Rage Against The Wrong Machine

When self-appointed guardians of the Internet and rightsholders argue about the fall and the future of the music industry, you can put all of the talking points into two buckets:

Guardians of the Internet
Open, free, free culture, remix, sharing, do no evil, censorship, don’t break the Internet, innovation, value creation, music-will-be-like-water (don’t worry), scale, disintermediation, alternative income sources, patronage, greedy and shortsighted labels, etc..

Rightsholders (artists, labels, publishers)
Copyrights, permissions, illegal sharing, stealing, royalties, negligible royalties, transfer of wealth, ad-supported sharing, free-loading, livable wages, the necessity of labels and publishers as investors, etc..

Like groundhog day, the debate keeps reoccurring.  However summer came and went sometime in 2011.  

Convenience is going to kill off file sharing; it’s the only thing that ever could.  In a few short years, downloading MP3s will seem so yesterday; like a heavy task that only meatheads do.

Meanwhile, the web is already ‘broken’.  Depending on which web we’re talking about: the world-wide-web-of-China, Facebook, iOS apps, Android apps, or the so-called “open” web – which is only compatible with certain browsers…supporting Flash or not?  And then there’s the private Comcast Internet, the Verizon Internet (think tiered access, throttling, and preference-based-billing), and eventually every major religion will have an ‘internet’.

If you ask me, ending file sharing versus saving the 'open' Internet is a so-yesterday argument.  Unfortunately or fortunately (depending on your view of the world), the marketplace is obsoleting the debate.

Artists, labels and rightsholders, tell the nerds the Internet is already broken.  The web is balkanizing around huge ecosystems run by giant companies and paranoid governments.  Meanwhile techies might want to suggest to artists that they should stop hunting file-sharing-dinosaurs; extinction is coming.  

Music attracts and sells things that are far more profitable than…music.  From advertising to electronics to cloud computing services, the presence of your brand, images, lyrics, songs and soft endorsements generates far more traffic, goodwill and profit for the Apple's and the Google's of the world than your music revenue does.  

In the not-so-distant future, if creators and rightsholders (versus Internet Corporation X) want to fully profit from the exploitation of their brands, likenesses and works, my advice is:

• Stay out of the file sharing rat hole.

• Collective licensing seems like a great idea. Obtaining cash and equity in exchange for blanket licenses is something the larger labels have turned into a profitable art form.

• Ignore the “break the Internet” arguments and continue to expect and demand the capacity to withdraw or withhold your stream of stuff from sites and services that don’t pay.

• Why are you paying for distribution? Without your music their products are simply narrow and boring.

• Why are you paying for distribution? This is backwards. Perhaps it’s time to consider disconnecting your works from the anonymous ‘long tail’ that costs more to distribute than it generates in revenue.

• Don’t buy the crippling royalty rates story the next time around. There are companies that sell other highly-profitable stuff that will gladly stream music.

The list above are just some of the things that seem more important than worrying about the kids that are filling their hard drives with soon-to-be-deleted MP3s.

Facebook Attention Banking Infrastructure

I wrote this in 2012.

So far, the analysis of Facebook's prospects for success or failure has centered on Facebook's capacity to monetize aggregate time spent on Facebook via some sort of Facebook-take-all advertising mechanism.  This analysis seems awfully shallow and unimaginative to me.

Facebook is positioned to become the world's attention banking infrastructure.  We live in an attention economy where the capacity to attract attention is given, sold, bought and traded daily…transparently and otherwise.

There are millions of humans on Facebook that are the thought, style, opinion and consumption leaders, and each on of them has a dynamic attention capital account.  In my opinion, the future of Facebook lies in enabling influencers to monetize their reputations and the downstream attention that flows from each and every (thin or thick) reputation.

On Facebook, every user has a private inbox and thus a queue for processing paid (and not) requests for attention; every user has a place, a timeline, where attention is proclaimed, consumed, liked and annotated; and most importantly, Facebook has the capacity to measure and convert attention into a currency…to be spent on Facebook and elsewhere.  

I wouldn't bet against Facebook yet.  Then again, execution is everything…

Caffeine Paves Over Bad Habits

Over the years, I have quit caffeine for years at a time.  I slip back into the habit when I forget how unnecessary it is to functioning at a high-level.

A big desert after lunch…coffee.

Too much booze the night before…coffee.

Not enough sleep…coffee.

Lots of time behind the desk and not enough time at the gym…coffee.

Staying out extra late…espresso martini.

Not making time to meditate…coffee.

Not enough fruit…coffee (beans).

Caffeine paves over bad habits, and conversely, the absence of it makes living...calmer.

Copyrights and Scalability

There's a portion of the population that doesn't respect, doesn't believe in, or that simply desires to abolish copyrights altogether; they have their non-rivalrous resource argument to bring to the debate; now here's something to toss back at them…

Every investor wants to invest in ventures where the incremental costs of scaling to infinity and beyond are minimal to zero.  In other words, $100 buys you the first 100 widgets, but the cost of producing the next 100 widgets is de minimis.  In fact, the competition for investment capital is often won or lost on a cost-to-scale analysis basis.
 
The problem with the "to hell with copyrights, you can make money from live performances" argument is that this thinking limits an artist's ability to scale to: his or her capacity to perform (live) on a consistent basis.  If music (for example) is consistently stolen borrowed or free, where does the capacity to scale through minimal additional investment come from?  T-shirts?
 
One might argue that if you reach the top tier of the profession that the capacity to generate easy, incremental income scales far beyond the income generated via performances.  However nobody wants to invest in a business or an industry where the only way to obtain a financial exit is to hit a home run.  There are far too many investment alternatives where you can pile up rewards by hitting singles and doubles…while preserving the opportunity to hit a home run also.

Art requires investment, as somebody always has to pay the bills.  Investing in artists has to appear attractive on a cost-to-scale analysis basis.  Every attempt: legal, cultural or otherwise, to weaken copyrights is an assault on every artist's capacity to scale via minimal incremental investments, and thus the capacity to compete for investment dollars.  

Who wins the race for investment money, the artist with the epic song or the software developer with the snazzy iPhone app?  Which took more time and skill to create?  It's all software to me.

For those of you that detest dumping art into an investor equation, simply substitute the concept of investment dollars with a personal time-cost / benefit analysis and ask yourself why so many artists become hobbyists prior to obtaining traction; the key reason is: the lack of copyright respect results in the sinking perception that scaling one's digital entertainment business by shoveling time (or investor money) at it, often results in a negative return.  For many, there simply ends up being…better ways to make a living.

Effective Music Advertising Campaigns

When it comes to music and advertising, there’s no such thing as a one-size-fits-all solution.  What works for some artists will not work for others, and vice versa.  However here’s one thing I can tell you for sure: too many artists are using advertising as a blunt force weapon.  Simply dropping a picture of yourself, your band, or your album art into an ad unit and then indiscriminately campaigning nationwide for clicks will rarely generate the advertising ROI you need to justify spending on another campaign.  

Based upon my own experiences and upon the numerous campaigns I have reviewed over the last year, I believe artists should 1) commit to running numerous test-trial campaigns prior to allocating the majority of their advertising spend to a single message, and 2) seriously consider which geographic targeting option (local, regional, or nationwide) will generate the immediate ROI artists need to justify a continuous investment in advertising.

For test campaigns, if you want to compare click results between campaigns, plan on spending at least $100 to generate 30 to 40 clicks per test campaign.  Campaign costs and results will vary widely between advertising platforms.  Test a matrix of targeting options, artwork, songs, messages and propositions to determine which combination outperforms all the others.

Are you a local, regional, or nationwide advertiser?
The answer to this most-important question depends on 1) your career goals, 2) your niche, and, 3) your evolving status as an artist that may (or may not) be attempting to obtain widespread recognition.  For most, jumping the rails and attempting to become a nationwide advertiser prior to achieving local and then regional success is an advertising investment mistake.  

When you progress from being a local, to a regional, to a nationwide advertiser you accumulate essential messaging signals that enable you to effectively telegraph a value proposition that music fans will instantly recognize as deliverable.  Let me explain...

Messaging signals help advertisers cut through the noise.  For example, car manufacturers love to blow their horns about the awards their cars have received because it strengthens their messaging.  Ditto for restaurants, hotels and coffee.  Signals that instantly communicate trust, value and quality convert more frequently into consumer actions (e.g.: clicks).

Effectively telegraphing a message translates into achieving enough return on your advertising investment to perpetually advertise.  

Delivering a value proposition that music fans instantly recognize as deliverable equates to communicating (I can deliver the goods) believability versus the same old bullshit fans see and hear everywhere.

Consider the following roughed out ad campaign examples for further clarification:

A Local Advertising Campaign Example:
Campaign goal: Increase my Thursday night audience size from 50 to 100 people.  Value proposition: Meet people similar to yourself and have a great time on Thursday night.  Messaging: Great food, great people, great music (briefly described), no cover charge.  Featured photo or video: Attractive shots of the sample audience that also take in the room setting and the performing artist; focus is on the audience and the venue and not on the artist.  Targeting: within 20 miles of the venue.  Notes: The venue should pay for or subsidize this type of campaign.  The campaign is about selling a great evening out with compatible humans; the artist takes a back seat to the event (the evening).

A Regional Advertising Campaign Example:  
Campaign goals: Generate regional awareness; increase music and ticket sales.  Value proposition: Discover new but proven, vetted, quality music.  Messaging: Award wining artist (list accolades and awards), selling out at (name venues), is releasing new music and coming to (name areas).  Featured photo or video: Close up of the artist; rotate to jam-packed venue / live performance shots.  Targeting: Regional areas where you will be touring soon; keyword targeting for fans of artists that have fans that could also become your fans.  Notes: Notice how excelling locally gives the advertiser the opportunity to insert essential messaging signals (believable bullets and great crowd shots) that enable the artist to effectively telegraph a value proposition that music fans will instantly recognize as deliverable.

A National Advertising Campaign Example:  
This is a campaign for an artist that has already obtained significant mass-market exposure.  Campaign goals: Inform/link preexisting fans about/to new music and about/to an upcoming tour.  Value proposition: The easy acquisition of music and entertainment from an artist that you already trust as a quality supplier.  Messaging: New music, new tour.  Featured photo or video: Artist logo and recognizable shots / footage.  Targeting: re-targeting of website visitors; keyword targeting for fans of artists that have fans that could also become your fans; regional advertising to a targeted demographic and a genre audience prior to visiting an area.  Note: Advertisers in this category may want to consider a re-targeting campaign where targeted display ads are repeatedly shown to previous visitors to the artist’s and the label’s website.  Re-targeting campaigns should be planned far in advance of any mass-market exposure such as a Saturday Night Live appearance.

Quick conclusion: The advice here does not apply to every artist. With niche artists being the exception, If you can't fill local venues with fans, don’t worry about squeezing your logo and an iTunes link into every banner ad, and stop pushing pictures of yourself unless you're hotter than the sun.  If you don’t have what I termed above as “essential messaging signals”, you will not be able to generate enough ROI to perpetually advertise.  Start small and think big.

Music Marketing ROI

There’s an item missing from the music-marketing dictionary.  What do you call the person that has decided to surrender an email address, follow you on Twitter, or Like you on Facebook?  If the word ‘fan’ is short for ‘fanatic’, or as someone said last week: “a fan is someone that buys all your stuff”, then we need an intermediate descriptor that sits between a potential fan that has yet to learn about you, and a fan or fanatic that is already buying your stuff.  ‘Pre-fan’ seems like it will work, but why bother?

As more and more labels and artists use advertising to bridge the gaps between social media islands, it’s essential to get the advertising return on investment (ROI) calculation correct.  If a potential fan is not yet a fan, and if a pre-fan is not really a fan, then you need to apply TWO conversion rates to your ROI calculation.

1) The Pre-Fan Conversion Calculation
The advertising cost to reach potential fans is typically priced on a cost-per-thousand impressions (CPM) basis. For each one thousand impressions, a small fraction of potential fans will convert into pre-fans; this is your first conversion rate calculation.

1,000 Impressions * Conversion Rate (CR%) = Total Pre-Fan Acquisitions.  1,000 * 0.2% = 2 Pre Fan Acquisitions

Note: For every 1,000 impressions, the conversion rate (CR%) to a pre-fan is going to be low.  As a point of reference, brand advertisers on the Internet typically obtain ‘click-through' rates that are far less than one percent.

2) The Fanatic Conversion Calculation
The second conversion rate calculation arises when you have to estimate the percentage of pre-fans (those that surrendered an email address, followed you on Twitter, or liked you on Facebook) that will become true fans or fanatics that actually purchase stuff; the conversion rate will vary depending on the engagement platform; I am using a blended Fan-To-Fanatic Conversion Rate of 20% for my example below.

Multiply a Fan-To-Fanatic Conversion Rate * Total Pre-Fan Acquisitions to get Total Fanatics.  20% * 2 = 0.4 Fanatics

Now divide your CPM price by Total Fanatics to yield Cost-Per-Fanatic.  $4.00 / 0.4 = $10 (cost per obtaining each fanatic).

Now Calculate Your Advertising Return On Investment
Estimate the lifetime, combined net profit you will make on merch, tickets, music sales and streaming on a per-fanatic basis.  I am using $100 in my example below.  Subtract your estimate of the lifetime value of a single fanatic from the cost of obtaining each fanatic to estimate the per-fanatic return on your advertising investment.  

$100 - $10 = $90 (your per-fanatic advertising ROI).  You spent $10 to earn $90 over a lifetime. Not bad if you can do it consistently!

What’s Missing?
Many potential fans will not notice and absorb a message until they have seen it more than once.  And, due to the time it takes for fans to absorb new music and for tours to rollout, you have to factor timing and time lag into your equation and into your campaign planning.  In addition, the term ‘lifetime’ is only equal to the projected longevity of you or your band as a branded and performing entity, as hoping to generate ROI solely from music sales three years from now would be highly speculative.

Your Visuals Need To Be Remarkable

Creating album art?  Thinking about advertising your band?  Over the last year, I have been working within the intersection of behavioral targeting, the music industry and ad design.  I can tell you that artists everywhere submit images for inclusion in banner ad campaigns that are less appealing, more boring and exceedingly less mysterious than the image above.

I have news for you: nobody clicks on images that feature four unknown dudes from Worcester, Massachusetts.  And why would they?  Four shaggy haired boys wearing skinny jeans in a band called 'yowhatever'…exists in every town in America.  Alert: you're not truly unique and you're not that cute, and nobody will click your banner ad if you feature your unknown self(s).  The same advice applies to pretty girls leaning against shady trees with acoustic guitars slung over their backs.  Attractive faces hitched to guitars are everywhere.

There are a million artists out there.  Humans on the Internet are bombarded with ten thousand images a day.  Your visuals need to be remarkable, arresting and compelling if you want people to click on your advertisements.

Consider featuring an stunning/halting (stock) image that tells the story of your song instead of the unremarkable picture of yourself.  Be mysterious.  Tell a story.  Draw people in.  Animate your ad.  But most of all, save the picture of yourself for the yearbook.

Artists Can't Solely Rely on Social Media

This post demonstrates why it's essential to use advertising and strategic PR to 'bridge' potential fan groups that have overlapping music preference profiles but remain entirely disconnected from each other on the Internet.

Fictitious Artist X - One Year Ago

One year ago, fans connected with artist X (liked, followed, or subscribed to) for a variety of reasons.  Some liked X as a person or a performer; some liked artist X's live shows; some liked song A, or song B, or song C; and some simply liked the drummer (it happens).  All this 'liking' happened along a spectrum, and none of it had to be mutually exclusive, as there were some fans that liked everything they saw and heard.

Fictitious Artist X Releases a New Song

Consider what happens one year later when artist X releases a new single through Facebook, Twitter and via his or her email list, and be mindful that we now live in a world where singles dominate the attention of fans.

The new song from artist X has a sonic, emotional and lyrical profile that is very similar to song A which was released one year prior.  However, the new song doesn't really resonate with those that liked songs B and C in the past; only those that previously liked song A are willing to move the 'new song' message forward to their friends and followers.

The Social Journey of a Song

The song, with it's own sonic, emotional and lyrical profile, continues to travel down social pathways along routes where the song profile intersects with the music preference profiles of interconnected fans and their friends. Finally the song ceases to travel further when it runs out of the combination of people that are both interconnected and receptive to the song.  You should also note that the time lag between obtaining, test driving, adopting and proclaiming affection for a song can often take months.

Bridging Song Roadblocks

However that doesn't mean that the song has nowhere else to go!  What's needed next are bridges that jump over roadblocks to new pathways where the song's profile keys into the music preferences profiles of other potential new fans.

All forms of advertising, including Facebook advertising, as well as strategic PR, serve as bridges to disconnected groups of people. 

Successful Bridging

The keys to successful 'bridging' for effective song promotion are:

1) Commit to running numerous short, inexpensive test campaigns where you precisely target various music fan segments with a mix of messages, creatives, and propositions.  Don't run large campaigns until you are sure you have the right mix.

2) Consider absorption rates.  Dropping different songs and propositions onto different segments are going to result in a variety of absorption rates.  For example, it may be many months before a free song download proposition results in a social mention or in a ticket sale.  Results will vary.

3) Make thoughtful and incremental campaign adjustments based upon the song engagement analytics provided by your advertising platform or PR service provider. 

Songs, Magnetism, and Business

How do you tell a businessperson that success in the music business…has nothing to do with business?

On the internet, you’ll find an overwhelming amount of advice on social media practices, fan engagement and conversion strategies, business planning, artist management, music marketing, music technology and enough similar sounding posts to make your head spin.  One might even be misled into believing that the equation: decent artist + solid business support = success.  However this formula is about as a sound as building a table that only has...one leg. 

If you are ever thinking about financially backing or supporting an artist, you should know that there are two other legs of the table that are of equal or greater importance.  In fact, if these first two legs are solid, the third leg, the business leg, almost organically grows itself.

Songs are the first leg of the table.
On the surface, the first leg of the table seems rather obvious.  If your artist doesn’t have fantastic, phenomenal, groundbreaking (non-trite, non-cliche, non-average) songs then the venture is beginning from a place that is already underwater.  The challenges here are:  one million songs a year are being uploaded to the Internet; to most people, many of these songs sound almost great; the average music fan can’t separate the value of a live performance experience from the value of great songwriting; nobody can consistently pick hits, as record labels repeatedly fail at trying (but they do know what average sounds like); and the process of song adoption and falling in love with songs is a complex journey that often takes far more time than standard market research testing accounts for. 

If you really dig your artists and you love his or her songs, then my advice here is to seek out at least ten people that each have ten years of solid music industry / music making experience and then challenge each music industry professional to point out, describe and contrast similar songs.  Judgments aside, similar song/artist analysis - produced by people that regularly traffic in music - is going to give you the essential, comparative marketplace information you need to make an informed investment decision. 

Magnetism is the second leg of the table.
The voyage your artist must take to obtain niche popularity is going to take at least three to five years, and your time and money cannot be glue that holds the raft together.  If your solo artist or band can’t attract, captivate and inspire fans, dedicated band members, experienced industry pros and a passionate support team without the use of your money, then think twice prior to investing.  No amount of money can buy enduring success in the music industry, and signing to a record label does not create an exception.  Instead, songs and magnetism are the keys to lasting success. 
 
In my opinion, magnetism is the sum of a dozen or more overlapping qualities.  To attract, captivate and inspire fans look for excellent songwriting, an alluring presence, unrivalled musicianship and the ability to deliver an arresting performance.  To find magnetism within a band and between band members look for the mutual dedication to excellent musicianship, generosity, genuine friendships, a natural leader and non-conflicting goals.  Personally, I prefer to find a notable industry veteran with twenty years of experience already attracted and attached (magnetized) to the project/artist/band; this may indicate songwriting chops, publishing knowhow, the wisdom to navigate within the entertainment industry, but most of all it indicates (to me) that someone that has seen a lot…also sees something that is rare and exceptional.  As for attracting a passionate support team - that includes levelheaded business people – this is one indicator that the artist(s) involved are 1) not fucked up, and 2) demonstrate remarkable character. 

If your artist is less than magnetic, and if you think you can pave over magnetic deficiencies with money, than I have two words for you…good luck.

Business is the third leg of the table.
If the song and magnetism legs are solid, the third business leg is simply there for balance.  All the business bullshit and music technology plumbing are nice-to-haves, mild accelerants, and/or revenue enhancers.  However if legs one and two are rock solid, everything else is trivial in comparison.  You can make numerous business mistakes and naïve technology decisions, but if your artist can’t write or obtain the best songs in the world, or if he or she is a selfish, lazy, drug abusing dullard then forget about obtaining enduring success.  The business leg is the easiest leg to change; the other two legs are often (permanently) carved into the table.

Dividing Ownership in a Startup

This post contains suggestions on how to effectively divide ownership in a group project - prior to taking on the burden of launching and operating a legal corporation.
 
The tasks within this post may seem like a lot of work.  However the process described below is essential to building a motivated organization...regardless of the legal structure (and legal minds) you employ.
 
If you are working with equals that you know and trust, the group should be able to read this document, negotiate the items on the ownership earn-in spreadsheet, and then construct a signed letter of intent in under three hours. It doesn’t get much easier than this.
 
Fictional scenario:  a group of professionals are about to create and promote a new media website that will attract and entertain a slice of humanity; as visitors come to this website, the business goals will be to convert visitors into fans (subscribers and repeat visitors), and then to eventually sell something that has perceived value to a percentage of the fan base. 
 
Everyone involved desires to protect their investment (time, money, art, etc.) and to preserve their ownership rights until the day arrives when the group decides to turn the project into a real company.  The following is a list of people involved in the (fictional) project and a brief description of the assets that each person proposes to contribute to the project:
 

• The Originator: The Originator has original art (intellectual property) that he or she has been working on (part time) for the last six months. The originator has already invested 500 hours, and she plans to invest 200 additional hours over the next six months.

• The Video Person: The Video Person has a track-record of, and the skills necessary to, produce compelling video footage. The Video Person is willing to invest 200 hours over the next six months.

• The Tech Person: The Tech Person has proven software, website or mobile application development skills. The Tech Person can invest 400 hours over the next six months. However the Tech Person’s personal financial situation requires him to charge a reduced hourly fee that equates to 25% of his normal, billable, hourly rate of $100 per hour.

• The Business Person: The Business Person is proposing to handle daily operating chores, and to develop strategic partnerships that will rapidly grow the fan base and/or increase gross profit margins. The Business Person can invest 500 hours over the next six months.

• The Instant Traffic Person: The Instant Traffic Person is stating that he or she has the capacity to bring almost instantaneous and significant attention (traffic) to the project once it launches.

• The Money Person: The Money Person is proposing to invest $15,000.

 
The Challenge:  The six people involved are bringing assorted value (assets) to the project; each person is willing to invest an allotment of time, traffic or investment capital; one person needs to earn a spot of money (an income) right away; nobody knows for sure how quickly this project will take off; but everyone involved wants to move forward as quickly and as inexpensively as possible. 
 
You need three things to get going quickly and inexpensively.

• The first thing you need is an ownership earn-in spreadsheet. See the accompanying spreadsheet.

• The second thing you need is a binding letter of intent that covers stop-dates, triggers, the ownership earn-in spreadsheet, and a method that dictates how all debatable matters are resolved.

• The third thing you need is an attorney to take a quick look at what you are proposing to cover with this “thin” set of documents.

 
In my experience, dividing ownership equally is mistake. Without fail, things always happen that prevent or enable project participants from contributing more or less resources than they originally pledged.  You want a plastic (cable of expanding and contracting) ownership structure that enables participants to contribute as much or as little as their ever-changing (financial, time, family, health, etc.) situation dictates.  A plastic ownership structure, governed by an ownership earn-in formula, is the best way to align motivation, commitment, value delivery, timing and expectations.
 
Step One - All contributions have to be valuated / appraised...
Everything (time, art, inventions, equipment, website traffic, etc.) that is being contributed to the project has to be translated (valuated) into a uniform monetary unit such a U.S. Dollars; this will enable a math-ready apples-to-apples comparison of all contributions. 
 
Once you have completed the valuation process, copy and update the accompanying ownership earn-in spreadsheet to determine ownership of the project.
 
Here are some suggestions for appraising value:

Art, inventions and intellectual property have to be assigned a value.
Originators (artists, inventors) often over-valuate their creations.  My best advice is to sum up the actual hours invested (in the art, or the invention/idea) over the last year or so, and then multiply the hours by a reasonable hourly rate to arrive at a valuation.  If you have created something that is truly remarkable, increase the value of your creation accordingly.  Note: if you assign too much value to your creation, it will be proportionately difficult to negotiate an ownership agreement with your prospective partners.
 
Labor contributions have to be assigned an hourly rate.
When you are forming a team of equals, one of the easiest points to negotiate is hourly (wage) rate.  If you can agree that you are all equals in the marketplace (in your prospective fields), then assigning everyone the same hourly rate makes this part of the negotiation simple.  However, if a team member works in a field where demand for a certain skill is red hot (example: iPhone app developers), you will probably have to bump up his or her hourly rate to reflect current market rates / market demand; the same logic applies to assigning hourly rates to those that bring significant experience to the table. 
 
You may also have a team member that can contribute labor at a reduced hourly rate, but he or she must also be compensated to justify participating in the project.  The accompanying ownership earn-in spreadsheet accommodates this (reduced compensation / paid out) scenario.
 
Non-cash contributions have to be assigned a cash value.
If someone is pledging a significant non-cash contribution to the project, it’s not unreasonable to offer (additional) ownership in the project in consideration for the contribution.  Non-cash contributions are things like: six months of office space, the use of a vehicle, equipment, or even measurable Internet traffic.  Non-cash contributions should be valued at the cost of substituting the contribution with a market-priced, comparable alternative.
 
If someone is pledging something like “Internet traffic”, “strategic relationships”, or “mass-media mentions”, proceed with caution.  All of the above are valuable.  However they should be (somewhat) measurable (for example: by using Google Analytics or internal sales figures) and accounted for at the end of the project term.  Your goal should be to create an incentive whereby the person supplying these (promotional) contributions is highly motivated to demonstrate (ongoing) measurable results.
 
Investment cash contributions and the risk multiplier.
It’s obvious that cash contributions are easy to quantify - it’s cash!  However within the ownership earn-in spreadsheet, there is the option of multiplying the impact of a cash contribution (a loan or an investment) by a “risk multiplier”.  The risk multiplier is a simple mechanism that you can use to motivate a cash investor.
 
Investment money (any money) is hard to obtain.  There are three criteria that motivate investors: the first is a compelling business plan, the second is a great team, the third is the potential for significant upside.  If you have criteria one and two locked down, the risk multiplier helps to telegraph a significant ownership and upside message to the investor. 
 
Note: if an investor is loaning the project money, versus directly investing in the project, and the investor is charging an annual interest rate on the loan, I would negotiate a risk multiplier that is substantially less (or none at all) than the risk multiplier that I would offer someone that is directly investing (cash for ownership; no loan documents).
 
 
Step Two - Create a binding letter of intent...
Here’s a partial list of items you can use to construct your letter of intent.
 

• Ownership, voting, tax, and profit sharing rights shall be accumulated on a monthly basis and calculated at the end of each month - using the ownership earn-in spreadsheet. The more resources a team member invests on a monthly basis, the more ownership, voting, tax, and profit sharing rights - the team member acquires.

• Unless noted otherwise, intellectual property pledged to the project, and intellectual property created during the term of the project, including URLs used for the project, will be owned according to the ownership acquisition methods outlined in this document.

• All team members shall report their monthly contributions (time, accomplishments, resources) to the entire team at the end of each month.

• All disputes and all debatable matters will be settled by a vote whereby a simple majority (more than 50%) rules; in the event of a tie, a coin toss will resolve any dispute.

• Primary contact, day-to-day management, bookkeeping, and all communications shall be the responsibility of an elected Project Manager.

• At some point (a date or a trigger) initial ownership should be finalized. For example: six months from day one, and/or triggers such as raising a certain amount of investment capital, or acquiring a specified quantity of subscribers.

• Briefly document the methods, incentives and values you are placing on non-cash contributions such as art, inventions, Internet traffic and strategic relationships.

• Bills / liabilities are the responsibility of the project’s owners.

 
 
Step Three - Consider hiring an attorney...
Before you launch your project, consider hiring an attorney to review your letter of intent and your ownership earn-in spreadsheet.   I would direct the attorney accordingly:
 

• The attorney is representing the project team and not any single member of the team.

• The attorney should transcribe your documents into the simplest set of legal documents that he or she can create - given what you have already negotiated with your team.

• The team is not interested in getting bogged down negotiating the particulars of launching and operating a corporation and/or negotiating investment terms at this time.

• All items pertaining to creating a corporation (in the future) will be stipulated by the persons controlling ownership in the project once the initial ownership is finalized.

 
The ownership earn-in spreadsheet is for rapidly launching and for managing ownership in (smaller) projects.

Promotion Less to Popular

One Billion True Fans - It Won’t Happen.
Even with overlap, at one thousand fans per artist, one million artists cannot acquire one billion true fans.  All the music lovers in the world are never going to accept and process billions of artist-initiated emails, status updates and text messages.  Pushy self-promotion doesn’t scale.  If everyone is doing it, nobody is going to do it effectively; the same applies to fundraising; fans are going to tune these messages out.  Collectively, artists and their managers are running the risk of appearing like financial planners at a cookout…occasionally invited, but often avoided.  Moreover, the sum of all the effort and capital invested in music promotion generates such a negative return, that it makes investing heavily in time travel machines appear outright attractive.  Perhaps it’s time to consider jumping off of, or avoiding altogether, the self-promotion bandwagon.

In this post I am going to argue that given the career economics of the music industry, a Promotionless To Popular Strategy (theory) is a strategy that artists are compelled to pursue prior to attempting to climb the mass-exposure / fan-acquisition pyramid.

First, some history: back in the day, to record an album in a top residential recording studio with the help of a gold-record producer and his tuned team of unkempt engineers and star-struck interns, it was commonplace to spend a small fortune to make an album.  To afford a major-label dream team and a big-studio experience, you had to have an illegal drug business, a shaky investor, or a record deal.  The ticket price to recording in an expensive studio on somebody else’s dime was to have long, long lines outside and crazed fans at all of your live shows.  If you ask me, you should set the same bar for yourself when it comes to investing in self-promotion.  Unless lines are forming out the door, down the street and around the corner, consider improving your songs and your live performances prior to doing anything else.  Given the economics of the industry and what I am about to describe below, artists really don’t have many other options.

A weak online pulse equals an anemic act.
For the first time in history, if fans are impressed, you should be able to find, analyze and measure fan-generated content that features you on YouTube, on Flickr, within an expanding list of Google search results, within numerous Twitter tweets, on blogs, on file sharing networks, on music social networks, and all over Facebook.  If fans are not rating, mentioning and featuring you or your songs, if the pulse of your online buzz is weak, then the very real possibility exists that your songs and/or your performances are just not good enough yet.  (I do acknowledge that the behavior exhibited by fans will vary (today) from genre to genre.)

The online landscape is far different today than it was twenty-four months ago.  As I stated in my last post, 500,000,000 music fans have recently acquired the unprecedented capacity to capture, edit, annotate and promote for you.  The creative and promotional work done by fans will be, or already is, powerful enough to build a solid fanbase upon.

Fan-based ad creation and social promotion is already occurring across a broad spectrum of consumer products.  There isn’t a smart consumer-facing company today that is not motivating ‘fans’ (crowds) to assist in message creation and/or promotion.  Given the 24/7 news cycle, fierce competition and shrinking margins, reliance upon ‘fans’ is more than a passing fad, it’s becoming necessary to compete and survive within numerous industries.

The Promotionless To Popular Strategy (theory)
Theoretically speaking, if you are brave (promotion consultants will say foolish) and remarkable, you don’t really have do anything today but continually improve and consistently (weekly or monthly) show up at the same place(s) and play.  Fans can almost do everything else.  Give them permission and a way to capture a clean recording of your live performances, and there’s not much you can do…that fans can’t do faster, wider and better, and this includes motivating new fans (prospects) to attend your shows.

Even if you are semi-famous, operating at the lowest cost structure possible has never been more important.

The economics of a Promotionless To Popular Strategy
The cost to create studio-quality recordings has plummeted; the cost to distribute music is negligible; music is nearly free; and now the cost of promotion (including effort) is rapidly approaching zero.  Going forward, you will practice and improve; you will be paid for live performances; you will sell physical merchandise and digital stuff; the need for middlemen will continue to fall off; fans will play an integral part in your rise (more so than ever); and the rewards for reaching the apex of the industry will continue to be substantial.  A Promotionless To Popular Strategy is really the only promotion strategy that any unknown artist can economically justify now.

When to conclude a Promotionless To Popular Strategy
There’s a point where it makes strategic sense to invest in capitalizing on the momentum that fans have created for you; this timing would also coincide with the point where you have probably become…remarkable.  I would argue that this milestone (milestone one) has been reached when the amount of online touch points, mentions and impressions has climbed into the high hundreds of thousands to low millions. This is when it makes (more) sense to seek mass-exposure placements (radio, television, film, ads, large festivals etc.); prior to this point, you are just one of the many millions (soon to be tens of millions) seeking fame and fortune via the submit-to-the-lottery-and-pray model, combined with the who-you-know-and-take-out-to-dinner method.  Good luck.

Moving forward, once an artist has obtained 50,000,000 impressions (multiply listeners by spins to get impressions), it makes sense to me to invest in a support organization and the offline/online effort to capitalize on 1) your efforts to date, 2) the momentum fans have already generated, and 3) the risk mitigation that has resulted from mass-exposure placement(s).  Obtaining anything less than 50,000,000 impressions diminishes your organization’s chances at achieving sustainable profits.

Note: there are plenty of people, including labels that gamble on investing in artists prior to achieving either of the milestones just covered above.  However, artist investing is a business that nearly has a 100% failure rate.  My advice is to never invest in expensive album recording projects, and to never invest in paid advertising, paid placement, or paid promotion until an artist has achieved milestone one.

Building a team for a Promotionless To Popular Strategy
Different times call for new thinking when it comes to ringing up obligations (paying cash or sharing percentages) to the people that work with you.  Think about the YouTube videos that fans will create; the compelling images people will post on Facebook; and generally about what will be mentioned on the Internet.  Strategies such as running a great party (consider a professional event planner), ensuring that your live sound quality is dialed in (use an experienced sound engineer), and seeking proven professionals to work on a single song, are more important than traditional management, Internet interns, and radio promotion consultants.  You can’t afford (time and money) to keep attempting to promote yourself forward.  Surround yourself with people that can help you create an unforgettable song, stage an arresting party, and deliver a stunning performance; these are the things will make your online pulse strong. 

Promotionless To Popular does not equate to doing nothing!  Make it easy for fans to promote you, but don’t get worked up about investing time and money into promoting yourself. 

Question:  My live shows are packed and I am really good, but there’s very little measurable, fan-generated activity.  How come?
Response:  You are just not good enough, your niche is paper thin, or you have confined yourself to a sparsely populated area.  The Internet is packed with competing alternatives.  Try harder and/or move to a bigger city.

Question:  I have songs that would be great on a movie soundtrack.  Do I really need all those touch points, mentions and impressions to obtain a placement?
Response:  If I had a dime for every time an artist said they have great soundtrack songs…I would be rich.  No, perhaps you don’t need all those touch points and impressions, but they prove that your song is remarkable, and more and more song and talent buyers are using ‘remarkable’ filters to find songs and artists.  Good luck.

Question:  I can name artists that are doing it differently, and artists that are building businesses on top of aggressive promotion.  What do you say to that?
Response:  There are exceptions to everything.  It seems like some random artist dreams up a press-worthy promotion stunt every month.  Good luck with that.  Aggressive promotion costs time and money.  Are these promotion-heavy artists truly generating consistent, family-supporting incomes?

Question:  Does fan-generated content/messages have the same reach as artist-generated content/messages?
Response:  Consider the sea of friend-networks on Facebook, the ocean of hourly tweets on Twitter, billions of text/picture messages a day, fan videos, and remixes.  For any random artist, which entity generates more views, clicks, rates, mentions and re-mentions - the artist, or the sum total of his or her fans?

Question:  What about the 1,000 True Fans model?
Response:  Depending upon how you execute it (passively or aggressively), the 1,000 True Fans model is a subset of this model.  Nobody wants to artificially stop at 1,000 fans.  Keep going.  If you are really starting to ‘hear’ your online buzz, leaning on 1,000 true fans to propagate your message is a great next step. 



Power Comes Out of the Ends of the Battery

It’s safe to play the middle, but power comes out of the ends of the battery.

I use this analogy when I am talking about what to create or how to say it.

Some creators have an inclination to attempt to appeal to the widest possible audience by splitting the middle. In my experience, the middle is never as large or as powerful as either end.

If you are building an audience, consider appealing to the ends. Power comes out of the ends of the battery, not the middle.

The Space Between

The time-space between the stuff we do is as important as the stuff we do.

The sum total of the time-space between our goals and activities is equal to or greater than the time-space we consume pursuing goals and activities.

How we use this time-space is often the difference between finding the time and energy to add value to the world or not.

When we put our minds to the task of making the most of the time-space between, it’s not surprising to learn what we can accomplish during a long commute for example.

What’s really surprising though, is to learn what we can accomplish as a bag of popcorn expands in the microwave.

Small time-spaces [between things] are the biggest part of our days.

We can use these time-spaces for anything, including rest.

And over a lifetime, wasted time-spaces can add up to years.

The happiest, the healthiest, and the wisest people I know are all strategic users of the time-spaces [between].