October 2, 2012

“A lot of people in our industry haven’t had very diverse experiences. So they don’t have enough dots to connect, and they end up with very linear solutions without a broad perspective on the problem. The broader one’s understanding of the human experience, the better design we will have.” – Steve Jobs

There are a few schools of thought when it comes to the future of the music industry. There are the Traditionalists, who still view file sharing as “stealing” and hope that their preaching will swing the pendulum of teenage consumerism back toward charged content. There are the Incrementalists, who believe that paid downloads will continue to grow, and essentially replace the revenues of physical formats past. There are the Internet Apologists, who want to give music away as a loss leader to sell more concert tickets and merchandise, hoping that these gains will make up for the loss of content sales at the macro level. Finally, there are the Defeatists, who are resigned to a shrunken industry that supports fewer artists.

Personally, I reject all these notions. I believe it’s very possible to revitalize the music industry with free music, without relying on unrealistic growth in the existing concert and merch sector. This requires us to create an entirely new product offering to fans. And unlike recorded music, this product’s value must be in harmony with the realities of the internet. In this essay, I hope to outline the contours and justifications for the viability of a new model, which I’m going to label “crowd patronage”.

This brings us back to Steve Jobs’s words above. He may have been talking about his tech industry, but Mr. Jobs’ quote so elegantly sums up the past, present and future of the music business, that its very deconstruction unravels the entirety of the industry’s fate.

So let’s begin.

“They don’t have enough dots to connect”

Ever since the launch of the Victor Talking Machine Company in 1901, selling recorded music has come to define the music industry. That means every single living person in the world right now has only known this reality. Recorded music = music industry… these are the only dots we know.

And yet, we know that musicians existed before the advent of recorded formats. They must have survived one way or another, right? As it turns out, there were a variety of “models” that have supported the creation of music throughout history.

Street performers, buskers, troubadours, gypsies, minstrels, vaudevillians… the number of synonyms alone signals the prevalence of an ancient breed of entertainers who performed in public for gratuities . Nearly every civilization in recorded history spawned a class of buskers, and by sheer numbers alone, it could very well be the “model” most musicians made a living on.

On the opposite end of the “social status” spectrum, some of the most epic and enduring compositions of our musical canon were commissioned by patronage. One of the very first disruptive information technologies ever, the printing press, coincided with the rise of the Renaissance, broadening the distribution of popular compositions and the fame of those that created it (and the royal class’ incentive to take credit). Patronage funded the ensuing Baroque era, which birthed the first enduring titan of musical composition, Johann Sebastian Bach.

The Classical and Romantic eras maintained the tradition of patronage, contributing to the rent of geniuses like Mozart, Haydn and Beethoven.

Skip forward a few centuries and across an ocean to the thriving Tin Pan Alley era. In the late 19th/early 20th century, a concentration of competing sheet music publishers on Manhattan’s West 32nd Avenue blossomed into a full blown, star-making industry. Irving Berlin, George Gershwin, Fats Waller, Cole Porter… these artists propagated their music and growing celebrity through the pieces of paper that bore their names.

These are but a handful of pre-grammophone “models” that have sustained centuries of musicians through the course of human history, some of whom we still canonize today. So at a minimum, we need to bust out of our historically narrow assumption that moving record units is the end all and be all of the music “industry”.

“… and they end up with very linear solutions”

Anyone involved in either tech or music should know the fixation each industry has with the fate of recorded music. Too often, the discourse is framed as a “technology vs. music” or a “Hollywood vs. Silicon Valley” fight. Just in the past year, the two sides have sparred over the Emily White letter, Spotify payments, SOPA… the list goes on. Very intelligent and influential people on both sides are getting red in the face over matters of property law - the consequence of competing linear solutions, sprouting from a baseline fixation on content sales.

It’s a natural reaction. Records cut as close to what “is” music as any other “product”. It doesn’t take a neuroscientist to realize that there’s something viscerally immediate about listening to your favorite artists – as opposed to, say, reading their sheet music. Outside of live performance, recorded music is the least abstracted manifestation of a musician’s craft. It somehow feels preposterous this “product” could have so little monetary value anymore. It’s one more reason why we’re so fixated on a linear solution.

Ultimately though, it is what it is. Whether or not artists like it, the inherent value of a record’s property value was in the scarcity of its physical distribution (i.e. CDs, tapes, vinyl). This scarcity has been permanently destroyed in the copy-and-paste internet era. As I outlined in a previous post , the fate of recorded content will inevitably end in a cloudy place where artists get paid on the backend of plays. No matter how optimized the ads, the subscription model’s payments come on the backend of plays, and just cannot approach the margins built into the “moving units” era, when the payment entire payment was front loaded. Sadly, recorded music’s monetary value is forever marginalized by the very physics of the internet.

If we hope to avoid a shrunken music industry, we need to look for disruption outside of recorded content.

“the broader one’s understanding of the human experience”

Music aids and abets the fundamental advantage of the human species, which is our capability to organize complex, tiered and coordinated societies. As such, the creation of music is a fundamental hallmark of our species (along with controlled fire, ritualized burials, religion and visual art). Homo sapiens have been creating music for at least 40,000 years. As a point of comparison, cultural developments like agriculture, writing and civilization are relatively new achievements in our species’ emergence. In fact, we’ve had music for 8 X the chronological length we’ve had writing. So music holds a dog-eared bookmark in our species’ evolutionary conquest.

For most of human history, music was a public and participatory experience, inextricably linked to a plural of people synched in a real-time experience. As a binding agent of dancing and singing bodies, music literally manifested community. And lest you think our modern society has evolved beyond the tribal utility of music, just think of religious services, sporting events, weddings, nightclubs, political rallies, protests, road trips… when was the last time you attended one of these without some sort of collective music ritual?

This gluing effect works just as well for many nodes of people as it does for just two. Sometimes just mentioning an obscure artist you love in common with another human being is enough to spark the bonds of an instant soul-meld. Music speaks to the muddied plasma of our right-brained soul; a direct poke to our brain’s ancestral empathy regions.

So why have we forgotten this powerful community-binding property of music?

A little thing called the gramophone. Starting around the mid 20th century, music morphed into a solitary activity, as radios and stereos invaded our living rooms. This trend continued with the advent and proliferation of car stereos and portable headphone devices – like the Walkman in the 80’s, personal CD player in the 90’s, and the iPod/iPhone in the new millennium. Suddenly music became personal, prevalent and convenient. But also, lonely. So while you might feel an instant soul-meld connection with the artist in your ear, it was by nature an isolating experience.

Of course, communal music lives on in modernity, especially at a good show. Even the live music scene is increasingly developing into a multidimensional experience, beyond the token call-and-response and occasional mosh pit of decades past. The growing EDM and festival circuit are just as much about the community, the dancing, the venue, the lights, the drugs, the costumes, the everything… as it is about whatever is happening on stage.

In short, music sways masses of like minded people, even today. Nations elicit loyalties by it. Revolutionary movements are fueled by it. And maybe most importantly for the sake of this discussion, teenagers inform their very identities by it.

Music is so much more than sounds – how else do you explain the Gathering of the Juggalos?

In many ways, music is the original social network. This makes musicians = founders of community. In a networked world, that’s powerful.

“the better design we will have”

To summarize, we know a few things to be true. First, we must allow ourselves to be okay with music being free, or close to it. Second, we must recognize the anthropological value of music itself in human societies. Lastly, we must attempt a solution based on what the internet enables (direct fan-artist connection + community), as opposed to what it takes away (scarcity of content distribution). Taking these assumptions and processing them through many layers of over-thinking, I believe the new music industry model will have the following, mutually-inclusive attributes:

Relationship Access: The internet might have destroyed the value and scarcity of content, but it’s opened up a world of possibility in enabling direct lines of communication between fan and artist. So while it’s now infinitely easier to @ reply a fan on twitter or video chat with them, the availability of artist’s time and attention remains scarce. There just might be a way to divvy this up and dole it out to fans, who earn it in some capacity that benefits the artist (i.e. money and/or promotion). This is the essence of “moving units of relationships”, instead of units of content.

Of course, these “units” of relationship access would only really work if you had an…

Ecosystem of Fans: These days, it’s not enough to have a fan base anymore… you must know your fan base. This is no revelation; plenty of artists have already learned the importance of social media to their own success. But it’s just the first step.

In the future, it won’t be enough to just know your fan base, but to lead them. That means herding your fans into a common community online, where fans know each other and perhaps even compete/collaborate for the affections/attentions of their chief. This may or may not happen on a singular, specific platform; I can’t be sure of the exact schematics. Regardless, the setup must have the capability to cross-stitch the nodes of your fan base, as it only enhances the value of relationship based products. For example, if you have a circle of friends who are obsessed with artist X, then the thrill of artist shouting you out on a youtube video is enhanced by peer recognition. Sort of like how badges work in the foodie community that is Yelp elite, or how the printing press spurred the patronage of Baroque music composition.

There’s all sorts of supplementary advantages to the artist as well; for example, a continuously buzzing community at the ready to jumpstart any launch (as opposed to a void of silence). Of course, putting out good, addictive music helps with this, but for the sake of this argument let’s assume that as a constant.

So, combine units of relationship access with an organized online community, and you get…

Crowd Patronage: Once upon a time, patronizing musicians and their work was an exclusive privilege of the royal class and/or an 18th century Florentine bankers. They were one of the handful of individuals in the world that actually had disposable income. And even if Mozart were to have a big market of micro patrons, it would have been impossible to collect their contributions, fan-by-fan, door-to-door – totally unscalable in the pre-internet era.

Now, with services like Kickstarter, crowd-funding is suddenly accessible and increasingly mainstream. We’re already seeing uber-successful music projects like the Amanda Palmer Kickstarter campaign, which met it’s ambitious $100,000 album bank-rolling goal in seven hours, and eventually went 12x profitable before a single note was recorded ($1.2 million). Along the way, it netted a Kickstarter record 24,000+ backers. The finished album is not even the point anymore; in fact, most of the money-making pledge tiers were based on some sort of exclusive access to Amanda Palmer herself.

For example, the $300 pledge – which garnered 625 backers equaling $187,500 – got you an invite to a private art show party, exclusive to the backers and hosted by Ms. Palmer. The $5,000 pledge – which garnered 34 backers equaling $170,000 – got you an Amanda Palmer House Party… at your house. Talk about breaking the fourth wall.

Just like in the era of patronage, pledgers are usually ignoring the commodified product. The most successful music kickstarter projects sell you one or more of three “values”: 1) access to artist (as discussed above), 2) exclusivity and 3) recognition/participation (especially for artist’s creation).

So we’re going to see more artists open up the creation process to their fanbase. Everything from crediting fans in the liner notes, to tracking fans’ recorded sounds as real stems, to skyping and polling fans during studio sessions.

As a musician, it’s already technically possible to do this. In the next few years, we’re going to find it become more culturally acceptable on both the artist and fan side. In fact, as much as some artists might assume their fans might find it cheesy now, I don’t think we’re too far away from the point where fans will start to demand relationship based products. More importantly, artists are going to start finding which sorts of packages or pledge tier incentives their fans actually buy, etching out the contours of a new crowd patronage “model”.

Kickstarter is a great start, but I suspect that artists will one day rely on a similar platform, tailored to their own needs. For one, the platform must be more than a transactional service. It must have an evergreen social networking element, to maintain a continuously buzzing community of fans. There should probably a way for fans to participate and contribute to the ecosystem, short of paying into it (points for promotion, etc) The platform must also provide the right set of tools for the artist to manage her community, like a CRM-like admin panel that can drill down to a specific fans, and their comprehensive history of participation.

The best part is, you only need a fraction of your audience to pay to make this crowd patronage model work. Move away from the one-product-fits-all model of the moving units era, and suddenly you can tailor mind blowing, premium pledge tiers for your whales. Crowd patronage suddenly makes the 80-20 power principle really work in the artists’ favor.

Recorded content plays a role as well. From a purely revenue generating point of view, the 80% or so of casual fans who don’t buy any crowd patronage product are still generating plays, which will eventually count for a foundation of revenue. Also, similar to the smells wafting from a good restaurant, free (and good) music attracts a wide net of fans – a percentage of whom will convert to customers.

And a few great customers is better than, well, none at all. Recorded music revenues will spiral to insignificance, this is almost inevitable. In its place, good musicians and their managers will soon find out it’s not about the units you move, but the relationship you share with your fans – for both spiritual and bank account fulfillment.

Check out Techdirt’s coverage of this post and the subsequent presentation at SF Musictech. Almost 200 comments there!

Big Thanks to Andrew J. Lee, Runae Lee and Ambert Ho for copy-editing this essay.

Follow me on Twitter because it’s there: (@freshbreakfast).

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