Rise Of The Musical Middle Class - hypebot

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Glenn

Name a few case studies?

I see what you're saying, but I'd be more prone to call it a growing lower-middle class. There is an absolute glut of music online. (Great music is indeed being created everywhere, but there's 1,000 times as much mediocre and terrible music clogging up the channels.) As the audience becomes more fractured, each player's piece of the pie shrinks.

As for increased loyalty, that will depend on the band's use of customer relationship tools. I believe success can be as fleeting as ever -- look no further than the manner in which bloggers chew up and spit out bands at record rates -- but there is definitely potential to keep fans if you do it correctly.

Bruce Houghton / Hypebot

Good comments as always Glenn.

In my own agency Skyline Music I see it in the organic growth of bands like Hot Buttered Rum and Toubab Krewe - neither of whom have never had real record deals and who now sell out enough 500-100 seat venues to make a decent living touring and selling music and merch direct to fans.

I also see it in former "label bands" like Over The Rhine. They are a fabulous band with loyal fans - but musically they don't fit anywhere neat in terms of radio or other media. But by continuing to make quality music and using all the Music 2.0 tools, they can hold on to and grow their fans base and make a living doing it.

If the measure of their success is vs. Maria Carey, then maybe you are right. But I'd take their lives (and mine) over M.C.'s any day.

Mike

The Rise of the Musical Middle Class has been imminent for a few years now, but it's starting to seem like it's going to be permanently just around the corner.

When people talk about bands that are opting out of the old major label way of doing business and using this new-fangled internet to chart their own course, these bands almost always seem to be acts that I've already heard of...because they got some traction in the old system before they opted out of it. Your mention of Over The Rhine is a good example.

Don't get me wrong - I'd love it if 2008 were the year that the new paradigm finally arrived (in fact, I'm staking my own musical career on it), but just because the technology for Music 2.0 is here doesn't necessarily mean that the economics of the situation have changed. The theory makes sense, but in practice, the money and attention that talented musicians need to break out of obscurity still seems to be in short supply.

Rob

RE: Glenn

Too true. The free software and networking sites are just as easy for mediocre artists as they are for great artists. We need more ways of sorting the good stuff from the not-so-good. Some sites do this through letting you look at what your friends have found...OurStage.com puts the music out there for the fans to judge and decide what's best. In any case, we need lots of new ways of sorting and finding and discovering music, because there's way too much of it that's junk.

Bruce Warila

18 months ago I was all about the new middle class, I was bullish on selling digital music and on backing emerging acts. 12 months later we decided we had to reinvent our business.

Over this time I came to some of the same conclusions as Glen. There are a ton great songs out there, but it's getting harder then ever to rise above the noise.

In addition, I tracked 25 decent bands doing shows up and down the east coast, and I have come to the conclusion that club touring is not all that profitable either.

Our solution: put products into the marketplace that put profit back into the system.

The MP3 can't be the final word on digital music products. The industry, especially the middle class, needs something that generates high-margin, reoccurring revenue; as nobody wants to keep touring just to exist.

In my opinion Music 2.0 hasn't even hit the oven yet; it's going to take 36-48 more months to fully bake.

It's still a great time to be an artist. The good stuff hasn't even hit the technology shelf yet!

Jed

Bruce,
I really appreciate the article, and largely agree with what you have said (Glenn makes some great points as well). I thought that maybe I could contribute some thoughts from the perspective of a company that has established itself around serving the needs of the MMC.

For almost a year now, I have had a front row seat here at ReverbNation to see how this great "leveling" of the playing field is unfolding for artists. The truth is, some of our initial beliefs have been reinforced and some dashed, with lots of surprises thrown in.

Our core beliefs, however, remain unchanged to this day, and are particularly relevant to the Musical Middle Class:

1. The most valuable asset an artist has is their relationship with their fans. Without it, they cannot sell music, tickets, merch, or influence (advertising & sponsorship). At ReverbNation, we call that asset an artist's "Band Equity". Artists who seek financial success need to nurture and understand those relationships with their fans.

2. Artists who engage in proactive FRM (Fan Relationship Management) can increase the value of that asset dramatically. Its not just about getting more "Friends". Its about moving those friends down the Value Funnel to become fans, then customers, then promoters for the artist, no matter where they live in the digital realm (Social Networks, Blogs, Virtual Worlds, Chat, Mobile, Games, etc).

3. Innovative ways to leverage their “Band Equity” will appear on the scene. MySpace opening up could be a big step in that direction, as 3rd party Rev sharing with artists seems a near certainty. Others are doing interesting things on this front as well.

4. Revenue from music sales will continue to decline as a % of the revenue mix for artists. Selling the "products" AROUND the music (the experience of a live show, the interaction between artist and fan, the influence to carry others messages) is going to be increasingly important for the MMC. Innovative business models are being launched and tested every day.


From our perspective, the future of the Musical Middle Class (coincidentally the same term we used to describe our users to investors in 2006) is bright and getting brighter by the day. The successful artists of tomorrow will be experts at FRM (as Glenn has mentioned). They will find innovative ways to earn more money from their relationships as the value of the content itself wanes. Artists will begin to sense that that rabid fans who promote them to friends represent an alternative distribution network when the metric shifts from song sales to influence. The MMC has one thing really going for it – to many people Indie artists are the arbiters of “cool”. This is not going to change anytime soon.

Dan Millen

Music business "professionals" and bands are discovering what we concert promoters have known for a long time - Recorded music is a loss leader for Concert Tickets, TShirts and the "experience" of being close to a band.

That being said, all of these principles do not apply if your artist does not have a basic level of "charisma" or that certain j'nais se quos (sp) that causes people to want to be part of their cult of personality. That, and a batch of great songs, with some drive, and some smarts is a fantastic recipe for success in any age!

Bruce Warila

Dan - is that one of your dates? Yow.. Let's grab lunch next week.

Jed - I here you on fan relationship management and the funnel thing. But, "show me the money".

I have put out this challenge in the past. Someone please put out a list of 100 unsprung (we don't use the word unsigned) bands/artists that make a decent living from selling music/touring/merch.

This is my mantra: "high-margin, reoccurring revenue". It makes this business so much better for everyone!

We don't have all of the answers, but check the front of our site for our solution to this problem. This is a solution we filed patents on five years ago, and in 2008 we hope to roll this out to the world.
http://www.unsprungartists.com


TonsoTunez

CAREER: A profession for which one trains and which is undertaken as a permanent calling.
MIDDLE CLASS: $40,000 to $100,000 per year ... or more.
REALITY: If you are in a band, can the band make enough money so each member's share is enough to classify them as ‘middle class?' If so, for how long?

A ‘permanent calling' is a long, long time.

It can be a kick in the head to stumble around in a band getting bombed and getting laid, but get to 30 and life really starts to set in ... You want to get married? You want to have kids? You got anything set aside for a rainy day? Retirement? How's that health care program? Pension? Are you contributing enough to Social Security to have a few bucks coming in at 65?

Is playing shit holes and selling T-Shirts getting old?

Are your non-musician friends making something of there lives?

Have you lost touch with the current trends in music? Can you create a continuous stream of compelling music to attract attention year after year after year? Have your fickle little ‘fans' grown up or moved on?

Are you getting too old to fake being young?

Are you letting yourself age out of a shot for starting a new ‘career'?

Being ‘Middle Class' sounds great (real warm and fuzzy) ... when you ain't got nothing ... But, if you wake up a 30 and you aren't a ‘brand', no matter how much middle class money you are making ... you're gonna realize that you still ain't got nothing.

Don't get trapped by the idea of a ‘Musical Middle Class' because you'll shoot for the middle and even if you make it, you'll lose.

David DeVore

I agree whole heartedly with my friend Jed. FRM (Fan Relationship Management) is the number one most important thing that an artist can invest in. The problem is that artists are not marketers. Indeed the whole music industry is a step behind on this. Nobody in the music world really knows who is to deal with FRM. Is it the artist, the webmaster, the manager, the label, the intern?

In the corporate world, where CRM (Customer Relationship Management) has been thriving for over a decade, it is the marketer who deals with it because marketers understand that technology without strategy is an inefficient effort. Corporate companies understand very clearly the cost of a client acquisition and the value of the individual client to return the investment over time. How many bands can put a value on a fan acquisition? How many bands can quantify the value of their fan over time? Indeed, most artists only think of their fans as a number, 1000, 10,000, 100,000 and never as individuals.

The corporate world also understands that CRM is not just a matter of having a persons email address, but in understanding exactly who that person is and then communicating the right message to the right customer at the right time through the right medium.

I can go to Home Depot and buy all of the best tools, but it won’t make me a great craftsman. I can use all of the latest web 2.0 music tools, but it won’t make me a great marketer. FRM is 20% technology and 80% strategy.

Bruce Houghton / Hypebot

Thanks everybody for your comments...even the critical ones! Please keep them coming. I'll publish a roundup of quotes as well as continue the New Paradigm series in a couple of days.

Ken J, cranky consumer

Interesting to read that our host is associated with Toubab Krewe. I was dragged to a T.K. show recently and was quite surprised to see it pull maybe 150 people, on a first visit to town and with no discernable publicity. From the audience side of the stage, Toubab Krewe do look like artists who are finding ways to make things grow outside of the traditional label framework.

I'm glad to see some participants in this discussion starting to think about the terms "supply and demand" with respect to musicians.

Perhaps some attention needs to be paid to the folk music scene, where numerous performers have decades-long careers outside the major label system.

Tina Padziora

Bruce it is a thrill to see people noticing the hard work of up and coming new talent and the stats they are accumulating without going into debt to a corporate label. We are sure to continue to see this success as it stretches into all areas of the music industry! Musician's have begun taking back their power by taking the time to learn the business side of the industry and many bands I have worked with have truely impressed me with decisions they have made during negotiations with management companies and labels.

Tina Padziora

Oh and just needed to add this name "Gooding" as I have watched this hard working group stay busy with shows and sales and loved by fans of all ages across the country! And they are awesome!

www.goodingband.com

and I have no financial interest in them nor do i work with them in any way so this is totally an unbiased note.

Vil Vodka

Between this series of articles about the emerging middle class, with last week's Wired article about Vinyl being the last nail of the CD's coffin, and the Seattle Times article about indie rock artists and labels struggling to make money in digital era, I have concluded that it is getting tougher to make money selling recorded music based on the fact that the three main formats work so heavily against each other.

1. VINYL. Most agree that vinyl is the premier format. It sounds better and holds a far greater aesthetic value. The problem is that, although it is making a strong comeback, 90% of the potential music buyers have no idea this format still exists. And by the time everyone gets the memo, it could possibly be considered a tired trendy. Is vinyl really stable enough to build a new company around?

2. MP3s. We all agree that mp3s is the lower tier format. It sounds the worse, it holds no re-sale value, and is the easiest to dispose of. In a perfect world, mp3s would just be available for free to everyone as a means of sampling music before you purchase the most premier products of CDs and vinyl. The problem is that the world's fastest growing music store (ITUNES) sells these disposable poor-quality files for 99 cents a pop. Therefore, bands and indie labels everywhere are signing on with CDBABY, Tunecore, IODA, and The Orchard to have their music be among the iTunes catalog. If iTunes is destined to be the world's biggest music store, can a new record company or emerging independent artist afford to not offer mp3 files designed to sell? Can they afford to give digital music away in hopes to sell vinyl and CDs to a fraction of the downloaders willing to pay the premium?

3. CDs. CDs are now considered a cliché and antiquated format. But by who? Some hip columnists? Wall Street? And maybe they will be right sooner than later. The problem is that CDs still account for about 75% of total music sales worldwide by some accounts. For the same reason Soundscan’s methods over-inflate the sales of CDs compared to vinyl, it could also deflate the true landscape since indie bands are selling thousands of CDs each week at merch tables around the world. So, can a new record company or emerging indie artist really afford to dismiss the CD as a passing format? And let's suppose you make a decision to release only vinyl with a side note to your customers that CDs are passé. Can you really afford to send a possible "if you still collect CDs you may not be hip enough to buy our brand" message to your prospects? Especially in this era of so many choices?

What I have learned from the Music 2.0 era is that what can be sold can also be given away. So is the trick knowing what your potential customers expect for free vs. what they will actually pay for? Or is the trick convincing your potential customers that what they can have for free is worth paying for

Vil Vodka
Vodka Tonic Media
www.vodkatonicmedia.com


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