The "Art" of Music Merchandising

If the music business is heading toward selling high-end, limited edition items, it may find itself either learning from, or being in direct competition with, the arts and collectibles markets.

But unlike those businesses (which try to position themselves as serving small audiences of discriminating collectors), music has marketed itself as a mass medium. In other words, the more people you reach and the more you sell, the better.

Although we are hearing about music splintering into a collection of niche audiences, music marketing still involves trying to reach as many people as possible to find that core fan base. Even at the indie level, music marketing takes a viral approach. Artists are encouraged to give their music away for free, to have their fans give it away to others, and to promote it on multiple music sites.

While art, fashion, and the luxury markets try to maintain a level of elitism by not promoting themselves to the masses, music, for the most part, does the opposite. Today's music marketing takes its cues from various forms of mass media (i.e., TV, film, print, advertising, high-traffic websites). The underlying principle, even for DIY artists, continues to be exposure. The Internet success stories we are told about generally involve artists who have reached thousands or even millions of people via Twitter or YouTube. After they have achieved a level of Internet fame, they can convert some of those fans into paying customers.

Here is the "new music business" model we hear most often about:

1. Give the masses (the top tier) something for free.
2. Sell casual fans (the second tier) something that isn't available to the masses.
3. Sell the hard core (the third tier) limited edition objects and events for even higher amounts of money.

It's the funnel approach.

Sure, there will always be fans who support unknown artists, but overall, music marketing is still focused on numbers. If 10% of your fans buy your most expensive offering, then the more people you reach, the bigger that 10% will be. Here's a good video that mentions the concept: Why Data Is the Future of Music Biz

In the paragraphs above I have tried to define the current differences between how music "stuff" is being sold and how art is being sold. The current thinking with music is that the fans will buy "stuff" because either they like the music, or they like the artists who create the music, or both. Fans like the music/artists, so they buy the "stuff." The "stuff," in other words, is a physical extension of that relationship. So today's artist is advised to establish the relationship, and then do the selling.

Art, on the other hand, is often sold based on the art itself. While some people collect art based on the artist (and relationships are reinforced by having artists appear at gallery showings), most collectors buy artwork because they like what they see and want to put it in their homes or offices. (It's not always that clear cut. Some buy for investment reasons. Some buy to impress others. Some buy because the piece comes with a good story. But most people who buy something for their homes buy the piece because they like that piece.)

To summarize: Music sells the relationship. Art sells the object.

But what if the quality of music "stuff" improves to such an extent that it offers its own value as design, fashion, or art? Then people may start buying the "stuff" even if they have no interest in the music itself. As more musicians get into the merchandising business, that is likely to happen for at least a few of them.

Given that possibility, it's useful for bands/artists to look beyond music merchandising into the greater world of art/fashion/design.

That brings me to a bit of news from last week. An online art gallery, 20x200, got venture capital funding. Here's what Tony Conrad, a partner in True Ventures, said about the project::

... in just two years since bootstrapping a now cash flow positive 20×200, the site has won the hearts of art lovers, selling over 50,000 prints to date, to a customer list that includes artists, celebrities, and respected collectors from around the world. 20x200’s approach is to sell limited-edition prints and photography at prices low enough to attract first-time collectors, starting at $20 for a print from a run of 200. If you want to start collecting, 20×200 is an awesome place to start. Prints are beautifully produced, packaged, and priced inexpensively. If you are an artist looking to take advantage of the reach of the Internet, 20x200 is the place to reach a deeply engaged, large community of new and experienced art collectors. "The Democratization of Art," trueventures.com, 10/21/09.

And here is a bit more from the New York Times.

Since the Web venture was unveiled in 2007, the company said 20×200 has shipped more than 51,000 prints. In 2008, the Web site took in more than $1.2 million in revenue and was on track to exceed that figure in 2009, the company said."For Online Art Gallery 20x200, An Unlikely Investor," Bits Blog, 10/21/09.

In future blog entries, I'll explore the world of art and collectibles in more depth and what it might mean for the music industry.

Suzanne Lainson
@slainson on Twitter

Selling "Stuff" Part One: Direct-to-Fan

Artists/bands have traditionally made their income from three sources: recorded music, performance, and merchandise.

Because digital music can be copied so easily and fans can find ways to get it for free, recorded music is no longer as reliable as a source of income as it once was. To make up the difference, bands are now looking to sell more goods/services/experiences that can't be easily copied.

For the next few blog posts, I'm going to be exploring different aspects of hard good sales.

Let's start with what is now being called "direct-to-fan" marketing. It's not exactly new. Some bands have been doing this since the earliest days of online commerce (and, of course, at shows well before that). They have been selling T-shirts, CDs, and merchandise from their websites. What appears to have changed is that rather than this being a side business, some artists/bands are viewing it as a primary business.

Lately I have been telling people that direct-to-fan sales is just another name for direct marketing. Why? Because there are already significant resources available within this sector. If the future of the music business is selling stuff directly to fans, music marketers should take advantage of the decades of experience and research already out there. Whatever merchandising and marketing services, products, or advice you may need, you will likely find it in the direct marketing industry.

Sure, there are some areas of direct-to-fan marketing that are more music-specific (e.g., music files, fan communities and interaction, ticket sales). But other tools (e.g., email marketing, shopping carts) aren't industry specific.

One topic which gets discussed a lot within direct marketing circles, but not so much during direct-to-fan discussions, is database marketing. Much of music marketing still operates at a basic level (e.g., capturing fan names, addresses, and emails). Music business articles and conferences aren't addressing more complex issues (e.g., purchase behavior, lifetime customer value, retention rates). One reason for this, I am sure, is that a lot of bands have short life spans, so people aren't thinking of selling to fans over a period of years.

But a few music marketing companies have grown into fairly complex operations that can outlive individual bands. Therefore they have reason to develop relationships with fans that might last for years and to utilize more sophisticated tools.

Madison House, for example, started as a booking agency. It expanded into a management company for String Cheese Incident. Over time it created a record label, a ticketing agency, a merchandise company, a travel agency, a design company, and a PR firm.

An even bigger operation is Musictoday, which was started in 2000 by Dave Matthews's manager, Coran Chapshaw.

Along the way, Capshaw built the mechanism for recording live shows (ATO Records, which now boasts more than a dozen acts, including David Gray and My Morning Jacket) and selling shirts, CDs, and tickets (Red Light Management).

Those early CDs contained the seed of what Musictoday would eventually become, in the form of a mail-order insert for merchandise. Capshaw and the band were designing and selling their own goods and pocketing "the retail spread." As that business expanded, it outgrew the spare room at Trax. Then, in the late 1990s, they began offering items online--and the bigger picture revealed itself. The infrastructure had fallen into place for a much bigger operation. "I realized that we could do it with more than just Dave Matthews," says Capshaw. "We had the potential to help other bands." "Way Behind The Music," Fast Company, 12/19/07

The article describes what the company does: "Musictoday's 200 employees are responsible for emailing fans, processing orders, printing tickets, mailing merchandise, fielding complaints, monitoring message boards--all of it."

What distinguishes Musictoday's approach from more traditional direct marketing is its emphasis on band personality.

"We believe that direct-to-fan relationship is stronger, more loyal, more long lasting,” says [chief of staff Nathan] Hubbard. “Coran had the vision to say, ‘Passionate music fans want to interact directly with the artist, both at the show, but also online,’ and so built the infrastructure to help not just the Dave Matthews Band fans, but ultimately fans of all kinds of artists.”

Part of what appeals to artists in this deal is Musictoday’s discretion: Rarely is it obvious that some company in Crozet is running the online store. Look carefully on the official Internet stores for artists as diverse as Bob Dylan, Eminem, Christina Aguilera or Le Tigre—scroll to the bottom and you’ll find an unobtrusive tag, “Powered by Musictoday.” That’s it, though. There’s no other evidence that the poster, the t-shirt, the cd you bought will be shipped to your door from the humble ConAgra building. "The music machine," C-Ville, 8/28/06

Still, even with the personalization of marketing services, Musictoday is about database marketing.

... there's a compelling lesson here for any company that makes a product: If you control a piece of the transaction, you understand more about your customers. By aggregating fan data that artists haven't usually been privy to, Musictoday can help shape decisions such as where to tour, advertise, or deploy superfans to evangelize. Considering that an estimated 60% of concert tickets typically go unsold every year, that kind of targeting is no small contribution. "We're able to say to artists, 'We know more about your fans than you do,'" says Nathan Hubbard, 31, who runs Musictoday as Capshaw's chief of staff. "'Let's put our heads together and figure out how to monetize this relationship.'" "Way Behind The Music," Fast Company, 12/19/07

Live Nation wanted access to those fan relationships and databases, so it bought 51% of Musictoday in 2006. Said Live Nation CEO Michael Rapino:

We're doing more consumer segmentation. We know that the average fan went to one or two shows last year, and the avid fan went to five. We know 30% of the population attended a live show. Who are they? What's the commonality between the teens and 40-year-olds? What else do those fans want to consume? "The Music Man," Fast Company, 12/19/07

A new company that is also going after some of this market is Topspin Media. It's developing online tools to help artists/bands to do more direct marketing themselves.

But unlike Musictoday, it doesn't mail out packages. According to its website, "Topspin is more about demand generation than demand fulfillment. We approach marketing on three fronts: direct (email and the like), viral (quality driving organic person-to-person marketing), and targeted (such as targeted paid placement)."

I will be covering fulfillment and other aspects of hard goods sales in upcoming blog entries.

Suzanne Lainson
@slainson on Twitter

Enough about "Free"

I think most music is and will be free. Lots of people play and record music for their own pleasure. They do it for self-expression. Finding an audience is a bonus. They willingly provide their music to listeners for free.

And so much music is available online for free (both legally and illegally) that free has become the expectation for many fans and artists.

Reinforcing that trend, a number of bloggers have been touting the free music model. They don't mean that musicians shouldn't be paid, but that giving away something for free (or using the "pay-what-you-want" model) is good marketing and will lead to sales of some sort. Here are some of the more prominent "free" discussions.

Free! Why $0.00 Is the Future of Business, Wired, 2/28/08

Review Of The Free Music Debate, hypebot, 4/6/09

How Bands Can Make More Money By Not Putting A Price on a CD, pampelmoose, 2/10/09

Mike Masnick's music business model articles for Techdirt  (He has posted so many articles about free and its variations that I'll just point you to a search list of them.)

But now that the subject has been covered so much, is there anything left to say? The war has been won. "Free" has become a reality in music. No need to sell the idea anymore.

So let's move on to discussions about what fans WILL buy. (And by this, I don't mean more discussions about digital music pricing. That topic has been done to death, too. And I'm also not talking about "monetization." That concept may be relevant to startups but doesn't really tell us much about fan purchase behavior.) In these tough economic times, what are we learning about the economic exchange between fans and artists? 

One of the few places that is actually providing some info about direct marketing to fans is this site. They aren't yet giving specifics about who is selling and who is buying what, but it is a start.

100 Days of Data (or Why Execution Matters), Topspin, 5/1/09

And here is a link from the radio show Hearts of Space explaining what they have done.

No one was going to give us any kind of funding, and our traffic numbers made any thought of advertising support a fantasy.

That said, it has taken us a long time to understand the value calculation that users make when deciding whether to pay. We have found that the entire area is very nuanced, and the relationship between free, paid, and 'freemium' models takes careful experimentation to get right. We wound up with 3 major levels of service and no less than 25 different pricing options! (see PLANS at www.hos.com) "Cheap is the new free," spatial relations, 4/20/09 

Also: Why Pay for Hearts of Space?

Free is the reality. But don't tell me about it anymore. 

Suzanne Lainson

@slainson on Twitter

UPDATE 9/13/09

Here's another resource if you want to explore the "give it away for free" discussion. Freemium Blog - 37 Best Freemium Links