New Music Business Models

Here's a dance I've seen conducted quite a few times in the past year:

An artist experiments with a new way to make money and has some success. This innovation is cited by some industry observers as an example of the future of music business.

Skeptics respond by saying the idea isn't scalable and won't work for most artists. Therefore it isn't really any sort of new business model at all.

The observers counter it was just an example, not a blueprint for every band.

Then I respond (I can be a skeptic) by saying that for them to expect every band to come up with an original money-making idea is not realistic. Bands look to each other for any promising ideas. For example, if one has success with giveaways, they all do it. If one has success with street teams, they all do it. (Speaking of which, how come we don't hear much about street teams anymore?) If one has success on a new website, before long millions of bands will be there. What was once a clever idea becomes standard operating procedure until it doesn't work anymore and everyone moves on in search of the next great music promotional idea.

Therefore, to spare people a lot of wasted effort, I'll explore some of the ideas currently being tossed around as new music business models and discuss their limitations.

1. Give music away for free to fans who buy an item (e.g., a collectible box, a T-shirt, a poster).
In other words, sell "stuff" fans will buy. Forget about selling the music.

This can make sense for some musicians, especially those who have the talent to design the "stuff" themselves. But other musicians shake their heads and say, "What does selling 'stuff' that have to do with music? If fans don't want to support the music itself, then what's the point?"

This is such a big topic, I plan to go into it in more detail in future blog posts. Suffice it to say that selling "stuff" is a separate business from creating music, so it's not a business that comes naturally to all artists/bands.

2. The special event.
Some artists are offering special events for a fee. Here are two widely cited examples.

Jill Sobule posted this as one of her sponsorship levels. "$5,000 — Diamond Level: I will come and do a house concert for you. Invite your friends, serve some drinks, bring me out and I sing." Jill's Next Record!

Josh Freese offered low end packages that included a phone call or a lunch all the way up to $10,000, $20,000, and $75,000 packages. “Josh Freese. What are you doin’? This summer,” Topspin, 2/20/09.

Freese was so successful that he found he was spending a lot of time on these events and not so much on his music itself.

I’m driving back to the Cheesecake Factory for the 11th time this month, and I’m turning down other work because, yeah, I’ve got a guy flying down from Canada. People will call me for a session, but I can’t show up because I’ve got to give someone a tour of the Queen Mary and a drum lesson, and then they gotta come over and pick stuff out of my closet. "Drummer Josh Freese Sells Himself, Famous Friends, Dinner at Sizzler to Promote His New Album," OC Weekly, 6/25/09.

To make this strategy work on an on-going basis, you've got to calculate what your time is worth. You don't want to price a special concert less than what you would normally charge to play a private party anyway. On the other hand, if you want encourage people to book you for private events, packaging the concept as a sponsorship and charging the same amount or a little bit more might be a good marketing tactic.

3. Rent-a-friend.
Some musicians have become known as personalities as much or more than they are known for their music. Amanda Palmer has become the role model for this. (I've cited her a number of times, so search for her name in this blog to see what she has been up to.)

In many respects it is the essence of social marketing. The artist cultivates a group of fans who are more than happy to chip in (via sponsorships, purchases, or subscriptions) to keep things rolling.

The primary limitation for this is personality. Some artists are social and know how to keep a crowd happy. Think of them as cheerleaders. But other artists are more introspective and can't engage in multiple conversations with fans.

Again, an example of musicians moving away from the music itself and into another occupation which may or may not be more lucrative than what they are currently doing for financial support.

4. The garage sale/auction.
Palmer pulled this off quite well. She held a three-hour online auction of random stuff and made $6000. Amanda Palmer Made $19K in 10 Hours on Twitter

There's really nothing stopping every band from doing this online or offline. People have garage sales and auctions all the time. But generally two things have to happen for this to work. One, you've got to have some level of fame or some exceptional junk to sell. Two, this has to be an infrequent occurrence to be special. Otherwise you're basically in the eBay or resale business. If you are holding a sale on a weekly basis, that IS your job, and your celebrity cache is likely to go down.


So there's a look at some of the new music business models making the rounds. With the exception of the private concerts, these ideas aren't really about music. And that can be a major dilemma. People who took up music because they wanted to write songs, sing, and play instruments may feel like they are spending too much time on non-music projects. And if it comes to that, maybe they should just look for the most lucrative day jobs they can find (which may have nothing to do with music or fan management) and use that income to support their music. It's not as glamorous as running an online party, but it might make more financial sense.

Another issue that has been raised by the skeptics is the whether these new music business models are gimmicks. The topic doesn't come up so much when we're just talking about music. Music delivery systems themselves remain relatively static (i.e., CDs, MP3s, vinyl, live shows). People aren't trying to come up with new products every week. There is variety, but it comes from the music itself.

However, when bands/artists feel pushed to come up with non-music ideas, there probably will be a high level of churn as innovators experiment and then move on to something else. So every time a new marketing technique gets touted, we'll ask if it is here to stay or is just a gimmick to generate some publicity.

Suzanne Lainson
@slainson on Twitter

UPDATE 7/14/09
Here's a great example of why the Amanda Palmer model probably won't work for most artists. She just posted this on Twitter.

"what was s'posed to be 1 benefit show @ #comiccon has turned into 3 signings, a naked drawing class, a perfume unveiling & a ninja uke gig."

UPDATE 7/27/09
I missed this article until now, but it confirms what I am saying.

After a series of re-tweets, many more followers, who may or may not have known she was a musician, were following the conversation. Palmer got 400 pre-orders - 200 that night, 200 the next day - for a T-shirt that had nothing to do with music (it read, 'Don't Stand Up For What's Right, Stand Up For What's Wrong' ... a phrase that is all but certainly not part of any merchandising contracts, by the way). Proof that people responded to Amanda for reasons other than her music can be seen in SoundScan sales data for her September 2008 solo album, Who Killed Amanda Palmer. Since the May 15, 2009, Twitter conversation and T-shirt sale, there has been no discernable effect on album sales. "Lessons Learned From Twitter Windfalls," Billboard.biz, 7/01/09

UPDATE 7/13/10
About the site RentAFriend:

While some of the suggested uses for the site do seem pretty practical (having someone show you around town or teach you a skill), many of them seem a bit like a crutch. Has social networking changed real-life interaction to the point where we need to pay someone to be a real-time friend? "Stuff We Didn’t Know About Until Today: You Can Rent A Friend," TIME NewsFeed, 7/6/10.

Some of what musicians are encouraged to do for income seems very close to the RentAFriend concept.