Two Year Recap

Two years into writing this blog, I'm starting to feel like I'm getting the hang of things. I'm endlessly greatful for all my regular readers and feedback I've gotten for my writing.

It's crazy how much has changed for the music business in the last year. Here are some highlights (and a lowlight) from 2011:

I outlined a strategy to manage the coming dominance of streaming music services.

I broke down how to sell out properly. My most popular post to date! I'm proud of this one.

I took a stab at creating a rough formula for predicting a band's success. I believe this is a great lens to view your band's performance through as is, but I'm still tinkering with revisions on this one.

I discuessed challenges to the 10,000 hours to mastery theory.

I pissed off a lot of people by criticizing BMI for suing a restaurant for playing music without a license. This post was a sore spot for me. Readers misunderstood my prediction that the payment of traditional royalties will decline and my disapproval of suing a small business as me saying that I believed music should be free. Far from it. This was written with the assmption that, whether we like it or not, we have to adjust to the new realities of the business. Piracy is here to stay. At the time of posting, I backed off my position due to the massive blowback from music think tank, but the more I ruminate on this post the more I stick by my predicitions of waning influence for traidtional royalties as digital music continues gaining marketshare.

I wrote about how being too polite and nice can hurt your career.

It's been an eventful year. I'm stoked to see more and more people getting value out of this blog.

Thanks for making all this work worthwhile.

-D

Facebook Is Not A Website

Facebook is not a website anymore, it's an operating system. Same with Google and Apple. Amazon plans to follow suit with the recent release of the Kindle Fire.

And these platforms are becoming increasiingly interconnected with many other websites you use daily. Ticketmaster, Spotify, CD Baby, and eBay have either already integrated ot plan on full integration into Facebook. Youtube just added a "buy it now" button for songs wo work with Google Music. All of Apple's products are designed for integration.

In order to survive as a musician in the digital world, you need to make your music compatible (available) with these big four platforms (not that big four, sorry). Most all internet traffic will be centered around these behemoths and if fans cannot get your music here, you'll either be pirated or worse, ignored.

How important is it to be on the "operating system" as your fans?

Magazines have been reluctantly making the transition to digital subscriptions for years, but with low renewal rates and slow growth, it was not as profitible a channel as it could be. When Apple released the Newsstand icon as a default on the iPhone and iPad, sales of digital subscriptions went through the roof.

PixelMags reported a 1,150 percent growth increase in the first week after Newsstand and iOS 5 debuted on Oct. 12. It’s now sold over four million digital magazines.

Why? Digital magazines finally aligned with the same platform that fan's were using. The Newsstand app moved magazines from being buried behind apps, to being front and center on the home screen. The product stayed the same, only the platform changed.

New music/tech websites form and disppear every day. Some will grow large, but most won't. A majority of your online sales will come from major platforms, as that's where most of your customers spend their time.

Make sure you're available on the same "operating system" as your fans.

What Can Music Learn From Video Games?

In an interview at a recent tech conference, Gabe Newell, co-founder of Valve (the video game company behind Half-Life and Portal), gives some fantastic hard data on the economics of sale pricing and freemium models of digitally distribution.

For those of you who aren't gamers, Value has a web service called Steam where you can purchase a game online and have it download directly to your computer instead of having to buy a physical copy of the game. You can download the game any number of times, but you have to be signed in to your account online to play. Simple, unobtrustive DRM (digital rights management) that protects creators but doesn't screw legitimate customers.

Beautiful.

With an estimated 70% of the digital game distribution market, Steam has access to more data than you could ever ask for on pricing and consumer behavior.

And they decided to share some insights with us. Groovy.

From the Geekwire transcript of the talks, Gabe Newell on piracy:

One thing that we have learned is that piracy is not a pricing issue. It’s a service issue. The easiest way to stop piracy is not by putting antipiracy technology to work. It’s by giving those people a service that’s better than what they’re receiving from the pirates. For example, Russia. You say, oh, we’re going to enter Russia, people say, you’re doomed, they’ll pirate everything in Russia. Russia now outside of Germany is our largest continental European market.

...the people who are telling you that Russians pirate everything are the people who wait six months to localize their product into Russia. … So that, as far as we’re concerned, is asked and answered. It doesn’t take much in terms of providing a better service to make pirates a non-issue.

Pay attention to your customer's wants and needs and they'll pay you for the effort. This business knowledge is far from new, yet it's also ludicriously easy to overlook. Don't do draconian DRM as it'll chase off paying customers and move them to less-hassle piracy.

Software-as-a-service / cloud platforms such as iCloud and Spotify seem to be the way forward as they balance DRM with customer service and price. However, royalties from these sources are small and will remain so for the foreseeable future. Use them as entry-level services for new fans but don't put your entire catalog on them.

Gabe goes on to talk about the company's pricing experiment by making Team Fortress 2 a free-to-play (aka freemium) game:

Why is free and free to play so different? Well then you have to start thinking about how value creation actually occurs, and what it is that people are valuing, and what the statement that something is free to play implies about the future value of the experience that they’re going to have.

And then the conversion rate, when we talk to partners who do free-to-play, a lot of people see about a 2 to 3 percent conversion rate of the people in their audience who actually buy something, and then with Team Fortress 2, which looks more like Arkham Asylum in terms of the user profile and the content, we see about a 20 to 30 percent conversion rate of people who are playing those games who buy something.

So that’s a fairly surprising and fairly recent statistic, which is that there seems to be something about the content that significantly changes how your monetization occurs, with apparently much broader participation than you would see out of something like FarmVille.

They first get the customer interested in the product, then increase the value they offer to the customer as the customer become more commited. Again, it's a simple concept that's simple to forget.

No matter whether your're talking about video games or music, It's all about making it easy to become a fan.

Major Labels Don't Care About Their Artists Or You

Despite what their emotional ads say, the RIAA's attempts to police the internet are not about protecting artists' work; they want only to create a legal structure where they alone benefit. This is about an old business model resisting change.

Remember, record labels are venture capitalists, not patrons.

Pro-Piracy website TorrentFreak describes UMG's campaign to shut down the website MegaUpload:

MegaUpload is currently being portrayed by the MPAA and RIAA as one of the world’s leading rogue sites. But top music stars including P Diddy, Will.i.am, Alicia Keys, Snoop Dogg and Kanye West disagree and are giving the site their full support in a brand new song. 

It's almost as if the artists and labels have different interests, gasp!

Here's the video in question:

Block This from TorrentFreak on Vimeo.

UMG forced YouTube to take down the video. No surprises there.

But wait, there's more!

The video is legally owned by MegaUpload as part of a marketing campaign. 

Wait, so Universal can shut down videos simply because it doesn't like the message? I thought copyright-infringement laws were put into place to help me as an artists?

Would it ruffle your feathers if a major label tried stealing royalties from an independent artist? Does it surprise you that the same people who wrote the SOPA act are entertainment lobbyists?  Are you shocked that the head of the MPAA used the great firewall of China as a shining example for a way to help artists?  (Ai Weiwei would disagree.)

It was never about protecting artists. It's about labels defending their competitive advantage through any means necessary, legal and otherwise.

When an argument rests heavily on an emotional appeal, be very certain you understand who actually benefits from the agreement.

UPDATE:Megaupload sued UMG. UMG reveals that it has an agreement with YouTube that it can issue takedown notices for ANY video without any proof of ownership.

The video is back on YouTube.

Spotify Takes Another Shot at Pandora

Spotify added a radio feature where you can build stations based on your favorite artist. Unlimited stations, unlimited skips, and access for both free and paid subscriptions.

I don't see any remaining competitve advantage for Pandora that Spotify can't match. Spotify is going to be the new heavy-hitter for the digital music marketplace.

My Crash Course for Streaming

Why Being Polite is Overrated

Negativity as a tactic is severely underrated.

We're taught to say something nice or not say something at all. After all, art is subjective so even if we don't like something, we don't have the right to critique, right?

But what do we do when the execution of the song is obviously flawed?

Sometimes, however, the best thing you give someone is a piping-hot plate of uncomfortable truth.

Steve Jobs was notorious for his outbursts of anger, but there's not a person in the world who wasn't affected by the inventions he shepherded into the market. He busted heads because he had to bust heads in order to release high quality products.

To make a masterpiece you must be willing to disagree.

Sometimes forcefully.

In fact, arguing and sarcasm make you more creative by forcing you to view concepts in a different light. Negativity improves group performance on idea-generation tasks. Competitive tasks improved creative output, (like Eric Clapton competing for the love of Layla). Moderate rule breaking is positively correlated with number of leadership roles. Anger at people who slacked off can make them up their effort (assuming they cared in the first place). Being angry also makes you process information more analytically. 

Being negative will also help you be more persuasive.

Negative reviewers were perceived as more intelligent, competent, and expert than positive reviewers, even when the content of the positive review was independently judged as being of higher quality and greater forcefulness.

However, don't storm into your next band practice, punch a hole in the wall, and go full-on Ghaddafi expecting magic to happen. A willingness to be negative when needed is different than oppressive pessimism. As anyone who has worked in a dictatorship of a job knows, pervasive criticism without positivity leads to learned helplessness. This is about the necessary balance between being emotionally sensitive to the needs of your band mates and being assertive enough to push through hard decisions to get serious work done.

Negativity is a tactic, to be used in some situations where strong analysis or action is needed. Breaking deadlocked negotiations, evaluating new opportunities, critiquing new songs: all of these are times where a little negativity might be needed to push through resistance. Trying to write new songs, improvising, networking or marketing: these activities would be much better served by positivity.

The next time you're stuck, step back and ask:

Should I be using a soft or firm touch to solve this problem?

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*Shout out to Eric Barker at Barking Up The Wrong Tree, almost every link referenced was from research he found.