7 Music Business Predictions For 2010

Yesterday I posted a number of predictions for the musical instrument and pro audio industry on my Big Picture blog, so today I wanted to post a few pertaining to the music business. As with my other predictions, they're based on a bit of inside knowledge, a few rumors, and my ability to read the tea bags.

1) Subscription music gains a bit more traction. Subscription service Spotify debuts but they'll be crippled due to oppressive licensing deals with the major labels and a cash flow problem. However, music lovers get more and more used to subscription - and they like it. 2010 is not the year subscription reaches critical mass though, because........................

2) Apple waits it out. Apple now has the infrastructure to launch a subscription service since they bought LaLa, and they're just the 800 pound gorilla to push it over the top. Not in 2010 though, as they squeeze one more year of downloads out of the iTunes store. 2011 will be a different story altogether.

3) Social media management becomes an issue. No artist has enough time in the day to adequately manage his social media strategy. Hell, most of them don't even have a social media strategy at all! But the demands of social media finally outweigh the demands of making music, and the artists rebel. As a result......

4) A new class of social media company arises. In 2010, you'll see companies that are dedicated to managing all the social media of an artist so the artist can get back to making music. Sure, there are a few companies like that now, but most of them tend to specialize in PR, or site, MySpace and Facebook design. This new class of company will concern itself only with social media management, and will remove the burden from the artist for better or worse.

5) Record labels get smarter. Let's face it, we like to paint these guys as stupid and out of touch. Sure, many of them are, but there are a lot of bright, passionate people still in the music business and they're learning fast what it takes to give the public and the artist what they need. Look for some surprisingly hip initiatives from labels big and small in 2010 (and a bunch of incredibly stupid ones too.)

6) Concert ticket prices come back to earth. You can only soak the people so many times even in good times, but when times are tough the pocketbooks close quickly. Major artists begin to realize that fans just don't want to see them every year, especially when they could be paying the rent or the mortgage or putting food on the table with the money instead. In 2010, the whole concert industry begins to wise-up and understand that the only way it can survive is by offering tickets at Chevy prices instead of a Ferrari.

7) Twitter takes a fade. It's happening already - there's more and more spam on Twitter and it's been hacked too. And more goofy, inane posts by people that should know better. Why would you think in your wildest dreams I'd be interested in the fact that you just bought a muffin at Starbucks? In 2010, the pushback begins.

Let's see how these work out. Happy New Years and thanks for reading everyone!!

11 Interesting Moments For The Music Industry In 2009

2009 was filled with numerous interesting moments for the music industry as Music 3.0 kicked into high gear. Here are some significant events from last year, in no particular order:

1) Social Media - 2009 became the year that everyone in the music business - from label execs to artists - realized the true value of social media and began to work it hard.

2) Twitter - This was the year that Twitter became a real force in the artist's social networking toolbox as artists large and small in stature reached out to their audiences. While acts like Coldplay and Pearl Jam kept it business-like, artists like John Mayer stayed personal enough to the point where you felt like you knew him. And Justin Bieber even caused a riot by an errant Tweet from his label.

3) Concert Attendance Takes A Hit - Long thought to be immune from financial downturns, attendance dropped everywhere in the concert business as even major artists played to less than sold-out audiences. Concert promoter LiveNation even offered "No Service Charge Wednesdays" and tickets for as low as $5 to get meat in the seats.

4) Virgin Music Closes - Even though they were still profitable, music retailer Virgin Music closed it's last 6 stores, discovering that the real estate was more valuable than the merchandise inside.

5) iTunes Variable Pricing - Apple acquiesces to the major labels and institutes 3 tiered pricing. Industry pundits battle, profit increases but sales drop. Who wins?

6) Box Sets Get Innovative - Major artists take Trent Reznor's lead and release box sets, with one more elaborate than the next. AC/DC even packages their merch inside a working amplifier (see side graphic).

7) Subscription Nears The Turning Point - With the subscription service Spotify gearing up to launch in the US in 2010, the industry gets the feeling that the public is finally ready to embrace subscription music. Is the feeling unfounded? We'll know shortly.

8) Apple Buys LaLa - In what may be a precursor to an iTunes subscription service, Apple purchases the hybrid service LaLa.

9) Music Games Slump - After dominating the game scene and becoming an unexpected income source to labels and artists alike, the music game business took a sales hit as new versions of Rock Band (even by The Beatles) and Guitar Hero struggled.

10) Secondary Ticketing Exposed - The long time practice of reselling held-back concert tickets through scalpers finally came to light, with major artists like Bruce Springsteen and Bon Jovi (among others) taking big hits to their reputations. No wonder you can only get the best seats from scalpers.

11) CD Sales Come Back A Little - In December, CD sales come back like it's 2005 as multiple artists sell in the 100,000's per week. Susan Boyle comes out of nowhere to sell nearly 3 million in a month, closely followed by Andrea Bocelli.

It was an interesting year. Let's hope 2010 is just as interesting.

The Shift From Music 2.0 To Music 3.0 In The 2000's

The music industry changed in oh so many ways in the 2000's. What started as a decade of business more or less as usual has terminated in a business in upheaval. Somewhere in the middle is where the industry transitioned from Music 2.0 to Music 2.5, then finally to Music 3.0.

In case you've forgotten how I've broken down the era's of the music business, here they are:

Music 1.0 - the first generation of the music business where the product was vinyl records, the artist has no contact directly with the record buyer, radio was the primary source of promotion, the record labels were run by record people, and records were bought from retail stores.

Music 1.5 - the second generation of the music business where the product was primarily CDs, labels were owned and run by large conglomerates, MTV caused the labels to shift from artist development to image development, radio was still the major source of promotion, and CDs were purchased from retail stores.

Music 2.0 - the third generation of the music business that signaled the beginning of digital music, piracy ran rampant due to P2P networks but the industry took little notice as CD sales were still strong from radio promotion.

Music 2.5 - the fourth generation of the music business where digital music became monetized thanks to iTunes and later, others like Amazon MP3. CD sales dive, the music industry contracts and retail stores close.

Music 3.0 - the current generation of the music business where the artist can now communicate, interact, market and sell directly to the fan. Record labels, radio and television become mostly irrelevant and single songs are purchased instead of albums.

As we entered Y2K (don't hear that term much any more) the music biz was sure that it could handle the onslaught of digital music in the form of MP3's. It was convinced that it could combat the piracy, CD sales, while not at all time highs, still remained strong, and radio and television were as important as ever for promotion. We were in the heart of Music 2.0.

2001 saw the first of many daggers to the heart of the music business, this one from an unlikely source - the computer industry - as Apple introduced iTunes. Little did the major labels know what was in store for them as they all made deals with Apple, which then released the iTunes Store in 2003. That was the year the music biz transitioned to Music 2.5 as digital music became monetized for the first time.

Although MySpace and Facebook were created later in 2003, it wasn't until later in the decade that they would become the key to the transition to Music 3.0. By 2007, artists everywhere discovered that they could reach out directly to their fans and their fans could reach back, which was the beginning of Music 3.0 and where we stand now.

Today's artists have so many possibilities that they've never had before, from producing their own music, to finding and developing an audience, to marketing and selling directly to that audience, to listening and communicating with their fans - all with ease and little expense. That's what Music 3.0 has to offer. But it sounds easier than it is, since all these possibilities still require good old fashioned work.

Top 10 Pop Christmas Songs

This has nothing to do with Music 3.0, but it is a great way to celebrate the Holiday.

Merry Christmas everyone, and thanks for reading!

The 4 Kinds Of Free

Yesterday's post was about how quite a few major artists are not taking advantage of the new digital economy, most notably the "economies of free," which is the theory that if you give something away for free then it will incentivize the receiver of the free product to come back and purchase something else.

I thought it was a good time to explain this in more detail, since the economies of free is a central premise in the new music business economy (especially for a young artist). Wired Magazine's Chris Anderson offers the following video description of the theory with "The 4 Kinds Of Free."

Top Artists Still Not Distributing Digitally

One of the tenants of Music 3.0 is a theory called "The Economies of Free." It's an odd theory and one that's counter-intuitive because it states that the more you give away for free, the more you end up selling. Think of it as if someone gave you a sample of a chocolate chip cookie in order to entice you to buy more chocolate chip cookies. That's what's happened with music in the era of Music 3.0 - the more easily it's available for free, the more you're likely to increase your market size and as a result, the more copies you'll likely sell as well.

That's why it's so surprising that some of the biggest artists of the last 40 years still have not made their music available for digital distribution.

The list includes:

* The Beatles

* AC/DC

* Garth Brooks

* Bob Seger

* Tool

* King Crimson

* Kid Rock (some limited licensing, including album-only Rock N' Roll Jesus on AmazonMP3)

* Def Leppard (some limited licensing, including songs from the Sparkle Lounge)

One of the reasons that these acts have never released their catalogs on iTunes is the fact that they don't want to break up their albums into a la carte offerings, but the primary reason is their fear of piracy. Perhaps if they understood the Economies of Free, they'd change their minds and see their sales increase.

7 Critical Marketing Basics Every Musician Should Know

Industry pundit Derek Sivers (who's also featured in my Music 3.0 book) had his "7 Critical Marketing Basics Every Musician Should Know" reposted by CyberPRurban.com. If you don't already know, Derek founded CD Baby, but also spent time at publishing giant Warner Chappel so he definitely knows the biz (he was a touring musician as well). But maybe the most interesting thing about Derek is he's a great student of marketing and how traditional marketing applies to musicians.

Here's his 7 marketing basics.

Lesson #1 - A Marketing Golden Rule: It’s about THEM Not YOU
When he was a student at Berklee College of Music, Derek was attending a music business lecture. Before the lecture started, he overheard his professor whispering to guest speaker Mark Fried from Warner Chappell Music that there would be no time to eat before the lecture and it was a 3-hour talk. Mark was looking hungry and there had clearly been a miscommunication about eating before the class started. So, Derek slipped out of the room to a pay phone and ordered pizza for Mark and for the entire class. Forty-five minutes into his lecture, Mark was eating pizza with the class and was extremely grateful to Derek (who was one of many students in the room) who went out of his way to help him.

After the lecture, Mark gave Derek his card and told him to keep in touch, which Derek did for the remaining 2 years he was at Berklee. When he came to New York he would meet Mark for coffee and their friendship grew. A week before his graduation, Derek called Mark to ask if there were any jobs at Warner Chappell opening up. Seven days later Derek had a job working at Warner Chappell in the tape room.

The pizza took Derek one phone call and $25 and it secured him a job in the music industry. There were probably 45 students sitting in that lecture hall that day and he was the one who ended up with a relationship with Mark and in the end…a job.

Lesson #2: Unsolicited Actions Will Get You Nowhere
While working in the tape room at Warner Chappell, Derek got to see first hand what it looks like from the inside when indie musicians send unsolicited music to a publishing company. Warner Chappell is a large publishing company that was not looking to sign new artists and Derek saw the packages arrive by the dozen on a daily basis. From this he learned exactly what never to do.

Lesson #3 - No One Is Coming To Save You In The Music Industry
If you hire anyone to be on your team, no matter what they are doing for you, you must understand that that person is your hired partner. You will both have to work to achieve your desired result. This is especially true in the realm of social media and online marketing.

Lesson #4 - Marketing = Consideration
Reach People the Way You Want to Be Reached. Stop thinking of it as Marketing and start thinking of it as creative ways to be considerate. Begin to pay attention to other artist’s messages and notice what works on you. The considerate thing is to be so novel and creative and innovative so that people say, "You have GOT to see / hear this musician play!"

Lesson #5 - Sharply Define What You Do
You cannot slice through the world’s attention if you are using a blunt knife and you will most definitely be blunt if you are trying to be all things to all people. Your message must be sharp and pointed. It’s OK to exclude 99% and have 1% worship you! Be unapologetic in your bluntness.

Lesson #6 - DIY Does Not Mean Do It All Yourself - Decide It Yourself
DIY does not have to mean do it all yourself. Doing it all yourself will surely set you up for exhaustion and will leave you no time to be creative. Decide It Yourself - you call the shots but you MUST learn how to delegate, put your fans to work and get things off of your plate.


Lesson #7 - It’s Who You Know Mixed With How You Persevere
Everything major that happens in your career starts with someone you know. Get used to staying in touch with hundreds of people with blogs and with your newsletter. It’s a psychological shift in your head but once you can make it you can be very very effective staying in touch with many people. This is the miracle of technology.

Make yourself meet 3 new people every single week: Do this by picking up the phone - people get hundreds of emails and dozens of phone calls.

TIP: AVOID saying the words “pick your brain” to anyone. That says, "I want something from you"

4 SEO Tips For YouTube Marketing

YouTube can be used as an effective marketing tool, but you must observe some search engine optimization (SEO) techniques in order to be successful. Sure, it's possible your video could be a big viral success without them, but the chances of that happening are something like winning the lottery.

In these following examples, imagine that your band is called "Emerald" and you want to post a video from a live gig at the Lone Star Club.

Before you post that video, make sure that you’ve:

• Named your video something descriptive. “Emerald at the Lone Star Club video 1/9/09” is good. “Untitled_bandvideo12.mov” is not descriptive at all so your video will never get added by the search engines and your fans won’t find it.

• Choose your keywords based on your title. In this case the keywords would be “Emerald” and “Lone Star Club.” Keep your keywords to 4 or 5 since anything more could be construed as “keyword stuffing” (using every keyword you can think of in hopes of getting ranked by a search engine) and you might get penalized as a result.

• Make sure that your description contains the same phrase as your title. For example, “This video features Emerald at the Lone Star Club on January 9, 2009” is a good description, although a bit incomplete.  Something like “Here’s our band at the Lone Star Club” wouldn’t be as effective because it omits the keyword “Emerald.” The description is critical to SEO so the more info you can add (150 to 200 words), the better.

• Be sure that you put “video” at the end of the title because sometimes people search just for videos.

Email Service Providers And Why They're Necessary

In the last post, I stated how important it is to have a master email list to keep in touch with your fans in these days of Music 3.0. I also briefly touched on email service providers (or ESP's) like iContact, WhatCounts and Constant Contact and a little on why they're essential partners needed for maintaining your master email list. What I didn't touch on was the biggest reason why using one is a necessity.

When I wanted to send one of my first email newsletters to a list of only about 1200 (which seemed large  at the time but is really tiny in grand scheme of email lists), I was astounded to find that my Internet Service Provider (ISP) wouldn't allow me to send to more than 200 addresses simultaneously from my company account. That meant that I had to split my list up into 6 batches, which made the job take a lot longer than it should have. After a number of calls to AT&T, I discovered that just about every ISP limits the number of email addresses that can be attached to an email in an attempt to keep spam in check, yet I knew that there were companies that sent emails to millions of addresses at time every day. How did they do it?

Then I found out about email service providers. ESP's have a deal with the ISPs to screen their customers to keep the spam count low, and the only limit to how many addresses you can send to is how much money you want to spend. The greater the number of email addresses, the more it costs.

ESPs are way more useful than just providing basic email delivery however, and are definitely worth the money in that they:

1. clean your list for you, which means they automatically delete any old non-existent addresses (you have to do it manually if you use your personal email client, which is a big drag time-wise).
2. provide a means to measure how well your email did in terms of open rate, click-throughs and pass-alongs and a lot more
3. provide a means to easily subscribe and unsubscribe to the list (again, much more difficult to do manually)
4. provide a host of pretty good looking HTML templates that you can use to easily design a professional looking email blast

Most ESPs offer more services than the main ones mentioned above that you can check out for yourself. As I said, you get charged more as your address volume increases, but some of them are free if you're just starting and only have a few hundred. Even with a volume that low, it's so much easier to use an ESP than your own email client. Try it. You'll wonder how you ever got along without one.

4 Reasons Why Your Email List Is Still Important

While the popular trend is to think that email is so "last year" for communicating with friends, fans and business partners as social networks like Facebook rise in popularity, it's a lot more important than you think in the grand scheme of Music 3.0.

In fact, your email list is one of the most powerful tools you can have because you control the message, and if done well, it can feel a lot more personal than communicating via Facebook or Linkedin or any of the other popular networks. Those two factors are important, but being able to control the consistency of your message is even more so.

For most artists and businesses today, the problem becomes how to effectively communicate with all of your "friends" and contacts, because social networks are a closed environment by nature. That means that you have a set of friends on MySpace and another set on Facebook and yet another on Twitter, and maybe even another set on an email list that you might already have, so your workload reaching them all has not only quadrupled, but the look and feel is inconsistent because of the nature of the network. If you're not consistent in your presentation, you're not controlling the message.

Those are already three points in favor of having an email list, but perhaps the biggest problem with social network communication is measurement. One thing that email can provide that social networks can't is sophisticated measurement of when the mail was opened, if it was opened more than once (even if it's reopened again a year later), how long it was read, and if it was passed along, among many other measurements. Obviously your personal email client on your computer can't do these things, but it can't easily reach out to thousands of people as well. That's why you need a service like Constant Contact, WhatCounts, or iContact, all of which also have the added convenience of constantly cleaning the list of bounces and outdated addresses (we'll discuss email service providers in a future post).

So now you can see why it's so important to capture any friend or contact info from those social network where you have a presence onto a master mailing list:

1 - communication control

2 - consistency of the message

3 - a more personal feel

4 - measurement

So if that makes sense, the next question becomes, "How do I get social network contacts on to a master email list?"

It's easy but takes a little work. When someone friends you on a social network, communicate with them and ask them to please sign on to your mailing list. Promise that you'll only send something of value to them when you email them and be emphatic that you won't spam them, then stay true to your word.

In a future post we'll look at some of the upcoming new email features that can help your click-through rates, as well as take a look at suggested email frequency and the ideal content.

3 Reasons For And Against Digital Music Subscription

It seems like everyone in the music industry now believes that the subscription model will be the ultimate solution for digital music and the inevitable direction that the industry will take. Subscription means that you pay a basic fee like $10 - $15 per month and then are able to access any song you want whenever you want where ever you want.

This view has been held by those inside the industry for a long time, but I really didn't get it until recently. In helping my partner clean up the hard drive on her laptop, we were eliminating everything that was outdated, already backed up, or simply no longer needed. After much work there was still wasn't much drive space reclaimed, so I took a look at her iTunes folder. Sure enough, she had well over 20 gigs of songs! At that moment, I understood that subscription was the future of the business.

Here are the reasons that I believe it will work:

1) It's a lot more cost-effective for the consumer. As industry pundit Ted Cohen states, “For $10 a month, you can get 10 songs on iTunes or 10 million songs on Napster.”

2) Managing a lot of songs takes time and a lot of storage space for the consumer (see my story above).

3) There's potentially a lot of money to go around - much, much more than the business is generating today. The potential buying public in the US alone is 100 million. If only 50% of those subscribed at $10 a month, that's $500 million a month spread around to everyone in the business. The consumer will never be happier and the industry will grow overnight.

Here are the reasons against it:

1) It's hard for people to get over the idea of "renting" music after buying it for almost forever.

2) Most artists are afraid of subscription. Oh, they like the idea of steady income every month, but as of yet there's no way to ensure they'll actually see any of it. Most fear that the labels will take the lions share of the money and the artists will not see their fair share.

3) It's a publishing nightmare. As of now, the artist and publisher split a grand total of .18 cents (less than 1/4 of a cent!) each time a song is streamed. Most publishers claim that they now get statements that may be 5 phonebooks high of reported streams that add up to maybe $12, of which they only get to keep $3. In other words, it costs way, way more to process the paperwork than they're capable of making in it's current form. It's great that you can get the type of granular information about number of plays that publishers always hoped for, but they'll never sign off on subscription until they stop losing money on the deal.

I'm convinced that subscription digital music will eventually take over the business. Already Rhapsody has nearly 800,000 users and Napster has 700,000. The upstart Spotify has over a million subscribers in Europe alone (it's not available in the States yet due to licensing issues, but it's coming in 2010) and is getting rave reviews. But as our friend Ted Cohen says, "If iTunes announced subscription tomorrow, we’d be over the hump."

We keep hearing rumors that might happen, and with Apple's recent purchase of LaLa, they seem to have the infrastructure in place. Stay tuned as the digital space continues to be the most interesting part of the music business.

Portions of this post came from a previously published post on bobbyowsinski.blogspot.com from about 6 months ago, but it's even more relevant now.

The Curious Case Of SuBo

Earlier in the month we had a post about how the CD was still a major part of the music business, despite all the gloom and doom that you read. Now we have the curious case of Susan Boyle to add to the mix.

If you've been living in a cave, Susan Boyle came to fame by turning an appearance on the the British version of American Idol into a viral video sensation, and that eventually turned into a major label record deal with Columbia. While not many in the industry gave her much of a chance for selling big numbers, here she is, selling CDs like it was 1999 again.

SuBo has defied the odds and sold a astounding (for 2009) 1.5 million of "I Dreamed A Dream" in 3 weeks since the CD's release in the US, and another 1 million in the UK. Sales forecasts predict it should hit at least two million in the US by the end of the year, and will probably be the biggest selling hit by a female artist this year. All in a little over a month!

SuBo wasn't the only one selling, with Andrea Bocelli's "My Christmas" nearing a million in sales after 3 weeks, as well as a host of more contemporary artists like Taylor Swift and Carrie Underwood all selling more than a hundred thousand a week. Just to show you how significant these figures are, there were weeks during the year when the number one record sold around 50 to 60,000 units, so when multiple artists break 100k for several weeks in row, that's significant.

Does this mean that the CD business is coming back? No way, it's declining and will continue to do so, but perhaps at a slower rate than predicted. Sure, a lot of the sales (especially for SuBo) has to due with curiosity and seasonal buying patterns, but he takeaway here is not to take the CD lightly as a product just yet. Fans buy it for the same reason they ever did - as a souvenir, a measure of their fandom, or just a way to be cool. It doesn't matter what the reason, they still buy. And it's a fact that some demographics (like hip hop, metal, country and christian) buy a lot more than others since they're still somewhat adverse to digital music.

What this means is that in Music 3.0, artists at any success level have to be distribution agnostic and treat all music containers (either digital or a plastic shiny disc) as simply vessels that get their music out to the fans. You can't become attached to only one. They're all important.