Making a living as an artist has never been easy — whether in film, music or publishing. But the digital revolution — and to a lesser extent, the global economic crisis of the last two years — is transforming the business of content creation. One of the biggest shifts is in how filmmakers, musicians and writers are compensated. There is an evolving relationship between creator and publisher in which the artist bears a larger percentage of the upfront costs for the production and marketing of his or her work. In this new world, artists’ pay is based to a greater degree on how their product sells in the marketplace, a change that has major implications for the content creators themselves, large firms like Hollywood studios and music labels, and consumers.

“In the past, it used to be the case that content creators got paid the bulk of their salary in advance and whoever made that payment — whether it was the music label, the book publisher or the studio — would take on the risk of marketing and distributing that product,” says Kartik Hosanagar, a Wharton professor of operations and information management. “If [the project] was a success, [the publishers, studios, etc.] kept the upside, and if it was a failure, they bore that failure. Now the upside — or downside — is shared with the content creator.”

This shift is largely driven by the move away from shipping physical products toward increasing digital distribution. In music, the threat of digital piracy has made the business of selling songs more challenging, even as the shift from album sales to digital singles has further undermined traditional revenue streams in the music industry. In film, the decline in home entertainment revenues as consumers switch from DVD purchases to online streaming video has also put pressure on profits. And in book publishing and journalism, the move toward e-readers and online news platforms where revenue models are still in flux has created additional uncertainty. The difficulty in predicting the profitability of these products, Hosanagar notes, means that marketers are trying to shift their cost base. “A lot of firms are asking, ‘How do we move from fixed costs to variable costs?’” he adds. “That makes a lot of sense when you have unpredictable returns.”

In the music industry, the pressures on the business model have been even more intense. Ed Pierson, a Seattle-based attorney who represents musicians, says the 1990s were the heyday of big advances for musicians. According to Pierson, easy credit and a war for talent led labels to pay escalating upfront fees to musicians. But as music sales began declining, in part due to piracy and digital downloads that allowed consumers to buy just the songs they wanted and not the entire album, the flush times came to an end. The result these days, notes Pierson, is that labels are making fewer advances and the upfront money they do dole out is smaller.

Artists have responded by taking greater control of their business. “The risk is shifting away from the label and toward the artist,” says David Kusek, chief executive officer of online music school Berkleemusic.com and a digital music technologist. Some big names, including the Dave Matthews Band or the Eagles, have created their own recording labels. Lesser known artists have been forced to become entrepreneurs of sorts. Kusek points to firms like ReverbNation and Top Spin Media that have sprung up to help artists sell their music on platforms like iTunes, to promote a group or artist, or to help sell merchandise. Those firms, in many cases, will charge a small upfront fee and then get a cut of the sales the act generates. “It is a different gamble now,” adds Wharton’s Whitehouse. “The corporate players may be gambling a bit less and the artists may be gambling a bit more. But those artists can now have more control over their work than they did before.”

Read the whole article here.

Listen to the podcast here.

Your comments are welcome.

Here is one of the videos.  Unfortunately you have to endure a 15 second ad before viewing the story.

There are two other videos on the Time.com website.  Enjoy.

The Life Cycle Curve

In order to find your audience you must consider several details. The first is to accept the fact that you cannot market to the majority; you can’t afford it, and even if you could you would fail because of issues related to frequency of contact with these gatekeepers (i.e. radio/press).

Take the Mavens and Early Adopters and focus on these two groups. The Mavens, a term popularized by Malcolm Gladwell in his book The Tipping Point, applies to people who actively and aggressively seek out new things. They are the ones who are not only the most connected to the information channels, but are also most predisposed to discover new things, and new channels as well.

These mavens have a personality type that generates deep satisfaction from not only the seeking out and discovery of new material, but also the sharing of this material. The first class of people with whom they will share are so-called Early Adopters.

These Early Adopters are one standard deviation closer to the majority than the Mavens, and thus there are more of them. However, while they will adopt new things more quickly, they are not typically at ground zero of discovery. If the mavens are the bloggers, the Early Adopters are the readers of these blogs, and — to a degree — the re-bloggers. Again, these Early Adopters are a more populated class, and thus their influence is potentially greater than the Mavens.

There is crossover between the two groups. The area of focus is detailed below:

In every product category there are Mavens and Early Adopters. Whether you are dealing with music or any other product or service, you must find a way to bring your product to both groups.

Pyschographic Modeling

In an era of interconnectivity, demographics and geographics, while still important, are less important than the habits, trends, personality of a customer; i.e. their psychographic profile. Finding your audience requires you to understand profoundly the psychographic profile of your customers. What do they look like, where do they shop, what type of food do they like, etc.?

Determining these factors allows you to create a “model” customer. This is the person who, if you could get your music to her, would deeply embrace it. Also, given the fact that she is a Maven/Early Adopter, she will likely share what she has discovered with her network. Significantly, defining this Model Customer allows you to determine where this customer is likely to congregate, and thus where you must bring your music.

The Straddle: Offline and Online

We do not make profound connections with products, services or people online. Profound connections occur offline — in person. The genius of Facebook, and why it has eclipsed networks such as MySpace, is that it represents a Straddle of offline and online; we upload pictures and detailed stories of our offline activity so that our friends and family can be aware of these offline experiences. In this manner, you must understand that technology is simply an accelerator of your offline activity. By locating the Mavens/Early Adopters within your psychographic landscape, and taking your music to them — in person — you greatly increase the odds of these people developing an emotional attachment to your work.

Architecture of Participation

One of our most primal urges is to share information; this is why babies make the massive cognitive leap to learn language skills. Your job, once the initial offline experience has been established, is to create an architecture of participation; a method for frictionless sharing of information so that those Mavens/Early Adopters who have discovered you offline can begin to share their discovery with their network (i.e. online).

This requires a series of steps related to value exchange. Your first task is to establish four things:

1. Your own site
2. A Facebook Fan Page
3. A Twitter Account
4. An email newsletter

Your Site

On your site you must present a value proposition that begins with exchanging some type of content for an email address. Email is your currency; the more of it you have, the more likely you will be to convert what is essentially a non-scarce resource (i.e. your music) into something of tangible value. Do not be fooled into thinking you can get away using a third-party site as “your” site. While, undeniably, service providers such as Reverb Nation and Bandcamp provide value, you do not own these sites, and fundamentally your participation does more to increase the value of these sites than increase your own value. This is not to say you cannot extract value from these third-party sites; however, this requires using them like Facebook, Twitter, and others, to drive potential customers to your own proprietary site.

Facebook

Your FB fan page, similarly, must also represent a value proposition. The value here relates to engagement. FB allows for easy engagement via its makeup. Consider contests, polls, short videos, or other ploys that will keep your fans not only engaged with you on FB, but will encourage them to direct those in their network to your FB fan page. Of course, you must use FB to direct customers to the value proposition that exists only on your site: a content-for-email exchange, and other site-specific offerings (chats with the artist, etc.).

Twitter

Twitter should be used to establish your voice and to direct people to your site. The establishment of the voice comes as much from your affiliations — who you link to, who you follow — as it does from your actual tweets. As above, use it to engage and to direct traffic to your site. Employ time-sensitive offers and offers only available to those who follow you on Twitter. The goal is to inter-connect these tools, and to leverage them to enhance the offline experience. In all mediums you must encourage and facilitate sharing. Your site must have a FB “Like” button and a share on Twitter so that whenever you post content, your constituents can share with their network.

Email Newsletters

The single best tool for conversion of fan to customer is email. While email is an increasingly ineffective tool for communication it still yields a higher return with respect to sales than any other tool.

Therefore it is imperative that you use your email newsletter wisely.

1. They must be short; highlight one and only one action. The total length should be less than 500 words.
2. They should be frequent; once a week on a regularly-scheduled basis.
3. They should have a call to action; tell the recipient what you want them to do: come to the site to get something, come to a show, etc.
4. They should be forwardable; ask your recipients to forward the email to someone they think will enjoy it.
5. They should have sharing functions embedded; allow people to Tweet, add to a FB status.
6. Make it easy for people to unsubscribe.

Don’t worry about overwhelming people with email blasts. If people are unsubscribing, they’re likely non-value adding “fans” any way. Instead, focus on presenting real, timely, share-able value to your current fans so that they have a tool to help you gain new ones.

Converting your Audience to Customers

It is an immutable law of business and nature that somewhere close to 80% of your activity (engagement, profit, etc.) will come from 20% of your constituents. This is referred to as the Pareto Principle or the 80/20 rule. This means that if you have 10,000 people on your email list something close to 2,000 of them will generate 80% of your total sales. The other 8,000 will be largely non-value adding.

The problem of course is that you won’t know which of the 10,000 are the true fans. Thus, you must continuously work to increase your overall amount of constituents. Rather than having 2,000 of 10,000 contributing, strive to have 20,000 of 100,000.  In order to sift through the layers of participation to find the most valuable customers, you must create a filter. Think in terms of a funnel. At the widest point of the funnel is the easiest level of engagement: a free song for an email address.

Summary: The Value of Psychographics

The key is to determine what you deeply care about; what your purpose is, what your values are. From there you can begin — via a psychographic analysis — to find fans that share these same values. At that point, your goal is to bring your music to them, and create the architecture for more participation. Straddle between an offline and an online engagement strategy, but use both.

Once you’ve aggregated these Mavens and Early adopters, you must begin converting them into both customers and evangelists. This is done by honoring the 80/20 rule and working to extract maximum value out of your loyal 20%. Always work to increase the overall pool of your fans.

By George Howard

George Howard was President of Rykodisc, is an original founder of Tunecore and  Assistant Professor and Executive in Residence in the College of Business Administration at Loyola University.

The future is all about breaking new ground and combining that with solid business models that you can predict and work with.  Here is a guest post from Fran Snyder on house concerts and what they should be a part of your future.

I encourage all of you to build on this model and create new experiences and interactions that create value and exchange between artists and their fans that cannot be digitized.

I would be very interested in your comments on this piece.

The Future of Music is Uncertain.

What we can confidently say, however, is that artists will benefit from increasing access to information, and systems/websites will develop to make that information useful, if not vital.

To find success with these new resources, I see two major limitations that artists must overcome. First, and almost instantly dismissed by todays artists, is the need to focus on fundamentals – namely, the ability to play and write great songs. The tsunami of social media and music advice is a relentless force pushing musicians away from their instruments. Before the recording, radio and tour budgets get out of hand, let’s go back to the woodshed – the one with no internet, the one that provides the solitude needed for a true artist to discover and develop their gifts. There is no substitute for great art.

The second limitation is a tired and unproductive definition of success. Artistic success is a muddy thing… not the shiny superstar image we all secretly (or overtly) harbor from decades of media brainwashing. You can be important, you can be happy, you can be filled with meaning from your work as a recording and touring artist. Rich and famous is much harder to accomplish, and many stars will tell you it’s not nearly as satisfying as it looks. Dig into your work. What about it makes you most happy?

I’m convinced that becoming a superstar is harder than it ever has been. I’m also convinced that for artists who focus on a different goal, there is a rising tide of new opportunities, and more chances to succeed than ever before. Let’s start with touring.

Small is the new big, and why house concerts could save touring artists.

House Concerts – Mozart was onto something.

Mozart was well known for performing “parlor concerts,” in the homes of rich patrons who would delight in the opportunity to show off their acquaintance with him. Things have changed, however, and you no longer need to be rich to have access to some of the finest talent available. Furthermore, many of these artists are genuinely interested in their fans, and enjoy an opportunity to connect in a way that rarely happens in traditional venues.

Breaking New Markets = Breaking the Bank

Most acts, regardless of talent, are lucky to draw 30-40 people when they play in a new area. The resources needed to get beyond those numbers are getting more expensive and less effective all the time. Publicity and radio promotion can cost many hundreds if not thousands of dollars per week, and these methods employ people to beg, bribe, or cajole overwhelmed media personnel (writers, DJs, music programmers) who can rarely make the returns worthwhile. Ask any act how many “butts in seats” result from a nice article in the paper. Few, if any. Likewise, airplay doesn’t yield much unless it is sustained. Posters and flyers? Don’t get me started.

It’s been universally accepted for years that touring is so important, that artists should be willing to do it at a financial loss. Furthermore, it’s often suggested that you play anywhere and everywhere, because you never know where a new fan (including one with some power to help in a significant way) will turn up. And if you return consistently, you’ll build an audience.

I say it’s nonsense.

Of course, if you are an artist on the road, not every gig is likely to be a part of your grand strategic plan. But it is wrong to start with the premise that you should play in rooms where people don’t pay attention, and where the financial prospects are gloomy at best. That mentality is a disservice not only to your music, but to professional artists everywhere.

Shame on us. For decades we’ve been teaching audiences that it’s perfectly O.K. to sit 5 feet away from a performer, and carry on conversations at the top of their lungs. Who started this? Has anyone built a lasting audience this way?

Play Rooms You Can Fill – Play Rooms Where You Can Connect.

Without a fat budget and a dedicated team of smart supporters, I believe the best way to build an audience is to play rooms
you can fill, and
that allow you to really connect in a personal or powerful way with the audience.

But where are the rooms you can sell out with 40 seats? Specifically, where are the ones that don’t have an espresso machine screaming during your ballads?

Shrinkage!

The potential audience for live music in traditional venues continues to shrink and fragment. People have more choices than ever for entertainment, and many of those choices increasingly keep them at home. Rentable and on-demand movies, xBox 360 and Wii, and the increasing variety and breadth of sports events and programming provide serious competition to the concert business.

In addition, despite the good they’ve done to society, stricter DUI laws have reduced the number of people who go out to listen to music, and smoking bans force “would-be listeners” out of the room during the show. We now have 200 capacity clubs who routinely have 50 people show up, and a majority of the audience spends half the night outside.
So venues have to diversify to stay in business.

Pool tables, televisions, electronic trivia – anything to bring in more bodies, sell more drinks, and stay in business. They have to do this, regardless of how it affects (distracts) from the core vision of the enterprise – putting on live music shows. Artists (who seemingly have no better option) gladly walk in, set up, and waste their evening playing for ungrateful, inattentive patrons, and force their true fans to watch a show while drunks are screaming about the latest touchdown.

And everyone accepts it. That’s life.

Wanted: Hundreds of Geniuses

The fact is, it takes a genius to run a music venue that can turn a profit (consistently) by presenting shows with audiences of less than 50 people. The economies of scale mean that running a club that is 50% smaller than before might only trim your overhead by 20%, all else being equal. The ones that do succeed often split the club (restaurant/venue) physically – by creating a separate room for the music. Eddie’s Attic, in Decatur Georgia is a good example of this, but has had its share of tough economic times.

The fact is, as audiences continue to fragment and dwindle, many clubs will go out of business unless they downsize or change what they are doing. Especially if they are not doing it well. Artists have long accepted second jobs or being broke as a way of life – some club owners have as well. This is not new, but is it necessary?

In the absence of geniuses, how can we have profitable concerts with an audience of 30-40 people? One way is to create an event that is so special that one person (the venue) is willing to let the other (the act) keep all the money. Who would do such a thing? A house concert host.

What is a House Concert?

It’s an invitation-only concert in someone’s home, presented by a host who does not profit from the event. Although there are many exceptions and variations from these guidelines, house concerts are usually…

• held indoors and on weekends
• attended by 20-50 people
• paid for by a $10-20 donation per guest (for the performer)
• known to include light snacks, beverages or a pot-luck dinner
• attended by the host’s friends, neighbors, co-workers, and maybe a few fans of the artist
• attended by a 25-60 age group
• performed by solo, duos and small groups
• performed with little to no amplification
• very intimate – the audiences sit close and are attentive
• performed as two, 40-minute sets with a 20 minute break
• stronger for artist’s merchandise sales than traditional venues
• booked without a financial guarantee (sometimes a modest guarantee to cover expenses)
• known to house and feed the artist for the night

The Growth of House Concerts

All over the world (but mostly in North America) music fans are discovering that putting on a house concert is a lot of fun, inexpensive, and a great way to entertain friends and acquaintances. They also get a kick out of having personal time with the artists, and knowing that they are playing a very important role in their careers. And thousands of these events happen every year.

Due to space considerations, these house concerts are more likely to help singer-songwriter acts and small ensembles, but the variety of genres and spaces available continues to grow. Jazz combos, instrumental acts, or any act that can comfortably fit in a living room might really enjoy performing in these intimate spaces.

Until we have enough geniuses to develop a commercial infrastructure for small, profitable concerts, house concerts will have to fill the void. In the meantime, small clubs owners, since they often lack the purchasing power to get A-List performers, should connect with these non-profit promoters to take advantage of block-booking opportunities and “double buys.” Even when they are in fairly close proximity, there is usually a very small overlap between house concert and club audiences. House concerts often draw people who don’t like late nights and driving downtown.

Are house concerts the perfect pill?

So far you would think so. But a house concert host can have just as much trouble building an audience. Some hosts have a natural ability to gather crowds (through personality, standing in the community,etc.) but some really have to work at promoting their events. Booking a “stiff” act or two can seriously damage your reputation as a host, and start a downward trend of the audience you’ve worked so hard to build. House concerts are subject to all the same “acts of God” and “acts of Playoffs” that traditional venues deal with.

The upside, however, is that even a modest turnout (15-20 people) can be very satisfying, profitable, and not leave the artist scrambling for a hotel at the end of the night. Many house concert hosts provide food and a guest room for the night – two of the biggest expenses of being on the road.

Rebuilding Our “Infrastructure”

House concerts are filling a key missing ingredient in the live music infrastructure. They provide the venue for artists who cannot draw the numbers necessary for a traditional “for profit” live music venue. This provides opportunities for niche artists, such as
great talents who are not famous* yet, or not famous anymore
great talents who aren’t chasing fame or major commercial success
world class performers who’s fame and market share are limited by the genre (i.e. folk) they inhabit
developing talent

* substitute “well-known” if you prefer.

In the absence of house concerts, these acts play in bars and coffeehouses, serving no particular purpose. They don’t make a living wage, and neither does the venue. They don’t fully express their art, because a distracted audience simply cannot participate fully in the show. These “concerts” are often another missed opportunity to do something smaller and more rewarding.

Never before in our history has there been so much talent available, yet so much of that talent is “stuck.” There are not enough venues where small successes are possible – places that are the necessary stepping stones for an artist building a regional or national fanbase.

Necessity is the mother of invention, and the development of new house concerts, by enthusiastic and savvy fans, is necessary – always has been. Just ask Mozart.

Fran Snyder is a touring singer-songwriter, and founder of Concerts In Your Home

Thanks Fran!

I encourage everyone to build on this model and create new experiences and interactions that create value and exchange between artists and their fans that cannot be digitized.

Decades before indie labels and DIY were the norm, and years before women had any real access in the industry, Cris Williamson was busy changing the face of popular music. Cris’s stellar vocals and compelling persona are regarded as legendary for good reason. Despite being like a well-kept secret, and dwelling almost completely in the independent music world, she nonetheless had an impact worldwide. Her now-legendary classic album, The Changer and the Changed, is one of the best-selling independent records of all time. For nearly 30 years, Cris has toured incessantly, selling out Carnegie Hall numerous times and headlining folk festivals around the country.

Here is an excerpt of an interview with Cris where she talks about the importance of gaining a foothold and going direct.

Get Busy Committee

My friend Ian Rogers, CEO of Topspin has started to co-manage the band “Get Busy Committee“.  He has begun to blog about ALL the activities that an artist manager needs to drive their band to success.  It is a fascinating read and a real world education on how to take a band to market in the new music business.  This is going to be really fun to watch as Ian lays out step by step what he is doing to break this band and “get busy” in the marketplace.

To bring a band to market in today’s indie music market is a hell of a lot of work.  You need to be an entrepreneur and you need to build a team of people to help you market, package, promote, distribute, brainstorm, license, and develop a successful artist.  Ian is taking the indie artist management route described at Music Power Network.

Here are some excerpts from his blog.  Required reading for the indie artist and manager today:

The first thing we did was define success: as I mentioned earlier, the goal is to get this music to as many people as possible, connect directly with the ones who like it, build products those people want to own, and turn a profit. Sure it would be great to make enough money that Get Busy Committee could be their primary income, but we definitely aren’t starting with the “if we don’t get a song on a radio this is a failure” mentality. We are starting at zero. The goal is to grow every single week and not lose money.

We started by putting together a release plan. I opened a Google Doc and started dropping ideas and info into it, and encouraged others to do the same. We needed a team, so we started assembling the roster of people, services, and tools which would help us get this record out the door:

Building a Team

Press Relations and Marketing
Creative Direction
Web site design and development
Digital distribution
Physical Distribution
Non-traditional physical manufacturing
Performing rights organizations
Legal

While getting the album to iTunes is the main thrust for a lot of artists, it’s only part of the story (and a very small part so far) for us. We’ve been preparing for this release for months, started selling the album in six different package two weeks ago, are selling the album for $1 on MySpace all weekend, and much more.

Web Site

The object was to make the site:

Home base. The top SEO result for “Get Busy Committee” and anything else related to the band.

Vibrant. It should update with the latest information about Get Busy Committee with very little effort, from a variety of sources. Furthermore, we weren’t going to spend time or money building any of these tools from scratch. We integrated WordPress and Twitter to make sure it was easy to update with long or short-form updates (respectively) easily.

A fan acquisition tool. The site should be sticky like fly-paper. If you visit the site you should have an incentive to leave behind your email address, follow GBC on Twitter, become a fan on Facebook, a friend on MySpace, friend on Flickr, subscriber on YouTube, or subscribe via RSS. We may only get one chance to make a connection with you. We don’t want you to bounce in and bounce out without granting us permission to reach out to you later with an update.

A tool for fans to create other fans. Every page of the site is instrumented with simple ways to share on Facebook and Twitter, and feedback for having done so either in the form of a counter or free music for having done so. We want it to not only be easy to spread the word but for you to be recognized for having done so.

A place to convert at whatever level of fan you happen to be. Never heard of Get Busy Committee? No problem, you can stream the record or download a few songs for free. Super fan? How about the T-Shirt/USB Flash Drive combo for $55? Somewhere in between? No worries. We have something for you.

Useful. If you’re a college radio DJ who needs a clean version to play on your show or a beatmeister who wants an acapella to remix that should be easy to find. If you’re a blogger writing about the band there should be, even if it’s not linked from the front page. Anything you email to people regularly should be on the site and easily linked to.

Read much, much more about marketing, pricing, making connections, creating awareness and all the things a smart artist manager needs to know.  Brilliant!

Thanks Ian.

The more you know, the better decisions you can make and the further you can go.  Simple as that. Topspin is generating data, as are Nimbit, Reverbnation and others.

Symphony of a Million

“Symphony of a Million” is a 6-month campaign, a commissioning project that brings together composers, performers, and the general public.

The goal is to sell 1 million notes. Purchased notes will be used in not just one single million note work, but rather many new works. Composers will work with performers and compose pieces of varying lengths. The first work to be written will be a 1000 note work for solo marimba composed by Music Academy Online founder, Dave Schwartz, and written for percussionist Nobue Matsuoka. The second work will be a 4000 note composition for saxophone and harp and it will be composed by Anthony Lanman who will be working with saxophonist Dr. Noah Getz and harpist Jacqueline Pollauf who perform together as the duo Pictures on Silence.

* Buy a note for $1

* Each note becomes part of a piece of music composed by award winning composers. Throughout the process we will be commissioning composers to write new works of varying lengths using the notes that you purchase.

* A special “Symphony of a Million” concert, sponsored by Music Academy Online and featuring world-class ensembles, will premier all of the works created using the notes you buy. The concert will be held May 18, 2011, the 100th anniversary of the death of Gustav Mahler, the man who composed the “Symphony of a Thousand.”

* Buy as many notes as you wish. Dedicate the notes to someone special. Help to shape entire sections of new music with the notes you select! Your name (and theirs) will forever be part of the final scores.

* Encourage your friends and family to buy notes.

Find out more here.