The Deconstruction of the Music Industry and the Opportunity for Lifestyle Brands Within




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COLLOQUY: MUSIC BUSINESS

(E85.2606.001.SP09)


The Deconstruction of the Music Industry and the Opportunity for Lifestyle Brands Within


Karl Fricker

karl.fricker@gmail.com

9.2.09


Table of Contents


1.0 Introduction…………………………………………………………………….1


2.0 Futuristic Visions Inspired by an Anarcho-Primitivist……………4

    1. In the Beginning……………………………………………………………....5

    2. The Rise of the Record Industry………………………………………....7

    3. Consolidation and Exploitation……………………………………………8

    4. Pandora’s Box…………………………………………………………………..9

    5. The New Paradigm…………………………………………………………..10


3.0 The Artist………………………………………………………………………..13

3.1 Marketing……………………………………………………………………….15

3.2 Financial Support…………………………………………………………….16

3.3 Touring…………………………………………………………………………..18

3.4 Distribution…………………………………………………………………….18

3.5 Promotion……………………………………………………………………....20

3.6 Shift in Leverage……………………………………………………………..21

3.7 The Rise of the Middle Class………………………………….…...…….22


  1. The Consumer………………………………………………………………...24

4.1 Access to the World’s Catalogue………………………………………..25

4.2 Effectively Communicating Opinions..…………………………….....29

4.3 Effects on Consumer Behavior………………………………………..…30


  1. When the Dust Settles………………………………………………………32

5.1 Show Me the Opportunity………………………………..……………….34

5.2 Music as a Tool for Communication……………………………..….…36

5.3 First Movers………………………………………………………………….…36

5.4 Organic Collaborations……………………………………………………..40


6.0 Application of Theory: A Proposal to Nike 6.0…………………….44

6.1 Nike 6.0 Overview……………………………………………………………44

6.2 Assessment of 6.0’s Strategy…………………………………………….46

6.3 Competition…………………………………………………………………….48

6.4 Competitive Advantage – Resources of Nike…………………….…51

6.5 Consumer Profile……………………………………………………………..52

6.6 Recommendation………..……………………………………………….….54


7.0 Works Cited……………………………………………………………………61



1.0 Introduction

As conventional forms of marketing become increasing less effective, brands have turned to “entertainment” to help shape their identity. Endorsement deals have been struck, songs licensed, signage posted, screenings organized, tours sponsored…but what are the takeaways from these types of initiatives?  Can marketers truly justify the often high costs of these efforts with genuine ROI in the context of brand equity or sales? The effectiveness of these initiatives are measured by resulting media value, which is determined by the reach and frequency of signage. Yet what this analysis fails to calculate is the potency of the exposure. How have consumers truly evaluated the participating brand? Has it improved their reputation? Has it improved their sales? These questions are often left unanswered while marketers creatively scramble to conjure some arbitrary measurement to legitimize their existence.

The innovative minds at Ogilvy have created a model that could potentially make ROI more transparent. Instead of purely relying on media value to measure a campaign’s effectiveness, Ogilvy has given their client Ponds, a unit of Unilever, the opportunity to exploit a tangible product (the rights to the production “The Starter Wife” on the USA Network) in addition to various branding opportunities within the context of a production (logo integration, organically integrated branded content, advertising, online components, and consumer involvement through contests). The Ponds marketing team will no longer need smoke and mirrors during their annual review, instead they will stand behind a balance sheet that demonstrates incoming cash flow and an integrated campaign that touched their target demographic with supreme intention.

Ponds are not the only ones who have turned to branded entertainment to strengthen their identity. Grey Goose, a division of Bacardi Limited, have concocted the successful series “Iconoclasts” (Sundance Channel), while Dove, another unit of Unilever, have sponsored the production of “Trust Me” (TNT Network). Granted not everyone has the deep pockets of Bacardi Limited or Unilever to back up their marketing initiatives, but why haven’t more brands attempted to become integrated within the creation process of “branded entertainment” and leave with some kind of ownership of intellectual property?

One element of the entertainment industry that brands haven’t taken full of advantage of is the compelling power of music as a tool for communication. Considering the current state of flux that music industry is weathering, not to mention the economic downturn that we are facing, it’s understandable why brands have kept their distance. Yet, an industry in transition also leaves an opportunity for entrance. Over the course of this document, it is my intention to shed some light on where this opportunity lies and how lifestyle brands can strategically incorporate music into their marketing initiatives to strengthen their image.

To solidify any assertions of what the music industry will look like in the future and the opportunity within it, one must first have genuine understanding of the past. That been said, I intend to put forth a historical perspective painted by a macro-economic analysis of the market forces that have produced the unstable environment which the music industry now exists. With the lay of land established, we can then begin to examine the newly paved paths that both artists and consumers can navigate in order to satisfy their needs. By focusing in on the most elemental components that make up the music industry, content creators (artists) and consumers (fans), one can then postulate how to bring value to this relationship. Entrepreneurs and emerging businesses have begun to recognize this opportunity, and therefore, it will be in our best interest to examine their services so that we can strategically incorporate best practice. At this point, we will have theoretically drawn a map for brands to utilize music to strengthen their image. In order to bring some practicality to this academic paper, I will formulate a marketing plan for Nike 6.0 (action sports division) that will harness some of the concepts put forth as they continue to build their brand.

So what makes me, Karl Fricker, qualified to propose a music marketing initiative to an action sport brand? As a self-proclaimed music industry deconstructionist, new-media enthusiast, and aspiring waterman:

I breathe sports culture.

  • I grew up as a swimmer/ocean-lifeguard and competed on a national level for 15 years.

  • I have dove over 100ft in the open ocean on a single breath of air to hunt some of the largest pelagic fish on earth. In 2007, I placed third amongst 50 international competitors in the OMER Blue Water Spearfishing Tournament held in Cape Hatteras, NC.

  • A promising surf report will give me goose bumps. I'm in the water at first light, even if there is snow on the ground and sub 40 degree Jersey-toxic water.


I have vision.

  • My time at the University of Chicago/NYU and my various work experiences has allowed me to attain a holistic view of the entertainment industry, and with this knowledge I'm ready to strategically maneuver within this new paradigm.

  • My assessment of the music industry’s future is not tethered by obstacles and hindrances, but rather by opportunities for growth – an entrepreneurial paradise if you will.

  • My judgments are rooted in the passion that I have for music and refined by a deep appreciation for aesthetics, design, and functionality.


2.0 Futuristic Visions Inspired by an Anarcho-Primitivist

In the world I see - you are stalking elk through the damp canyon forests around the ruins of Rockefeller Center. You'll wear leather clothes that will last you the rest of your life. You'll climb the wrist-thick kudzu vines that wrap the Sears Tower. And when you look down, you'll see tiny figures pounding corn, laying strips of venison on the empty car pool lane of some abandoned superhighway.”

- Tyler Durden, Fight Club


As Tyler Durden launched Project Mayhem in the quintessential film Fight Club, which plotted various attacks on consumerism, he spoke these words to the narrator, Edward Norton. Tyler was a charismatic, anarcho-primitivist1 with a strong hatred for consumer culture, and his words described a “back to square one” existence, which he strived to create. Well, Tyler would have been elated with the deconstruction that the music industry is experiencing, as Project Digital Mayhem has rendered much of the previously built infrastructure obsolete. In its place a back-to-the-basics industry will be forged from the liberating nature of the Internet that will allow artists and consumers to be the most influential sectors of the business. Drawing a parallel from Tyler’s vision, let’s put forth a scenario that encompasses the current momentum of the music industry.

In the world I see - “record” industry will be clinging to their business model, as physical product fades into obscurity. Physical distribution pipelines will be rendered obsolete and CD’s will simply have the potential ability to give the consumer a sense of nostalgia. Digital media will obviously take its place, considering its potent ability to suit the needs of the contemporary consumers through accessibility and convenience. Artists will continue to disassociate themselves with labels and begin to individually create lean and efficient business entities that which will manage their content. They will distribute their music in some fashion for free in order to drive awareness. There will still be a revenue stream from the sale of digital downloads, yet it will not be enough for the artists and labels to exist. Instead, a slew of other revenue streams will be realized as artists tailor product offerings that engage a loyal following and as marketers fully realize the power of music as a communication tool. Alternative product manufacturers, media producers (films, video games, TV shows), and service industries will be looking to associate themselves with music that resonates with the public in order to push their agenda. Music will be more popular than ever, with startups and entrepreneurs taking full advantage of this opportunity to enter and bring value to consumers and artists alike. Contracts and roles will be restructured to reflect this new climate. Competition between artists will exponentially increase, considering the playing field will be leveled. Consumers will rely on trusted filters in order synthesize all the available content. Artists who will attain the most success will be the ones that are able to convert casual fans into true ones.

So how and why will the music industry arrive to such a state of affairs? Well, find yourself a comfy nook and let me spin you a tale of the rise and fall of the modern music business enterprise.


2.1 In the Beginning

Let’s start from the beginning. Music is an inherent byproduct of humanity, as suggested by Charles Darwin in the “Descent of Man”:

When we treat of sexual selection we shall see that primeval man, or rather some early progenitor of man, probably first used his voice in producing true musical cadences, that is in singing, as do some of the gibbon-apes at the present day; and we may conclude from a widely-spread analogy, that this power would have been especially exerted during the courtship of the sexes,--would have expressed various emotions, such as love, jealousy, triumph,--and would have served as a challenge to rivals. It is, therefore, probable that the imitation of musical cries by articulate sounds may have given rise to words expressive of various complex emotions. (56)


Exhibit A

Yet it wasn’t until the mid-to-late 1700s that there was an impetus to monetize the compelling nature of music, as performers and composers such as Wolfgang Amadeus Mozart began to seek commercial opportunities to market their music and performances to the general public. Prior to this point, the process of composing and printing music was for the most part supported by patronage from aristocracies and churches.

Then in the 1800’s, publishers came into the picture and laid the foundation for an industry by printing sheet music. Unfortunately for artists, copyright control of their original work was hardly regulated. Publishers would print their own versions of popular music and timeless songs without ever compensating the original creator. Fortunes were made by these early publishers who created a distribution platform that exploited a new technology, the industrial printing press, and the intellectual property of artists. Sounds familiar, doesn’t it!? (Exhibit A)

Stronger copyright protection laws took effect late in the century, as songwriters, composers, lyricists, and publishers started working together for their mutual financial benefit. Most notable was Tin Pan Alley, a collection of music houses based out of New York City, who were largely responsible for the creation of The American Society of Composers, Authors, and Publishers (ASCAP) in 1914. The sheet music industry’s dominance of the early 20th century was aided by the massive explosion of parlour music, with a piano becoming a common fixture in the middle class home.


2.2 The Rise of the Record Industry

At the beginning of the 20th century, music could only be sonically disseminated by the sole means of a live musical performance. Yes that’s right, you even had to witness a player piano “play” if you wanted to “hear” music. The widespread introduction of radio receivers in the 1920’s and phonographs in the 1930’s finally allowed people to listen to music without having to actually be at the performance. These two innovations changed the dynamics of the industry by offering consumers a superior product which provided accessibility and convenience.

Over time the modern business enterprise structured an industry around recorded music, which unseated sheet music publishing as the driving force of the music industry. With motivations of ascertaining the highest levels of financial success, record companies built relationships with distributors that could deliver their products to retailers nationwide. As the most powerful sector they used their leverage to structure relationships with original content holders (artists) that would force them to relinquish their rights to the master recordings2 which were eventually exploited through the sale of physical product. The foundation of the entire recorded music industry was structured around the management of the master recording. As the industry matured fortunes were made, competition increased, interests merged, and consolidation followed.


2.3 Consolidation and Exploitation

By the late eighties, the dominant force of the music industry was the “Big 6” - EMI, Sony, BMG, PolyGram, WEA and MCA – which all had built-in global distribution platforms and “intimate” relationships with major radio broadcasters, print magazines, and TV outlets including the immensely influential MTV. If an artist had aspirations of participating in the music industry, they were forced to sign with record labels that were tied to the “Big 6” because they were the only entities that could introduce you and your artistic product to the world. The “Big 6’s” control of distribution and promotion enabled them to become “gatekeepers” of the industry. Over time the industry became insulated from the forces of nontraditional competition. Competition was only seen amongst familiar players. There was no stimulus for true industry innovation. Instead standard procedures were formed.

With no stimulus to innovate, the record industry collectively focused on exploiting their leverage over not only artists but the general public. The creation of the Compact Disc and its proliferated use in the mid-eighties helped in this endeavor. Considering that the CD provided a more desirable user experience, consumers found themselves repurchasing their entire catalogue. This behavior only lined the fatty bellies of the “Big 6”, who collectively controlled available product. They recognized consumers’ high demand and took advantage of their willingness to spend by inflating their already high profit margins. Remember CD’s costing $18.99? Remember purchasing that album because it had one song that you liked? Unfortunately the cold influence of “big business” forced music to be pitched and sold as static products, rather than artistic-cultural products. In pursuit of satisfying the near-sighted desires of invested shareholders, major labels shifted their focus away from music and towards cultivating artists that appealed to the lowest common denominator among consumers. A once product oriented industry now shifted its collective ambition towards becoming sales oriented.


2.4 Pandora’s Box

The mid to late 1990’s rolled on in with the conception of a new digital format, the MP3, and a free software program, Napster, that allowed users to share these new digital files with the click of a mouse. Once again, these innovations provided accessibility and convenience to consumers. Pandora’s Box was officially opened on the traditional music industry, releasing nontraditional competitors of all shapes and sizes. No longer was it “business as usual”. The infrastructure that the industry spent decades building was at risk of becoming obsolete. The record industry’s solution was to try to impede the technological innovation from infringing on their control of distribution by suing consumers who illegally shared music files. Fast forward to 2009 and the RIAA is still attempting to reclaim the record industry’s prior status3 with little hope in sight.

Prior to the conception of MP3 and Napster, large corporations controlled almost every element in the supply chain, which allowed them to be the global curators of music. This is quite a big responsibility to have considering the potent influence that music has on shaping our cultural identity. The act of crafting our cultural voice with the intention of prospering financially is the cancer that has plagued the modern music enterprise. It has undermined the power of the public to determine the significance of what they have created. Fortunately for the public, these technological advances have caused tectonic shifts in the traditional business model. Major labels no longer have the ability to control access, available content, and pricing, as they once did as “gatekeepers” of distribution. No longer can they draw a straight line into consumers’ wallets. The cumulative effect of the digital landscape has necessitated the music industry to experience a phase of “experimentation” that will eventually correct the inherent flaws of the traditional model as it assumes a new paradigm.


2.5 The New Paradigm

Consumption habits have obviously been altered with the advent of digital innovations. The digital landscape has enabled consumers to obtain music for free, whether it is through peer-to-peer software, burning CD’s, online streaming, or transferring hard drives. Consumers have now begun to question the utility of actually purchasing music by asking, “Where is the added value?” With no certain answer to the question, consumers have been looking elsewhere to spend their discretionary entertainment dollars. Bearing in mind that music can now be essentially collected for free, it is no surprise that video games and wireless services provide consumers with more added value per dollar spent. Yet the most compelling alternative to purchasing physical recordings has come in the form of manufacturers that provide digital music delivery systems (MP3 players), specifically Apple’s iPod. As first movers, Apple completely recognized the potential of the MP3 and created a device that exploited the functionality of the digital format. The market embraced the iPod because it provided enhanced accessibility and convenience, a now common theme amongst every innovation that has significantly changed the dynamics of the music industry.

These changes in consumption habits have ultimately caused physical album sales to decline 45 percent since the industry’s peak in 2000 (Sisario). Historically the music industry has been completely reliant on the sale of a physical product. Now it will have to reinvent its standard practices as to compensate for a loss of revenue. That been said, the digital format at first glance might appear to be the thorn in the side of the music industry’s well-being. Yet its proliferated use could also be its saving grace.

Music has become more popular then ever, as consumers have the ability to listen to an endless variety of music anytime, anywhere. The dissemination of broadband access and mobile delivery systems has sparked this trend.

Music Consumption Stats:

  • Apple sold a record 22,727,000 iPods during its first fiscal quarter of 2009, which is a three percent unit growth to the year prior (Dowling). Portable MP3 player ownership among 12-17 year olds is estimated to be 71% according to Arbitron and Edison Research (“The Infinite Dial 2009” 24).

  • According the NPD Group, the percentage of teens downloading or listening to music on social networks increased from 26 percent in 2007 to 46 percent in 2008 (Graham).

  • According to Arbitron and Edison Research, listenership to online radio grew by nearly a third last year, with an approximated 42 million weekly online listeners (“The Infinite Dial 2009” 8). While the NPD Group reports that 52 percent of teens said they listened to online radio in 2008, which is up from 34 percent in 2007 (Graham).

There are also many sectors of the music industry that are experiencing an actual increase in consumer willingness to pay for music.

Willingness to Pay Stats:

  • Digital album sales reached an all time high in 2008 with more than 65 million in sales, which is an increase of 32% from the previous year. Digital track sales increased by 27% with more than 1,070,000,000 sold in 2008. (Billboard/Soundscan).

  • The digital music business internationally saw a sixth year of expansion in 2008, growing by an estimated 25 per cent to US$3.7 billion in trade value. Digital platforms now account for around 20 per cent of recorded music sales, up from 15 per cent in 2007 (IFPI Digital Music Report 2009).

  • During 2008, 1.88 million vinyl albums were purchased which is an 89% increase form the year prior (Billboard/Soundscan).

  • The Rock Band franchise has surpassed $1 billion dollars in North American retail sales in 15 months, according to the NPD Group. Over 40 million songs have been sold through Rock Band platform via download (“Rockband”).

  • NIN self-release generates over 750,000 transactions and $1.6 million in sales revenue in the first week of the album's availability, despite the fact that the 9 tracks were available for free through the bands official website. The $300 Ultra-Deluxe Limited Edition sold out its run of 2500 in 48 hours (Van Buskirk).

  • Billboard reports that global ticket sales were up almost 13% in 2008 over 2007, totaling just under a record $4 billion worldwide (Hampp).

  • Pollstar gives a midyear analysis of the top 100 grossing tours within diagrams below (Bongiovanni).







That being said, the music market is positioned to be healthier than it’s ever been. The dynamics of how the industry can monetize music have simply changed. Just as radio receivers and the phonograph relinquished the grip of the publishing industry in the 1920’s, the MP3 file, broadband access, P2P networks, and the iPod have undeniably unseated the record industry as the driving force in the music industry.

A self-sustaining model will be built upon the democratic nature of the digital landscape. Unnecessary players and their standard procedures will eventually be phased out by new entrants who better meet the needs of a transitioning market. A newly liberated market will build an industry around the most basic relationship of the business, that between artist and consumer.


3.0 The Artist

Artists have gained unprecedented leverage within this new paradigm. Previously, artists were forced to have relationships with a label because they could provide funding for production and touring, a distribution platform, and a network that could promote and market their music. The digital landscape has partially negated this dependency. ProTools has enabled artists to create a professional production on a shoestring budget in a one bedroom apartment. The availability of digital distribution has enabled artists to globally distribute their music with a click of the mouse. Digital applications such as “smart” software that acknowledges a user’s preferences and direct marketing platforms have given artists the ability to better focus their marketing approach by effectively connecting with niche markets. In a brave new world full of opportunity for innovation, artists will have the ability to manage their own career without being connected to a “gatekeeper”. The competitive landscape in effect has been leveled.

With this in mind, there will be an exponential increase in the number of artists who will have an opportunity to uninhibitedly release their product. This will ultimately saturate the market with an enormous product offering, and will necessitate artists to uniquely differentiate themselves in order to cut through the clutter. Another obstacle that artists face in a D.I.Y. scenario is a lack of financing to get a project off the ground, whether it is funds for touring, merchandise, promotion, or simply existing.

That been said, record labels still offer some value to the market. Labels can provide a vast network of marketing and promotional support and they can front an initial investment, even though it will be substantially smaller then in years past. These are the two elements that keep labels relevant within the new paradigm. Yet the market is beginning to see alternative platforms that could uniquely satisfy artists’ needs for marketing and financial support, as well as touring, distribution, and promotion.


3.1 Marketing

For artists looking for marketing support, Topspin and its team of developers are creating software that could potentially change the face of the music industry. Topspin is a self-proclaimed, “technology-focused direct-to-fan marketing, management and distribution platform” with a mission, “To provide artists the tools they need to market music directly to their fans and build successful businesses” (“About Topspin”). In its purist form, Topspin’s software will help artists manage their catalogs, connect with fans, drive demand, and generate revenue. Led by an extremely experienced management team of Peter Gotcher (former CEO of Digidesign who led the creation of Pro Tools), Ian Rogers (former Yahoo! Music GM), and Shamal Ranasinghe (former MusicMatch product strategy executive), Topspin is positioned to exploit the wonders of the internets tubes in order to bring democratization to the music industry.

The intention of Topspin is to bring “record label administration” into the grasp of the average artist, just as Pro Tools brought the “professional recording studio” into any space equipped with a computer. Thus far, they have worked with a group of artists, ranging from big name acts (David Bryne, Brian Eno, Arcade Fire, Yeah Yeah Yeahs, Metric) to grassroots singer songwriters, and have experienced notable success including an average revenue-per-sale of $22 (Rogers, Topspin). Topspin has garnered these results partially because of the flexibility in its marketing and commerce engine. Artists can offer fans multiple pricing models, including pay-per-track, free streaming access, an all-you-can eat subscription model, special bundles that include higher-quality encodings, B-sides, demos, live or other unreleased content, and even the ability to sell limited-edition CDs, tickets and other physical merchandise. This allows fans to self-select where they fit on the scale in terms of “How big of a fan are you?”. This high-margin, multiple price point approach is in stark contrast to the traditional mass-marketed, low-margin, one-size-fits-all model of one $15 CD suits fans of all levels of commitment.

Another reason the Topspin platform has been so successful is because of its focus on demand generation instead of demand fulfillment. Their campaigns have received amazing response rates with the use of direct marketing (email and the like), viral marketing (quality driving organic person-to-person marketing), and targeted marketing (such as targeted paid placement). These three channels not only generate demand, but provide data-driven feedback that enables artists to uniquely customize their subsequent campaigns. In terms of a pricing structure, Topspin receives 20% of sales generated through their platform, which decreases as volume increases (Rogers, Hypebot). Essentially, Topspin is well on their way to creating media marketing software that will empower artists to build lean, niche, self-sustaining careers as they intimately connect with their fans.


3.2 Financial Support

A new financing model has emerged out of the tangible soul of online communities, where consumers have become the investors. Termed “crowd financing”, an entrepreneur seeking to use the model typically makes use of online communities to solicit pledges of small amounts of money from individuals. In return these individuals could potential share in profits made from the entrepreneurial endeavor, participate in the management of the entity, or just to have the opportunity to support a worthy vision. Crowd financing has been utilized to buy and manage a professional soccer team (www.myfootballclub.co.uk.com), establish a profitable T-shirt business (www.cameesa.com), and even to raise enough funds to help a struggling artist get off the ground.

Crowd financing has crept its way into the confines of the music industry in the form of Sellaband, a start-up that launched in 2006 out of Amsterdam. The premise of their service is simple. An artist can sign up to the site and showcase their music to the general public. As part of signing up, the artist issues 5,000 shares which cost $10 each. These shares are made available to purchase to the general public, and it is this show of support that turns an individual into an investor. Together investors need to raise $50,000 to get their artist of choice in the studio and produce an album. After costs and a 10% share for SellaBand, revenue from each album is split 50-50 between the artist and the investors. To date 30 Artists from 13 different countries have raised the full $50,000 and over $3,000,000 has been invested in unsigned artists4.

Sellaband isn’t the only platform to bring financing support to artists who otherwise never would get an opportunity to proficiently record and distribute an album. Slicethepie.com, Mymajorcompany.com, Musicslu.com, and soon to be released Crowdbands.com are all unique crowd financing service providers that are creating a more intimate bond between artists and fans.

As a model, crowd financing has some interesting implications on the traditional development scenario.

  • Crowd financing platforms aggregate the “wisdom of crowds”,5 which is a theory that a diverse collection of independently-deciding individuals is likely to make certain types of decisions and predictions better than individuals or even experts (“The Wisdom of Crowds”). In effect, consumers have taken the role of what a sought after A&R rep would be responsible for: spotting new talent and ensuring the best artists get put forward for financing.

  • As a financial entity, crowd financing dilutes the inherent risk of solely investing in an artist by spreading the risk amongst all investors. If there is less risk involved, a greater percentage of artists that didn’t necessarily fit the standard record label mold will get an opportunity to release their product.

  • Finally, it’s in the best interest of all participants that the project succeeds. Artists that form a relationship with a group of investors, therefore, will have access to a tribe of potent vocalists ready to organically promote the fruits of their foresight.


3.3 Touring

Democratization has also crept into the live music industry. Online service platforms like Sonicbids and Ourstage have effectively helped artists find gigs without the use of a booking agent. Sonicbids, for example, has a community of over 200,000 bands and 18,000 music buyers. Their platform has resulted in over 61,000 gigs getting booked in 2008, which is nearly twice as many as the previous year (Panay). These types of services have broken down the once formidable barriers of booking a tour. Now instead of relying on relationships and a sales pitch, artists can purely use their music and proven track record to land a gig. Through these platforms artists and promoters can communicate on a more transparent level, which will only encourage the cream to rise to the top.


3.4 Distribution

Many digital storefronts have established their presence with the onset of the digital landscape. They came in the form of digital retailers, like iTunes and Amazon, or subscription services, like Rhapsody or eMusic. So how do artists actually get their content into these platforms? Well, unless you are signed to an established label or your band is the Beatles, you most likely will have to create a relationship with a digital distribution company like The Orchard or the Independent Online Distribution Alliance (IODA). As a digital distribution company, they will essentially give the average artist access to digital retailers and subscription services in addition to claiming to “market and promote” your music to these entities. A tall order considering, “How do you market and promote every artist with the same intensity?” Regardless of their intentions, to forge a relationship with The Orchard or IODA an artist would have to assign the digital rights of their masters to them for an exclusive period of time. In addition, The Orchard and IODA take a percentage (usually between 9% - 30%) of the money earned off the sale of an artist’s music. A relationship with these entities seems to be quite confining and exploitive given the fact they their core value proposition is simply giving access to their established relationships.

In 2006, a digital distribution company, TuneCore, recognized the repressive nature of this model and launched a service of their own. TuneCore provides access to digital retailers and subscription services without asking for the digital rights, without asking for an exclusive agreement, and without collecting revenue from the sale of music. Instead, TuneCore functions on a flat-rate model where there are reasonable upfront fees associated with song/album submissions and a yearly maintenance fee. For example6, distribution of a five song album for a year would cost an artist around $30.

No matter how you slice the pie, access to digital distribution has ultimately brought democratization to the music industry. TuneCore has just taken the next step forward to providing “ethical best practice” to the distribution sector. As platforms continue to provide alternative paths for artists to follow, service providers are appearing to recognize the leverage that artists have assumed in this new paradigm and have correspondingly gravitated towards the ethical treatment of artists’ rights.


3.5 Promotion

Traditionally, music was discovered by fans from the top down when it was heard on commercial radio, read about in magazines, or seen on TV. Now music is being discovered from the bottom up as blogs and social networks have given the general public a forum to communicate with the world. Fans discover music and share their ideas, passions, and musical loves through outlets like Facebook, Myspace, and Youtube. This has ultimately empowered consumers in that the prosperity of an artist’s career can be partially dependent on the collective review of the online community. No longer do artists need huge promotion budgets to get noticed. Instead, it has become increasingly imperative that artists produce quality and compelling content that will uniquely differentiate them from the rest of the pack. If that is achieved, an artist will reap some of the most potent promotion available – “word of mouth”. The electronic group, “Make the Girl Dance” has a clever way of accomplishing this with a recently released video…magnifique!




3.6 Shift in Leverage

In considering the new paradigm from an artist’s perspective, it’s interesting to note all the alterative paths that an artist can navigate to build a successful career. Whether any of the specific companies that offer these services find sustained success is irrelevant. What is significant is the fact the entrepreneurs that are reconstructing the standard practices of the music industry have recognized the inherent power shift from label to artist. These entrepreneurs aren’t formulating new service platforms simply to be ethical either. Instead, they have a solid understanding of the “big picture”. They aspire to bring about change and find success in an industry that once didn’t allow them to enter. Coincidently, success will be found with those entities that formulate their business model around the ethical treatment of artists. These are the entrepreneurial endeavors that will bring true value to the market place as original content holders assume their newfound power.

The embodiment of this new found leverage can be seen in the creation of the Featured Artists Coalition, which is an organization that campaigns for the protection of artists’ rights. The FAC functions as a collective voice of the artistic community as they engage with government, music and technology companies, and collection societies, arguing for fair treatment and, where necessary, exposing unfair practices. The FAC recognizes the unparalleled opportunity for artists to excert their influence on the market, and they are galvanizing the artistic community to do just that. Artists (from major acts like Radiohead and David Gilmore to grass-roots singer songwriters) have joined this organization in support of the FAC’s charter (“Our Charter”):

T
We believe that all music artists should control their destiny because ultimately it is their art and endeavors that create the pleasure and emotion enjoyed by so many.

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