Digital Music Business in music industry’s crisis
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Digital Music Business in music industry’s crisis

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In almost 55 pages, I described and analyzed the main Digital Music Business through many theories and strategies. I gave my opinion and communication recommandations concerning promotion of music in ...

In almost 55 pages, I described and analyzed the main Digital Music Business through many theories and strategies. I gave my opinion and communication recommandations concerning promotion of music in the context of the music industry's crisis.

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    Digital Music Business in music industry’s crisis Digital Music Business in music industry’s crisis Document Transcript

    • 1
    • Acknowledgments First, I would like to thank Ms. Elizabeth Albrycht, memory tutor and Ms. Virginie Berger, my memoir master advisor who helped me both in working on then subject and more specifically on the challenge of this term paper to fit my personal professional project. I especially thank them for giving me good direction and advice thought my whole work. I am extremely grateful to Ms Virginie Berger for her time, precious counsel and serious feedback concerning this term paper and the case study’s strategies. I don’t want to forget each person and blogger who took time to answer my study. They allowed me to further understand its purpose and make my personal recommendation. I also don’t want to forget the Americans who helped me edit my memoir, and gave my memoir, its international point of view, special thanks to an American student, Josh David. For the same reasons, I thank some professionals, like Ms. Virgine Berger (digital music business analyst), Mr. Marc-André Laporte (digital music blogger) or Mr. Konstantinos Xristoforou (Greek singer) who accepted being interviewed. I’m also thankful to all the record label professionals and digital music specialists who I had occasionally spoken with and gathered information. Finally, I give thanks to all the persons who enable me to change my field and find domain in what I would want to practice and to all the persons I maybe have forgotten who had a direct or indirect link with this term paper. Thanks a lot. 2
    • Subject: Digital music business in music industry crisis. Problematic: How digital music business model can be used and integrated to the current worldwide music industry crisis. Method: International Digital Music Business Models Strategies Memoire master advisor: Virginie Berger: Music Marketing Machine, Music business analyst, strategist, digital marketer. Contact: twitter.com/virberg, virberg@gmail.com 3
    • Contents Introduction……………………………………………………………………………………………………...5 FIRST PART – THE MUSIC INDUSTRY’S EVOLUTION: THE NEW MARKETING MUSIC…………11 1) New behaviors for a new ‘music offer’ ………………………………………………………………...11 a) Traditional French music industry’s structure…………………………………………………………….11 b) The new consumer’s behaviors & music industry’s evolution…………………………………………..15 2) New digital music business model……………………………………………………………….…16 a) Digital music platforms……………………….…………………………………………………….…17 b) Consequences for the music industry……………………………………………………………………21 SECOND PART - THE DIGITAL MUSIC CASE STUDIES………………………………………..………26 1) The main digital music strategy bases………………………………..………………………………26 a) The future of Music Business Models (= CwF + RtB)…..………………………………………26 b) The ‘Direct to Fan’ (D2F) …………………………………………………………………………………..32 2) The express to fan dirty: give a reason for buying…………………………………………………..35 a) The strategies of contents: CwF (Connect with fans)……………………………………………………35 b) The CwF + RtB = $$$ application and examples………………………………………………………37 THIRD PART: PERSONAL RECOMMENDATION……………………………………………………42 a)‘Connect to fans’ & ‘reason to buy’ = $$$………………………………………………………42 b) Be present on digital platforms and create your own team…………………………………..……44 c) ‘Do it yourself’ and ‘direct to fan’…………………………………………………………………………45 General Conclusion…………………………………………………………………………………………..46 Reading list-sources……………………………………………………………………………………………47 Annex…………………………………………………………………………………………………………....48 4
    • Introduction: According to Mr. Seth Godin, the ‘‘music industry is not in crisis period. More and more persons are listening to music; like they never have in the history of humanity. Probably five times more than twenty years ago. [...] But the music industry has serious difficulties. ” Because it stays in front of a new paradigm’’. 1 The website zdnet.fr also replies the music industry takes advantage of the ‘digital revolution’. These last five years, they saw their sales of CD collapsing, from 10 % to 20 % per year 2. The benefit of consumption dematerialized the music, regrettably for labels, mainly because of digital music hacking (P2P). Music industry can be defined like all the companies, and the persons working for music broadcasting. We can also take the definition of Wikipedia 3, which defines music business like an industry who ‘sells compositions, recordings, and performances of music’. This in fact an association of many little industries all around the world for selling music (in different formats and supports). The Wikipedia’s article dedicated assimilates also the music industry as an industry which ‘sells compositions, recordings and performances of music’. It also says that ‘among the many individuals and organizations that operate within the industry, they are musicians who compose and perform the music; the companies and professionals who create and sell recorded music’. We will remind you later how this industry looks inside and how does it works with the actual ‘digital revolution’ of the digital business models. The music industry is organized of upstream downstream from the following way. Upstream, labels are seeking new talents and producing the artists in contract (recording of discs, financing of these recordings, pressing of CD). In the first category, we can find mainly the four majors, Universal, Warner, Sony and EMI. They all have several labels and distribute their productions and on their side they are independent labels, sometimes depending on majors. It is difficult to quantify the exact number of labels in the world (because of their quickly disappearance). The domination of the majors finds his source in the economies of scale in the functions of distribution and of promotion. _______________________________________________ 1 In the French newspaper Musique Info, in the ‘dossier’s part, http://www.musiqueinfo.com/dossiers/une-redefinition-radicale-du-marketing-de-la musique.html. 2 http://www.zdnet.fr/actualites/internet/0,39020774,39387572,00.htm 3 Music industry’s English article, http://en.wikipedia.org/wiki/Music_industry 5
    • The distribution consists in conveying the discs of the factories of pressing to the final sales. Promotion and communication strategies, which will be our case study in the following parts, have a lot of important economic characteristics in the music industry. We can also say that, the situation in USA with artists’ position is not the same way as to the type of economy in France. In France, we can remember that there is no help assistant from French Government (of the civil society) and non-trading companies for artists and music labels (instead of festivals and cinema, but we are only focusing about music industry). We can begin wondering, how adapt actual artist’s promotion strategies, and integrate the current digital music business model to the worldwide music industry? We will see later in our memoir, that artists and labels can have many channels and streams of potential incomes through the digital music marketing models. Indeed, the cost of promotion is primarily a fixed cost. For a given album, the expenditure of advertising brought back to each sold unit thus fall as the number of sold albums increase. In addition, the channels of promotion of the mass media have a limited capacity. The number of artists profiting from abroad press coverage is thus restricted. Economies of scale and constraints of capacity in the promotion channels are contributing and making the majors some profit regulations of their artists. Music companies’ global digital revenues grew by an estimated 12 per cent in 2009 totaling US$ 4.2 billion in trade revenues (IFPI 2010 report) 4. Digital channels now account for 27 per cent of music sales, up from 21 per cent from 2008 (IFPI). The music sector is generating far greater value from the online and mobile market than any other sector in the creative industries, with the exception of electronic games. Music labels revenues from digital channels are now proportionately more than double that of the film, newspaper and magazine industries combined. In fact, we can speak according to Ms. Virginie Berger (Music Marketing Machine, Music business analyst, strategist, digital marketer) that today there is a real ‘reinvention of the economic the music’s model’. _______________________________________________ 4 International Federation of the Phonographic Industry, http://www.ifpi.org, Get the 2010 report in this link: http://www.ifpi.org/content/library/DMR2010.pdf 6
    • We will argue this postulate through strong digital music’s theories (Express to Fans + Express to Fans dirty). We can estimate the fall of the music recorded sales in the world (since 1999), even with sales proven for certain markets (Germany, Japan, the United States), because of P2P hacking music files online. Consumer’s education is becoming an essential element addressing digital piracy, but stays only a form part of the solution, alongside good commercial music services and well-enforced legislation. We can also add this quotation from music industry’s professionals: “Whilst more education is needed, increasingly familiarity with the law does not appear likely, on its own, to reduce file-sharing.” Harris Research 5, from the IFPI Digital Music 2010 Report 2010: ‘’2009 music sales show decline but digital retail market starts to deliver’’. Kim Bayley, Director General of the Entertainment Retailers Association, replied: "2009 started on a low note after the collapse of Woolworths and Zavvi, but entertainment retailers across the board worked with their suppliers to end the year with a far better result than anyone had expected. (…) "We are particularly pleased at the progress made by digital and internet retailers. The key maintaining momentum in 2010 will be to maintain a flow of innovative and compelling product to the consumer." In fact, the actual music market loses more recorded music incomes because of P2P and thanks to Digital music development on many platforms (which we will see later). We can also give you some of the IFPI publishes assessments, concerning the actual music industry’s situation 6 : - 400 services licensed worldwide by music companies with ISPs, mobile and other partners - New figures show local music collapsing in major markets as piracy bites into releases, sales and investment in France, Spain and Brazil - IFPI Digital Music Report highlights urgent need for legislation to curb digital piracy on ISP networks _______________________________________________ 5 Page 4 on the pdf document of the IFPI 2010 report. 6 See pages 3 and 10 on the pdf report, or the Annex part. Global digital music trade revenues reach US$4.2 billion, up 12% in 2009 7
    • In fact, we can justify and complete these numbers thanks to this IFPI’s comment:: “New licensing deals help push digital music sales to 27% of global revenues - but piracy is damaging investment in artists”. So in fact, this is all about digital music business and piracy fighting.7 Generally, all the media and music labels professionals talk today about a real ‘music industry crisis’, because of the half loose of music recorder’s sales. Many reasons are also behind this crucial recession. The consequences for little labels and artists are very detailed too. The ‘digital music business’ is maybe one of the reasons of the actual situation; it might change and evaluate the current music industry. We will talk about this expression in our main reflection. We also took this particular subject, because it belongs to our personal and future professional project. Indeed, the cost of digital music market was published by the famous movie release Wolverine which was illegally downloaded 100,000 times in 24 hours Six out of 10 music file sharers in the UK also illegally downloaded. You can also find, in the Annex part, some assessments illustrated the evolution of the digital sales in the last years (source: IFPI, 2009/2010). The IFPI Digital Music Report also counts the 2010 digital market tendencies, and estimating the music companies ’global digital revenues grew up by an estimated 12 per cent in 2009 totaling US$ 4.2 billion in trade revenues. 7 In fact, this new online market (appeared with Itunes in 2001, and more developed today thanks to many different digital platforms) is becoming growing up the digital music industry’s sales. The physical music records decline can also be caused by the rise of new technologies. For example, in the United States, the audiotape quickly replaced vinyl and CD the same by mp3. In the case of France, the business model did not change thanks to the music support changes (from the vinyl to mp3), but through the appearance and the digital platforms development which sharing and selling music on Internet, since the 2000’s decade. _______________________________________________ 7 Same sources than 5 & 6. 8
    • We also know that the new Hadopi law is still reloaded the rights debate around Internet linked to music broadcasting. We will focus during our memoir elaboration only on the crisis communication in the worldwide music industry, linked to the digital music business influences (as practicing well in the US). We are also aware of the huge knowledge and significations issues or our memoir theme, that’s why we will limit our analysis and recommendation on the whole world music market application (or the global international music market). We will choose some digital streaming cases later, to show how these strategies can belong and integrate better the actual world music industry to digital music business structure (US online & digital business models strategies will be mostly taken as examples). Our memoir’s subject will concern the global digital music’s communication in the term of music record’s crisis. We chose this subject, first of all because we wanted to explore the ‘online’ problem of the music industry crisis to understand and recommend our strategy solutions. Secondly, we wanted to choose a communication’s subject to continue and fulfill our professional project based on music industry, which we are deeply interested in. Many statistics, professional interviews, and artists’ opinions will be enclosed to this memoir. We will try to assemble all the points of view and the different aspects of the subjects for elaborating the best communication recommendation against the musical industry crisis. Many digital music’s theories and tendencies are actually used by professionals and music’s consumers (many music store closed in USA, even the big Virgin Megastore), because of the development of digital music in the last years. We will explain you, how French music industry can re-invent its online strategies (marketing, proMb and communication promotion for Internet’s presence). How an artist and its label have to communicate through Internet to reach the right person? What means the theory ‘do it yourself’ for an artist, today? Why is important also to understand and analyze the segmentation of the fans? They are many new behaviors and strategies to develop in France, permitting industry music to stay optimist and making profitable for artists and labels… 9
    • We will wonder during our analysis, in the face of the music industry crisis, how the digital music business model can be used and integrated in the context of the current music industry’s crisis. We prefer to focus and respond our problematic through the analysis of the main digital business bases and strategies (direct to fans, the reason to buy, connect with fans, etc…). The upcoming analysis will be assimilating to some advices in our recommendation about music industry for ameliorating and integrating these (online) strategies to their digital music’s distribution. We will see in the first part, the focus on the music industry evolution, through the new international music marketing’s tools and tendencies. Secondly, we will approach more the digital music business models through the main strategies and real examples. We will finally propose you in the last part, our personal communication’s recommendations in the context of the current music industry’s crisis. 10
    • FIRST PART – THE MUSIC INDUSTRY’S EVOLUTION: THE NEW MARKETING MUSIC 1) New behaviors for a new ‘music offer’ Before going deeply about the new evolution of the ‘digital music offer’, we will remember you some main bases, of the music industry structure: a) Traditional French music industry’s structure We can resume the business structure between three simple parts: the ‘music offer’, the ‘music demand’, and all the ‘actors & contributors’ who belonged to the music industry. The ‘music offer’ on the ‘music offer’, we can find all the records, music releases (all format) and the music’s rights available in music store (and on internet now). This can be all the music presents on the catalogues of the recording companies. This offer is extremely remained since the last industry crisis with a lot of promotions and special offers in the music store (example of getting 5 discs for the price of 3 discs). The ‘music offer’ is mainly dued to music and label records. It referred to all the production, distribution, promotion and music creation process part in the music industry. Inside it we can count all the artist and people engaged to the the recorded music. Nicolas Curien and François Moreau, talked, in the industrie du disque 8, that in 2002, the “recorded music offer is composed by an extreme horizontal concentration and a special vertical integration”. _______________________________________________ 8 L’industrie du disque, France, La Découverte, September 2006, page 33-34. 11
    • This distribution control by the majors allowed them to impose to the independent labels and returned back, the whole reinvested strategically in the marketing and promotions campaigns. We can for example talk about Madonna, who is a typical example of a commercial famous artist, releasing a new disc (best of) and promote it in many stores through huge marketing and promotions campaigns (displaying, teasing, press relations, etc). The majors are since end of the seventies, the pillars of competition relating to the distribution and promotion within the music industry. Moreover, the independents, are sometimes dissociating from majors in new strategies and have to be more 'original and creative' than majors which have more money for promotion. We have also to figure, that before having a look to the ‘music demand’ and our case studies that the ‘music offer’ is mainly due and variable thanks to these factors below: The specifics of the credits, the opportunism, the uncertainty of the market, the frequencies of the transactions of the offer market. These factors will strongly influence the majors to integrate in the distribution rather; towards the contractual relation (more preached at the independent). Concentration known as the majors also create ‘vertical’ of the ‘music offer’9. Indeed, this corresponds to bringing together of these last, their acquisitions of independent, thus with the many repurchases of catalogues of rights. That once more makes it possible to position the power struggle of the majors on the music industry in their granting important market shares (in spite of the crisis). Beside, the majors always do not hold better last innovations in terms of communication strategies. We will see this important subject with debate very soon… This is not a chance if the majors repurchase the best independent (example of the label Def Jam having launched the Rap current on outside Atlantic, was repurchased in 2000 by Universal Music). That allows the majors to facilitate the contracts of distributions between labels concerned. The limits of the ‘music offer’ are at the level of the music support marketed and distributed on the music industry. This means that all the bonds linking the industry of the media and of the disc (Sony Music currently is the strongest bond dominating with the readers known as the 'hardware' allowing the reading of the music distributed by the major). _______________________________________________ 9 L’industrie du disque, France, La Découverte, September 2006, page 36-38. 12
    • All these contents qualified by Nicolas Curien & François Moreau in l’industrie du disque’ are comparable to ' immaterial contents registered voters on physical supports or totally dematerialized like the digital files (sharing files) important effects in the network. This can moreover lead to the standardization of the market on only one of technologies competitors' 10. The ‘music demand’ The ‘music demand’ concerning the entire person who is consuming music. It is mainly the music consumers who buy the music, the entire person who listening too, and making compulsive purchases. This demand includes also all the record sales, which allow some payments for the industry (music rights, artists’ incomes the royalties, etc.) and all the persons who created the musical offer (which are not always calculable). It’s in fact easier to count the demand music than the ‘music offer’ in the music industry annual assessments 11. To be more concrete, we can resume the ‘music demand’ with all the music sales. We can take again, the recent analyze of Nicolas Curien & François Moreau about the French Music Industry, illustrating the last main tendencies: The more sales are concentrated mainly on singles sales, and all the promotional music titles in media mass. They call this small market of the 100th or 200th best music titles (or albums) sales 12, the ‘star system’. It means that if one artist succeeds to sell enough albums and to be including in the best music charts, thanks to promotions and its music label, he could enter in the ‘star- system’. The ‘star system’ is like a system based on the celebrity of certain known people of the general public. That is why the most fifty famousness international artist, like Madonna, can sell easier their new futures releases, than recent band, not yet signed, because of their limited communication/promotion tools. By the way, this system can be discussed with the success of some independent band like niches band). _______________________________________________ 10 L’industrie du disque, France, La Découverte, September 2006, page 39-41. 11 See the Annex Part for the IFPI music industry’s 2009 assessments. 12 L’industrie du disque, France, La Découverte, September 2006, page 43. 13
    • We understand also that the ‘music demand’ is essentially controlled and followed with communication, which makes all the music industry’s promotions. We will see very soon, that this system will be broken and useless with the ‘digital revolution’, which reverses and modifies deeply the tangibles industry’s bases. For example, we can say thanks to the IFPI Digital Music Report 2010 that the 2010 ‘music demand’ is mainly due to the ‘diversification of business models‘. Lucian Grainge, Chairman and CEO 13, Universal Music Group International also said in this report that: ‘We are shaping our own future by finding new ways of getting music into people’s lives.’ This quotation means that today the music needs to be more adapted and corresponding to all the music consumers (constituted the ‘music demand’). Downloads music continue to grow in the general music industry as IFPI can show us by their last results (see Annex Part).Three key music industry’s developments in 2009 were: the roll-out of more DRM free services, continued growth in digital album offerings and the introduction of variable pricing. We have also to know that nearly a third of European Internet users watch music videos online. This is one of the good examples of the new behaviors’ music consumers, which has to be counted too in the music industry incomes lost. In 2009, the whole music industry represented 587.8 million euro, against 607.2 million euro in 2008 is a fall of 3.2% compared to 2008 (against15% in 2008). The physical market: 512 million euro, with a fall of 3.4% (against 19.5% in 2008). The digital music industry: 75.8 million euro, with a fall of 1.9% 14. We can explain this fall of the ‘music demand’ through several factors: The prices elasticity on recorded records. The change of the practices and the investments of the households and consuming music are another reasons. Indeed, the average consumer will prefer to buy an electronic device, like a mobile phone or to travel. In fact, the explosions of file hacking (musical P2P) on Internet will definitively changing the practices of the consumers to not to buy music like before. Generally, video games are still the first source of expenditure in P2P. _______________________________________________ 13 Page 8 on the pdf document of the 2010 IFPI report. 14 Page 10 on the pdf document of the 2010 IFPI report. 14
    • In addition, we can add new French determinants of consumption, (same source industry crisis page 48), like the average musical sales per people approximately around 69,50 euro by household (SNEP; 2009) 15. This result was composed into 2009 of 2 albums, 0, 2 individual and 0, 2 musical DVD. Among explanatory independent factors of this new tendency, income of households the price and 'quality' of ‘music offer’ are most repetitive of the industry carried out. Thus, how to manage to dissociate itself in a saturated market and completely pirated? I will explore this problematic in our future case studies… We can also say that, we can also anticipate the 'music demand' per moment. Indeed, we can speak of the important release time of commercial artist new record, already known the music industry, like Mylène Farmer in France. This release might interest music consumers, thanks to important works of promotion and marketing financed before and especially during the date release (example of her live Record N°5 On Tour). Many clips videos, and collectors were revealed and diffused on Internet. Mass media (tv, web, radio) recreated the event in incentive teasing for inciting consumers to pre-order it thanks to her majors’ presence record files on legal website store. It was a real true a marketing buzz, which showed exactly to majors how to interest more fan to buy music for (and thanks to) their idol. We will see later, that this model does not go for all the singers, but primarily for the 'star-system's elites. Thanks to Internet, and new industry’s promotions, the ‘music demand’ is moving faster. That is why we will focus more about the communication and the marketing strategy of the music industry inside and outside the music production… b) The new consumer’s behaviors & music industry’s evolution The 2010’s IFPI Digital Music Report talks about a diversifying inside the industry music business started with the creative the digital revolution. In 2009, for the first time ever, more than a quarter of the recorded music industry’s global revenues (27%) came from digital channels; a market worth an estimated US$4.2 billion in trade value, up 12 per cent on 2008 (IFPI). 16 _______________________________________________ 15 The Syndicat national de l'édition phonographique (SNEP), http://www.disqueenfrance.com/fr/ 16 Page 10 on the pdf document of the 2010 IFPI report. 15
    • In the US, the world’s largest music market, online and mobile revenues account around 40 per cent of music sales. Consumer choice has been transformed as companies have licensed more than 11 million tracks to around 100 legal music services worldwide (same IFPI sources). Today, the Fans can access and pay for music in diverse ways; from buying tracks or albums from download stores, and using subscription services, or using music services that are bundled with devices. They can also buy music through mobile apps for music, and listening to music through streaming services for free. Music companies have licensed advertising; supported services to attract non- payers and file-sharers, struck groundbreaking deals with major ISPs, developed partnerships with device manufacturers and established a new platform for high- quality music videos aimed at mass audiences. All of these initiatives are experimental and innovative, and all are predicated on the simple principle of meeting the needs of music fans. In the digital era, the music industry is diversifying its business models and revenue streams. The download model ‘à-la-carte’ (2010 IFPI report), launched by iTunes, remains the largest revenue source in the online sector and has more than 150 million accounts across 23 countries (Apple). Recent innovations in the à-la-carte sector include the introduction of variable pricing, which has increased the conversion of track purchases to album sales, as well as the launch of the iTunes LP and the rollout of DRM-free downloads internationally. With all these changes, and influences, is not hard to understand, that music’s consumers prefer to buy (or not) music online. In the last 3 years, two big tendencies came in the music industry sector: The increase of P2P (hacking of music files), and the increase after of digital music incomes, through some methods and strategies. We will show you later, that the increase of digital music incomes is more in US than Europe (expect England), because of different online marketing/communication strategies… 2) New digital music business model Today, music distribution is more developed and profitable with digital music business. It is composed by record labels, which make music available in an unprecedented number of ways. A few years ago, an album would have been delivered in just a few formats. 16
    • Today, albums come in hundreds of formats and products. Let’s take the example of the album of Beyoncé Knowles untitled I Am... Sasha Fierce. This album is available in more than 260 different products in the US including music videos, mastertones, ringback tones and audio tracks. Over the past couple of years, music companies have partnered with ad- supported services such as Spotify, Deezer, MySpace Music and We7, ISPs such as TDC in Denmark, Terra in Brazil and Sky in the UK, mobile operators such as Vodafone, handset makers such as Nokia and Sony Ericsson, and online video channels such as Hulu and VEVO. “Our vision is music availability everywhere, at any time and in any place. But the biggest question is how do we monetise it in an environment of widespread piracy?” Eric Daugan, Senior Vice President, Commercial Strategy, Warner Music International EMEA. This quotation means a lot for digital music business. Digital music development is for Eric Daugan and all music majors, the best solutions to destroy piracy hacking. But it’s also becoming a best way to share and ‘monetise’ music, through new tools and new digital strategies, wich we wil expose you… a) Digital music platforms The current Digital music business model is composed by many platforms, which push aside (knock down) the consumer habits to listen, share and buy music online. We can enounce the most digital music platform as Spotify, Deezer, Facebook, Pandora, MySpace, MyMajorCompany, Bandcamp. They are in fact specific tools developed and came from web marketing. The rise of streaming services In 2009, the digital music platforms rich the growth of advertising-supported services that offer music streaming at no cost to fans. The “up selling” of users to premium services is critical to the long-term success of these companies. Spotify 17 is one of the highest-profile of such services. More than seven million users across six countries have signed-up to date. _______________________________________________ 17 http://www.spotify.com/fr/ 17
    • Unlimited streaming is free on a computer and is advertising supported. Portable access through a mobile application is present with no advertising is available for €9.99 a month. Spotify has reached an agreement with Swedish ISP TeliaSonera, allowing its customers to pay for the premium service on their broadband bill. Another service operating a similar model is Deezer 18 is a web-based service, which users can access on any computer without the need to download software. It offers music streaming and personalized web radios and has attracted more than 16 million users to date, including 10 million in France. Advertising supported models have shown some success in migrating users unwilling to pay for music and who have mainly used illegal file-sharing services. According to GfK, six out of 12 Swedish users of Spotify reported in July they had stopped or cut down on their file-sharing activity since using the service. ITunes 19 announced in late 2009 that it was purchasing Lala, in a move that industry commentators said could lead to the company becoming involved in the streaming market. ‘Monetising’ music videos online Music video joined into the area of digital music, driven by the success of streaming services. According to a study by Jupiter Research in 2009, sites such as YouTube 20 dominate digital music activity in Europe with nearly one-third of all Internet users (31%) watching music videos online. In December 2009, Universal Music Group and Sony Music Entertainment partnered with YouTube and the Abu Dhabi Media Company to launch VEVO 21 in the US and Canada. The service has also signed an agreement with EMI Music. The service is focused on the ad-supported distribution of professional music videos online through the VEVO channel within YouTube, through VEVO. _______________________________________________ 18 http://www.deezer.com/fr/ 19 http://www.apple.com/itunes/ 20 http://www.youtube.com 21 http://www.vevo.com 18
    • Vevo is more specialized on music videos platforms. It’s a new concept created in partnership between Google’s YouTube, Universal Music and Sony Music. The organization has also signed a multi-year license with EMI Music. With three of the four major record labels on board and partnerships with independent music companies including The Orchard and INgrooves, VEVO offers 85 per cent of the music videos available on the market and is looking to sign future deals with additional music companies. It aims to create a better music video experience for fans and a more attractive online environment for advertisers. “Music videos are largely the same as they have been for the last 30 years. They don’t reflect the transition from being primarily consumed on television, a linear medium, to the Internet, which is a two-way communication platform.” Rio Caraeff, CEO of Vevo 22. It is also a good way for promoting in ‘premiere’ diffusion new artist’s releases, through video clips shared and viewed, like Christina Aguilera did for its new song Not Myself tonight, exclusively showed on VEVO, in May 2010. We have also to know, that Warner Music signed a deal with YouTube in September 2009 that created a feature-rich experience for fans accessing music related-content from Warner Music artists, including a high-quality premium player, enhanced channels and links to artist websites. This agreement also allowed the record company to sell advertising alongside videos that use its music across multiple channels. Thomas Hesse, president, Global Digital Business, US Sales and Corporate Strategy, Sony Music Entertainment, says “VEVO was created to improve the experience for both customers and advertisers with a new premium environment dedicated to viewing professionally produced content.” Hulu 23 is another service offering music videos and live concerts online. MySpace Music has also extended its service to launch MySpace Music Videos. Direct to consumer Labels also work for support artists in ‘direct-to-consumer’ sales of music. It means that they create and promote merchandising and concert tickets, and many other artists’ collector like goodies, etc. Warner Music started to take artist websites in-house in 2008 and now operates them for around a quarter of its European roster. _______________________________________________ 22 Page 10 on the pdf document of the 2010 IFPI report. 23 http://www.hulu.com 19
    • In Spain, the company runs artist Alejandro Sanz’s official site, signing up around 80 per cent of his fan club to premium membership for €38.99 a year 22. The site’s monthly unique user numbers soared by 300 per cent since Warner began to work with Sanz on it, with the artist blogging four or five times a day to help generate an active online community. Today, even if the worldwide music industry is losing each year billions incomes on their physical music sales. But on the other hand, the digital music is becoming bigger year per year, and sounds to be more profitable for some artists (Lady Gaga is most downloaded historic artist on Internet). This new evolution of the last business model appeared after many different support changes (vinyl, tape audio, compact disc and MP3 for the more famous of them), and with the introduction in consumer’s daily life, of Internet and of web marketing, and music digital platforms. On of the famous of the main reference in digital music business is Topspin. Topspin is a digital and marketing platform helping artists in marketing actions and also monetize. The music industry, and more the French one, didn’t succeed yet, to integrate digital music business in their industry, for financial and selfish reasons (preference for win more money on their best commercial artists). We could see thought many statistics and latest sales tendencies, that music industry looses so many incomes the last 5 years, especially on their physical music sales (disc). You can find more details about their market loose and win’s incomes in the annex part. We can also say, that in America, many music stores closed, because of the development of the ‘digital music businesses. Some American people prefer to buy online their music and surfing on their digital mobiles phone (IPhone, Blackberry), permitted to buy easily on Internet, though digital music platforms like Itunes, Spotify or Deezer for France… There are no more record music stores in France also, instead of the increasing of mobile navigation of digital music. The music digital platforms arrived since the Internet explosion (and the development of MP3 support). We will choose some of them to analyze their good contributions to artists and music labels. Music digital platform is like a commercial website, where people can listen and buy music. Some of them create more applications and interactions, permitting for consumers and artists to create and update real relations/interactions, which can increase music incomes for everybody. 20
    • They are also Digital Radio, where people can listen, for free, music on Internet, like the well famous Pandora 24, which became one of the best actors of digital music in Internet. It share simple links to all the main digital music platforms, which is good for promote and ‘monetize’ artists and music labels… We can resume, thanks to Virginie BERGER advices 25 , the reasons and the interest of music platform inside the digital music business : • Embed your shopping cart anywhere - even on Facebook • Sell custom products with offer-specific pricing (digital, merch, tickets) • Distribute offers to fans across the Internet • Strengthen fan relationships with minimal Topspin branding • Delight your fans with world-class customer support Effectively drive traffic and demand • Acquire fans by giving away media on Twitter, Facebook and via email • Easily create promotional streaming widget campaigns • Easily integrate into Myspace, Facebook and other social networks • Find, follow and interact with fans with an integrated Twitter client • Send no-cost, targeted, custom email messages Deep knowledge of your fans • View sales by channel • See fans, followers, blog posts, comments and plays across the Internet • Target fans by social media reach, behavior, source and geo-location • Review detailed campaign and asset-specific reports • Integrate with Google Analytics E-commerce reporting All these main digital platforms recommendations and advices for artists and labels created and update continually, the fans digital relation (which we will see later). We can give you, according to Virginie BERGER’s personal researches, some current numbers about the actual state of the digital union: _______________________________________________ 24 http://www.pandora.com 25 Don’t believe the Hype, http://digitalmusic.tumblr.com/ 21
    • • 40% of music was bought digitally in 2009 • 1 billion Youtube videos watched daily • 20 hrs of content uploaded every minute • 175 k new blogs create daily • Facebook users = 400 million • 45 million daily status updates • Myspace users = 120 million • 50 million tweets per day (600 per second ) b) Consequences for the music industry The e-commerce; How does it works this new music world? Starting from 2000 with the Internet explosion on the world with many technological developments, a new world entirely ‘digital’ quickly appeared through the decade and changes deeply the music industry. We began to talk about ‘e-commerce’ or ‘e- business’, the virtual place where people can buy all sort of product through Internet access Reven. Indeed, since the development of many suppliers permitting the internet access, with a lot of means of connections, with relatively gravitational prices, more and more of people might have the possibility to connect on Internet, and share the ‘cultural access’ very easily (sometimes free). The ‘digital revolution’ just beginning! These deeply change the practices of people and emitted also many consequences concerning the French and the worldwide music industry. These marketing website are one of the best ways to incite consumers to buy music and special music’s offers, instead of hacking and make the music die (by piracy). ‘Climate Change’ For All Creative Industries “We are in danger of creating a world where nothing appears to have any value at all, and the things that we make...will become scarce or disappearing commodities.” Stephen Garrett, Chief Executive, Kudos (IFPI Music Report 2010) Flat existing shape We can enounce some of the best known existing shape like Bandcamp, Paypal, or CD1D for explain how music is selling by internet: 22
    • Bandcamp 26 is a publishing platform for musicians. Artist can show to their fans, their design, music and URL. Artist can also retain all ownership rights. Bandcamp just hang out in the background handling the tech stuff. This website offer the artist’s tracks all the formats of the ‘fan’s music demand’ (in mp3, AAC, FLAC, Ogg supports, etc…). The original point of this site is that artists can choose between giving away the artist’s music, or setting a price and letting folks name their price. They also are strong in viral distribution, because they give to the artist’s fans drop- dead easy tools to share their music with their friends, which drive traffic back to them. A complete transparency into how the artist’s music is spreading can also be present. The motherflippin stats party: Bandcamp can also show where the fans are coming from, what they’re listening to, even which tracks they’re obsessed with versus which ones they’re skipping over. Your fifth (very nerdy) Beatle: Bandcamp can provide fast, dependable streaming and downloads entire catalogs, adorn tracks with all the metadata they need to sail into iTunes with artwork, titles, they necessary can get for the artist subscribed, their site top-ranked in Google. The Bandcamp’s incomes are going to PayPal’s fan’s account. This website is all dedicated to Internet’s digital music platform publishing. Marc-André Laporte through is personal blog 26 said about BandCamp ‘it is like MySpace but with the interesting options which this last one did not provide you with. I liked the concept when I discovered the concept last year and I estimate it even more today by seeing the use which the Quebecois bands makes’. He replied also that BandCamp was last December used by the group Malajube during the release of their new EP name. The consumer has for option to listen to the whole album and to buy it. The Quebecois musician Maxime Robin uses this service marvelously since a few months. Whether it is for its personal project either its album with Master J, J-Robin. _______________________________________________ 26 http://www.bandcamp.com/ 27 Article in his blog, BandCamp, le nouveau MySpace qui paye, January 9, 2010 http://donnetamusique.com/2010/01/bandcamp-le-nouveau-myspace-qui-paye/ 23
    • PayPal 28 is an American (from California, USA) e-commerce business allowing payments and money transfers to be made through the Internet. Since 1998, PayPal served as an electronic alternative to traditional paper methods such as checks and money orders and has been involved in many cases of litigation concerning fraud scams. A PayPal account can be funded with an electronic debit from a bank account or by a credit card. The recipient of a PayPal transfer can request a check from PayPal, establish their own PayPal deposit account or request a transfer to their bank account. PayPal is an example of a payment intermediary service that facilitates worldwide e-commerce. We can also talk about ‘CD1D’29. CD1d is a French federation of independent music label. This platform was made for alternative on-line music distribution. Cd1d.com is a federation of independent music labels created in 2004 by 7 founder labels [Aïlissam, Crash Disques, Facto Records, Foutadawa now replaced by 6AM, Irfan (the label), Jarring Effects, and Vicious Circle]. Cd1d.com proposes a fair distribution from the producer to the listener, and shares 85% of its sales between the artists and the labels. It does not make any profit on the fringe of «culture business». Cd1d.com is a fair on-line sales platform from the producer to the listener. For a label, being a member of cd1d.com means belonging to an alternative distribution network, profiting from a visibility and strong credibility, managing its own distribution and its public sales prices, as well as supporting the different genres and the independent artists. They are right now 11262 members of this cultural diversity. This platforms offers benefit from a preferential price list and various offers which help the weakest labels to survive. The online distributors (Zimbalam, Itunes, etc.) They are the new main way for music industry to distribute all their catalogues to all the digital platforms. Itunes is the most powerful distributor with more than 10 billion dollars selling in 2009. Zimbalam 30 is a new (since 2009) big French digital distributor (affiliate to st BELIEVE 1 digital European music distributor). It gives to the artists who upload their music (for digital distributions) until 90% of the royalties’ incomes. It has also a large list of partners like Rhapsody, fnac.com, etc. _______________________________________________ 28 http://www.paypal.com/ 29 http:// CD1D.com/ 30 http:// Zimbalam.com/ 24
    • It also in fact, a good way for independents artists and independents European labels (like the famous Jamendo) to distribute their music catalogues online which this simple website. They also propose some promotions offers like widgets, automatic links in other platforms for share the artist’s music, and some main information about artists (bio, news, etc. like a mini website). It’s in fact a simple and interesting way for everyone to be distributing on Internet, instead Itunes, which takes more money on royalties… Zimbalam is run from Believe Digital's offices in Paris, France but has offices and staff around the world, including dedicated staff in London, Germany and Italy. Some words about the famous digital distributor, iTunes, which is since 2001, a proprietary digital media player application, used for playing and organizing digital music and video files. The program is also an interface to manage the contents on Apple's popular iPod and other digital media players such as the iPhone and iPad. Additionally, iTunes can connect to the iTunes Store via the Internet to purchase and download music, music videos, television shows, applications, iPod games, audiobooks, podcasts, feature length films and movie rentals (not available in all countries), and ringtones (only used for iPhone). iTunes is also available in more than 25 international languages, which makes it more attractive for distribute and sell digital music on Internet. After resuming and seeing the main digital music business structures, and correlations between the different actors (distributors, digital platforms), we will explore deeply, what are the digital marketing strategies behind the digital music business, like the direct to fan strategy, and the monetization (the reason to buy). 25
    • SECOND PART - THE DIGITAL MUSIC CASE STUDIES 1) The main digital music strategy bases: We open our case studies concerning international digital music strategies (more using right now in USA), with the main digital music strategies bases, concerning the ‘direct to fans’ between artists/labels. a) The future of Music Business Models (= CwF + RtB) It's no secret that there's a lot of concern these days about what the music industry willlook like going forward. Social Consumer behaviors Because of the piracy increasing and the music industry income’s lost, consumers becoming more attractive to don’t buy online music because they can have it easy for free. These behaviors are very propagated in our society and become a new challenge for new music digital business, Instead of social education role; the music industry has to develop new online strategies to sell more digital music on Internet. They (IFPI 2010 report) also involved across the world more than 70 aware hacking programs. However, it is certain that consumer education alone, while it has effectively raised awareness of the legal and ethical issues around unauthorized downloading, does not change consumer behavior. For reaching closer consumers, music industries have to develop legitimate music offerings and meaningful deterrence, which become vital online in digital music business influence. Legislation and ISP cooperation The music industry and other creative sectors around the world are seeking to engage ISPs (Internet Service Provider) in curbing digital piracy on their networks. 26
    • For your information, Internet Service Provider is a company that offers Internet access to individuals and businesses for monthly or yearly fees. In addition to internet connection, ISPs may also provide related services like web site hosting and development, email hosting, domain name registration etc. A number of governments however, Including France, UK, New Zealand, South Korea and Taiwan, have enacted legislation to require such cooperation. A variety of things have caused rapid changes in the music market. The competition from other forms of entertainment, like the Internet, movies and video games, have put more pressure on the industry. Consumers have been presented with significantly more options for their entertainment attention and dollars. There's also the ever-present specter of unauthorized file sharing, or music "piracy." While, the industry spent many years fighting the rise of the internet as a distribution and promotion method for music, the labels eventually licensed music to Apple and iTunes, as we said before... It took too long time to recognize that people did want at all DRM (Digital Rights Management)/free music, but they've finally come around to recognize that as well. But the big new questions are all about licensing. New services are starting to show up on the scene, such as the industry's new darling, those are attempt by Choruss and Warner Music, which set up something akining to a blanket license. Numerous innovative startups have suffocated under burdensome licensing terms and just gives consumers more and more reasons to actually use these services, wondering how long each will last until it goes out of business. However, there is another solution applicable: stop worrying and learn to embrace the business models that are already helping musicians make plenty of money and use file sharing to their advantage, even in the absence of licensing or copyright enforcement. The Business Model In simply terms, the model that we will develop soon can be defined as: Connect with Fans (CwF) + Reason to Buy (RtB) = Business Model (by Mike Masnick from Techdirt’s weblog, after made a case study on NIN’s Reznor strategy). It’s one of the best online ways to add value on music, fighting against free music available on Internet. Techdirt’ is a weblog that focues on technology nezs and tech-related issues. It sounds simple, if you understand the basics, and can be incredibly lucrative. 27
    • The problem is that very few seem to fully understand how this model works. However, let's go through these following examples, through our case studies argumentation and Virginie Berger’s articles (Don’t believe the Hype): Trent Reznor, the man behind the band Nine Inch Nails, has done so many experiments that show how this model works that it's difficult to describe them all. He became a true leader in showing how this model works in a way that has earned him millions while making fans happy, rather than turning them into the enemy. Reznor has always reached out to his fans, and has an amazingly comprehensive website, with forums, chat rooms and many other ways of interacting. He encourages fans to better connect with each other as well. While companies like Warner Music forced all the music videos of their artists off YouTube for many months, Reznor actually aggregates all the videos his fans take at concerts (he encourages them to bring cameras) on one page on his own website. He does the same for photos. He released a (free) iPhone app that allowed fans to locate each other, and communicate with each other, while sharing photos and videos as well. In fact, this is all about connecting with those fans, and helping them to become better connect with each other, so they feel like a part of a club. From there, he gave to fans, real reasons to buy. Lately, he took the releasing of a lot of his records for free online, knowing that the music will show up on file sharing sites anyway, so he saw no reason to fight against it. After, he added many other options that people might want to buy. With his release of the album Ghosts I- IV, he released all the tracks under a Creative Commons license that allowed anyone to share them online for free. He also set up some cool "reasons to buy." You could get the two discs CD, if you wanted, for just $10. Above that, though, was a Deluxe Edition Package, for $75. It was, effectively, a box set, but around a single album. Beyond the two CDs, it also included a DVD and a Blu-ray and a photo book of images. This experiment got even more interesting was that he offered up the $300 Ultra-Deluxe Limited Edition Package; of which there was a limit of just 2,500 available. This was an even more impressive "box" that also included the songs on high quality vinyl, and some beautiful ‘giclée’ print images. But, most interesting of all was that those limited sets of 2,500 were all signed by Reznor himself. It took just 30 hours for all 2,500 to sell out, bringing in $750,000 in just over a day. For only music that he was giving away for free. 28
    • But, by connecting with fans, and giving them a reason to buy, they did. In the first week alone, combining all the other offerings for Ghosts I-IV, Reznor brought near $1.6 million. Again, this was for music he was giving away for free. The idea that you "can't compete with free" or that free means there's no business model remains a myth. As Reznor and others have recognized, when the music goes free, it opens up new opportunities for better, stronger, more efficient business models. Reznor's next album, The Slip, was released just a few months later, and again, was given away entirely free, but it was released the very same day as he announced his next Nine Inch Nails tour. All he asked, if you wanted to download the music, was that you provide an email address. He then gave fans the option of what quality to download the songs. It was an interesting digital strategy for way up to lossless FLAC files. All for free again for this second case. But, if you downloaded the files, you also learned about the tour, and the tickets were quickly snapped up. The free music didn't hurt Reznor's ability to earn money. It more enhanced it, in fact. By connecting with fans and giving them a reason to buy, he's been able to thrive. Some people have criticized that Reznor is not a representative example. After all, that huge fan base came about in large part because of his success under the "old" model, where he was signed to a major record label that helped promote his album and turn him into an international rock star. While some may quibble with how much the label actually helped Reznor, it's worth exploring how this model has also worked for many other artists, from the superstars to new up-and-coming artists. Josh Freese is a session drummer based in Los Angeles, who appears on well over 100 albums and performs with many different bands. He's played with (among others), NiN Inch Nails, Guns 'N Roses, Sting, Devo, The Vandals, the Offspring. Yet, outside of certain musical circles, he doesn't have a huge individual reputation with fans. So, when he released his first solo album, called Since 1972, in March of 2009, he decided to set up a system similar to Reznor's Ghosts I-IV experiment, but made it more fitting to his own personality, which meant making the options extreme and hilarious. There were cheap options to get the music and CDs, but at $50, you would also get a personal 5 minute "thank you" phone call, where he said you could ask anything you wanted (his suggestion: "Which one of Sting's mansions has the comfiest beds."). There was a limited $250 option to get lunch with Freese at a PF 29
    • Changs or a $500 chance to get dinner with him at Sizzler. The lunches sold out in about a week. Then Freese took the model to a different level altogether. At $2,500 (limit of 5 available), he would provide a drum lesson, where you'd get to keep one of Freese's snare drums. You'd also visit the Hollywood Wax Museum with Josh and one of a rotating list of his rock star friends (depending on who was available). Finally, you'd get to take and keep any three items from Josh's closet. At $10,000, you'd get dinner with Josh and a rock star friend, before hanging out at Disneyland (where Josh's father worked for many years and where Josh got his start as a professional drummer) with Josh. And at the end of the day, you would get to keep Josh's Volvo station wagon -- after dropping him off at home. Obviously, there was only one of those available. There were also $20,000 and $75,000 options available, including many more offers, like having Josh join your band or be your personal assistant for a few weeks. You'd also get to go on tour with Josh. He would also write and record a five-song EP about you. A teenager in Florida actually purchased the $20,000 option, and spent a week with Josh, including a night on the Queen Mary cruise ship, a pizza party at Mark Mothersbaugh (of Devo)'s house and a game of mini-golf with the singer from Tool. Once again, by connecting with his fans, and giving them something of scarce value, Freese was able to create a business model that worked. Modern Music Marketing Basics This little part is inspired from Virginie Berger’s online lessons developed for her French blog Don't Believe The Hype. DBTH is an online resource and self- directed learning opportunity for DIY (Do It Yourself). Music is one of the most entertaining forms of art, and people want to be entertained. The great artists know this and create persona and brands that transcend everyday life. To a large degree, it is all make believe. If you want to be successful as an artist, you have to entertain people and make them feel you and to associate with your brand. The trick is creating music and personal reflects what you are all about. Why should anyone care about artists? The record labels and all artists’ advisors should wonder about the following questions until you find the answers. For create one artist’s brand, you have to take 30
    • a hard look at what you are good at and what you stand for. What is the overall mission behind music? You should also wondering what are you trying to say? What is the main message? Why should anyone care? What do you want them to remember? All the best bands, and all the best music, are manufactured, thought up, packaged, and brought to market. Consumer and Mass media have to remember and understand your own and specific vision. How does the artist see himself, how do he wants to project itself onto its audience, and what are the ultimate goals? If some artists want simply to create a musical “character” that people can relate to. They will just need to be able to understand what you are about. They have to think more about some favorite artists and what their character is like. Prince, Kid Rock, Jay-Z, Sting, Usher, Marilyn Manson, Norah Jones; they all having personalities that they bring to market in different ways. It is interesting and easy to see what they are all about and this is achieved by careful packaging. Present a Genuine and Unique Story It is very important that your character and your story be genuine. That does not mean that you shouldn’t make something up, or project an image that is much bigger than life, but there has to be some substance behind it and something that is a reflection of you and what you are all about. You will have to live with the brand that you create, so make it something that you are comfortable with. What do you believe in, what is important to you, where is the well from which you are going to pull your material? It is also important to be unique. If you are “just like” another band then it is going to be hard to differentiate yourself and stick in people’s minds. How can you be different? This is especially important when entering the marketplace. There is so much music out there, and so much noise to cut through, that you have to give people something to grab onto and really notice if you are going to have any chance of breaking through. Something different is the key. These artists have to create their own team, including manager(s), lawyers, promo team, public relations, distribution (physical/digital), Radio promoter, web design, booking agent… 31
    • Find a Need and Align Yourself Many artists/writers sing and write about issues that they believe in and create songs that can create a difference in someone’s life. This does not have to be your entire career or the focus of your brand, but creating music that reflects societal issues and challenges can help you find and build an audience. Music has a long history of driving social change. What do you care about?By thinking through these issues and trying to wrestle a brand definition in your mind, it will help you with all the rest of the marketing and promotion that you have to do. You will know where you are coming from, what your message is, and how to present yourself. It will guide the creative work of designing your packaging, web site, videos, messaging, and publicity campaigns, and give you direction and substance. b) The ‘Direct to Fan’ (D2F) Today, each artist (and also music labels) has to be strongly present in the digital music business. They are also main web marketing bases, and direct-to-fan strategic plan for rich easier and longer all sorts of fan. We will see soon that they are three sorts of fan in music industry… However, they have to establish and update a complete fan base for many reasons. These reasons are referred to ‘direct-to-fan’ marketing plan. It’s also a good way for them to develop and secure the loyalty of their different fans and increases the selling of their music, which is online this time! Virginie BERGER listed the main reasons, the tools and the interests to create and update a fan base: The Direct-to-Fan Marketing Plan Strategy. For making an artist more profitable and selling more money on their last release and all sorts of merchandising, labels have to integrate the ‘Direct to Fan’ theory which is all about connections between the artist and their fans. Ms. BERGER suggests in her blog the key actions to do for practice the D2F theory: 1) Establish Goals 2) Craft Product Offers 3) Create Content 4) Formulate Value Proposition 5) Analyze & Optimize 6) Apply Pareto Principle 7) Repeat, iterate, Experiment 32
    • They are three stages of ‘Direct to Fan’ strategy, artists have first, creating awareness, making connections and in final process, monetizing. This is all about alert, connect and sell… Different types of fans In the musical industry, we distinguish three types (chaps) of admirers: the occasional (80 %), the regular (15 %) and the truths, “true fans “(5 %). The occasional fans are the ones who pirate most, seduced for example by a piece spread (broadcasted) on the waves, without being interested in the artist. The regular fans follow the artist on the social networks and buy their music. They have the potential to become real fans, provided that the artist gets closer to them (via a Web site, exclusivities, etc.). The real fans, them, would be ready to buy all that sells the artist, to go many kilometers to follow the tour, etc. " We cannot monetize with all the fans, it is necessary to address to those of whom we are safe (sure) that they are going to buy ", namely the regular fans and the true fans, notices Virginia Shepherd, consultant in musical marketing and blogger. 80 % of sales result from these 20 % of customers. Generally, the regular fans and the true fans, notices Virginia Shepherd, consultant in musical marketing and blogger. In fact, she announced that 80 % of sales result from these 20 % of customers. 1000 fans theory (by Kevin Kelly) According to Kevin Kelly 31, there is the approximate number of ‘true fans’ for permitting an artist to be paying enough for continuing doing music. The long tail is famously good news for two classes of people; a few lucky aggregators, such as Amazon and Netflix, and 6 billion consumers. ‘Of those two, I think consumers earn the greater reward from the wealth hidden in infinite niches’. 33
    • A creator, such as an artist, musician, photographer, craftsperson, performer, animator, designer, video maker, or author - in other words, anyone producing works of art - needs to acquire only 1,000 True Fans to make a living. A True Fan is defined as someone who will purchase anything and everything you produce. They will drive 200 miles to see you sing. They will buy the super deluxe re-issued hi- resolution box set of your stuff even though they have the low-resolution version. They have a Google Alert set for your name. They bookmark the eBay page where your out-of-print editions show up. They come to your openings. They have you sign their copies. ‘True fans’ buy also the t-shirt, and the mug, and the hat. In fact the Direct to fan (D2F) is more profitable to the artist than the traditional music industry’s marketing strategies. For example, the average revenue per sale for iTunes is less per $3 instead of $20-$50 for the average revenue Per Sale by D2F (on TopSpin 2009 sells 32). Develop Direct Relationships With Your Fans There are many ways to leverage direct-to-fan marketing, and the advantages are powerful: • Use widgets and social media to market your music all over and leverage your fans as distributors • Use email, twitter and text messaging to directly market your music to fans. • Leverage the power of the web to create links to your music everywhere. • Have ownership of the fan relationship and develop it over time. Drive people to your web site. • Gather and build the data required to build lifetime fan value and drive your musician business. • Integrate your marketing across social media with widgets, email, and SMS. • Provide instant gratification to your fans and a connection between you and them. _______________________________________________ 31 Her blog, The Technium, the 1000 true fans article, http://www.kk.org/thetechnium/archives/2008/03/1000_true_fans.php 32 http://www.topspinmedia.com/ & Ms. Virginie Berger personal researches 34
    • In fact, there are many companies available to help you address the direct-to- fan opportunities, and you can choose among them to meet your needs including Topspin, Nimbit, Bandzoogle, Artistdata, Mozes and lots of others. You may find that one company has everything that you are looking for, or that you are better off picking and choosing certain features and capabilities from different vendors to build your own direct marketing machine. There has never been a better time to take control of your career and drive it forward. 2) The express to fan dirty: give a reason for buying The strategies of contents: CwF (Connect with fans) ‘Connect with fans’ Today it’s really easy to get music for free thanks to Internet and the P2P hacking files. That is why artists have to use some more special connections with audiences. The main goal is to keep their audiences. That is why artists have to add some more special value on their music for stopping people going downloading for free the same music. But what can be more interesting than getting music for free? The ‘connect with fans’ theory answers to that with one simple theory applicable: CwF + RtB = $$$ (developed by Malnick/Techdirt) 33. In other words this equation means if there is a connection with fans and a reason to buy for them, then digital (or not) music will be selling more, and make the artist profitable (as we saw before through many examples). Concretely, it is all about getting closer, and touches a largest number of his fans, to stick to public’s artist. Several artists dashed into the concrete application of this theory with a certain success. We shall think naturally of Radiohead, NIN whose leader Trent Reznor is actually one of precursor of this theory, Metric whose returned in 2008 were the most band won money during 4 years, Corey Smith or still Amanda Palmer, the singer of the Dresden Dolls, who explained that she won $16 000 in a month of sale of merchandising specialized on Twitter and by having nothing putting on sale 30 000. ___________________________________ 33 Virginie Berger’s article, Une formule alternative pour le nouveau business model de l’industrie musicale ? , November 26, 2009, http://digitalmusic.tumblr.com/post/258229756/une-formule- alternative-pour-le-nouveau-business-model 35
    • We can complete the last part on CwF + RtB theory with some Techdirt’s online recommendations (analyzed in Ms. Berger’s blog): ``It is necessary to create a feeling of membership and exclusivity (…): 1. Give some songs free of charge and regularly in free DRM. 2. Collect the email addresses of your fans. It allows you to start a database of your prospects. It also good for informing your fans of what you make and when. Do not hesitate to thank the users who subscribe to your list mailing (a free title, a t-shirt; they show commitment!). 3. On your website: update constantly your site with the contents, the photos, the videos, the blogs. Throw of bulletins, to begin a community. Naturally, be present digital platforms like MySpace, Facebook, Twitter and the others. But you have to tempt your fans to return often on your site. Engage your fans! 4. Do not hesitate to advance regularly new pieces of your music. Let us pass in $$$: how to give some financial value to the free? 1. Visit Topspin and BigChampagne to be able to sell everything and manage from your website. 2. Offer prémium packages in limited editions. Think of something special that you would like to have as fan. Sign these packages for example. Ask to your fans to create the packaging… 3. Base your pricing on what you think you can sell (volume) 4. Offer various prizes and package. From 1€ to 300€ for example (like Fanfarlo did) 5. Sell the merchandising, the vinyls, posters or join these products with your purchases of package 6. Sell applications (album is dead, long live applications!) and remix 7. Sell exclusive videos, interviews, behind the scenes 8. Allow your fans to submit their own contents and sell help (for example of the best illustration of a vinyl album) 9. When you will have advanced several pieces on your site, nothing prevents you from packaging them by adding to it several still unknown song titles and to sell it as a collector's item in a special packaging. 10. Put on iTunes by paying all that you put in free in your website. The iTunes consumers are not your true fans. It is about more traditional fans who will buy on iTunes 36
    • (as tested and validated by NIN) even if it is free. 11. In summary, think about all that you could sell and that we do not find on a Torrent. You will not sell on your website a title which we hear in the radio and which is sold on iTunes; On the other hand, you will sell the demo studio, the video or the T-shirt which you carried. You will sell a premium album signed by your hand accompanied with a t-shirt. You will sell a single, which can be remixed by your fans (open music / creative commons). In fact, you just have to create the experience and give the reason to buy. b) The CwF + RtB = $$$ application and examples Connecting with Fans (CwF) and the Reason to Buy (RtB) can work well. However, some still complain that he's a product of the "old" industry, even if he was little known outside of it. The example is Jill Sobule, who had a hit song in 1995 with "I Kissed A Girl" (not the Katy Perry song). Since then, however, she's been dropped from two record labels and had two independent labels she was signed to go out of business. When it came time to record her latest album, she decided to get her fans to help fund it. She'd already done an excellent job connecting with her fans, regularly interacting with them on Facebook, where she would hold fun contests each day and actually chat with them and respond to questions. She launched a website called "Jill's Next Record" that -- like Reznor and Freese -- offered up many options for how her fans could support her to fund a new album. They could pay $200 and get free access to any shows for a year. They could get their name mentioned on a "thank you" song. At $5,000, she would do a home concert at your house. She even noted you could charge for that one, and maybe even makes some money. She ended up doing five or six such concerts. At $10,000 (described as the "weapons grade plutonium" level) you could sing on the album. This was meant to be a joke, but a woman in the UK purchased it, and Jill had her flown out to LA where she did, in fact, appear singing backing vocals on the album. Her goal was to raise $75,000, and she had no idea if she'd be able to reach that number at all. Yet, she broke through that number and ended up raising over $80,000 in just 53 days. With that, she was able to go into the studio and record a full- scale production, including hiring famed producer Don Was to handle production. CwF+RtB worked again. 37
    • Again, some complain that Jill is not representative, due to her hit song in 1995. Though, again, they'll ignore her being dropped from two record labels and having two others go out of business. So, let's look at Corey Smith. In the earlier part of this decade, Smith was a high school teacher, playing open mic nights on weekends. But then, he started focusing on building his music career. He started playing numerous live shows, and really worked hard to connect with fans. He gave away all of his music for free off of his website, and used that to drive more fans to his shows. On top of that, he offered special $5 pre-sale tickets to many shows, which has a useful side effect: his biggest fans would convince many others to go as well, building up his fan base, and getting more people to go to more shows. He tried pulling his free music off of his website as an experiment, and saw that his sales on iTunes actually dropped when he did that. In 2008, mostly thanks to live shows, Corey was able to gross nearly $4 million. While giving his music away for free. Connecting with fans and giving them a reason to buy worked wonders. Jonathon Coulton was a computer programmer. In September of 2006, he decided to write, record and release a new song every week for a year -- with all of the songs being released under a Creative Commons license, so anyone could share them. And share them they did. Coulton became a cult sensation, and was making a good living within months of this decision. His fans were supporting him along the way, even creating music videos for every song he released. He started using services like Eventful to more strategically target concert opportunities. If enough people requested a show in a certain location, he knew it would be profitable and started "parachuting" in to do shows that he knew would make him money. Again, by connecting with fans and giving them a real reason to buy, he was able to build up a great following and make a good living. Connecting with fans and offering them something fun and unique to buy had worked wonders. To date, she hasn't received a single royalty check from Warner Music on her album. Matthew Ebel is a singer in Boston who started building a fan base by playing live and actively participating in social networks and other sites. He started regularly performing in Second Life, for example. At one point, he decided to set up a "subscription" backstage pass offer, whereby fans could pay $5, $10 or $15/month to get various benefits -- including access to new songs every couple of weeks, as well 38
    • as having new recorded shows sent to them. Depending on the level of support, they could get access to special shows, gift bags or other opportunities for unique offers not available to others. Ebel has discovered that he's making enough so that music is his full-time job. Subscription revenues represent nearly 40% of his income, which is about equal to live gigs and sales of CDs and digital songs combined. Connecting with fans and giving them a real reason to buy has made it so that he can have career as a musician. Moldover is an electronic musician based in San Francisco. Being in such a high tech hub, he had an interesting idea for his next album. Along with the music itself, the CD case would be a working circuit board, with all the songs spelled out in soldered electric circuits. These connected various components to make the CD case itself an instrument. Pushing a button on the side of the case would light up the center and make a noise, which could be modified through a pair of light sensors, creating a virtual therein. The case even had a line out jack, so it could be plugged into a computer or an audio system. The CDs themselves were sold for $50, and Moldover discovered the demand was far stronger than he expected. Yes, even though we're told that no one will pay for music (without strict copy protection), this less well-known artist is doing brisk business selling $50 CDs. Of course, these are just musicians, but these sorts of models impact the wider ecosystem. Companies like TopSpin, Nimbit and Kickstarter are making this work today (for artists big and small). TopSpin has helped enable musicians to better connect with fans and give them a reason to buy over and over again -- and found that, when it's done right, people absolutely buy. One of TopSpin's artists recently had an average transaction price of over $100, and multiple artists have seen their average transaction price at over $50. The claim that fans just want stuff for free is not borne out by these examples. Across all of TopSpin's artists, they've seen an average transaction price well over $20 -- more than the cost of your average CD. By enabling bands to connect with fans while giving them something of unique value to buy, beyond just the music, these bands are thriving. And, of course, there's a role for labels to play as well. Terry McBride runs Nettwerk, a Canadian-based label that has tremendous success embracing these sorts of models with a bunch of different artists. McBride has declared that copyright won't even matter within a decade, and he's acting accordingly. But he's making sure that his acts really do connect with fans. With a recent album release by the hip-hop 39
    • artist K-OS, before the album was released, they released all the stems from the songs to let the fans do their own mixes. These weren't "remixes" because the original mixes weren't even out! Rather than worrying about an album leaking, K-OS and Nettwerk purposely got the core of the music out by themselves and let fans do what they wanted with it. They then set up a system to submit the fan mixes and to vote on them, such that the best mixes were then put on their own album, and both the "professional" and the "fan mixed" albums were released at the same time -- leading many fans to buy them both. Both albums, separately, but at the same time, ended up in the top 50 on the charts. As you look through all of these, some patterns emerge. They're not about getting a fee on every transaction or every listen or every stream. They're not about licensing. They're not about DRM or lawsuits or copyright. They're about better connecting with the fans and then offering them a real, scarce, unique reason to buy - - such that in the end, everyone is happy. Fans get what they want at a price they want, and the musicians and labels make money as well. It's about recognizing that the music itself can enhance the value of everything else, whether it's shows, access or merchandise, and that letting fans share music can help increase the market and create more fans willing to buy compelling offerings. It's about recognizing that even when the music is shared freely, there are business models that work wonders, without copyright or licensing issues even coming into play. Adding in new licensing schemes only serves to distort this kind of market. Fans and artists are connecting directly and doing so in a way that works and makes money. Putting in place middlemen only takes a cut away from the musicians and serves to make the markets less efficient. They need to deal with overhead and bureaucracy. They need to deal with collections and allocation. They make it less likely for fans to support bands directly, because the money is going elsewhere. Even when licensing fees are officially paid further up the line, those costs are passed on to the end users, and the money might not actually go to supporting the music they really like. Instead, let's let the magic of the market continue to work. New technologies are making it easier than ever for musicians to create, distribute and promote music -- and also to make money doing so. In the past, the music business was a "lottery," where only a very small number made any money at all. With these models, more musicians than ever before are making money today, and they're not doing it by worrying about copyright or licensing. They're embracing what the tools allow. A 40
    • recent study from Harvard showed how much more music is being produced today than at any time in history, and the overall music ecosystem -- the amount of money paid in support of music -- is at an all time high, even if less and less of it is going to the purchase of plastic discs. This is a business model that's working now and it will work better and better in the future as more people understand the mechanisms and improve on them. Worrying about new copyright laws or new licensing schemes or new DRM or new lawsuits or new ways to shut down file sharing is counterproductive, unnecessary and dangerous. Focusing on what's working and encouraging more of that is the way to go. It's a model that works for musicians, works for enablers and works for fans. It is the future and we should be thrilled with what it's producing. After having seen the main actual digital music business strategies, we will make our final recommendations for the French music industry about online strategy…. 41
    • THIRD PART: PERSONAL RECOMMENDATION: Having seen and analyzed the main digital business model strategies, we can give you our personal recommendation about marketing/communication strategies for the music industry in case of digital music business. We remind you that our problematic was based on the way the digital music business model is being used and integrated in the current worldwide music industry crisis. Here, we will suggest through three main actions, to the global music industry and artists how to integrate their online strategy to the current digital music business model. a) ‘Connect to fans’ & ‘Reason to buy’ = $$$ First of all, we can again take the ‘direct-to-fan’ theory that advises music records and artists to establish a strong list of targets in order to create and share a good communication through online digital music strategies. Before ‘monetizing’ your fans, you must to learn exactly who your fans are, and if you want to sell, to be represented in music industry, and of course which type of relationship you want with your fans. Music records have to help more artists to build a new and strong online marketing/communication strategy before launching a new release on the Internet and in music stores. Before all the online music communication (and marketing) strategies, artists (through their music record) must ask themselves who they are exactly, what their music style are precisely, and their first music tools and experiences. As Ms. wrote in her personal blog, artists will go nowhere if they are not clear about their marketing targets and on their fan data-bases at the start. The fan databases are the second main action to do for better targeting of the appropriate marketing online music strategy. Music records and their artists have to encourage more fans and music consumers to subscribe more to their digital platforms (Vevo, Youtube for example), which can be a very good digital intermediate making connections between the digital music store and the digital artist’s website. Secondly, we advise before you build and share strategies such as ‘connect to fan’ and the ‘reason to buy’, to build and develop a strong digital image on your personal website. For completing the Ms. Berger’s blog and articles, we will suggest to artists (through music records again) to create an attractive website, that is new, simple, equipped with the latest news, the discography, main links to other digital 42
    • platforms (My Space, Facebook, Itunes, etc.), and of course a biography, photos/videos, and other media supports. Indeed, the most important tool of the artist’s website is to often create and update many virtual interfaces in order to improve and start launching communication between artist and their fans. They can in fact create spaces dedicated to forums, chat rooms, and to put several bonds and interfaces allowing the fans to communicate with their artist. We suggest strongly organizing many contests, to involve the fan community in your music life (for example: photos and upcoming release’s covers creations contests, etc.). All of these actions and interfaces will might make your fans want to regularly visit your website and see (watch, listen to) your general and musical actuality. Artists should also leave some personal messages, in special part dedicated like the artist’s blog. Giving news to their fans permitting artists to maintain strong and privileged relationships with them. This is the beginning of the ‘connect-to-fan’ theory and the ‘reason to buy’ online strategy and application. If your online communication is well developed, you will very quickly take off again and spread on the Internet, thanks to the word of mouth, which can bring artists into the future star 'niche' of the Internet! You can begin after these first online actions to attract your ‘true fans’ to buy your collector of special merchandise around the latest release. If you reach near 1000 thru fans, then artist could begin become profitable in terms of their music records, which is what digital music business is searching after all, selling their music on the Internet. But you also need another main digital tool… In fact, artist and labels have to redefine their consumer by product; establish their objectives associated to a similar offer. They also have to create web sites, contained integrating the fans in a circle of sales. They also need to collect data, and to measure their performances; optimize their countryside. Always repeat, improve, and try out these actions until reaching 'true fans'. Never forget adding value to music rivaling free offer music online. b) Be present on digital platforms and create your own team We have to be clear, without any presence on digital musical platforms like iTunes, Topspin or Spotify, artists will never be able to sell on Internet. That is why the artist, has to invest money and making special contracts on many digital platforms to sharing and selling more digital music on digital e-trade 43
    • (e-commerce). Of course, some of the digital music platforms are only dedicated to independent artists, who will prefer to leave music record labels, and do it all alone. If you are not sure how to manage your personal website, booking dates, and promotions for TV, radio, or just managing your sales, we strongly recommend to artists to create their own team with a manager, including press relations, manager(s), lawyer, a promo team, public relations, distribution (physical/digital), radio promoter, web design, booking agent, etc… The best thing for an artist is the be signed with a major record label, because they normally have all these actors working or your music and your promotions through different systems. It’s not easy for artists alone to get into and understand the online and digital business models bases. For practicing well all of them, you need to have the right people and the best potential artists (which will be enough profitable with their sells on digital and physical music markets). Music labels have also to have the right people for doing each task, and not combine all the different tasks into one. Indeed, it is not good anymore for some major to mix offline and online marketing director, because you cannot communicate the same way offline (traditional media like TV, radio, press) as online (internet). We should in fact mix communication and marketing in majors’ strategies, which are very close in online digital music business strategies and strongly separate the offline and the online music strategy. c) ‘Do it yourself’ and ‘direct to fan’ In fact today, we suggest two different options for an artist today to communicate in the digital music business: Choose a major (music label) for creating an online strategy like we already described above. We suggest for artists to begin their musical contract on international and more precisely on American music records, because they already use digital music business models and are more practiced online (digital) music strategy to their artists. Major (or music label) might communicate and integrate the artist to online digital music strategy mixing the ‘reason to buy ‘ &’ connect with fan theories. Don’t choose a major (or a music label) and do it all yourself (‘Do it yourself’). This means that you accept to have less budget and tools to create and share your online digital music strategy to reach your ‘thru fans’ and for becoming famous. However, it’s not because that you have less money that your online communication 44
    • can be worse. If you’re doing and developing a good and attractive online communication, and making enough connections with your fans and your audiences, you can maybe become a certain ‘niche’ on the internet, then you can continue growing alone (as an independent, selling music on digital platforms like Topspin or Bitcamp), or be signed with a major (or as another record label), which can making you more money, and sign another contracts (for advertising, selling more merchandising, or another sell category…). Finally, today music is selling more and more on Internet through digital music platforms. This is the current trend and evolution of the music industry, which lost its physical support as mentioned in the introduction and the first part of this analyze. In fact, today artists have many ways and options for selling music on internet, through digital music platforms tools, but by all the way of their choices, we strongly recommend them to always use their online digital music business strategy for making their thru fans and fans want to buy their music and to making always on (updating) their connection between artists and fans. Before all developments of strategy online, artists and labels have to take time for defining the weak points and strong points. They also have to establish various objectives: #1 Who are you looking for? (label,artist, group, kind of music); #2 What you sell (What is your offer)? ; #3 Who is your audience (age, kind, CSP.)? ; #4 What do you want? To identify your actions: On what you have to concentrate your efforts to achieve your goals? After all, we suggest you, after decided your own objectives and targets, to not to forget during the development (and practical) of your musical strategy online, to communicate on: Graph and branding, Press Kit, Fan Bases Development, Relations media, Lives Tour, Web sites Social Media Strategies, Distribution, and other sources of revenue… All of these recommendations can be applied, used and addressed to everyone (i.e. label, artist) without exception. It’s up to them now, to adapt and apply these reflections, for becoming the future ‘niche' of Digital music market. 45
    • General Conclusion: For beginning to conclude on our memoir, we would like to affirm that, in fact today we cannot exactly speak about a musical industry crisis like all professionals use to do. Indeed, these last years, the Digital Music Business Model bring to music industry a new evolution to the music industry, which was losing a lot of incomes on physical music sales. The digital music become to get back the loose of the physical music sells, which is a proof that today we have a metamorphose of the music industry, thanks to the digital revolution and the P2P’s increase. We have seen that today the online digital music business strategies are using to make more connections between artists and fans, for rich closest thru fans, and given them (to all fans) the reason to buy, which makes the digital music profitable. Lady Gaga was a good example, that Digital Music Business is the future of the music industry success with more than 500 millions downloaded through digital music platforms, which are becoming the main actors of online distribution for artist. Today, majors and independent music records might use more these online digital music business models for integrate more the worldwide music industry to this new evolution of Digital Music. Indeed, we can also say that the huge closing of music stores is a large error in terms of discovery, distribution and diffusion. In face, this is not on music stores the profitability’s problems, but more on majors’ digital music’s investments, but that is another reflection… Finally, music industry is not the only sector touched by ‘digital revolution’ and P2P hacking (cinema and video games are so much more downloaded). But the many artists’ showed that artists and music records can sells and fight strongly the P2P hacking and make the ‘digital revolution’, the new actor permitting to fight against hacking. ‘Digital revolution’, is becoming the new actor preaching the diffusion and the affiliated profitability of the 2010’s new music industry. The new digital music marketing business is in fact a real new opportunity for music industry to be present on the online market. Labels should take the successful example of the Warp label (British independent label), and artists can also create and sell their music online according to Reznor case study. Even if this market, which I would like to work later, evolves so quickly, we just can wish to Digital Music Business a long, and artistic online life. That’s what I like, in this industry everything turn around music and evolves with society changes. Digital Music is one of the actual solutions, but in fact they’re many possible solutions… 46
    • Reading list-sources Books GODIN, Seth, No 50.01: TRIBES or How to Sell a Book (or Any New Idea), France, Creative Commons, 2010, 9 pages LAPORTE, Marc-André, 1000 choses à faire pour réussir sa stratégie musicale 2.0 Tome 1, Canada, Creative Commons, 2010, 39 pages. GERD, Leonhard, MUSIC 2.0 and Co-author of The future of music, Finland, Creative Commons License, 2008, 226 pages. MADDEN, Mary, The State of Music Online: Ten Years After Napster, Usa, Pew Internet, June 2009, 18 pages. CURIEN Nicolas and MOREAU Francois, L’industrie du disque, France, La Découverte, September 2006, 121 pages. Articles - Virginie BERGER, in her personal blog, Don’t believe the Hype: ’’Dis c’est quoi une bonne strategie musicale digitale?’’, March 26, 2010 ’’Comment bien penser ses objectifs pour promouvoir sa musique?’’, January 8, 2010 ’’ Réinvention du modèle économique de la musique’’, 18 November 2009. - Philippe ASTOR, ‘’Marché mondial de la musique enregistrée, un bilan 2009 contrasté’’, Eletron Libre, April 28, 2010, http://prod.electronlibre.info/Marche-mondial-de-la-musique,00726 - Pauline TURUBAN, Fan 2.0, on the blog, Industrie musicale : Ou est passe l’argent ?, March 19, 2010 - ‘Une redéfinition radicale du marketing de la musique’, Musique Info April, 2010 - Michael ROBERTSON, ‘’Spotify, Napster and The Quest For Premium Music Dollars’’, Tech crunch, August 7, 2009 Websites Virginie Berger, Don’t believe the Hype, http://digitalmusic.tumblr.com/ Marc-André Laporte, Donne ta Musique, http://www.donnetamusique.com Olivier Ravard, Where is my Song, http://www.whereismysong.net/ Lucie Robert & Pauline Turuban, Industrie musicale : Ou est passe l’argent ?, http://largentdelamusique.wordpress.com/ Music Power Network http://www.musicpowernetwork.com/default.aspx?mpnid=0103 Some Digital Music Platforms : http://www.spotify.com /, http://www.bandcamp.com/ , www.zimbalam.com/, www.vevo.com/ Study and other sources -The Syndicat national de l'édition phonographique (SNEP) http://www.disqueenfrance.com/fr/ -IFPI publishes Digital Music Report 2010, http://www.ifpi.org/content/library/DMR2010.pdf, January 2010 -The British Recorded Music Industry, ‘’2009 music sales show decline but digital retail market starts to deliver’, 7 January 2010 - LABARTHE-PIOL, Benjamin, BOURREAU, Marc, Le peer to peer et la crise de l’industrie du disque: une perspective historique, ENST, Département EGSH, et CREST-LEI & Université Paris Dauphine, 2010, 34 pages. 47
    • Annex Annex 1 ………………………………………………………………………………49 Basic Social Media Strategy Outline, ecosystem developed by Tom Williams (Berklee Music School). Annex 2 ………………………………………………………………………………50 2009’s assessment of World Music Industry by IFPI Annex 3 ………………………………………………………………………………50 The 2010 music industry tendencies and assessments by 2010 IFPI Report Annex 4 ………………………………………………………………………………51 Interviews: Virginie Berger (digital marketer), Konstantinos Xristoforou (greek singer) Annex 5 ………………………………………………………………………………52 Reading Book reports 48
    • Annex 1 : Basic Social Media Strategy Outline, ecosystem developed by Tom Williams (Berklee Music School). 49
    • Annex 2 : 2009’s assessment of World Music Industry by IFPI Annex 3 : The 2010 music industry tendencies and assessments by IFPI 2010 Reports (page 10 and page 3) 50
    • Annex 4 : Interviews A) Virginie Berger Ms. Virginie Berger is a Music Marketing Machine, Music business analyst, strategist, digital marketer. Her French blog Don't Believe The Hype. DBTH an online resource and self-directed learning opportunity for d.i.y. (Do it Yourself) musicians and music industry entrepreneurs. We prefer to select and reformulate after a long discuss (from the French interview retranslated) the more interesting words and ideas in this interview (concerning our memoir’s subject): 1) What do you thing about the current French music industry? VB : ‘In fact, it started with the P2P hacking. Instead investing in effective in marketing solutions, French majors preferred diversified their incomes, by developing a various offer. They also lost more than ten years has to try to gain lawsuits. This is in fact the fault of the French majors. They actually haven’t really try to change the classical music industry business, which evolved a lot since Napster arriving in the early of 2000’s.’ 2) Why do you think major labels along with independent labels were unsuccessful in their relaunch efforts within the French music industry? VB : ‘The majors’s management has been the same since 10 years, they were no life around disc release. Their strategy’s plan was especially turn on the distribution instead of the relation artist/fan. The majors prefer thiking about the global license rather than more invest them catalagues towards streamings on many platforms (new market to concquerir, called the digital music business market on Internet)’. 3) Can you tell me more about ‘Digital Music’? And what about are your adives for French industry for the Digital Music Business? VB : This is in fact a concept defining the music selling online. However, we use also this term to talk about new marketing strategies of new music industry faces. Their plan strategy was especially turn on the distribution instead of the relation artist/fan. With the digital music, artists can sell and/or promote their music online, thanks to this various tools: the unit of sale, the online radio, the free streaming, the video music pay out, their official sites, the P2P hacking, the mobile and offers telephone (Vodafone offers for example), etc… The majors fix their own systems of rights and the general terms of sale (for paying streaming), towards platforms Internet, for example the collective licence (equalizes) will make it possible to lay off those which requires it. The remuneration of the platform is in fact complex system to understand, its shelterer, and all the rights of the majors, and artists/type-setters, etc. Moreover, approximately, I advise the majors to deeply re-examine their marketing online, redevelopper a new offer turning around digital music for giving more desire to consumers to buy on line and to follow their artists, like for example Spotify and TopSpin did. They don’t have to forget to put the artist in the center of the online (digital marketing) transaction, adding more value to their music. 51
    • B) Konstantinos Xristoforou Mr. Konstantinos Xristoforou is a Greek singer working for EMI GREECE since 1999, he gave us (in Greek), the same answers (except the Digital Music term which was remplaced by the Hadopi/P2P French law), he gave us some ideas and advices which we selected and retranslated here : According to the Greek singer, the hacking is very present in Greece and also in Cyprus (its native country where he sells music). He suggest to music industry going back to the source of these people who share the online illegally music … In addition, is grateful working for EMI major, because it makes for him all the work necessary for his distribution and promotion around his album ( from the release until the national lives). Nevertheless, this singer seems to be less informt about the new strategies of the digital business models. According to him, it would be necessary to apply the French law (Hadopi) more severely to all the states victims of P2P (music hacking), for giving again to the music, its traditional value. It makes confidence enormously has its recording company, which has good element, goal not out qu' it makes parties off the small core off the 50 best artists selling in Greece. What edge in addition justify its answers and its positioning towards the law anti hadopi (which n' is not the best solution for ms. Shepherd), and his digital less informed in connection with the music. ANNEX 5: Reading Book reports Music 2.0 Essays by Gerd Leonhard Co – author of The future of music. Creative Commons License,This work is licensed under a Creative Commons Attribution-Noncommercial No Gerd Leonhard, 2008, Edit: David Battino, www.batmosphere.com, Printed at: Hämeen Offset-Tiimi Oy, Hämeenlinna, Finland In its first and recent (2008) book, Gerd Leonhard talks about digital music and the next generation of the music industry starting from 2004 (in airplanes, taxis, trains, busses, hotel lobbies, conference halls, and at home). Its first book will focus more on Internet time, because digital music is for him the new business linked to music industry. Its definition of ‘Music 2.0’, is like the new principles that define the next iteration of the music business. 52
    • He defines in its introduction, what will be the eight predictions for the future of music, which will be developed later in the chapters… Here is the main predictions and definition he gave in its introduction: 1. music like water: Music is no longer a product but a service. Music became a product with the advent of recording (records, tapes, CDs) and the formation of an industry that quickly figured out that selling the bottle can make a lot more money than only selling the wine. For the future, think of a “record label” as a “music utility company.” 2. a bigger pie, but cheaper slices: Today’s music pricing schemes will be completely eroded by digital music services (legal and, mostly, otherwise) and by stiff competition from other entertainment products. A “liquid” pricing system will emerge, involving subscriptions, bundles of various content types, multi-channel/multi-access charges, and countless added-value services. CD prices will end up at around €5–7 per unit. But most important, the overall music consumption and use will steadily increase, and – if the industry can manage the transition to a service-based model – can eventually bring in €50–90 per person per year, with 75% of the population in the leading markets as active consumers – the pie will be three times as large. 3. diverse and ubiquitous: A wide range of music will be everywhere, and music will be part of everything that used to be “images only”: from rich media advertising to interactive slideshows to car software to MMS and digital cameras, to advertising in magazines, the audiovisual use of music will soar, and the licensing revenues will explode along with it. 4. access to music will replace ownership: Soon, consumers will have access to “their” music anytime, anywhere, and the physical possession of it will in fact be more of a handicap, or a knack of collectors. Music will feel (and act) like water. 5. multi-point access to music will be the default environment, allowing consumers to fill up their music devices at air ports, train stations, and in coffee shops and bars, using all kinds of wireless connections as well as other on-demand and ad-hoc networking technologies. 6. go direct: Major artists will increasingly rely on their own “brandability” and – via their managers – go direct to the consumers, using their own in-house marketing, branding, and promotion teams. 7. the software pro: The (performing) rights organizations (PROs) as we know them will likely fade away. Complete technology solutions comprised of watermarking and fingerprinting, so-called DRM and (better) CRM components, monitoring, admin/accounting, and instant payment solutions will do the job quicker, cheaper, and, of course, with complete transparency. 8. mobile mania: Cell phones and other wireless devices will eventually utilize and suck up more “content” than any Internet service or P2P client ever has. Real-music ringtone offerings, Multi-Media 53
    • SMS (MMS), Java-based games, wireless streaming audio and video, i-Mode type applications, and other cell-phone based offerings will proliferate very quickly, at first in Europe and Asia, followed by the U.S. I choose this second book, because it gave me all the bases and reflections concerning the context of music industry crisis linked to the Internet trendy. He also explained why and how the music industry came into the crisis situation from 2004 until 2008, with their new way of selling music, communicate. He detailed and explained very well, what is the digital music’s business, and how it can be mixed with the current music industry, which is seeking and losing money. All its proposals are very useful for thinking about the future communication and strategy of the music industry in my memoire’s essay. I have another book in this kind of theme for pursuit the reflection, and starting thinking about my case study and the problematic that I asked. I prefer using international and American books and essays advised by my new memoire responsible (which found so many resources for me!). L’industrie du disque, de Nicolas Curien & François Moreau, 2006, collection Repères, édition La Découverte. In this short French book, the authors present all the main sides of the music industry in the world, and precisely in France. After an historical introduction on the book’s beginning, they talk in a first part about the organization of the industry with their actors. Many statistics, laws definition and organization are explained with economical concept, enclosed this first global insight. Then they analyze on the first hand, the French musical offer recorded, followed by the French musical demand recorded on the second hand is detailed. In a fourth part, they are talking about the numerical revolution, and the Internet piracy (hacking). A huge debate between music records professionals, and many statistics tend to some explications of this current trend. In the two last parts, they explored news economical models (like Bundling and versioning), and redefine the boards’ limits of the industry because of the numerical revolution. This French book is also interesting for being use in my final memoir’s introduction, and for the general context included in my plan. But the statistics included are becoming exceeded by time (2005/2006). I have found also found some recent statistics (2008/2009) concerning the French music industry. I will also use it for explained in some paragraphs, what is the French music industry and how does it work. I will use this book for explaining how this special industry communicates and which strategy was basely used before the crisis 54
    • (near 2004/20ith Napster’s arrival). 55