Music Marketing

Some really interesting comments in the NYT article this afternoon on Atlantic Records statement that their digital sales are surpassing their CD sales. What really struck me was how Atlantic is going about increasing their digital sales. Good quote here:

“I think we’ve figured it out,” said Julie Greenwald, president of Atlantic Records. “It used to be that you could connect five dots and sell a million records. Now there are 20 dots you can connect to sell a million records.”

I really think the same can be said for developing artists. A common thread in my course (as well as the other business courses that we’re teaching here online) is that diversifying your revenue streams and engaging in niche marketing is a big part of making it work for musicians these days. Check out what Atlantic is doing:

Replacing compact disc sales are small bits of revenue from many sources: Atlantic Records’ digital sales include ring tones, ringbacks, satellite radio, iTunes sales and subscription services. At the same time, record labels — Atlantic included — are spending less money to market artists. In the pre-Internet days, said Ms. Greenwald, “we were so flush, we did everything in the name of promotion.” Among the cutbacks are less spending to produce videos and to support publicity tours when a new album is released.

The same principles can be (must be) applied to developing artists. Get your music out to Pandora (who accept indie submissions), start selling ringtones, start selling merch off of your own site, use TuneCore or CD Baby to get your music up on iTunes. Be aggressive with your outreach, and targeted with your outlets.

It only takes a couple hours for a musician to get started with basic online marketing. Setting up an account with MySpace, Facebook, Twitter, uStream, Flickr, Reverbnation, OurStage, Fanbridge, and the dozens of other options is simple, and an excellent first step. But I tend to think that some bands lose sight of the fact that online marketing is not an end on to itself. The most effective online marketing campaigns support the physical marketing efforts as well.

Two examples from this week:

1) Don Bartlett, manager of Joe Pug (via the Lefsetz letter):

“We decided to put an offer up on Joe’s website and MySpace. We told any fan that if they knew anyone who might be interested in Joe’s music that they could send us an email and we send them as many copies of a two-song sampler CD as they wanted. Free. We even cover the postage. To keep costs down, we invested in a cd publishing system that burns and prints them robotically. Each CD has two songs, contact info, MySpace, and a reminder that the full cd was at iTunes. If someone lived near a place where a show was scheduled, we printed that show info on there as well. People requested as few as 2 and as many as 50. We sent all of them. Requests continued to pour in, and the more we sent out the faster the new requests came in. We’re at the point now where we get about 15 a day. Joe writes a thank you in each and every one. And almost instantly, sales took off. [Show] attendance jumped noticeably and MySpace/website action began a steady upward arc. More importantly, we built an incredible database of his most hardcore fans. And after receiving a mailbox full of cds for free, they are willing to do anything to help forward the cause. And it is the ultimate in target marketing…you have people who already like your music passing it on to their friends, whose tastes they presumably know.”

2) Rock/Jam band Umphrey’s McGee

The band is organizing an online pre-sale campaign that gives their fans a reason to encourage others to buy the record pre-sale. They’re announcing it on their Website, as well as using banner ads on their social networking properties. Here are the details from their site:

Much like an Umphrey’s show, no one is exactly sure what will happen with Mantis, the upcoming release from Umphrey’s McGee. The more fans that pre-order the release, the more bonus content we’ll unlock for everyone. We are leaving the amount of additional content and the makeup of some of that content entirely up to you. There are 8 total levels of material that could be unlocked containing over 45 unique & unreleased audio tracks, including behind-the-scenes perspectives, videos, and plenty of quirky surprises. Bonus Material Part I available EXCLUSIVELY to those who pre-order.

Great to see both of these bands nailing the online campaign to affect tangible change offline and facilitate a personal connection directly with their fans.

Music Ally has posted their thoughts on the best online promotions from October 2008. I was familiar with many of these (the AC/DC video in Excel being my favorite), but there’s some other really creative ideas in here worth looking into. Great iPhone app ideas from Snow Patrol, NIN and Pink, and a cool online distribution idea from Ben Folds that leverages iTunes and his live music.

Also: if you are not part of the Twitter train yet, I suggest you give it a look. Microblogging is another great marketing tool that should be considered as part of your overall community-building plan. Even Britney Spears is on board!

Of course giving away a free record is nothing new – huge bands who’ve had major label support throughout their careers (Radiohead, Prince, Nine Inch Nails, etc) have the luxury of releasing free music to their massive fanbases with the understanding that doing so will fill the seats in the stadiums when they are on tour. But how does a band capitalize on free music when they don’t have this built in community, when they are not a household name?

Although Mercury Rev was signed to Columbia for their first two records, the bulk of their material was released by then-independent V2 (Richard Branson’s post-Virgin label). The band has fluttered close to mainstream success (1998’s Deserter Songs is a masterpiece), but has remained an indie favorite playing mostly mid-sized venues in the US.

Indie Label Yep Rock (who signed Mercury Rev for their latest, Snowflake Midnight) has put together a great plan to leverage free music to build up the bands fanbase, and draw interest to their new release. Promotion for the new record draws folks back to their Website (not their Myspace!), where the band is giving away Snowflake Midnight’s companion release Strange Attractor, another full length record. Folks that sign up for the Mercury Rev mailing list get a link to download Strange Attractor as a high quality DRM-free mp3 that can be played on any device. The free release became available on the same day as their paid release hit the stores.

I think this is good marketing: they’re providing a value add for old fans, giving new fans a reason to get on board, and most importantly, collecting a ton of email addresses that they can use down the line to announce tour dates, sell merch, sell tickets etc. And the fact that they are providing music that people can own outright, share, play at parties etc is huge. The fans are part of the action, and are playing a part in making the release of the proper record a true event (via word of mouth). There is SO much music out there, that it is easy for folks to get distracted. Bands need to take special care in keeping their existing fanbase interested, providing incentives for potential new fans, and above all continuing to build their community.

I’ve talked at length about the fact that it’s certainly easier (and cheaper!) than ever to sell your music online using CD Baby or TuneCore as a digital distributor. And while I think it makes all the sense in the world to get your music out to iTunes, AmazonMP3, and the other online retailers, it’s also important to sell directly to the fans that are visiting your own site or blog. Selling from your own site not only provides you with the opportunity for a higher percentage of income than selling through a third party site, but it also affords you the ability to creatively price your music, offer higher quality FLAC or lossless files, put songs up for a limited period of time, or engage in other subscription pricing models (like what Ari Hest is doing) that is not easily possible with third party online retailers.

Where do you sign up, right? Well, that’s the catch. The process of setting up an e-commerce store on your site is not necessarily the most straightforward thing to do. Andrew Dubber, whom I first heard about when he published his free e-book 20 Things You Music Know About Music Online, has a great post on his blog outlining his research on selling music online. He outlines several options from straight up outsourcing it (easiest option of course, but also most expensive), to open-source e-commerce platforms and plug-ins (the most interesting being this free Wordpress plug in).

Check out Dubber’s complete post here.

After accumulating (way too many) CDs since 1987, I’m making the move to converting my collection to digital. The prices of external hard drives have decreased to the point that it makes sense to rip my CDs to a lossless format, and the truth is, while I’m a big fan of liner notes and artwork, I’ve had it with CD storage. And moving the collection is nothing short of a horror show nightmare.

The major problem with digital music for me has been playing my music at home. I’ve been using the Airport Express to wirelessly stream my digital collection to my receiver, which is a huge step up from listening to digital music on tinny computer speakers, but even then it’s still inconvenient to have to control my music selection from my computer using iTunes.

The Slimbox Duet solves this problem for me. The Duet is a two-part (hence the name) digital music solution consisting of a receiver, and the thing that really makes this product special, the remote control device. Modeled after the iPod interface (but with a slightly less responsive scroll wheel), the remote control component hooks up to the digital music library on my external hard drive, allowing me to stream anything from my collection to my home stereo – without getting up from the couch. Also, the system is compatible with streaming radio services like Pandora, Rhapsody, podcasts, and other online resources like the incredible live music archive found at www.archive.org. I’ve had the duet set up for a week, and it’s like a whole new world to me.

While the Slimbox can play virtually all audio formats, it cannot play DRM files – including almost anything purchased on iTunes (which uses Fair Play DRM). All the more reason to purchase from DRM-free online retailers like Amazon, eMusic, or the new Napster mp3 store!

Hot on the heels of Starbucks warning on Wednesday that they expect their earnings to drop to 15 cents a share (down from 19 cents a year ago) in the fiscal second quarter, Starbucks announced Thursday that they were ceding all management responsibilities for its music label, Hear Music, to its partner, Concord Music Group. Starbucks, which cut about 600 positions in February, is clearly looking for more ways to reduce costs.

“As part of our ongoing transformation, we are committed to examining all aspects of our business that are not directly related to our core,” said Howard Schultz, chairman, president and ceo in a press release here. “We have had numerous successes in music and books including eight GRAMMY® Awards and three No.1 books on the New York Times bestseller list. However, now is the appropriate time to restructure our Entertainment business to better align our efforts with our overall business strategies.”

Hear Music, founded in 1990, was purchased by the Starbucks in 1999. In 2007, the company partnered with Concord to release Paul McCartney’s Memory Almost Full, record, his first non-major label recording. Hear Music has also released music by Dave Matthews Band, Joni Mitchell, Paul McCartney, James Taylor, Simon & Garfunkel, and Wilco.

I’m a fan of alternate retail and distribution outlets, and completely targeted niche-marketing campaigns. But I tend to agree with Mr. Schultz in that perhaps managing Hear Music has interfered with Starbucks core market, and the resulting changes are designed to refocus what they’re good at: selling high priced coffee. The fact is that Starbucks/Hear have done some great things for developing artists (including being an instrumental partner in breaking Antigone Rising, whose members are current Berkleemusic students!), but the sales from Starbucks were marginal at best. The New York Times reported last month that on average each Starbucks location sells only two CDs per day!

Well, there’s certainly no shortage of news from the major labels lately. Following recent announcements from Warner (who are presenting a vague idea to charge people a flat fee for all the music they care to download from peer-to-peer sites), and Sony/BMG (who’s head, Rolf Schmidt-Holtz, revealed that he supports the idea of a DRM-free unlimited music service), The New York Times today reported that three of the four major labels (EMI is rumored to join soon) have struck a deal with MySpace to launch “MySpace Music.” The deal will be set up as a joint venture, where the labels will receive an equity stake, and MySpace will control and operate the organization. Reuters news service claims the service could launch in days.

Some interesting points:

• The major’s entire catalogs would be available.
• The labels will stream their music for free, and be paid through advertising dollars (MySpace apparently makes $70 million a month in advertising revenue currently).
• Tracks will be available for download DRM-free, so they can play on any MP3 player.
• The labels will also use the outlet to sell artist’s merch, ringtones, and tickets (which, thanks to the 360 deals the majors are going for now, will provide additional revenue streams for them).
• There is also a possibility of a subscription-based component that would allow users to pay a monthly amount for unlimited downloads (likely through subscription DRM).

It looks to be a real win-win situation for the labels (as well as consumers), apparently made possible through Universal settling their 2006 lawsuit against MySpace for roughly $100 million (which is rumored to be part of the deal).

The only wild card is if folks can be convinced to actually purchase music through MySpace. Shawn Fanning’s Snocap, which folks can currently use to create an online store on MySpace, has not been popular (check out what Derek Sivers, CEO of CD Baby, said about their past arrangement here).

Following hot on the heels of No Depression’s announcement that they were closing up shop, Harp Magazine, another one of my favorites, announced this AM that they too were ceasing publication.

From my old contact there, Jake Flack:

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I am very sorry to tell you that, effective March 20, 2008, I will no longer be the Associate Publisher of Harp. Because of the declining revenues and increasing costs related to print publishing, Harp is discontinuing publishing as of that date. The March/April issue (with Dave Grohl on the cover) will be the last issue printed and distributed. The company is shutting down operations and will not be publishing the May issue.

It’s been my distinct pleasure to work with all of you. For the past five years I’ve been very fortunate to work with so many wonderful people who are dedicated to putting out and promoting great music. I’ve always felt that Harp provided a first class platform for giving independent music a voice that otherwise might not have been heard. We were able to do that because our advertisers shared that vision.

I apologize for the mass email but time dictates this rather impersonal notice. Best of luck to everyone and thank you so much for everything!

Jake

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It’s always a drag to see another positive entity in the music business go down, but I suppose I am not incredibly surprised. When I think of the parties and folks at SXSW that made an impression on me, much of it was online focused: Ioda’s party on 6th and Red River, Imeem’s event, the Ourstage folks, and so on. Similar to mid-level indie labels, I think mid-level music print mags are in for a tough haul, in particular those that are not making a serious push for online business. Online businesses with marketing dollars prefer to spend it on online advertising: certainly keyword buys, but also newsletter affiliation, banner ads, and contextual marketing. With online marketing, you can pinpoint exactly how successful a particular campaign is, and more importantly, online marketing folks know that it is easier to attract someone that is already online than it is to to attract someone that is offline. To survive these days, Harp and others need to monetize their online efforts by creating an online community, that A) folks want to be part of, and B) advertisers see value in.

Those that are not evolving are going to be left behind…

I’ve talked a lot about how TuneCore and CD Baby are great online distribution options for independent bands. The two are set up differently, with CD Baby taking 9% of sales, and TuneCore making money on a $19.98 annual fee plus $.99 per store per record upfront costs. We run the numbers in my course on which is the better option for online distribution, and at low sales, there is very little difference between the two services. But at higher sales figures, there’s quite a bit of difference.

Eliot Van Buskirk at Wired’s great music blog just wrote a quick piece on what Trent Reznor likely paid to distribute his new record, ‘Ghosts I-V’ to Amazon. It’s really pretty amazing:

“Trent Reznor found a great deal for distributing his comprehensive new Nine Inch Nails album to the Amazon MP3 store: going through TuneCore, while keeping ownership of the master recordings and 100 percent of royalties. Now we can see why he was so eager to leave his record label.

This is assuming TuneCore charged Reznor its standard for delivering a 36-song album on the Amazon MP3 store for the first year; I have a question in with TuneCore to try to confirm:

$35.64 ($0.99 per track)

$0.99 to put one album in one online music store

$19.98 charge per album

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$56.61: Total cost to distribute Ghosts I-V to Amazon MP3

That’s not the only efficient aspect of Reznor’s plan. He’s using BitTorrent to distribute the first 8-song volume of the album to fans for free, and the innovative aspect of the release generated lots of (deserved) press attention.”

Trent is using a Creative Commons license with this current release, which I also think is noteworthy