New Business Models for Musicians

In the latest “The Future of the Music Business” article that I can’t seem to avoid linking to and writing about, James Reed in The Boston Globe writes about artists relying on fans to fund the recording of new albums. The article mentions Ellis Paul and Jill Sobule who have both gone to the fans in the last year to raise $90K and $80K respectively for albums.

I don’t know why you need $80K to record an album in this age of Garage Band, but Sobule says is it’s for publicists and what not. Because, really, why shouldn’t the fans pay to tell other people about the music they paid for?

Not mentioned in the article is Josh Freese who paid to record his album himself, but is looking to recoup some of the costs by selling album packages to fans for between $7 and $75K. (The $10K package that includes Disney Land and Freese’s Volvo is unsold, as is the $75K package that includes shrooming with Freese, though the $20K miniature golf game with singers from Tool and Devo did sell.) I’m thinking Freese was inspired by the Nine Inch Nails packages from last year. Kottke commenter Jeff Stern says of this model “instead of 1,000 true fans, 1 wealthy fan”, a reference to Kevin Kelly’s 1,000 True Fans model for artists. (A model that is criticized here, by the way.)

When I was touring with Addison Groove Project, we were selling all of our merch in one package for $75. This deal included 1 t shirt, 1 sweatshirt, 5 CDs, stickers, a beer coozie, a bottle opener, a foam finger, and a trucker hat and represented a savings of about $40. We sold a bunch of them, too.

I’ve been saying for a while that the future of record labels is not to distribute and promote records, but to manage communities of fans. Artists are proving that they can rely on fans for funding, they can rely on iTunes and other online sellers for distribution, and they can rely on bloggers for coverage. All the real money is in ticket sales and merch, anyway.

Plus 2 bonus articles from Portfolio. Record Labels Get Real (except not really) and a discussion of The Celestial Jukebox.

New Business Models for Musicians

The Changing of the Music Business

Universal Music Group says that the traditional music business isn’t dying (at least not as much as it seems because the 6% decrease shoots up to a 1% decrease when you account for the strengthening of the dollar against other currencies.

What happened? CD sales are still declining, of course. But Vivendi said the rise of digital music–that means you, Apple (AAPL)–is finally beginning to balance out some of the decline. Digital sales increased 33 percent in the first nine months of the year, the company said.

And then Live Nation has announced that they will begin selling DRM-free MP3s for their artists making LN a one stop shop for everything involving your favorite artist (so long as they are a Live Nation/Music Today band).

Essentially, Live Nation is turning into a microcosm of the music business at large. If you’re a fan of one of its bands, you’re going to spend money on them eventually, whether its a concert ticket, a T-shirt, a CD, fan club access to exclusive “VIP” content, an MP3 from an artist page or whatever. And when you do, Live Nation will be there to take a slice of the pie — a savvy business strategy when no one knows for sure where the bulk of music revenue is going to come from.

This touches on something I got from Kevin Kelly’s True Fan thoughts from several months ago. Musicians don’t need record labels to do most of the stuff for which they used to need record labels. They don’t need large advances to record in expensive studios (they can record in Garage Band). They don’t need help with distribution (they can upload their music themselves to iTunes and social networking sites). And they don’t necessarily need marketing help (they can use Facebook and MySpace to organize street teams, directly target their fans, and create and manage a community that increases a fan’s passion for the band).

Many savvy bands will be able to manage all of this (the community especially) themselves, but many also won’t or will not want to. I think this is going be where music businesses of the 21st century make their money. The record label dinosaurs can stick to their business model, or they can adapt to offer community management services from which they may once again become prosperous.

I’ve always been envious of Music Today as someone who used to work for a band (and I’m still sending out CDs twice a month! How’s that for long tail?). They figured out that it’s mostly impossible to make any money offering services to bands because band’s don’t usually have any money. The way to make money off of bands is off of their fans. That will always be true.

The Changing of the Music Business