Entrepreneurship

 by Brendon J. Wilson

Future Sound of Music

My discussions with Phil Johnson (of the local band Roadside Attraction) at the recent Entrepreneur Meetup were quite thought-provoking. Here’s a guy from a typical band trying to figure out how to “make it” – it sounds like every guy you knew in high school with a band, a three chord masterpiece, and immaculate hair. Except for the fact that Phil is part of a new breed of über-savvy independent artists. When people ask him if his band is trying to get signed by a label, he can only laugh and respond, “Why would we? We can do it all ourselves now!”

We can do it all ourselves? Damn straight – this guy gets what many in the record industry are fumbling to comprehend.

Welcome to the new reality for musicians (or any artist for that matter): any moderately talented garage band can fire up GarageBand and record high-quality audio both at home and on the road, capture photo and live video footage, and release it all via their web site. And they don’t even have to pay for the bandwidth if they use tools like BitTorrent. Anyone with a web browser and half-decent bandwidth can skarf it all down by the gigabyte, as much as they can find, and often as cheap as they can find it. Which brings us back to the dilemma facing the aforementioned recording industry: how does a band make any money?

As my buddy Kevin Burton pointed out, the challenges facing the music industry in its battle with file-sharing networks and darknets are quite similar to those the software industry has been dealing with for a long time: lots of people are stealing precious intellectual property that has negligible marginal cost of production. But, as Kevin points out, aren’t we forgetting the benefits of software piracy? Think of all the economic activity driven by software piracy – didn’t that more than offset the losses incurred by the industry? In particular, I recall one particular urban legend about Photoshop that makes me think this may not be so far-fetched.

A couple years back, there was a rumour that Adobe was leaking its software to pirate sites – or doing very little to prevent it at the very least. I don’t believe it was ever shown to be true, but it’s plausible enough from a business perspective to warrant consideration. The story goes something like this:

  1. Adobe wants to become the dominant player in the industry, so it leaks copies to pirate sites.
  2. Pirate sites distribute the software.
  3. Amateur web designer trying to build their first web sites start using whatever software they can find – and they easily find Photoshop.
  4. Fast forward a few years, those same web designers are now working at dot-coms building web sites – what software do they choose? That’s right, they choose Photoshop. Why? They already knew how to use it and heck, they weren’t footing the $800 for a copy of the software!

Once started, this system formed a nice feedback loop that effectively locked out competitors. Overpriced commercial software drives amateurs to piracy, software that is made easily accessible to those who know where to look. These amateurs get free software, become experts on the software, get locked into the software, and finally businesses hire the (now-expert) amateurs and foot the bill for the software. Can you say “business model”?

How does this apply to music? Well, first consider artists like Elton John – artists who own their whole back catalog (or, conversely, ask The Beatles, who don’t). These guys make lots of money every time they release a new album because fans buy not only the new album, but also two or three albums from the artist’s back catalog. The rights to the back catalog become a value multiplier. Will this model extend into the digital realm?

In a world where the marginal value of an individual song asymptotically approaches zero, albums in their current form cease to exist, and competition for audiences undergoes explosive growth, musicians will have to put aside the idea of making the money off individual songs and albums. Will an artist’s back catalog have value? Sure, but not the way it does right now. No one’s going to get rich selling albums; they’re going to get rich selling experiences. For what is music, but a mental shortcut to all the memories we associate with a particular song?

I predict that the value represented by a band’s back catalog will be indirectly captured in the prices of the only remaining asset of the artist that has any scarcity and hence any value (see the diamond-water paradox): their time. And ours. Think the Rolling Stones‘ ticket prices are exorbitant? Just wait. The winners in this game will be those artists that can that build and sustain an audience over the long term and craft experiences that form a deeper bond between the band and the listener that goes beyond the elements that can be captured in bits and bytes.

Of course, that does beg the question: how does a band keep themselves in mascara and spandex long enough to build this kind of value? This model requires long-term dedication to a band, the kind of dedication the music industry current model is incapable of providing – which, I would argue, is a good thing. The current pump-n-dump model of finding a pretty girl, teaching her to dance, writing songs for her, and hyping the hell out of her is directly responsible for the current deluge of craptacularly bad music. A “slow cook” approach is just the remedy we need – only those acts who actually have the musical talent, the dedication to their craft, and ability to forge lasting relationships with their audiences will be able to survive in this new environment.

in Business / Culture / Entrepreneurship / Technology 1 comments
 by Brendon J. Wilson

Entrepreneur Meetup

We had a great meetup with some really interesting attendees. Much animated discussion that, oddly enough, just happened to coincide with topic I sent out on the agenda: creative marketing.

Attendees

  • Bego Gerber: is an independent business development agent working on a “pro-sumer” (as opposed to consumer) product that enables individuals to buy directly by from companies at wholesale prices, as well as receive rebates on the products they purchase. (You’ll need a password for his web site: ebiz)
  • Phil Johnson: is a musician working fulltime to promote both his band, Roadside Attraction, and the band’s record label, Dangerous Grooves.
  • Anthony Ettinger: is a software engineer who has two side projects – a politics-focused discussion site called It’s All Politics, and a search engine optimization site called Top 25 Web. He’s looking for ways to turn these resources into a steady revenue stream.
  • Brendon Wilson: is a product manager at PGP.

Topics Discussed

  • The majority of the conversation centered on the creative marketing techniques being used by the attendees to find new customers for their products. On the personal side, Bego uses the personal touch to spot potential customers and business partners; for example, wouldn’t that smartly-dressed woman in the line at Starbucks with her child, obviously going to work, like another income stream that would allow her to stay at home with her child? For Anthony’s business, most of the new “customers” for his come to him via Google or other web sites, and so the challenge for him is to stimulate enough interest via valuable content to encourage linking that will drive traffic. In the world of rock’n’roll, Phil and his band are using a combination of sampler CDs (one of which he provided to each attendee), surveys, and email lists to not only get his band’s music out there, but also understand the audience for their music; particularly interesting is his band’s use of email – after a show, they send an email to all concert attendees, inviting them to download the MP3s of the live show. Great stuff on all sides.
  • Some of the conversation focused on how to enable consumers themselves to generate the value of the product. For example, Anthony has been toying with the idea of releasing his partially completed search engine optimization book via a Wiki on his web site, thus enabling his community to flesh out the book and add value to his site. For Phil, a similar effort using message boards on his band’s web site met with limited success due to a flood of comment spam/inappropriate content that limited the usefulness of the effort.
  • Many thoughts on the difficulty of “rising above the noise”. As more access to technology enables anyone to publish music, software, or other content, how do you get your message out there and gain an audience? This group’s opinion appears to be that the only way to succeed in this environment will be for entrepreneurs to build a core committed audience, one that will closely follow the artist’s work and spread the word of what they’re doing, not simply because they’re the “hot new fad”, but more because their is a strong bond between the audience and the artist that transcends the commercial nature of the artist’s work.

Interesting Books, Movies, and Events

in Entrepreneurship 1 comments