The End Date

In any business, a good manager should be able to tell you the ‘end-date’.  The end-date is a hypothetical day in the future when cash reserves will run dry if expenses continually exceed revenues.  Knowledge of the end-date is a huge (negative) motivator.  When the boss says: "We need to generate X by next Thursday or else...", people respond like soldiers going to battle.  

I am going to argue that bands and projects need end-dates to succeed.  Far too often, as music industry participants, we begin things with no end-date in mind.  We enthusiastically invest our undervalued time, and we keep doing so until the project crumbles, until a bandmate unexpectedly quits, or until the van breaks down five hundred miles from home.  This is no way to run a business.  Pick an end-date on day one.  Print it, hang it on the wall, and let it serve as a motivator for everyone.  If you haven’t reached your goal(s) by the end-date, then end it.

There’s another great reason to pick an end-date.  The end-date should serve as the date when the founders officially acquire their ownership in the band or project.  Think about it: it’s actually silly to allocate ownership to anyone on day one.  Instead, participants should sign simple agreements that stipulate that ownership is acquired on the end-day (e.g.: two years from today).  If someone leaves before the end-day, then a pro rata share is allocated to the missing person (by days and/or depending on the terms of the agreement).

What happens after the end-date?  The end-day is a time to assess if you met, exceeded, or undershot your goals, it’s also a time to evaluate the assets and the liabilities that you all have created.  And if everyone agrees to continue onward, it's a great time to pick another…end-day.

Music as a Service

Written in 2013:

Today, a great wireless device has to be a phone, a camera, a computer, a GPS, an e-book reader, an application ecosystem, an entertainment center, a social instrument, a business toolbox, and a great music service.

Music probably consumes more device-time than any other phone feature.  So, it’s clear that device manufacturers understand that music-as-a-service (MAS) is a core feature that’s essential to competing. 

However, the current music stack that includes: MP3 acquisition and management, playlist management, playback control, music discovery, music recommendation, and social sharing is outdated and cumbersome.  

Streaming services such as Spotify and RD.IO are far better.  However, to a device manufacturer such as Apple, leaving MAS to a third party is akin to letting Sony or Canon supply the iPhone camera (after the sale and out of Apple’s control).  

Similar to cameras, maps, telephony, social, and cloud services, MAS will be a supplied (more than less) by device manufactures.  Here are some of the features I expect to be directly welded into every device:

Integrated Recognition and Tagging - Shazam-like recognition and tagging is central to music discovery, integrated playlist management, and (native) ad revenue generation.  Expect this feature to be universally accessible and baked into the highest level of the device UI.  Recognition, tagging, and playlist insertion/management should be a seamless, integrated experience.  

Speaking of Shazam…Shazam has missed so many opportunities to be a permanent part of the music ecosystem.  Unless they own rock solid IP (think acquisition), expect Shazam to slowly dissolve as sound recognition and tagging become ordinary device features.    

Song Cards - Songs will cease to be files; instead, they will resemble cards that can be easily manipulated, played, shared, turned, flipped, flicked, traded, shuffled, and stacked.  Files won’t be shared; instead, song cards will be instantly exchanged via audio recognition, messaging, email, and OTA technologies like airdrop.  Upon arrival, cards will be pushed, pulled, dragged, and dropped into playable stacks that can be shared, merged, and shuffled.  Since payment only happens upon full consumption, cards (decks and stacks) will zip between users like gossip at a slumber party.  

Central Command - Tagging, playlist management, playback control, and card sharing will be accessible from everywhere, overlay anything, and will be part of the top-level navigation on every device.  

Native Advertising & Music Preference-Based AD Targeting - Advertising will subsidize MAS, while ad-free will be a premium option.  Paid, relevant, and seamless song recommendations (native song advertising) will appear during tagging, and while managing playback and playlists.  Unfortunately, banner advertising will appear here also, but expect it to be highly targeted and based upon the music preferences of end-users.

Apps Become Features - As previously stated, music (as a service) is too important for device manufactures to ignore.  I expect lots of third-party app ideas (most are not businesses) to become MAS features.  Anything that is at the intersection of social, proximity, location, sharing, discovery, and/or recommendation will be become ordinary features.  

Interoperability and Lock-In - Rightsholders that are in a position to bargain with companies like Apple, Amazon, and Google have to avoid the scenario where one hundred million users (five years from now) can’t migrate their cards, decks, or stacks from one device ecosystem to another.  When migration is simple and seamless, rightsholders can preserve the threat of withdrawing from a service (for any reason).

Do Great Songs Ever Go Unheard?

I am not talking about good songs, I am talking about great songs.  I know good and great are subjective, but can you point to a song that you said to yourself - “that’s one of the best songs I ever heard in my life” - and then that song went on to die on the shelf…never to be heard by more than a handful of humans again?  Does death by obscurity really happen to great songs, or does lack of traction only happen to mediocre songs?

To learn more, read the great comments on Music Think Tank.

Do fans want anything from you other than your music?

I think this is one of the most important questions that we can ask ourselves. Do most fans just want your music, or do most fans want something else from you beyond your music?

Why is this question so important? In a world where music is generating less and less revenue, it’s important to understand what fans truly want; especially if you plan to sell them something other than your music.

The following quote is from Ariel Hyatt:
“People want personality. They want authenticity. They want a genuine look at the person behind the music.”

Personality, authenticity, a look at the person behind the music… I am trying to understand who, why, when, what, how and how-many fans (what percentage) would trouble about anything but your music, tickets or t-shirts. 

Do fans want to have a packaged, semi-authentic, digital relationship with bands? Can anyone quickly describe how the effort required to maintain these ambient relationships could generate a measurable return on investment? Is this stuff just for kids, or can adults find the time to participate also? 

I am asking, in a rather provocative way, because I am looking for clues as to what the next generation of digital music products might do for you and your fans.  What’s missing?  What do you need to capitalize on your efforts to sell be more than your music?

To learn more, read the comments on Music Think Tank.

Music Absorption

2008:

Music absorption is the process that occurs between music discovery and the (self) conversion of an average music consumer into an active fan. I believe the music absorption process is radically different now than it was just two years ago, and understanding how this process has changed should impact your approach to succeeding in the music industry.

The New Law of Music Absorption
Consumers are rapidly accumulating vast libraries of songs from around the globe at unprecedented rates. As a consequence, the speed (the time) that it takes the average consumer to absorb new music is increasing proportionately. 

Music Absorption - From Average Consumer to Paying Fan
That rate at which consumers absorb songs varies. Absorption rates depend on the song, the song’s genre and on the song’s natural demographic. 

Stage 1 - Artist Discovery: This post is about music adsorption, and not about how early adopters discover your presence on the Internet; for the sake of this discussion, they just do. For music to be absorbed, it has to be found one way or another. Create >> promote >> discover >> absorb, will become: create >> filter >> absorb. This will happen in the near future, but that’s a subject for another day.

Stage 2 - Rapid Review: Like it or not, billions of songs are being sold and downloaded by consumers that only review 20 to 30 seconds of a song. Moreover, confident music fans (they know what they like) can scrub though a song and make a consumption decision in 10 seconds or less using the scrub bar on any music player.

Stage 3 - Playlist Installation: After rapid review, songs are installed into playlists. Statistics show that music collections and playlists have grown substantially over the last 36 months, and this trend is only growing. A song may have to tumble around a playlist (set on random shuffle) for months before it moves into the next stages.

Stage 4 - The Substitution Challenge: Consumers are rapidly acquiring vast quantities of songs now - legally and not. To obtain multiple p-spins, which are spins within the portable/personal devices owned by music consumers, your song has to compete with every other song in the playlist and/or on the device. Every song is only a button press away from being substituted for another song that’s equally interesting and probably free.

Stage 5 - Who Sings That Song? After obtaining multiple p-spins, consumers begin to connect the dots. A mental note or a physical act is made to move a song into heavy (p-spin) rotation, or to plop your song into a playlist designated as tolerable background noise, or to just trash your song all together.

Stage 6 - Public Proclamation: This is the stage where fans of new music test out their taste-making ability on friends or within a social setting (online and offline). I suspect that this stage is far more important to younger music fans than it is to confident music fans. In addition, this is the stage where others also discover new songs (go back to stage one).

Stage 7 - Imprinting: Someone said: “Songs are like memory sponges.” Memories and shared memories become forever tied to songs. However today’s consumers listen to a broad selection of music; seemingly delivered through anything that runs on electricity - from video games to mobile phones, consumers have more listening options than ever. As a consequence, imprinting is spread out over more songs, the impressions are probably shallower, the shared imprints are probably less frequent (think five friends with five iPods all in the same car), and the imprinting opportunity is spread over a longer timeline (consider today’s 15 year-olds imprinting on Led Zeppelin for example).

Stage 8 - Meaningful Patronage: Unless you have a truckload of money, you are relying on organic growth to convert numerous listeners into paying fans. Organic growth outside of the geographic areas where you perform is only going to happen (globally) when your songs have made it through the absorption gauntlet (funnel). On the other side of absorption, you should have name recognition, perhaps an email address tied to the fan or an RSS subscribe (better), the untapped willingness to attend a show, and probably even the inclination (from the fan) to purchase something that you’re selling.

Stage 9 - Rockstar Recurring Revenue - The music absorption process is taking longer than ever; competition (within devices) is increasing; legitimate substitution (fueled by recommendation technology) is a button-press away; and imprinting frequency is falling. It’s a lot harder to become a rock star capable of generating recurring revenue from music. Consumers are going to try just about every song before they buy you and/or your music. In addition, the entire process can take many years instead of a few.

Advice and Conclusion
Outside of what a smart record label with a lot of promotion money (contradiction?) can do for an artist, it seems to me that nothing can have more impact on the absorption process and the desire to achieve success, than to have an evenly paced plan and a vision to make lots of great songs over numerous years. Most artists don’t have enough money or time in the day to alter the process with DIY promotion in a meaningful (financially material) way; they have to do it with music. Even if you had the support of a label, you would flame out of the funnel if the quality and consistency of your music didn’t exceed the gravity of your promotion. 

In short, you should be trying to persuade everyone around you to believe in a five to ten year plan, anything less is probably doomed to fail. If you are relying on organic growth, you have to reconcile your plan with the absorption patterns that are typical of the fans within your genre and niche

Music Can’t Be Marketed, It Can Only Be Found

With the exception of marketing music to naïve teenagers that consume anything that’s fed to them on FM radio, it’s becoming impossible to market music to people that know what they like.

In the old days, mystery, intrigue, celebrity, and real or imagined bullshit benefits could be baked into the product and into the packaging.  Record labels profited wildly by being experts at it, but digital music has changed all this.

Music is now the most naked product on Earth.  Music sits upon the shelf unwrapped, raw and void of packaging. Consumers can fully try it before they buy it; they can take it home unmolested; and they can pay for it randomly, or not at all.  I can’t think of another product that is so fully exposed and vulnerable to quick and precise, pre-purchase decision-making as music. You click. You listen. You buy. It doesn’t get any quicker or more precise than that.  

I fully believe, of the five billion tracks sold on iTunes to date, a billion (20% or FAR more) have been sold to consumers that have NEVER seen the artist, have NEVER visited the artist’s website or MySpace page, and have NEVER had any interaction with the artist…other than exposure to a thirty second clip. A billion(s) of iTunes purchase decisions have been driven off simple recommendation algorithms (those that liked X, also liked Y).  

Fortunately for artists that make great songs, the same naked qualities that make music impossible to market, also make music the easiest product in the world to recommend. Once again, I can’t think of another product that has the viral qualities that are inherent in music. It’s the only product where the entire product (the MP3) can be easily attached to the recommendation. Try doing that with chicken nuggets.

In my mind, the greatest unintended consequence of being stuck with a product that can’t be marketed, and can only be recommended, will be the overwhelming desire to seek brutal feedback and rapid validation.  You can no longer say: it’s a marketing problem…when marketing was not an option. The only questions worth pondering are: does this song suck?  If so, how can I make it better? Nothing else really matters in the recommendation-driven world of naked digital music.

Compound Growth For Artists

There’s a lot of commonality between business advice for artists and startup advice.  In a recent post, Paul Graham (@paulg) writes about doing things that don’t scale.  Near the top of the post, he talks about compound growth:  

“If you have 100 users, you need to get 10 more next week to grow 10% a week. And while 110 may not seem much better than 100, if you keep growing at 10% a week you'll be surprised how big the numbers get. After a year you'll have 14,000 users, and after 2 years you'll have 2 million.”

You don’t need to hit home runs.  10% weekly growth will get you where you need to go. 

Startup Articles That Standout

Why are software development task estimations regularly off by a factor of 2-3?

Over the years, I have tried to explain to friends that building software is not like building house or baking a cake.  It’s more like surgery.  Sometimes you open up the patient and find the unexpected; what starts out as day surgery can result in months of medical attention.  However, this post on Quora, and the comment by Michael Wolfe is a far better analogy.  There are also some great comments on the same page.  Well worth reading.  

The one cost engineers and product managers don't consider…

Kris Gale, VP of Yammer (acquired my Microsoft) writes about how features drive up unaccounted costs.  

“The work of implementing a feature initially is often a tiny fraction of the work to support that feature over the lifetime of a product…”

You can code a feature in two hours, but the cost of supporting that feature into infinity and beyond needs to be accounted for.  This is another post that reminds to keep it simple stupid.  

Product Strategy Means Saying No

Des Traynor, the CEO of www.intercom.io, makes a powerful case for saying NO to features.   

“Editing a product requires some hard decisions about what to build. You can speculate that any un-built feature could transform your product. But speculation is all it is, nothing more. When you’re afraid to make hard decisions, you fall back on appealing to the unknown, and therefore building everything. You end up with a repository of features, not a product.”

Pitching Hack: It’s Not What You Said, It’s How You Made Them Feel

Tyler Crowley, a man that knows a thing or two about pitching ideas to people, has some great advice on using visual, emotional stories to hold the attention of audiences (investors).  

Do Things that Don't Scale

From Paul Graham.  There are a lot of things founders should do that don’t scale, such as paying extreme attention to the WHOLE experience of being a user, with “product” being just one component of the overall experience.  Lots of great examples and antidotes in this lengthy post.

Narrow ≠ Narrow

It seems to me that the narrower the value proposition is, the harder it is to build a minimally viable product. Not sure if the following holds up everywhere, but try this broad-to-narrow analogy:

• [broad] If you want to provide reliable ground transportation, you could build a locomotive.

• [less broad] If you want to provide high-speed, ground transportation, you need to build a bullet train.

• [narrow] If you want to provide comfortable, high-speed, ground transportation, you need to build a bullet train with leather seats and beds.

• [super narrow] If you want to provide non-stop, nationwide, comfortable, high-speed, ground transportation, you need to build a bullet train with leather seats, beds, and a nuclear reactor.  

A narrow value proposition does not equate to a narrow market opportunity, it's just harder to build.

The Best Kind of Work

Every time I go out to move a pile of firewood, I think this is hard labor, but it's not hard work. 

The best hard labor is the occasional manual labor you do that tires you out, makes you sore, and it compliments the routine exercises you do in the gym. It's really just another form of exercise.

The worst hard labor is the repetitive manual labor that some of us have to do every day of our lives. This is the type of labor the wears out joints, mangles spines, and beats young boys into weathered men. 

Hard work is something different. It's work that's hard to do, only a few are willing or capable of doing it, and it's highly valued by others.

It's probably fair to say, If everyone could do it, it would be called...easy work.

My wife homeschools our eleven-year old twin boys. That's hard work. Going to the office and doing something familiar…that's easy work. I couldn't do my wife's job.

My father always said: "If you never want to work again, find a job you love."

This brings me to the 'best kind of work'. It has to be hard work that you love to do. This kind of work creates the most value and doesn't seem like work at all. If you have to work for a living, then having fun while making money is about as good as work gets.

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.