The Real Cost of Direct To Fan - midem-exclusive White Paper

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Good Lizard Media will tackle the hot topic of Direct To Fan over a series of four white papers. Discover, with this first paper, the 'Direct To Fan' concept, where Direct To Fan happens, its place within the music business, and who the major players are. As well as looking at how it relates to the various different revenue models implemented by artists, managers, online stores and record labels.

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The Real Cost of Direct To Fan - midem-exclusive White Paper

  1. 1. The Real Cost Of Direct To Fan<br />Part 1 of 5<br />David Riley & Sam McGregor, <br />Good Lizard Media (UK)<br />Insert your logo here<br />
  2. 2. Table of Contents<br />What is Direct To Fan?<br />Where does it happen?<br />What causes it to happen?<br />Who is making money?<br />
  3. 3. 1.    What is Direct To Fan?<br />Direct To Fan is a specific term used to describe the process of selling a wide variance of products to a ‘fan’ of a certain project or collective. The definition however even in this state leaves a lot to be desired in terms of bringing a definitive fence around the usage of the term. This first part of a series of whitepapers on Direct To Fan seeks to answer this basic question in order to move into a closer analysis of the financials and into the future of the model.Over the last few years Direct To Fan has become a hot topic amongst managers, labels, merchandise companies and the wider music industry . As revenues fall from traditional sales of recorded music, artists are looking towards making the most of the other revenue streams that derive from having a recognisable brand and connection with loyal supporters or ‘fans’. The real heart of the definition of Direct To Fan derives from the relationship that exists between those who make music and those who consume it. In our research for this paper we asked music industry types and music fans for anecdotally what they considered Direct To Fan to be. The answers were disparate and lacking in any clear consensus except for one word that came up again and again, “feeling”. The reason that a definition isn’t easy to come across is because of the innumerate different ways that Direct to Fan happens, Merch Desk, Website, Social Networks, Advertising, Bundles, Experiences and so on can all be described as methods within this definition and invoke that “feeling”.<br />
  4. 4. 2.    Where does it happen?<br />Lets look closer then at the areas where Direct to Fan happens. The first and longest running is the merch desk at live shows and events. Artists make tshirts and CDs and then, often quite literally, sell the product to their fans directly without a middle man. This however hinders as much as it helps in the definition of D2F, as at a small level where artists set up themselves at a table near the back and sell product, this is clearly directly selling to fans. Yet when looking at a higher level of touring where venues take a percentage of sale, merchandise companies man the tills with the product they produced, how much does this differ from a label selling a CD through a bricks and mortar store? The difference is that the artist controls the pricing and more importantly the sales are stimulated by the feeling and experience of being directly in touch with the band, all be it from behind a barrier in a venue. Certainly owning the place from which you sell the music isn’t important to the definition, artist’s do not own the venue they play at in the same way they do not own the technology behind Topspin, Sandbag, eBay, or any other mechanism though which Digital Direct To Fan is done. So clearly Direct To Fan can have a middle man without causing a deconstruction of the definition, which turns the term ‘direct’ into a near fallacy in its actual usage.<br />
  5. 5. 3.    What causes it to happen?<br />The most typical example of Direct To Fan is selling from the artist’s own website. Although for the reasons previously discussed it is not technically direct in real terms it definitely has the “feeling” of buying from the artist as the site is theirs and is a hub for everything around that artist. What then drives fans to actually purchase from an artist website. We received data across the online stores for 25 medium to large sale artists in the Uk over the period of a year. This was matched to the promotional and release points throughout the year to find the events and exercises that increased Direct To Fan purchasing:Biggest drivers of Direct To FanLive showsAlbum releaseNew product launch (with promotion)Brand new merch storeBundled or up-sold against a ticketNewsletter to fanbaseTwitter / Facebook postSales & discountsltd edition items<br />
  6. 6. 3.    What causes it to happen?<br />Live shows (in terms of sales correlating to the artist being out touring) and a new album release where by far and away the biggest drivers of sales. The reason for album release being so influnetial is mostly attributable to bundling. Using the CD effectively as a loss-leader in a group of products brought together to be sold as a package relating to that release. Obviously the increased attention aorund the artist will cause more sales as is the case with touring but above all it is the increased attention that artists pay to fanbases when touring and during an album release that constructs the “feeling” that drives increased Direct To Fan sale as a result.<br />
  7. 7. 4.    Who is making money?<br />Direct To Fan is not a given, some artists do considerably better than others at engaging with fans and offering products and experiences that relate well to their fanbase. Taking the same set of data from a year of sales, we looked to see if their was an easy correlation between the size of the fanbase and the amount of monthly sale that an artists makes from Digital Direct to Fan.<br />
  8. 8. 4.    Who is making money?<br />This clearly shows two sides of how artists are working direct to fan. It is not a case of having a big fanbase and therefore by the sheer volume of numbers alone that this translates into sales. The artists with the most amount of Facebook fans (we used facebook as a rough indicator of size and reach) do not have the highest sales. In fact what we see is that Direct To Fan needs to have two aspects working well to make it generate revenue. The first being the interaction and generation of a closeness between artist and fan that creates the size of the “feeling” of wanting to buy directly from the artist and secondly an offering that fits to this demand.The Direct To Fan model has as much to offer to developing artists as it does to established and legacy artists who have built a career and a following over a number of years. In the following papers we will look more closely at the actual sales and profit to be made from the various of what we have defined as Direct To Fan. The graph above shows sales, what the industry needs to be looking at more carefully as this model blossoms is the actual profit.<br />The next white paper will focus on the real costs of direct to fan for established artists. Discover it on midemblog in October.<br />
  9. 9. About the author<br />At Good Lizard Media we use over 18 years of digital experience to develop and manage creative digital marketing strategies, growing and expanding fanbases whilst planning towards monetising at key promotional points.<br />Setup in 2009 by ex-head of digital at Cooking Vinyl Records, David Riley, and ex-head of European client relations at international digital distributor IODA, Pete Heaney, joined shortly afterwards by marketing freelancer and serial entrepreneur, Sam McGregor, all in our mid 20s, with a team of like minded individuals helping to make us the most creative and effective digital outfit around.<br />Proudly working with clients including The Prodigy, Underworld, Subways and many more.<br />This report is brought to you by midem<br />9<br />midem is the place where music makers, cutting-edge technologies, brands & talent come together to enrich the passionate relationship between people & music, transform audience engagement & form new business connections.<br />midem takes place every 3rd week of January and brings together 6,850 professionals from 77 countries.<br />SHARE THIS REPORT ON AND TWITTER<br />Contact us: info.midem@reedmidem.com<br />Visit midem’s website - www.midem.com<br />Follow us<br />Download midem iPhone App <br />http://road.ie/midem<br />

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