A Conversation with a Major Label

Is the cassingle dead?

I was recently asked to present my thoughts on digital music for a major label.  As I couldn’t attend the session, I prepared the script below.  Though I would have rather been there, the script gave me some leeway to say things I couldn’t have said in the flesh.

I’m reprinting it here because its a good summary of my thoughts on the music business.

Q: How would you summarise the record business since March 2000 when ’N Sync sold 2.4 million copies of ‘No Strings Attached’ in one week?

A: Physical sales have fallen faster than digital sales have risen, while illegal downloads have completely dominated.

• Since 2000, US-based album sales have dropped 54.6%
• In 2008, digital platforms accounted for 20% of the world’s recorded music market up from 0% in 2003.
• IFPI estimates are that by volume, 95% of all music downloaded is illegal.

Q: Is the sky falling in?

A: No.  The amount of money being made from the sale of CDs is shrinking but  CD sales still represent the majority of revenue from recorded music sales.

Q: So digital is not the knight in shining armour?

A: No.  Digital music is five years old.  Five year olds rarely save their elders.

Q: So why even bother?

A: Because if you follow the trend for CD sales (and by trend I mean, how many CDs did your mother/brother/uncle buy last year compared to five years ago), you can see it’s heading downwards.  If we are to survive, we need to find new ways of monetising the relationship between bands and fans.

Q: What do you mean relationship?

A: More music is being consumed in more ways and by more people than at any other time in history. Fans love bands and they love them enough to spend money on what they create.

“Let’s run away and join the Animal Collective”

Q: So why doesn’t our Head of Marketing have her own private jet?

A: Because people have too many other options apart from buying plastic CDs – too many siblings with hard drives full of music, too many iPods, too many CD burners, too many mp3 blogs, Limewires, Torrents and YSI accounts.

They’ll pay for concert tickets, for T-Shirts, for ringtones, for mobile phone credit, for an internet connection.  Sometimes they’ll pay for a CD, but that’s decreasingly likely.

The trick for music labels now is managing the relationship between the artist and the fan.  Labels need to know the fan that pays US $250 for imported deluxe vinyl packages.

They need to know who 1000 most dedicated fans are of your top-selling artists. They need to know which websites fans read most and whether they prefer the iTunes, Amazon mp3 or Direct To Consumer interface for downloading music.

• The more you know, the better you can market.
• The better you can market, the higher the demand.
• The higher the demand, the more you can sell.
• The more you can sell, the more you know.

Q: So how do labels get this knowledge?  Where does this process begin?

A: If we accept that the fan and the artist have a relationship then we need to look at the dynamics of a successful relationship.

Put simply: both parties listen, both parties share and both parties benefit.

This isn’t about cramming more calls to action in the next email blast or getting a more zany roadblock on Take40.com.

It’s about going back to the basic premise that if you give fans lots of value for their attention, their likely to lavish you back with value of their own.

Q: I think I can hear our Head of Finance being sick in the other room.  How does all this airy-fairy ‘value’ talk help us to pay bills?

A: You are right.  Tell Mr Finance to clip his tie back on, put on some Mike and The Mechanics and calm himself down.  Let’s talk sales.

The point of all marketing is to drive sales.  At this point in time, that means sales of recorded music.  Soon, that should include sales of all kinds of artist related product (but that’s a discussion for another time).

Sales are the end goal so let’s work back from there.  Right before a sale, comes engagement.  And before engagement comes awareness.  And before awareness there are thousands of strangers dotted all around the world just waiting for a new favourite song.

So that’s the basic process for how we turn a stranger into a sale.

Make them aware, engage them, make them buy.

One way to move through that process is to buy ads on TV and in bus-stops and in the Daily Telegraph and hope that by shouting loud enough and by having the song spin on radio, these strangers will be compelled to buy our plastic CDs.  That’s the model we know and trust.  But it’s also the model we’ve been using while CD sales have fallen by 50% and illegal downloads have grown to account for 95% of digital music consumption.

“Bryan, play Wonderwall!”

Q: Are you about to get to the point?

A: Yes.  Here is the point.  While the old models are still entirely necessary, we need to try new ones.

There’s more to it than single transactions where strangers buy records after being yelled at.

We need to move to a relationship model.  A long-term model, which builds career artists around fan communities who transact multiple times.  But there’s an additional step.

Q: What’s the additional step?

A: After people buy, they need to become advocates for the product.  In five years time, it’s unlikely we’ll be able to afford TVCs during series 16 of Two and Half Men.

Instead of TVCs, we need to create advocate communities around artists and empower those communities to spread the word.  In a sense, that community becomes the marketing campaign.

The bottom line is that empowering 1000 rabid fans to spread the word by giving them 2 CDs each will deliver better ROI than a banner-ad campaign with a $30 CPC.

Making cash online is easy when you know how.

Q: So what does this new model look like?

A: It looks different for every artist.  Twitter might work for Erykah Badu, but it’s not going to work for a more commercial artist.  I might read a band’s blog about supermodels and designers they love, but I’m not going to read it if it’s full of tour dates and requests for votes on Channel V.  Each artist has to find a balance that works for its fans.  But while it looks microscopically different for each artists – macroscopically it’s always basically the same.

Let’s take those elements we spoke about.

• Strangers need awareness.  They need a reason to CONNECT.
• The next step from being aware is being engaged.  That engagement happens when we CONVERSE.
• Once the conversation begins, we need to make it as easy as possible to make the sale.  We need to CONVERT.
  

CONNECT, CONVERSE and CONVERT.

Q: How do we CONNECT?

A: You’re doing it already, you just need to do it better.

• CONNECT with targeted banner advertising that’s reinforced with a proper SEM campaign.  There’s no point generating the interest if it’s not being captured by search (which is the dominant means of web navigation).
• CONNECT with better online PR campaigns that include links back.  Engage with bloggers from a central point and allow them to spread the word of the artists they like (not the artists you want them to like).  Good online PR helps to improve SEO, which helps with SEM.  Get the SMH online to write articles.  Get fasterlouder.  Get Who The Hell.
• CONNECT with your existing traditional campaigns.  Every offline campaign should tie in an online element.
• CONNECT after you build a presence in forums and use that presence to spread the word.

Q: How do we CONVERSE?

A: You’re doing it already.  Just do it better.

• CONVERSE with fans via an artist’s homepage, blog, MySpace, facebook or Twitter.
• CONVERSE with fans in a monthly email (I’ll get to this in a second as it’s really important).
• CONVERSE passively by having a strong online presence across (in order of importance) – the artist’s homepage, Wikipedia, MySpace, YouTube and Last.FM.  If a fan is listening to streams on MySpace or YouTube or Last.FM, that’s conversation enough.

Q: How do we CONVERT?

A: The music will do the converting.  The role of the label is to make it the conversion process as simple and accessible as possible.  If someone wants to buy the latest artist album, what do they have to do?  Get in the car, drive to the shop, find a park, get out, walk to the shop, find it, buy it, walk back, get in, drive, get out.

Forget it.

If they want to buy it online, how do they do it?  Right now they do it on iTunes.  For most labels iTunes is enough.  But you have a Direct-To-Consumer property.  It’s proprietary.  You control the content and the distribution now.  So use it to convert people.

iTunes dominance will end when someone comes up with a better way of selling music online.  As a label, you are able to get your online property in Google Search.  iTunes can’t.  There’s your headstart.

The goal of the label is ultimately to reduce the number of clicks between the web browser being opened and the file being downloaded by the user.  The difference between 5 clicks and 10 is worth millions of sales.

Again, you are converting already, you just need to be converting better.

• CONVERT by increasing the simplicity and accessibility of the music.  If it’s easier to download than it is to buy, expect that people will keep downloading.  Reverse that equation and the game changes.
• CONVERT by reducing the clicks between awareness and the Buy button.
• CONVERT by tying in a purchase option to all your online content.  Like the video you are watching on YouTube?  Click here to buy the album.  Like the song you are streaming on MySpace?  Click here to buy the album.

Q: CONNECT, CONVERSE, CONVERT.  Sounds simple.  What about the advocate stuff you were talking about?

A: Right, now we need to close the loop.  The second best conversion after a sale?  An email address.

Capture email addresses for artists.  Store them in a central place.  Over time, build up more information about the community like location, preferences and consumption patterns.  But start with an email address and a monthly email full of value.  By value I mean content that a fan is going to enjoy.  Value is not a call to action.

Value is not a request to vote for me on Channel V or a list of tour dates.  Valuable content will compel people to do all those things without having to be asked.  Great music compels people to buy it. Great live shows compel people to buy tickets.

Deliver value and you will convert.

Q: Anything else.

A: Yes.  Lots.  But we’ll talk more later.  Send me an email any time.  nick@waycooljnr.com.au