A true story. We’re at my mother-in-law’s house yesterday, and she has hooked up to her Bose radio, a CD player. My daughter points at the CD player and goes, “what’s that?”

Indeed. Why even bother anymore. It hardly seems worth the trouble to make a CD anymore. My kids have never really seen one – they want what they want when they want it. They’re willing to pay for high value only. They are the omnivores of media, and they’re willing to search to the ends of the internet for what they want… largely for free.

Thus, I find it beyond brilliant what U2 did. Enter the age of the content marketing of music. It will undoubtedly put more money in the pockets of artists, and probably signals the final death knell of the recording industry as we’ve known it for the past 70 years.

Content Marketing Music

The content marketing mantra goes like this – give really valuable stuff away for free – so you can draw in customers and sell them really expensive stuff. Ok, that’s basically what U2 did. They gave away their content for free (hell, they probably even are saving money since CD sales would have been minimal at best – maybe a few hundred thousand – and would have been a loss for the publishers), in exchange they’ll get millions of downloads of their songs, probably bring in a million new fans who never heard them before, and sell out their concerts for the highest premiums imagined, plus renew fans loyal to U2.

Ad that cost, um, what exactly? I suspect a hell of a lot less than how LA does it now. While everyone is going “ga ga” over a digital phone strapped to your wrist – the real mega play made by Apple yesterday was they fired two torpedoes straight into the hull of the recording industry.

Basically, if I’m a content marketer, if I buy into the content marketing mantra, this isn’t just a win – it’s a mega-Earthquake, 9.9 Richter scale level win. Unprecedented.

As a matter of fact – they expect the downloads to be so massive, Billboard refused to allow the album to be tracked against the rest of the chart (but I’m sure Apple, and Billboard, know every second what’s being downloaded and played). Why? Because they know it would skew the entire industry’s understanding of what’s possible. It’s the last gasp of trying to hold on to the payola system, the radio station system, the archaic producer, distributor, agent system of music.

Simple question – is this the future of music? Maybe.

No Joy in Mudville

Recording artists and music companies are grappling with a rapidly shifting business. Most of my clients complain they’re in a commoditized industry that’s sliding. Well – nobody has it worse than the global music industry. Album sales are declining because people prefer to buy individual songs (in large part because of iTunes) and that has hurt the profits of major publishing houses and artists. The outlook for the music business looks bleak. This year, so far, U.S. album sales have fallen 14.6% while digital album sales are down 11.7%, according to Billboard.

Music piracy is also taking a huge toll. Take a look on YouTube, pretty much any song you want is on YouTube, usually in CD quality, and with multiple providers and version of it; not to mention all the illegal copies that are available in the dark web. One credible study by the Institute for Policy Innovation pegs the annual harm at $12.5 billion dollars in losses to the industry (from producers to retailers).

It may sound illogical to deal with all this by giving it away for free – but that’s exactly what you should do when you think less like a record company and more like a publisher of content. Sell only that which is very hard to duplicate – namely – the highest gross margin offerings. For U2, I guarantee you that isn’t CD’s, or even tracks in iTunes.

The Real Money In Content Creation

So if you’re following the content marketing mantra, you have to remember the second part – when you’ve lured the customer in with your wowed free content, then you have to sell them something worthwhile. Most content marketers forget that part, which is why they go broke. A key issue here – U2 is the real publisher of this music. They own the rights. They decide who gets the cut. Paired with someone like Apple, artist should pay very close attention to what’s going on here – because the reality is this – there is a finite sum of money to be made in a record’s distribution. Who’s going to make it – the artist, or the multitude of people who take a cut to get it distributed.

I think most people would hope the artist. I know I would. And if you take this approach, the publisher “content marketing” approach, then there are all sorts of avenues available to “Monetize your Assets” and make real money. For example:

Some people are always going to want to bonus content, and the records, CD’s, etc. I suspect U2 will sell considerably more of these than they would have had they not given the bulk of their content away for free. They can also sell them at a premium. Scarcity always draws a higher price.

Millions of people will hear U2’s newest album who never heard it before. That’s great, some percentage of those new fans will undoubtedly go back and download the band’s prior works. Thus, a mixture of content that’s free, can draw people in to content that’s paid. I’ve heard this aptly called crack content – the first one’s free, then they’re hooked.

You could combine this idea with Wu Tang’s idea of having only one super-special record. Everyone hears the songs, thus building the market base, but only one person is going to get the record – the most dedicated fan willing to spend millions perhaps. I don’t know about you, but I’d be more willing to sell one album for $5 million, then try to sell 2 million CD’s and tracks and get only about half that. It’s simple economics at that point.

Concerts will undoubtedly be more expensive, because now the only way to hear genuine authentic artistic music is at a concert. This removes in its entirety the profit incentive of piracy and puts the bulk of the profits to be made in the artist’s hands.

Merchandising of course. I mean, who didn’t have a KISS lunch box as a Kid. I know I had one without really having many of their records. Merchandising works because you have a large audience – and no better way to get a huge audience then to have your work distributed for free in iTunes.

The real money to be made in content creation is in monetization of the audience. When the artist has control over how that’s done, it’s difficult to copy, and thus, difficult to pirate. Given the product of music, which is ultimately experiential anyways, fans will pay top dollar for things like concerts, subscriber only materials, and the like. The gross margins on something like that are infinitely better than getting paid 90 cents for a CD every time it sells (and knowing 7 times out of 10 – it’s a bootleg and you get zero as the artist).

In the Final Analysis – Apple is Changing Music Again

While everyone says content is “king” – the reality is that’s a load of garbage. In the end, distribution is what’s king, and U2 scored the biggest album release in the history of records… five hundred million. Let’s say only 2% of those people download – 10 million albums. That means that U2’s record today instantly hit Diamond status if it was RIAA certified.

There is little chance that U2 would have gotten that level of sales through the normal distribution channels of music marketing today. At best, in all honesty – they would have sold maybe a million albums by year end – and that’s giving them the benefit of the doubt. It’s just not how music is bought anymore.

U2 has only had one Diamond certified record, at their peak of popularity, with the album Joshua Tree. Moreover, U2 is one of only about 90 bands in the 70 year history of RIAA certification ever to receive that level of distribution. If U2 manages to get 5% penetration, then it will match the greatest selling record of all time, Thriller.

Now perhaps you’re beginning to see the math of it all. That size of an audience has long term profitability for both Apple, U2, and potentially, other artists. It’s going to change the face of music.

If you can build a large audience, there is profitable business to be made serving them well.