From Yaro Starak’s “Entrepreneurs Journey” Blog.
You may not know this about me (unless you follow me on Twitter where I tweet music video clips from time to time), but I’m a huge fan of the progressive and vocal trance scene. That’s dance music for the uninitiated, although the genre of dance is massive in terms of all the categories and sub-categories, which includes genres like techno and rave music, which you might be familiar with.
In the case of trance music, the leading DJ, at least in terms of a popular vote run by DJ Mag, is Armin Van Buuren. Armin has been number one for three years running and as DJs and trance producers go, he’s about as prolific and talented as they come. I’m a fan, that’s for sure.
One of the things I enjoy often late at night when I’m in the mood for music is to trawl around YouTube watching video clips of the latest and classic trance tracks. There’s an absolute library of great music in YouTube, and of course it’s all free.
Armin Van Buuren is not only the number one DJ, he is also co-founder of a music label called Armada Music. One of the very smart things I’ve noticed Armada is doing is making heavy use of YouTube as a marketing channel.
At least 50% of the tracks I listen to on YouTube come from Armada, especially if I follow a music trail going from one track to the next following the “similar video” recommendations provided by the YouTube algorithm.
Watching Armada use YouTube is interesting, because the music is free, but obviously the company makes money. I believe Armada, and labels like them, are pioneers in adopting new media, rather than fighting it. There’s a lesson in this case study for any of us who want to leverage the web for exposure of creative output, even if their is a profit motivation behind it.
The Profit Model For Music Has Changed
It’s been a wild last ten years for the music industry. The old big record labels clearly messed up, and instead of embracing change, tried to hold on to their old ways of doing things.
You can’t blame them of course, why wouldn’t you want to keep using the system that had poured billions of dollars in profits to them ever since the days of vinyl and the 8-track. Clearly stubborn greed won out over smart leadership during times of revolution.
Unfortunately as a result of a rigid thinking process, rather than being innovative and leading the industry through a period of change, which couldn’t be stopped – it was a revolution of how music is distributed – the big labels decided to fight it.
Taking actions like attacking customers, using the courts to sue certain unlucky members of the public, hoping it would act as a statement to discourage others from “stealing music”, is like biting the hand that feeds you. Sure you don’t want to encourage people to steal music, but if your deterrent is a slap on the wrist, that’s not good enough, you’re not addressing the core change occurring.
You need alternatives that offer innovative methods to consume music where everyone wins, that are as easy or even easier than the options available to download illegally.
Nothing really good surfaced until iTunes came along, which has gained some traction as a viable and legal method to distribute music with profit, thanks in no small part to the incredible adoption rate of the iPod.
It’s fair to say that in many ways Apple’s ingenuity has led them to become market leaders because no one else stepped up with a good enough alternative, plus they managed to convince the major players to support it.
If you look at how Apple has married their hardware and software, making one so dependent on the other, with a heavy dosage of cool factor marketing to convince the masses to take part, you begin to see how truly genius they really are.
Not everyone uses iTunes and fewer still make a purchase from the service. I feel confident saying that the majority of music listeners on this planet now purchase less music than they used to, largely in part to the relative ease of access to any genre you could possible enjoy thanks to websites like YouTube or niche specific music websites and podcasts.
So if so many people are enjoying music for free, on demand, whenever they want, how are musicians going to make a living from what they do? And what about the music labels? The Internet allows direct access to artists without the need for middle-man marketing and distribution services, so where exactly is going to happen to the music industry?
The Web Is Not The New Radio
Although I wasn’t alive at the introduction of the radio, I can only imagine that the idea of broadcasting music for free could have been upsetting to some business people.
Eventually everyone realized that the radio meant exposure, and because you can’t decide what tracks the radio plays, you still head out and buy that tape or CD of your favorite song or artist album, so you can decide when and what you listen to.
The radio turned into a marketing channel that led to an increase in sales. Landing air time on enough radio stations could make or break a band.
Television had a similar impact, and thanks to MTV, the music industry had yet another means of marketing their product. Once again, the music-listener could not dictate what was played and when it was played. Music videos on TV, like radio creating awareness and excitement about certain artists lucky enough to get air time, was more like a sample sized helping for the music fan. To enjoy a full music meal, you have to go out and spend some money to buy a record.
The Internet, though comparable to the television and radio as a new form of music distribution lacks one key ingredient, or should I say, restriction.
Content on the web can be time-shifted, stored, shared and consumed at will. There are no restrictions, you can press play over and over again on your favorite track or watch your favorite music video again and again.
Making things potentially even worse for the record labels, but way better for music fans, thanks to the infinite scale of the Web, ease of use of the technology and low start-up costs, music artists have flooded the medium with content. No longer are we forced to listen to only the top ten, twenty or one hundred tracks based on a mainstream popular vote. Now we can have what we want when we want it and there’s more variety to explore than we could ever hope to in a lifetime.
The music industry now lives in the Long Tail.
Music online is an all-you-can-eat buffet that only costs the price of a device to access the Web and the fees you pay to your Internet provider.
So what’s a record label or music artist to do if no one buys physical music anymore and so much digital music is free?
Exposure Still Counts
Although we’ve gained in the breadth and depth of content – we have more music than we could ever hope for – for a time it became hard to find the good stuff.
We went from having a few options based on what the mainstream or record label execs thought was good, to having so many options that even the most obscure tastes could be met, if you could figure out exactly what the good stuff is.
Then Google came along with its clever algorithms that show us what the majority think is best, even within tiny niches.
Next came social media, with the social-vote acting as the criteria to decide what is good and what isn’t.
Though not completely foolproof, if people vote with their attention and actions, what links they click and how long they spend consuming media, you can use technology to decipher what’s popular, even when presented with near-limitless options.
The end result we have today, is a conglomeration of new media companies, evolving old-media companies, e-commerce, social voting tools, search engines, file sharing and good old word of mouth all driving how music is distributed. It’s complicated, but we’re getting closer to a model that works, and from the point of view of the music fan, there has never been a better time to be alive.
One thing that hasn’t changed is that exposure still counts. If there is one commodity that has become scarce as a result of the technological shift, it is people’s attention spans. As options increase, attention decreases.
The Internet has brought down barriers to distribution, so your every day musician can capture attention for their work, even sitting at home strumming a guitar on their bed. With ideas like “1,000 true fans” demonstrating that you can at least make a living if you can get a loyal following from a small group of people, it could be said that it’s also one of the best times to be a music producer as well.
The music labels still have power because old media still has attention, and there are some things you can only do with the scope of a company behind you. People still watch TV and listen to the radio. Marketing is a multi-faceted function of a music label, with claiming air time on old media as important as building a solid following on Twitter, Facebook and Myspace.
If you want to be a big star, you still need big attention, however as Armada and smart labels like it are realizing, the key to success rests in giving away a lot. Instead of buying exposure in the form of advertising, today you give value for free, and just like us information marketers, record companies and musicians are coming to grips with the idea that selling their music is not necessarily how they are going to profit. Instead they have to give it away.
The Performing Artist
If the music itself is a marketing tool which you give away, how do you profit?
Before I go on, it’s worth stating that I don’t work for a record label and never have, and my musical inclinations are very much on the consuming side of the fence, so what I’m about to write is merely speculation from my business brain.
I like thinking about this especially when I can see a revolution going on in an industry that has contributed some of the most joyful moments to my life – music is transcendent to me. However I’m not privy to the accounting books of any record labels so I don’t know what the real profit centers are, what revenue streams are on the increase and which are in decline.
My gut feeling is that musicians and record labels, like us bloggers, are relying more and more on multiple streams of income, and the highest value product they have, is the face-to-face time they offer. In the case of music, that’s live-gig time, and especially at the very top end of most popular artists, the big cash is made from ticket sales to concerts.
The MP3 may have replaced the CD, but it’s not become nearly as profitable as the small disc, even though the manufacturing cost is so much less. Instead, the MP3, and videos on YouTube are the currency that captures attention, but they are mostly free. They help build the fan base, communicate creativity and are certainly valued highly by the listeners, but since so much of the music is free, it’s not a significant revenue stream.
ITunes is no doubt making millions, but it’s not the profit center that CD sales used to be for the record labels. Plenty of recording artists will never profit from direct sales of their music, which isn’t necessarily new – many a struggling artist has had to keep the day job (or night job) while attempting to “break into” the music industry – the difference now is the profit model has shifted, taking the power away from the labels and into the hands of the people, or at least anyone who can access the Internet to publish music.
Today because it has become so easy to reach people all over the world without the help of a label, and manufacturing paraphernalia to sell is an option to anyone online, smaller musicians can realistically survive.
If a proportion of their 1,000 true fans in each city they visit on tour attend live gigs at bars and clubs, buy a record or two and perhaps some related product like shirts, caps and posters, and combine this with some online sales, maybe some sponsorship income and other promotional opportunities, the artist can make a fairly good living.
At the top end of the scale, today’s leading DJ, or band or singer will leverage all media, both old and new, organized by the music label, though some media, such as twitter, will work best when the artist themselves is in charge of content, rather than an employee. The labels who will thrive in the new environment, are those who innovate by finding new profit channels and understand that online media is not about them losing profits to people stealing music, it’s about cutting marketing costs and finding new audiences around the world using the Web as the most affordable exposure tool ever invented.
Armada Gets It
Bringing this back to Armada Music, if you watch their tracks on YouTube you will notice they include plenty of branding and calls to action to bring a listener into the world of the label.
If you like this track, subscribe to our channel, or check out our website or podcast, or buy tickets to the upcoming gig for this artist, or share this video with your friends. They don’t even mind if you take the track and mix it in to your own podcast or video on YouTube that you give away.
Everything is free, which fosters a frictionless distribution of the music, the artist and the associated brand – Armada. The end result is massive exposure, with a huge global following, leading to sold out gigs all around the world (which are not free).
In my favorite industry, DJs release regular podcasts full of great tunes. Each MP3 podcast is an hour or two hour long mix, full of the latest music, all for free and designed to spread exposure for the DJs featured in the podcast, and the host DJ too of course. Armin Van Buuren runs a live radio show and podcast called A State Of Trance, which apparently has 30 million listeners world wide, which if that is true, makes it one of the most popular shows on the entire planet.
Unfortunately not all labels share the free distribution and sharing of music attitude and will send cease and desist notices if they find you infringing on their copyrighted materials. Is this old thinking or just protecting your assets?
It’s tough to say, but I certainly know what feels right – giving the goods away and asking for nothing but attention of your work.
Leo Babauta of ZenHabits has a very liberal uncopyrighted content policy, where he states –
I think, in most cases, the protectionism that is touted by “anti-piracy” campaigns and lawsuits and lobbying actually hurts the artist. Limiting distribution to protect profits isn’t a good thing.
If you read his full policy you will see he gives full rights to do whatever you like with his content.
The Free Economy
The web has ushered in an era where free has become the accepted norm. However the Dot Com boom and subsequent bust demonstrated that while giving away things for free is great for audience building, you still need a profitable model behind what you do, if what you are in the business of building a business.
As information publishers, we follow the model of give away so much that people never need to buy from you, but have the option to buy something from you anyway, of which a small proportion will.
The music industry is evolving to a place where the product that used to make them millions is either free, or in the case of a site like BeatPort for DJs, and of course iTunes, you can buy individual tracks for a couple of bucks.
As more and more companies learn to Move The Freeline, the most challenging aspect of what we do online will be about translating your hard work into money. Social media services have huge valuations as companies, but as yet, many of them don’t profit, though they are expected to eventually.
One thing is clear, as consumers we’re enjoying an unprecedented amount of free-ness in our lives, so much so that the challenge is finding the best content to fit into our busy lives. The future, as in the past, will belong to those companies and artists who find a way to bring meaning to our lives, and make enough to survive and thrive financially while doing it.