Surprise! Fake Fans Don't Come To Shows

Great article at Hypebot about an artist who bit the forbidden fruit of promotion. Writer Clyde Smith investigates BAKER, who has 5+ million views on his videos but can't get more than 30 people out to a show.

Note that he's from New York:

What you will find if you go back and check the stats for videos posted one to two years ago on BAKER's YouTube channel , such as the above stats for "All I'm Gonna Say," that his primary audience has been from the Phillipines, Malaysia and India with one video, "No No [Audio]," adding Australia.
Age-related demographics indicated that top viewers were:

• Female, 13-17 years
• Male, 35-44 years
• Male, 45-54 years

One video, "Wonderall," has all female groups for top demographics.
While there are some plausible explanations for the odd dominance of certain age groups, the regional sources of viewers do raise the possibility of paid YouTube views. Otherwise the fact that his audience is dominated by an Asian audience would be newsworthy and would also help explain his lack of real world audience in New York. Though if he had a strong following among those nationalities on social media, he would also be likely to have a following among students and expats from those countries in the U.S. as well.

I suspect we won't hear much about this artist two years from now.

Nickleback is Richer Than You (Why do you play music?)

Bloomberg Businessweek delves into the Nickelback money-printing machine::

As of May 2011, the rock-star-cum-business-mogul was earning $9.7 million a year from his various ventures, according to court records filed with the Supreme Court of British Columbia. He has a vacation home with friends in Cabo San Lucas, Mexico, a 20-acre farm with stables in British Columbia, and his own home recording studio. Chad Kroeger is not just a drunken rock god: He’s a kingmaker.

In an age of declining music industry profits, Chad is one of the few musicians who still lives "The Rockstar Lifestyle" as portrayed in the media. At the same time, they're one of the most maligned musicians today, especially by fellow musicians.

In 2010 skeptics set up a Facebook (FB) group that purposely misspelled the band’s name: “Can This Pickle Get More Fans Than Nickleback?” The pickle rallied about 1.5 million people in the single month it was live. Last Thanksgiving, an online petition to prevent the band from playing during halftime at a Detroit Lions game drew 50,000 signatures. In the fall, when Chicago’s teachers went on strike, a pro-union protester attacked the mayor with what was meant to be a devastating sign: “Rahm Emanuel likes Nickelback.” The mayor quickly denied the charge.

How is this possible?

It's about differing strategies and motivations towards the music industry.

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Why do you play music?

Your answer to this question has profound ramifications on your band's ideal strategy.

Lets think through some answers to get an idea for how this will effect your goals.

Be Nickelback-rich?
This is the major label game.

You'll need to play music with a very wide appeal. Your live show needs to be excellent. Your image will be groomed. You're going to be a performer, not a musician.

Read my previous guide on How to Sell Out Properly for a more in-depth treatment.

Be highly regarded among the music community?
This is a different, smaller clientele than the music listening public. Be aware of the nuances and limitations of this different market.

And you should probably be practicing while reading this post, too.
Be famous?
Making amazing music is the obvious method here, but there's a million different paths to this achieving this goal. It's about attention.

If you have video or choreography skills you could build a massive following through videos like OkGo did with that sweet treadmill video. Make music so out-there that you develop a cult following like Sunn O))).. You could even join The 27 Club (not advised).

Play music and have financial security?
This would be an argument for keeping a day job. Freedom for your art and you don't have to survive on ramen alone.

Play music for a living (no day job)?
Play a lot. Probably in a few different bands to diversify your income streams and ensure that you don't over-play a market. Network. Build up savings and get your costs down (rent, car, food, etc.)

Be attractive?
Let's be real here. Some of us only play to look good. If this is all you care about, invest in good photographers and videographers as a top priority.

Go on a world tour?
Start befriending larger bands in every location you'd want to hit. Look into finding fans in each city that would be willing to host you and help promote. Get everyone in the band's schedules and business straightened out. Figure out the math to make it profitable, or at least break even. 

Disgust and assault your fans?
GG Allin, you naaaaasty.

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This is only a cursory glance at all the reasons we play music. The list is effectively endless, but it's important to figure out what motivates you to keep pushing forward.

By the way, do you know why your bandmates play music?

You should.

Pomplamoose, "The Future of Music", Interview at Hypebot

This is the best interview I've read all year.

Jacke Conte of Pomplamoose, a band heralded as "The Future of Music" breaks down their entire business model with Hypebot.

I'm not going to give you all the highlights, this is too good an article to ignore.

Jack Conte: Yeah. The thing that I think you should learn from Pomplamoose is not about YouTube. It's not about social media. It's not about music. It's about iterations. It's about trying a million things until something works. That's all we did. We tried a million things and something finally worked, and we were sick and tired. I literally went on three tours where I played – I mean, there were shows where I played where the bartender left. There was literally nobody in the room that I was playing for, and I was not a successful thing. It was a total flop, failure, but we just kept trying and trying and trying, a million different things, and that's what I hope everybody takes away is.

...In fact Derek Sivers, who started the company CD Baby, wrote a book and he put little episodes of the book on YouTube, and one of the episodes is called "If It's Not a Hit, Switch, " and basically his idea is try something. Is it a hit? Are people flocking to it? Are people running to your idea? Do you have value? Are you adding value to the world? Do people really want it? No? Switch, something else. Iterate. Iterate. Iterate a thousand times until you have a hit, and then you've got something. So I love that idea – if it's not a hit, switch.

Jacke brings up one of my recent talking points:

We are not one of those bands that believes that you need to post on your Facebook page every day to engage your fans. I've gone to a lot of these social media conventions and I always just kind of throw up a little bit in my mouth when people are like, "You have to post on Facebook every day, and if you don't post on Facebook every day, then there's no point in posting on Facebook at all." And that's just a giant load of steaming bullshit because when we post on Facebook after not posting on Facebook for two weeks or three weeks, and we post a picture, it's awesome. People are into it. They're excited because we have a new, cool picture, and if we were posting every single day, we'd just dilute the effectiveness of our posts. I think at some point people are going to get really sick of all of the crap in their Facebook feed.

People want to be updated when you have new content. That's really what we've found is people want to know about something when there's something to freakin' know about. If there's not something to know about, don't force it, you know? People want new content. They want to hear a new song. They want to see an awesome picture of you guys backstage, you know, stuff, things that add joy to your life.

Another great point:

You have to think that you're not a genius. You have to think that, "Well, I just worked really hard and I kept working on this song until it sounded good, and I spent hours and hours and hours tweaking and tweaking and tweaking until I really liked it." If you think you're a genius, then you're just going to fucking barf onto a piece of paper and call it art and put it out on the Internet, and then it won't be very good any more.

Go read the rest.

Poor Uses of Social Media

Social media revolves around Permission Marketing.

As Seth Godin describes it;

Permission marketing is the privilege (not the right) of delivering anticipated, personal and relevant messages to people who actually want to get them. 

If you're not adding value to your fans' newsfeed/social media, don't be surprised when they unfollow you. 

Please, no more "what's your favorite sandwich?" posts. (Local / mid-level bands, I'm looking at you.)

These "question" posts don't accomplish or convey anything. You don't really care about any responses as long as you get likes or comments. This insincerity is passive-aggressive and manipulative.

Fans are allergic to insincerity.

Fans don't fall in love with your music because you ask them what type of bed sheets they think are the best. Fans want to know about your art and your stories. That's what connecting to fans is about. Loving a band is an identity decision. 

Likes and follows are only as valuable as the fans behind the numbers. Don't obsess over social media numbers simply because they're easy to quantify. Focus on doing what you do best, bringing art and value to your fans.

Please respect your fans' time and attention.

If you don't have anything worth reading to post, don't post.

Nielson Research Confirms Radio Still Primary Source of Music Discovery

Media information giant Nielson released the results of their recent 3,000 person survey of music listening habits.

The full article is worth a read, but here are some tasty knowledge nuggets.

Radio is still the dominant way people discover music

• 48% discover music most often through the radio
• 10% discover music most often through friends/relatives
• 7% discover music most often through YouTube

More teens listen to music through YouTube than through any other source

• 64% of teens listen to music through YouTube
• 56% of teens listen to music on the radio
• 53% of teens listen to music through iTunes
• 50% of teens listen to music on CD

Positive recommendations from a friend are most likely to influence purchase decisions

• 54% are more likely to make a purchase based off a positive recommendation from a friend
• 25% are more likely to make a purchase based off a music blog/chat rooms
• 12% are more likely to make a purchase based off an endorsement from a brand
• 8% of all respondents share music on social networking sites, while 6% upload music.

I was surprised that YouTube was the primary music streaming source, but I suppose I've been spoiled by Spotify. Upon reflection though, whenever I want to hear music that isn't on Spotify I immediately load up YouTube to give the band a listen.

The big takeaway from this research is the primary driver for purchasing decisions: recommendations from friends.

We are over four times as likely to purchase something recommended from friends than we are from a brand endorsement.

This isn't surprising, but it's a good reminder to where we should spend our limited time and money on marketing. Word of mouth is cheap and effective, but requires a substantial time investment. With sponsorship and ad campaigns you could spend precisely infinity dollars trying to purchase opinion with meager results. Remember Rhianna spending a cool million on a flop single or some kids who blew through $100,000 without "making it"? The internet has severely crippled the effectiveness of "he he shouts loudest wins" marketing.

Save your money for higher quality recordings, shows, and merch. Focus your marketing efforts on people and, to a lesser extent, blogs.

The game is about quality and personal connection.

Like it's always been.

Zoe Keating Releases Her Actual Pay

Add another item to the growing list of why Zoe Keating is one of my favorite artists. Hypebot discusses the numbers with her:

During a six-month period from October 2011 to February 2012, Zoe earned $84,386.86 before taxes.

Here's a breakdown of where that money came from:

....

A good chunk of Zoe’s support comes from her regular and super fans, who she feels remain loyal to her due to their interest in her story.

“They seem interested in my DIY-story,” Zoe told Hypebot. “Or the mechanics-of-how-I-make-music-with-a-cello-and-computer-story; or the classical-musician-gone-rogue-story; or the radiolab-Amanda Palmer-Imogen Heap-Rasputina-connection; or the I'm-a-geek-too-story, etc. The casual listeners might not know my story or anything about me.”

“Casual listeners won't [support], but they never did anyway,” Zoe added in her Google Doc. “I don't buy ALL the music I listen to either, I never did, so why should I expect every single listener to make a purchase? I think that a subset of my listeners pay for my music, and that is a-ok because... and this is the key... there are few middlemen between us.”

As an artist, you are kept afloat by the connection you have with your fans. Nourish them and they'll nourish you.

Electronic and Hip Hop Better Suited to The New Music Industry

Electronic Dance Music (EDM), and to a lesser extent Hip Hop, are much better poised to thrive in the new music industry than traditional bands (live guitarists, drummers, vocalists, etc). Lefsetz has been talking about this phenomenon for a while but it's only been recently that the truth of his claims have become apparent.

Traditional bands have, and always will, exist. I'm not arguing that. What I am saying is that the environment for the new music industry is far more favorable towards electronic music than it is traditional bands. If we take equal amounts of each type of band, over time we'll see more electronic groups for all of the reasons listed below.

---

-Economics
   True, the cash outlay for a decent studio setup is much larger than buying a crappy guitar and combo amp. Much larger. But electronic music doesn't need to rent out recording studios and engineers to put songs, all of that is part of the studio setup in the first place. Putting out a new single takes much less time and much much less money for electronic music than it does traditional bands.

And as unfortunate as it is to say, the less people in the band the more everyone gets paid. The same $10,000 show fee will feed a DJ and two techs a whole lot better than a five-piece band each with their own roadies. Touring is expensive and isn't always a good idea.

Low variable costs make a big difference. Profit is easier to come by for EDM and Hip Hop.

-Speed of Release
    EDM & Hip Hop artists put out many more singles than they do full-length albums. Less production time and more frequent releases keeps the artist in the fans' mind more easily.

-Cross Promotion
   Within a large majority of traditional bands, cross pollination between members of different acts through split EPs and remixes is rare (except for the Mastdon / Feist split, which was excellent).

The exact opposite is true for EDM and Hip Hop. It's hard to find a new single that doesn't either have guest artists or remixes of the track.

Cross promotion is a fantastic way to get potential fans of your music to discover that they actually like your music as you're essentially being endorsed by their current favorite artist. Hearing a new artist work with your favorite artist is even better than a friend's recommendation since it's coming from the source of your admiration. It wasn't until I heard Nas spit on the track Classic that I even considered getting into him. Cross promotion is one of many reasons groups like Doomtree are able to out-hustle and out-last many unconnected artists.

Fans are to be shared, not hoarded.

-Less Gatekeepers
   Electronic music isn't on mainstream radio yet it can sell out 30,000 person festivals. Electronic music, and to a lesser extent Hip Hop, grew up and thrives through the internet. Friends and bloggers pass music that resonates to one another, there's not radio spots or billboards hawking the newest Deadmau5 album. The movement is fan-led.

-Electronic Music Is Built Around Giving Away Music for Free
   DJs have long since known that getting your track the spins it deserves is more important that making a few extra bucks. Fame comes from people knowing and loving your work. Albums sales, like retweets or "likes", are indicators of fame, not the totality of fame. It's much easier for these acts to survive with the "music as a commodity" reality of today than it is traditional bands simply because the architecture for EDM wasn't built around album sales.

The album is marketing material for live performances now, not the primary product.

Which leads me to my next point.

-Cooler Shows
   Now I adore traditional music groups; they account for at least 80% of my listening. But Messhugah's five piece crushing metal blast couldn't compete with the spectacle of Skrillex riding a giant, smoke-spewing transformer in front of a throng of ten thousand fans dancing and drenched in the soft light of LED hula hoops.

Maybe I'm jaded from seeing so much live music, but if all a band does is stand on stage and play their album I feel ripped off. If I go to see a performance, I want to see a performer. It wasn't really until I saw an electronic music show that I began to actually appreciate the genre.

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Dare You Bite the Forbidden Fruit of Promotion?

Desipite your relentless hustle, your last release was a flop. With no energy and limited funds left, you begin to accept that there may be nothing else you can do.

A siren song begins to pierce through the static hum of the internet.
Glaring, the offer dares you.

"For $75, This Guy Will Sell you 1,000 Facebook Likes"

Considering how hard we've worked for the Likes you have, this is a pretty fantastic deal. Previous ad campaigns have been measured in Likes and email list sign ups so this seems like a more direct method of getting the results you want.

"But wait, there's more!"

How about buying profiles in bulk?

BEN ZHAO: Right now on the black market, you can actually buy and sell bundles of Facebook account credentials, tens of dollars or hundreds of dollars for hundreds of thousands of Facebook accounts.

So you could buy a legitimate Facebook ad for $240 and get 240 Likes, as Pizza Delicious did. Or you could drop the same amount of cash and get 10,000 "Likes" from fake profiles. Seems simples, but there's much more to this than meets the eye.

CHACE: For example, one company that sells likes showed me this Nashville country singer who was a client. She had a lot of likes. But then I check what city the fans are from, and they were primarily from Cairo.

What would you do if you found your your favorite band was buying Likes? How would this change you opinion of the band? Would you still listen to them?

How would this change your opinion of a local band you've never heard of?

...

With Facebook's initial stock offering coming tomorrow, the $100 billion dollar value of Facebook rests on the value of Likes and the profiles.

But the value of Likes is shaky at best. Pizza Delilcious got a $10 return on 240 likes, so in this case each Like is worth $.04. Not worth it. But if we were to pay the same $240 for the 10,000 fake facebook credentials would we earn $400?

No.

This is a smokescreen. Fake profiles don't buy tickets to your show, nor do they force their friends to listen to your new EP. Only true fans do.

You can't buy loyalty in bulk.

When the cash runs out, the only people left are your true fans. Even with a couple million dollars, the mercenaries will only be as loyal to you as you pay them.

But fans will always be loyal to Motorhead as long as Motorhead is loyal to them.

"Likes" and followers are are only as valuable as the fans behind the numbers.

Integrity, attention and quality are the currency of artists.

Are you investing or spending?

Maybe You Shouldn't Tour

"I'm going on tour!"

Those words burst with coolness. The romantic ideal of hitting the road with your best buddies to see the world and play your music strikes a lovely chord in our hearts. And the hearts of our other friends, tied to a their less-creative lives. It'll be a trial, for sure, a marathon. But you'll have the stories of comradery forever.

But beyond the adventure aspect, do you actually have a compelling reason to tour?

Tours cost money. Lots of it.

Every day you spend on the road your band is bleeding cash. Hotels, food, gas, merch and money foregone from missing days at work, everything adds . As nice as it feels to have a day off, a tour day without a show at night means a large hit to your overall cost as you drain your bank account without any show to offset this drain.

You need to think about:
   -How big of an audience will we be playing in front of? The logic of touring looks much different when you're opening for a national headline act that pulls 500+ fans than when you'd be touring with another local band from your town.

  -Will we be able to play this location again within 6 months to 1 year? The more recognizable you are the more highly you are rewarded and the more "famous" people perceive your band. Since we build our love for music largely through repetition of the hits we love, there's a strong multiplicative effect on the number of times you can expose a fan to your music. Ideally a fan will see you the first time and love your show so much they drag two more friends to the next show. If you won't be able to hit the region in the foreseeable future, you miss out on this huge boost to your fan base.

      -How well do the other bands fit your sound? Not all exposure is created equal. You may well be touring with a substantially larger band, but if their fan base probably wouldn't like you than you're wasting your time.

   -How much do you expect to make at each tour stop? Are there guarantees for the show or is it based on head count? How many shirts, tickets and CDs do you expect to sling?

   -What kind of promotional effort can I put into this tour? Do you have time / energy / talent to put together a marketing push for these shows? Are the towns you'd be visiting friendly to your genre?

   -How well is your current lineup of merch selling? Do we need fresh gear? What would you estimate the percentage of people at a show who buy your merch would be?

   -Do you have enough merch to last through the week or month that you'll be gone? If we sold everything, what's the most money we could make from merch?

   -How much gas will we need? Use google maps and your vans' MPG to estimate. Then figure out the cost.

   -How many nights at a hotel / hostel will we need? Do you have any friends / fans who would let you crash at their place? You'd be surprised how helpful fans can be. This'll make a big difference on the overall cost of your tour.

   -How much mental energy / sanity do I have to spend? Cash isn't your only limited resource. Being away from home takes a mental toll on everyone. If your bassist is already having a terrible run of luck lately, he'll be more likely to have issues throughout the tour. For your working members, taking time off from work means more stress when they return. Make sure everyone has enough willpower to spend that they won't come after you with a chainsaw before the end of the tour.

   -What's your budget? Can your band afford to lose a few grand without breaking a sweat or would that money be better spent on recording a few extra songs on your album?

After all this we're left with the question of "Will we actually make money going on tour?" There's a limit to the number times a business can undertake a large project without any positive return. Simple as that.

In no way am I saying that you shouldn't tour. Far from it. Live shows and merch are becoming the primary means for independent musicians to make cold cash money. And I'm all for traveling, too. It makes you more creative and gives you great perspective on the world. But if the only compelling argument you can make for touring is the adventure, take a roadtrip with your friends instead. It'll be cheaper and much less stressful when you're not carring trailers full of gears and watching a dwindling bank account.

If you're going to tour, make sure it'll feed your band's energy more than it drains it.

Should I Always Listen to My Fans?

The second you stop becoming a passive listener and create something, it's on. Everyone has an opinion and would love to be your CEO for a day.

This is good.

Feedback and constructive criticism help develop your art and your business. Listening to your fans is a good habit to get in; they do pay your bills after all.

However, sometimes they're very wrong.

Steve Blank's piece in The Atlantic describes A Great Way to Kill Your Startup: Listen to All Your Customers. It's a conversation between Steve and an ex-student Satish. Satish spent loads of time doing customer research and is now facing a stagnant business where no customers are converting from his free version to his paid version. After Satish finishes explaining his predicament, Steve finally reveals the wisdom he hinted at with the title of the post:

Part of Customer Development is understanding which customers make sense for your business. The goal of listening to customers is not please every one of them.  It's to figure out which customer segment served his needs - both short and long term.

If airlines did exactly what I wanted I'd be flying around for free in a jacuzzi-only section of the plane. As awesome as this would be, I suspect this may not be in American Airlines' best interests, especially with that whole bankruptcy thing going on. Fans will tell you what makes them happy, which is very important, but be aware that they're not thinking about your underlying business model.

Be open minded, but do the work in evaluating the idea before you run amok.

Now Is The Golden Age of Indie

With all the doom-saying about piracy, it's easy to become disheartened about the state of the music industry.

Far from it.

Just like the shift from selling sheet music to recordings hurt the legacy industry of music publishing, the new digical landscape is the newest change in the landscape of the music industry.

And it's the best it's ever been for small bands.
1. Less middlemen = more money in artist's pockets.

Every intermediate link between the fan and the artist take a little bit of money out of the equation. The economics term is rent-seeking, or using structural factors to increase one's share of existing wealth instead of creating new wealth.

Remember Louis CK's million dollar self-release? He released an entire special via a $5 direct download on his website. With no unnecessary links in the chain between Louis and his fans, there was so much money on the table that Louis gave half of the money to chairty and a quarter to the production crew that helped create the special.

Selling a 99 cent song on iTunes gives the artists 79 cents back. Back in 90s, each $15+ CD Toni Braxton sold earned her only 35 cents, which lead her to declare bankruptcy twice. And this was after being certified 8x platinum in the US.

2. Dedicated fans are becoming a larger and better source of funding than major labels / corporations.

When game design great Tim Schaefer wanted to fund an old-school adventure game, he knew he was out of luck getting a major player to take a big risk on a largely ignored genre of game. So Tim started a kickstarter page with a goal of $400,000. He raised $1,000,000 within a day. This year alone, Kickstarter is expected to provide more funding to small artists than the National Endowment for the Arts.

But the amount of money raised isn't the only import issue here. This is also about control.

Signing a contract with a large company to record an album means you're giving up total creative control. Suddenly your music has baggage and you must use this producer and release this way. Stifling.

When your fans fund you, the only thing they want is for you to be yourself.

3. The middle-ground is hollowing out. Niche is in.

Major labels are Wal-Mart, they need to move hundreds of thousands of units to just break even so they shoot of safe, middle-ground music. (Here's my post on how to sell out properly) Depending on their budget, indie bands can break even with only 10,000 album downloads. It's a lower bar to clear, meaning it's easier for risky projects to succeed.

Given the reach of the internet and the irrelevance of having your music physically in stores, it's easier than ever to connect with these fans of your post-polka-core band instead of begrudgingly accepting that a label will never pick you up.

If you're starting a new grocery store business, trying to compete with Wal-Mart is suicide unless you have infinity plus one dollars. Start an artesan cheese shop instead.

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.

Your Fans Have Your Back

There's a fantastic happening making the rounds among nerd-ish websites today. A writer for Gawker went on a date with world champion Magic: The Gathering player Jon Finkel, and she called him a loser.

Fans of Magic: The Gathering, a delightfully addictive collectible card game, rained down hellfire and righteous fury upon the unsuspecting writer.

But this wasn't a PR disaster at all.

We can learn a couple things from this ordeal:

1) Fan/Nerd-Baiting builds buzz and strengthens fan's devotion.

As this article in Forbes points out, it's a possibility that she knew this would happen.

Gizmodo’s readership is hugely male, and hugely tech savvy and therefore mostly “nerdy” in the traditional sense. To post something trashing a “geeky” activity like Magic the Gathering would be the equivalent of their video game blog Kotaku writing a post trashing professional eSports. Oh wait, they did that too.

... as of the time I’m writing this, that article has 529,280 views.

She probably benefited quite nice from the number of hits generated by the article, but the real story is about fans of Magic and Jon.

This is the same as rapper feuds. Being a fan of music, Magic, or nachos is a part of our identity. When someone talks smack about your band, it's an affront to your taste. You gotta back up your people. (In group bias)

And as fan's come to the defense of their favorite artist, both devoted and casual fans begin to see the vast numbers of people who are dedicated to the artist. Current fans connect and bond, prospective fans look into the artist to see what all the hullabaloo is about. Remember how everyone came to Michael Jackson's defense when he went to trial for some seriously nasty allegations?

Nearly one BILLION people watched his funeral service.

Social Proof. Learn about its power.

A beef could be good by drawing out your committed fans.

2) How you respond to a crisis determines the outcome.


When word of this broke, Jon Finkel took it like champ and created an IAMA on Reddit to control the message. (IAMA stands for I Am A _____, Ask Me Anything! It's popular format on Reddit where the famous and not-so-famous can talk directly with fans.)

In the thread he responded, coming across like a normal, chill dude. No lashing out at fans, just an average guy with some cool stories to tell.

In a heated argument, the person who remains calm and collected is in control.

Considering he had an article written about how crappy a date he was, I'd say Jon came out on top:

The topic of "controlling the message" is a big 'un. Expect more on this later.



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