Music and entertainment are being revolutionized — again — by the proliferation of internet-connected devices. A new dynamic has evolved, with new rules determining whether an artist, festival or event is successful or not.
In the old-style model, artists and organizers concentrate on gaining exposure in a limited number of key channels — certain magazines or radio stations, for example. They opt for a selective presence. But the new reality of 24/7 connectivity enables direct, flexible and scalable relationships with the fans or clients. All the time.
What’s my business?
The right business model focuses on the product’s value to the fan or client, not on the product as such. People are not interested in solar panels, say, but in the benefits they bring.
You need a value proposition: a description of the cluster of products and services that creates value to a specific segment of clients. The proposition is the solution to a client’s problem, or provides for their need. What benefit are you supplying?
What’s my value?
So often in music, the proposition is simply: “We provide music, a festival or an event and we add a bit of support in exchange for a slightly better margin.” However, fans and clients have become more assertive and less gullible. They demand transparency, attention to their needs, and personal contact with their idol or provider.
In today’s digital realm, your value proposition, as an artist or an event/festival producer, must include and express the fan or client’s complete experience. It can then no longer be limited to marketing or sales, but has to be supported by the entire organization, from management to shop floor. It’s based on detailed knowledge of the fan or client. This is no longer “just business”, but includes personal and emotional understandings.
A properly formulated value proposition includes the following aspects:
- Why? What do I believe in? What sets me apart?
- How? The method of delivering experiences and perceptions
- What? The sum total of the content, product and/or services on offer
- When? The manner and moment of company-induced interaction between you and your fans or clients
Thinking “outside in”
Always look — and think — “outside in”. In other words, step into the fan or client’s shoes and see the world from their perspective. Who, really, is your client and what are their values? Use these values to assess what differentiates you from the competition.
A company’s business model includes a number of essential basic functions:
- Who are our potential clients or customers and what do they want?
- How do we offer this?
- What is our strategy to achieve this proposition?
- How are we making money via the proposition?
The business model lays out this idea: the clients provide the potential turnover, the offering determines the costs, and the strategy and proposition makes for the profit (turnover minus cost).
Work out what you create for the fan or client, how it creates value for them, and how you can claim your share of that value, and you have formulated a projection of your profitability.
Income is vital! For any music business the main sources are:
- Ticket sales
- Content licensing (radio, TV, internet, IPTV, subscription video, music services, video services)
- Media value (advertising, sponsoring, endorsements, brand integrations)
- Additional services (membership, lockers, etc)
A business model must be plain and simple. It should take no more than 20 minutes to write down all the key elements. These key elements are:
- The problem that is being tackled
- Target: fans, clients or users
- The unique value proposition
- The solution
- Distribution and communication channels
- Revenue streams
- Numbers, metrics and analytics
- The “unfair advantage” (what cannot be copied or bought)
Content is still king
Text, audio, video and illustrations are the lifeblood of the internet. Without content, it would be empty technology. Everyone is a content creator, every day, and this can be curated and redistributed in limitless ways.
Artists and event organizers are privileged content creators, delivering entertainment, infotainment and, of course, music. Consumed across multiple channels, the content message is amplified, cementing the bond with the fan. Moreover, each channel can potentially supply income. And understanding fans’ social-media behaviour with this content can in turn lead to new products and revenue.
Remember, the internet companies (search engines, social media, online retail and distribution) are all profiting from your content and the data it generates — and so can you. Every piece of information about the interactions of your client or fan with your content helps to better understand them and is an integral part of the business model.
Your product in the networks
Social media and the internet are ever-more intertwined. It’s no longer social media — it’s the social web. And all this happens, predominantly, on smartphones.
Social-network activity breaks down roughly into four main categories:
- Publishing (blog platforms)
- Sharing (platforms for music, video and photos)
- Communicating (the various platforms for digital friends and communities)
- Networking (the business equivalent of the social network)
It’s an overcrowded market of DJs, artists, festivals and events, so original, unique and authentic content is crucial for grabbing and maintaining fans’ attention within this social web.
You are a brand. You want to catch the fans and clients’ attention organically — and they have an endless appetite for news updates, up-to-date features, social media and video. The focus shifts from your product to your network.
Brands must create
Any smart brand knows that relevant and authentic content is the future of advertising and marketing. That’s why leading brands organise content creation in-house, as opposed to outsourcing it. The consumers of their content are, of course, potential future clients.
Red Bull is fine example of this trend. The soft-drink producer has redefined itself as a media company in order to express the quality and depth of the brand. Red Bull is virtually a media company, having created its own network within the internet ecosystem that competes with various traditional radio and TV broadcasters. It has shifted its attention from its product to its network.
In order to win over fans and connect them to your company, you need to set up a new business unit. This unit should be flat, small and aimed at creating new opportunities for sources of income. It should actually be managed like a start-up company and be given time to learn how to optimize digital interaction with fans and clients. Since this business unit is run as a free-standing company, it should work with its own profit-and-loss calculation. It has to be managed like a profit centre.
The independent artist
Not too long ago, record companies and music publishers dominated the world of music and dictated its practice. Musicians were reliant on them for financing, marketing and distribution. Those days are over. Self-published content is more powerful than many realize. It can be the launching pad for a career in music (or writing, film, whatever…). The key issue, though, is to create a fan base, which is more important than making money from the self-published content. So what is the artist or DJ’s new business model?
If you’re serious, the first thing to do is to start a “house of copyrights” — a legal entity (limited company or foundation) that owns, administers and exploits the artist’s intellectual property. This makes it easier to negotiate deals with organizations in the music business, such as record companies, music publishers, booking agents and the like. It simplifies the application and management of the artist’s internet ecosystem.
A house of copyrights is a 360-degree co-operation: it represents a common interest. This co-operation is currently the juridical solution for the changes the internet has forced upon the music business. Decreasing revenues from record sales and pay-per-downloads oblige the artist or DJ to look for new income models within the business model. But the value proposition must be the focus, not the income model. The fans remain the most vital players.
This dynamic sees borders dissolve and power dynamics shift. The record company is no longer in pole position, while the booking agency is on the rise, as live performance income dominates. However, the 360-degree contract frequently fails to deliver on its promise. Record labels, as well as many booking agencies, are simply not able to fully exploit the copyrights or work in tandem with outside parties. Releasing and marketing music — which is an income model, not a value proposition — is the record label’s core business and top priority.
The vital question is this: who “owns” the artist or DJ’s fans? The answer, obviously, is the artist or DJ. The fan connection is their only tangible asset. But although the artist or DJ has more data on their (potential) fans and followers than ever before, the vast majority of this data is not stored or valued. As a result, the artist or DJ misses out on opportunities to extend their fan scope, not to mention connect directly to existing fans. Thus, they overlook what could very well be the crux of the matter, which is the monetary value their fans represent. After all, the fan base represents financial value, which can be added to the balance sheet. This is the new paradigm.
The present day artist or event producer collects, without realizing it, an extensive volume of fan-related data, produced by their email data base, Facebook friends, and friends and followers on various channels such as Twitter. The database is a map of your audience and the most powerful thing you own.
The artist as business
As we’ve seen, in the new business model, the most important income models for the artist or DJ are content licensing, ticket sales, merchandise, media value (advertising, sponsoring, endorsements, integrations) and, perhaps most crucially, data.
The “content = relationship = information” principle is the new foundation of the value proposition of the entertainment and music industry’s business model. The artists, event organizers and others within the music world that understand the fans and clients, furnish the optimum 24/7/365 experience for them, and are able to read out the data and use it to strengthen the relationship by providing the right content, will eventually reap the rewards.
* This is an edited version of chapter five of Denis Doeland’s book, EDM And The Digital Domain which soon will be published.
– This article appeared in the Amsterdam Dance Event 2015 Black Book –