall Street and Madison Avenue have tried to redefine what music means to people, but most people are voting with their wallets by refusing to buy any new recordings. The view of the vast majority of consumers is that very few new recordings are worth buying compared to those released a couple decades ago, and this has become the dilemma of the industry. You have to sell product to survive, but it’s impossible to develop that product while trying to please your corporate masters. It might work when selling soap or clothing or any other consumer product, but a creative endeavor like music just doesn’t work that way. It’s too personal, both to the artist and the consumer, to be a mass-market product.
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Sunday, May 1, 2011

The Official 2010 Music Sales Stats, Or Are They?

As you can see from the chart on the left, the RIAA recently released their official 2010 music sales statistics. As with most stats, they can be interpreted different ways, both good and bad. Here's one way to look at them.
  • 1.265 billion downloads were sold worth $2.38 billion. That's a lot of music.
  • Ringtones (seen here as Mobile) were down by just about 28%, but worth $526 million, still a lot of money.
  • There were almost 30% more subscribers to subscription music, but the revenue was down by almost 6%. Not a good sign.
  • No surprise here, but CD sales were down by 23%, but that meant that there were still 226 million sold for a revenue total of $3.36 billion. That might not be as much as what was sold at the height of the business, but it's still a lot of music.
  • Vinyl was up by 26%, but that only meant 4 million units for $87 million in income, a mere drop in the bucket.
  • One excellent stat for musicians is that performance royalties were up by 60% to $249 million.
Now keep in mind that what these stats represent are every sale that's been recorded by Soundscan (the service that measures music sales whenever a barcode is scanned), but doesn't represent anything sold independently on artist websites or distribution sites like CD Baby or TuneCore. It's been suggested that there's actually a huge hidden and uncounted amount of sales that you'll never see represented. As a result, the music business may be much healthier than the RIAA stats indicate. The problem is, we'll never know for sure.
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Help support this blog. Any purchases made through our Amazon links help support this website with no cost to you.

You should follow me on Twitter for daily news and updates on production and the music business.


Check out my Big Picture blog for daily discussion of music, recording, and production tips and tricks.

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