Brainstorming Session on New Business Models for the Music Industry Report:

From Theory to Action

Michael MasnickDennis Yang

Floor64, Inc.

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The Future Of Music Business Models (And Those Who Are Already There)

from the a-thorough-look dept

It’s no secret that there’s a lot of concern these days about what the music industry will look like going forward — especially from those who work on the label side of the business and have been around for a bit. A variety of things have caused rapid change in the market. Competition from other forms of enter-tainment, such as the internet, movies and video games, have put more pressure on the industry, as consumers have been presented with significantly more options for their entertainment attention and dollars. And, of course, there’s the ever-present specter of unauthorized file sharing — or, as the industry prefers to call it (accurately or not), “piracy.”

While the industry spent many years fighting the rise of the in-ternet as a distribution and promotion method for music, it was eventually forced to recognize it. The labels eventually licensed music to Apple and iTunes (as well as some other stores). It took them way too long to recognize that people wanted DRM-free music, but they’ve finally come around to recognize that as well.

But the big new questions are all about licensing. New services are starting to show up on the scene, such as the industry’s new darling, Spotify. Then there are attempts, such as those by Cho-

russ and Warner Music, to set up something that is somewhat akin to a blanket license. For the most part, the industry hasn’t shown much willingness to do these sorts of deals in manners that allow the underlying companies to survive, let alone profit. Numerous in-novative startups have suffocated under burdensome licensing terms — and as each one fails, it just gives consumers fewer and fewer reasons to actually use these services, wondering how long each will last until it goes out of business.

However, there is another solution: stop worrying and learn to em-brace the business models that are already helping musicians make plenty of money and use file sharing to their advantage, even in the absence of licensing or copyright enforcement.

In simplest terms, the model can be defined as:

Connect with Fans (CwF) + Reason to Buy (RtB) = The Business Model

Sound simple? It is, if you understand the basics — and it can be incredibly lucrative. The problem, of course, is that very few seem to fully understand how this model works. However, let’s go through some examples.

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Trent Reznor, the man behind the band Nine Inch Nails, has done so many experiments that show how this model works that it’s difficult to describe them all. He’s become a true leader in showing how this model works in a way that has earned him millions while making fans happy, rather than turning them into the enemy.

Reznor has always reached out to his fans, and has an amazingly comprehensive website, with forums, chat rooms and many other ways of interacting. He encourages fans to better connect with each other as well. While companies like Warner Music forced all the music videos of their artists off YouTube for many months, Reznor actually aggregates all the videos his fans take at concerts (he encourages them to bring cameras) on one page on his own website. He does the same for photos. He released a (free) iPhone app that allowed fans to locate each other, and communicate with each other, while sharing photos and videos as well. It’s all about connecting with those fans, and helping them better connect with each other, so they feel like a part of a club.

From there, he gives fans real reasons to buy. Lately, he’s taken to releasing everything he records for free online, knowing that the music will show up on file sharing sites anyway, so he sees no reason to fight it. Yet, he adds many other options that people might want to buy. With his release of the album Ghosts I-IV, he released all the tracks under a Creative Commons license that allowed anyone to share them online for free. Yet, he also set up some cool “reasons to buy.” You could get the two disc CD, if you wanted, for just $10. Above that, though, was a Deluxe Edi-tion Package, for $75. It was, effectively, a box set, but around a single album. Beyond the two CDs, it also included a DVD and a Blu-ray and a photobook of images.

Where the experiment got even more interesting was that he offered up the $300 Ultra-Deluxe Limited Edition Package — of which there was a limit of just 2,500 available. This was an even more impressive “box” that also included the songs on high quality vinyl, and some beautiful giclée print images. But, most interesting of all was that that limited set of 2,500 were all signed by Reznor himself.

It took just 30 hours for all 2,500 to sell out, bringing in $750,000 in just over a day.

For music he was giving away for free.

But, by connecting with fans, and giving them a reason to buy, they did. In the first week alone, combining all the other offerings for Ghosts I-IV, Reznor brought in $1.6 million. Again, this is for music he was giving away for free.

The idea that you “can’t compete with free” or that free means there’s no business model is a myth. As Reznor and others have recognized, when the music goes free, it opens up new opportunities for better, stronger, more efficient business models.

Reznor’s next album, The Slip, was released just a few months later, and again, was given away entirely free, but it was released the very same day as he announced his next Nine Inch Nails tour. All he asked, if you wanted to download the music, was that you provide an email address. He then gave fans the option of what quality to download the songs — all the way up to lossless FLAC files. All for free. But, if you downloaded the files, you also learned about the tour, and the tickets were quickly snapped up.

The free music didn’t hurt Reznor’s ability to earn money. It en-hanced it.

By connecting with fans and giving them a reason to buy, he’s been able to thrive.

Some have complained that Reznor is not a representative example. After all, that huge fanbase came about in large part because of his success under the “old” model, where he was signed to a major record label who helped promote his album and turn him into an international rock star. While some may quibble with how much the label actually helped Reznor, it’s worth exploring how this model has also worked for many other artists — from the superstars to new up-and-coming acts.

Josh Freese is a session drummer based in Los Angeles, who appears on well over 100 albums and performs with many different bands. He’s played with (among others), Nine Inch Nails, Guns ‘N Roses, Sting, Devo, The Vandals, the Offspring. Yet, outside of certain musical circles, he doesn’t have a huge individual reputation with fans. So, when he released his first solo album, called Since 1972, in March of 2009, he decided to set up a system similar to Reznor’s Ghosts I-IV experiment, but made it more fitting to his own per-sonality — which meant making the options extreme and hilarious.

There were cheap options to get the music and CDs, but at $50, you would also get a personal 5 minute “thank you” phone call, where he said you could ask anything you wanted (his suggestion: “Which one of Sting’s mansions has the comfiest beds.”) There was a

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limited $250 option to get lunch with Freese at a PF Changs or a $500 chance to get dinner with him at Sizzler. The lunches sold out in about a week.

Then Freese took the model to a different level altogether. At $2,500 (limit of 5 available), he would provide a drum lesson, where you’d get to keep one of Freese’s snare drums. You’d also visit the Hollywood Wax Museum with Josh and one of a rotat-ing list of his rockstar friends (depending on who was available). Finally, you’d get to take and keep any three items from Josh’s closet.

At $10,000, you’d get dinner with Josh and a rockstar friend, before hanging out at Disneyland (where Josh’s father worked for many years, and where Josh got his start as a professional drum-mer) with Josh. And at the end of the day, you would get to keep Josh’s Volvo station wagon — after dropping him off at home. Obviously, there was only one of those available.

There were also $20,000 and $75,000 options available, includ-ing many more offers, like having Josh join your band or be your personal assistant for a few weeks. You’d also get to go on tour with Josh. He would also write and record a five-song EP about you. A teenager in Florida actually purchased the $20,000 option, and spent a week with Josh, including a night on the Queen Mary cruise ship, a pizza party at Mark Mothersbaugh (of Devo)’s house and a game of mini-golf with the singer from Tool.

Once again, by connecting with his fans, and giving them some-thing of scarce value, Freese was able to create a business model that worked.

Connecting with Fans (CwF) plus a Reason to Buy (RtB) worked again.

However, some still complain that he’s a product of the “old” industry, even if he was little known outside of it.

The next example is Jill Sobule, who had a hit song in 1995 with “I Kissed A Girl” (not the Katy Perry song). Since then, however, she’s been dropped from two record labels and had two indepen-dent labels she was signed to go out of business. When it came time to record her latest album, she decided to get her fans to help fund it. She’d already done an excellent job connecting with her fans, regularly interacting with them on Facebook, where she would hold fun contests each day and actually chat with them and respond to questions.

She launched a website called “Jill’s Next Record” that — like Reznor and Freese — offered up many options for how her fans could support her to fund a new album. They could pay $200 and get free access to any shows for a year. They could get their name mentioned on a “thank you” song. At $5,000, she would do a home concert at your house. She even noted you could charge for that one, and maybe even make some money. She ended up doing five or six such concerts. At $10,000 (described as the “weapons grade plu-tonium” level) you could sing on the album. This was meant to be a joke, but a woman in the UK purchased it, and Jill had her flown out to LA where she did, in fact, appear singing backing vocals on the album.

Her goal was to raise $75,000, and she had no idea if she’d be able to reach that number at all. Yet, she broke through that number and ended up raising over $80,000 in just 53 days. With that, she was able to go into the studio and record a full scale production, includ-ing hiring famed producer Don Was to handle production.

CwF+RtB worked again.

Again, some complain that Jill is not representative, due to her hit song in 1995 — though, again, they’ll ignore her being dropped from two record labels and and having two others go out of busi-ness.

So, let’s look at Corey Smith. In the earlier part of this decade, Smith was a high school teacher, playing open mic nights on week-ends. But then, he started focusing on building his music career. He started playing numerous live shows, and really worked hard to connect with fans. He gave away all of his music for free off of his website, and used that to drive more fans to his shows. On top of that, he offered special $5 pre-sale tickets to many shows, which has a useful side effect: his biggest fans would convince many others to go as well, building up his fan base, and getting more people to go to more shows. He tried pulling his free music off of his website as an experiment, and saw that his sales on iTunes actually dropped when he did that. In 2008, mostly thanks to live shows, Corey was able to gross nearly $4 million. While giving his music away for free. Connecting with fans and giving them a reason to buy worked wonders.

Jonathon Coulton was a computer programmer. In September of 2006, he decided to write, record and release a new song every week for a year — with all of the songs being released under a Creative Commons license, so anyone could share them. And share them they did. Coulton became a cult sensation, and was making a good living within months of this decision. His fans were supporting

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him along the way, even creating music videos for every song he released. He started using services like Eventful to more strategi-cally target concert opportunities. If enough people requested a show in a certain location, he knew it would be profitable and started “parachuting” in to do shows that he knew would make him money. Again, by connecting with fans and giving them a real reason to buy, he was able to build up a great following and make a good living.

Moto Boy is a singer/songwriter in Sweden on the wonderfully named label “Songs I Wish I Had Written.” Moto Boy and his label purposely put all of his songs on file sharing networks — including The Pirate Bay (the label’s founder, at times, has shared an office with one of The Pirate Bay’s founders). But, Moto Boy has worked quite hard to connect with fans. He has a great web-site, where fans can interact, and he encourages sharing his music in creative ways. When a bunch of his fans started filming his concerts and putting them on video hosting sites like YouTube and Vimeo, his label found the best such vidoes, and put them all together into a “YouTube concert.” Compare that to record labels like Warner Music forcing their content off of YouTube. While all of Moto Boy’s music is free, he’s continued to con-nect with fans in fascinating ways. Last year, he began selling wind-up music boxes, that play one of his songs. Just recently, he launched a limited edition (only 25) of those music boxes in beautiful, hand-crafted wooden boxes, signed by Moto Boy, with a CD and the music notation inside the box. Connecting with the fans and giving them a reason to buy beyond just the music has turned Moto Boy into a star in Sweden.

Amanda Palmer is a singer who made a name for herself as a member of the “punk cabaret duo” The Dresden Dolls. While she put out a solo album on Roadrunner Records (a subsidiary of Warner Music), she found that they had little interest in promoting her, and took things into her own hands. She reached out directly to fans on services like Twitter, often setting up “flash gigs” where people would show up wherever she wanted to perform. In June of 2008, one such flash gig at a beach in Los Angeles ended up with an impromptu, beautiful, music video for a song that Palmer had just learned that morning, due to a suggestion from a fan on Twitter. And she’s doing a good job making money, as well. Bored in her apartment one evening, she started twittering with fans and came up with a jokey t-shirt suggestion, and set up an immediate store, selling $11,000 worth of t-shirts in days. Another night, she started a live video stream from her apartment, and started an impromptu online auction for various items in her apartment associated with a recent tour, often with a personalized twist. In three hours, she brought in

$6,000. Connecting with fans and offering them something fun and unique to buy worked wonders. To date, she hasn’t received a single royalty check from Warner Music on her album.

Matthew Ebel is a singer in Boston who started building a fanbase by playing live and actively participating in social networks and oth-er sites. He started regularly performing in Second Life, for example. At one point, he decided to set up a “subscription” backstage pass offer, whereby fans could pay $5, $10 or $15/month to get various benefits — including access to new songs every couple of weeks, as well as having new recorded shows sent to them. Depending on the level of support, they could get access to special shows, gift bags or other opportunities for unique offers not available to others. Ebel has discovered that he’s making enough so that music is his full-time job. Subscription revenues represent nearly 40% of his income, which is about equal to live gigs and sales of CDs and digital songs combined. Connecting with fans and giving them a real reason to buy has made it so that he can have career as a musician.

Moldover is an electronic musician based in San Francisco. Being in such a high tech hub, he had an interesting idea for his next album. Along with the music itself, the CD case would be a working circuit board, with all the songs spelled out in soldered electric circuits. These connected various components to make the CD case itself an instrument. Pushing a button on the side of the case, would light up the center and make a noise, which could be modified through a pair of light sensors, creating a virtual theremin. The case even had a line out jack, so it could be plugged into a computer or an audio system. The CDs themselves were sold for $50, and Moldover discovered the demand was far stronger than he expected. Yes, even though we’re told that no one will pay for music (without strict copy protection), this less well known artist is doing brisk business selling $50 CDs.

Of course, these are just musicians, but these sorts of models impact the wider ecosystem. Companies like TopSpin, Nimbit and Kickstarter are making this work today (for artists big and small). TopSpin has helped enable musicians to better connect with fans and give them a reason to buy over and over again — and found that, when it’s done right, people absolutely buy. One of TopSpin’s artists recently had an average transaction price of over $100, and multiple artists have seen their average transaction price at over $50. The claim that fans just want stuff for free is not borne out by these examples. Across all of TopSpin’s artists, they’ve seen an average transaction price well over $20 — more than the cost of your aver-age CD. By enabling bands to connect with fans while giving them something of unique value to buy, beyond just the music, these bands are thriving.

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And, of course, there’s a role for labels to play as well. Terry McBride runs Nettwerk, a Canadian-based label that has tre-mendous success embracing these sorts of models with a bunch of different artists. McBride has declared that copyright won’t even matter within a decade, and he’s acting accordingly. But he’s making sure that his acts really do connect with fans. With a recent album release by the hip hop artist K-OS, before the album was released, they released all the stems from the songs to let the fans do their own mixes. These weren’t “remixes” because the original mixes weren’t even out! Rather than worrying about an album leaking, K-OS and Nettwerk purposely got the core of the music out themselves and let fans do what they wanted with it. They then set up a system to submit the fan mixes and to vote on them, such that the best mixes were then put on their own album, and both the “professional” and the “fan mixed” albums were released at the same time — leading many fans to buy them both. Both albums, separately, but at the same time, ended up in the top 50 on the charts.

As you look through all of these, some patterns emerge. They’re not about getting a fee on every transaction or every listen or every stream. They’re not about licensing. They’re not about DRM or lawsuits or copyright. They’re about better connecting with the fans and then offering them a real, scarce, unique reason to buy — such that in the end, everyone is happy. Fans get what they want at a price they want, and the musicians and labels make money as well. It’s about recognizing that the music itself can enhance the value of everything else, whether it’s shows, access or merchandise, and that letting fans share music can help increase the market and create more fans willing to buy compel-ling offerings. It’s about recognizing that even when the music is shared freely, there are business models that work wonders, without copyright or licensing issues even coming into play.

Adding in new licensing schemes only serves to distort this kind of market. Fans and artists are connecting directly and doing so in a way that works and makes money. Putting in place middle-men only takes a cut away from the musicians and serves to make the markets less efficient. They need to deal with overhead and bureaucracy. They need to deal with collections and alloca-tion. They make it less likely for fans to support bands directly, because the money is going elsewhere. Even when licensing fees are officially paid further up the line, those costs are passed on to the end users, and the money might not actually go to support-ing the music they really like.

Instead, let’s let the magic of the market continue to work. New

technologies are making it easier than ever for musicians to create, distribute and promote music — and also to make money doing so. In the past, the music business was a “lottery,” where only a very small number made any money at all. With these models, more musicians than ever before are making money today, and they’re not doing it by worrying about copyright or licensing. They’re embrac-ing what the tools allow. A recent study from Harvard showed how much more music is being produced today than at any time in his-tory, and the overall music ecosystem — the amount of money paid in support of music — is at an all time high, even if less and less of it is going to the purchase of plastic discs.

This is a business model that’s working now and it will work better and better in the future as more people understand the mechanisms and improve on them. Worrying about new copyright laws or new licensing schemes or new DRM or new lawsuits or new ways to shut down file sharing is counterproductive, unnecessary and dangerous. Focusing on what’s working and encouraging more of that is the way to go. It’s a model that works for musicians, works for enablers and works for fans. It is the future and we should be thrilled with what it’s producing.

Moto Boy Music Box

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Ten Good Reasons To Buy

Going under the assumption that, by now, most people under-stand the basics of how to “connect with fans” (though, we keep hearing stories suggesting that many still struggle with this a lot) we wanted to focus this discussion on understanding the “rea-sons to buy.” One of the problems is that many people assume that “value” alone is enough to get people to buy — but as we’ve discussed multiple times there’s a difference between value and price — and assuming that value alone is enough to get people to buy isn’t going to cut it — especially if the product is abun-dantly available.

So the key is to find scarcities — as we’ve said many times. But, not just any scarcities. Those scarcities must also be valuable. Value plus scarcity is the real reason to buy. And, the intersec-tion may be different for each kind of content creator. In fact, it should be different for each content creator, because it is essential to recognize how to express the key value that a particular creator brings to the table. To help explain that, we discussed 10 key scarcities that are helpful to think through in creating reasons to buy. The list is not complete, but is a good starting point.

Access1. : Access to the actual content creators is a real scarcity and one that can often be used to make money in ways that make fans quite happy. In fact, a study released at Midem claimed that, in a recent survey, 19% of respondents claimed they would pay anything to meet their favorite star. Now, obviously, that’s a bit of hyperbole, but it does suggest a high degree of demand for access from top fans.

Attention2. : One of the most important scarcities in the digital age. Attention is incredibly scarce, and if you’ve got it, you can do a lot with it.

Authenticity3. : This one also includes “trust.” The ability to be authentic carries tremendous weight and is quite scarce at times. But if you can provide something that is authentic and valuable, it’s often a very strong reason to buy.

Exclusivity4. : Many people value having something that very few (or perhaps no) others have.

(New) Creation5. : The ability to create something new is a scarcity. This often confuses people, because a digital good

from the scarcity-plus-value dept

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once created is no longer scarce — but the ability to cre-ate it is still very much a scarcity.

Tangibility6. : The granddad of scarcities: physical prod-ucts. Sometimes when we discuss scarcities people seem to think that we’re only talking about tangible products. Nothing is further from the truth, as we often think that other non-tangible scarcities represent much larger op-portunities, but that doesn’t mean you should ignore the value of tangible products.

Time (saving or making)7. : People will pay if you can save them time (or give them extra time in some manner).

Convenience8. : If you make things more convenient, many people will buy, even if free options are available. That’s one reason why iTunes has done so well. Apple has made the whole process super convenient. It’s also one of the top reasons why people say they buy bottled water — even if they know the water quality is no different than tap water. They just find it more convenient.

Belonging9. : Never underestimate just how important a sense of belonging to a group or a tribe is — and being able to provide that in an authentic manner can be a true scarcity.

Patronage10. : Definitely depends on the situation, but there are some people who just want to support an artist, no matter what. And that presents a scarcity.

So, we’ve got the list, but then what do you do with it. In my presentation, I looked quickly at a few artists (most of whom we’ve discussed before, so don’t be surprised that you know their stories) and listed out what scarcities they appeared to use — and made sure to include artists of all types: small to big. Among those we discussed were Josh Freese’s hilarious tiers, as well as Jill Sobule’s tiered offerings, noting that they involved a combi-nation of access (hanging out with the artist, private concerts, phone calls, etc.), authenticity (in both cases, the lists were very much reflective of the individuals’ personalities), exclusivity (many were limited), new creation (both involved the ability for the artists to write songs for the buyer), tangibility (offering tangible goods like CDs, t-shirts, and Josh’s Volvo), belonging and patronage (big fans of both wanted a chance to support the artists they love).

We then looked at Moldover and Motoboy who each have offered really cool physical goods (Moldover’s CD case that doubles as a vir-tual theremin and Moto Boy’s wonderful music box). I showed off each of these products, highlighting how they clearly played up the tangibility scarcity as a reason to buy (as well as things like authen-ticity, exclusivity, belonging and patronage) to make this work.

As a final less well known artist, we looked at Matthew Ebel, whose experiments with giving fans a subscription service that provides new music and additional opportunities for access are working quite well. In that case, he’s obviously using access, authenticity and exclu-sivity along with belonging and patronage.

Of course, this isn’t just a model for small or up-and-coming artists. It can work quite well for big name artist, as well — and on that front we discussed both Pearl Jam and Mariah Carey. As you may recall, Carey and her team put together a whole issue of Elle maga-zine, all about Carey, where Carey’s team was allowed to sell the ads and keep the money. Some of the ads were for Carey-branded products, such as perfume. In this case, with a star this big, that particular aspect of the model is not about access (which is regularly used by smaller artists), but about belonging and tangibility (the magazine is tangible, as is the makeup that Carey was selling). But perhaps an even bigger point is that Carey was really selling her biggest fans’ attention in selling advertising directed at them. As for Pearl Jam, they have their “Ten Club,” which gives fans earlier access to the best tickets at shows (convenience, time saving, belonging, exclusivity) along with special physical goods, such as a special vinyl single, a magazine and other members’ only contests and giveaways (tangibility, exclusivity).

Of course, there’s a lot more that goes into building good “reasons to buy,” but using these ten scarcities as a starting point is an excel-lent way to start a brainstorming process - as we did ourselves at the conference.

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Applying CwF+RtB In Workshop

from the real-world-time dept

To figure out how to actually take advantage of the concept of CwF+RtB, it’s important to recognize that every artist is quite different. Lots of artists read about Josh Freese agreeing to go to Disneyland with a fan and cringe, saying that this does not sound like fun to them — but that’s part of the point. Each ef-fective use of CwF+RtB needs to fit specifically to that artist, and what they’re most comfortable with. Josh Freese’s Disneyland trips fit with his own outgoing personality, and his longstand-ing connection with Disneyland (his first professional gig was playing in the Disneyland band as a kid, and his father worked at Disneyland as well). The answer isn’t for artists to copy Josh Freese and play minigolf with fans, or Jill Sobule and do house concerts, or Motoboy and produce a music box. The trick is to figure out what fits with that artist and how their fans like to interact with them.

To do so, we set up a brainstorming session, based on a work-shopping process that we’ve used for years called the Techdirt Greenhouse, bringing together a group of disparate individuals to work on a single challenge. But to make it work, the impor-tant thing was to step through the basic thought process that makes CwF + RtB work.

Pick an artist:1. In this case, obviously we were working with a bunch of different people so we weren’t starting with any particular artist. In other cases, obviously, this exercise is done with specific artists in mind. However in the Midem+ Workshop, we tried to find interesting and different (or even especially challenging) artists, to see what could be done.

Define the artist:2. An important part of the exercise is to break down who the artist is — how does the audience view the artist and how does the artist identify with the artist. Who is the audience as well? While this may already be known in general, it’s good to go through the process of defining the artist as it helps in breaking out points later that are useful in setting up the business model.

What’s unique about the artist: 3. Often this can be pulled from the definition done above, but sometimes it requires some additional thought. What’s important here is trying to pull out the very unique special characteristics of this artist that makes them different from others. What characteristics make this artist stand out? It could be the music or it could be the style of performance. Or the way they connect with

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fans. It really depends on the artist, but try to list out every way that the artist is unique.

What’s authentic about the artist:4. Again, some of this can be pulled from the definition, but it’s important to figure out what “works” for the artist in connecting with the fans. For Josh Freese, Disneyland was very authentic. For another artist, it wouldn’t be. For Motoboy, the mu-sic box was perfect, because his music has a quality that sounds like it could be played on a music box.

Once you have these features listed out, then you need to start trying to break out those points and match them to some of the scarcities that we discussed earlier to create “reasons to buy.” This is where the real brainstorming stage is, and just tossing out various ideas for discussion is important, as it can help generate new or different ideas from others in the group. All of the dif-ferent scarcities are worth considering, but access, authenticity, exclusivity and belonging are the ones that seem to pop up most often, and are often the easiest to embrace. For really well-known acts, attention (often in the form of sponsorships/branding deals) comes into play as well.

As you brainstorm around these ideas, it usually doesn’t take too long for some solid ideas to form for what makes real sense as “reasons to buy.” These can be refined over time, but as the good ones come up, highlight them in some way and maybe consider ways to improve on them before moving on to new ideas.

Finally, as the ideas become more concrete, start to refine the overall package of how it’s going to be setup. These days, the most common idea is to offer “tiers” of offerings, that allow for a bit of very useful price differentiation on the part of the buyer — letting them self-select into what they think is the most valuable. Figuring out the best options requires some experimenting, but generally you want to have a number of really good low end options to bring people in (even casual fans) and expand on the value as you go up, to draw in the strong, committed, “true fans.” However, there should be a nice progression up the tier ladder, so as to make it easy for people to see how there’s greater value (and it’s worth it) at each step.

Once you put that all together, you can create some really com-pelling reasons to buy for just about any artist.

In breaking out into discussion groups in our workshop, one group chose to focus on singer Josh Groban. We chose him specifically because group members felt that his unique style and

positioning would present a challenge for applying the model, since he didn’t necessarily all into easy classification.

We started off by looking to define the specific attributes that described Josh Groban, hoping to find certain unique characteristics that could then be applied to a business model. From this, we noted that the biggest thing is that Groban is young, but known for being somewhat genre defying: he performs more classic music songs, even to the level of opera. This gives him a pretty broad base, but makes him less easy to define. Older listeners like him, for perform-ing music they like, while younger listeners are intrigued by the fact he’s young, but performing a different type of music. Also, part of his reputation is built around the fact that he looks like a traditional pop star (young and very good looking) even if he performs very different music. This made him appeal to a broad audience, but not in the same mass market manner of other pop stars today. On top of this, he regularly is paired up with a diverse set of other artists, including opera stars and more classical singers that have a larger (if older) audience.

From this, we learned that his image is quite important — and pay-ing respect to the classics and to high quality music would likely be important (and things like letting a random person sing with him would probably not be a good idea). Separately, we learned that his public persona was somewhat important. He plays up a very “clean” lifestyle that again fits with the broad audience he is attracting. He has done a Christmas album/Christmas TV special, and also is well known for his charity work and events supporting various charities. Thus, tying some promotions to charitable work would certainly be important — and any business model idea that might negatively impact his image would be ruled out.

Then we started to brainstorm around specific ideas. Seeing as he’s a multi-platinum artist, more personal interaction with fans was unlikely to be workable. However, there were some ideas of tying in to various mobile devices — such as offering Josh Groban call-in numbers or voicemails that people could hear. From there, it was suggested that perhaps he could offer semi-personalized greetings (like having Josh Groban provide your outgoing voicemail message).

In trying to build ideas around access, we figured that there could be some sort of Q&A, perhaps as part of a concert or in an online environment, but given his image, it would need to be a moder-ated Q&A with a serious moderator who could both weed out the frivolous questions, but also give the conversation a level of gravitas. There could be some aspect of backstage passes and a meet & greet, but it would have to be handled carefully (again, given the size of the audience). One thought was that to qualify for the meet &

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greet, you would need to donate to charity, to play up Groban’s charitable efforts. Another suggestion was that he could produce a video related to the charity with a fan who donated to that charity (so, for example, if it was “toys for tots” or something similar, a video could be made of Josh and the fan delivering some toys).

Another idea was to have fans choose cover songs or themes for his next album. Since he often covers classic standard songs, allowing fans to designate a song, or even the songs for an entire album would be an interesting way to build up a relationship with the fans. Related to this was the idea of holding some sort of contest — perhaps sponsored by a brand — where Groban would sing to someone for a special occasion (birthday/wedding/etc.).

Finally, we looked at unique offerings that Josh could sell on top of these ideas. Inspired by the Motoboy music box, we talked about classical sounding music devices that Josh could offer, in-cluding nice artwork-style pieces that also play music. Separately, there was an idea for a deluxe album that was also a coffee table book of sorts, that again, would fit with Groban’s wider image. Also, given his focus on musical purity, another great idea was selling off original sheet music used by Groban, including his hand written notes, that fans might like.

In the end, a combination of all of these different ideas — com-bined with some sponsorship opportunities and carefully chosen products, could produce an interesting alternative business mod-el for Josh Groban to continue to succeed in the market, beyond just selling music. Certainly live shows have been and would continue to be a big part of Josh’s appeal and business model — and, many of the ideas above are really focused on drawing more people into the live experience, which appears to be a key part of Josh’s appeal. Overall, though, even with a “difficult” artist who defies easy classification, we came up with numerous ideas for finding unique and scarce ways to build reasons to buy around Josh Groban.

We also discussed the American rapper Lil’ Wayne. Lil’ Wayne has done a good job connecting with his fans with his music and lifestyle. To capitalize on this connection, he has been able to launch several clothing lines for both men and women. As a target of many mashups, the group came up with the idea to commission personalized tracks for Lil’ Wayne’s most avid fans. By incorporating someone’s name into a custom version of a song, the scarcity of new creation is leveraged. In some sense, song customization also touches upon exclusivity and a sense of

belonging as well.

Moving on from Lil’ Wayne, we discussed 50 Cent, another American artist. 50 Cent has a vibrant community at ThisIs50.com, where fans have access to forums, merchandise and member content. There is an opportunity to further build a business by offering premium content to paying members. Fans are incented to purchase what they know to be “authentic” merchandise that has been approved by the artist himself. As an artist with a very strong brand, 50 Cent also has the opportunity to utilize attention as a scarcity and work with the right advertisers that will pay for the priviledge of being endorsed by 50 Cent.

We then applied these principles to Brazilian artist Nando Reis. Nando Reis has had a successful music career in Brazil spanning 3 decades, and is best known for his unique brand of song writ-ing. For him, we felt that creating a special set of CDs, DVDs and books that covered his long career would be best. And, since he is best known for the lyrics of his songs, creating merchandise that incorporated his lyrics into clothing or art would be particularly compelling for his fans. Like with Lil’ Wayne, incorporating a com-missioned name into a particular song also seemed very interesting. Finally, since Nando Reis has a loyal following and a busy show schedule, creating a dedicated fan club with early access to show tickets and information was also quite fitting for his business plan.

What becomes clear in all of these examples — both the ones that already exist, and these new ones we workshopped — is that to get this right takes actually understanding the unique nature of each artist, and what fits well with them. It doesn’t mean that every artist should offer up the same things, but the opposite. The successful business models of the future are business models that leverage the special value that each artist brings to their relationship with their fans.

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About Michael MasnickMike is the visionary behind Floor64, building up the core idea into reality and recruiting the management team. In addition to providing the strategic direction for the company, Mike oversees all editorial aspects of the Floor64’s public and customer sites. Mike’s insight into the realms of business and technology are the basis for his frequent posts to the award winning Techdirt blog. The widely followed, often quoted blog was launched in 1997. Prior to found-ing Floor64 Inc., Mike worked in business development and marketing at Release Software, an e-commerce startup, and in marketing at Intel. Mike has a bachelor’s degree in Industrial and Labor Relations and an MBA — both from Cornell University.

Mike can be reached at mike@floor64.com or on Twitter as @mmasnick.

About Dennis YangDennis is responsible for managing the development of Floor64’s suite of insight management tools for both its corporate clients and the public websites. Dennis joined Floor64 after seven years at mySimon, a division of CNET Networks. As Associate Vice President, Dennis was responsible for the overall management, operations, and development of the mySimon com-parison shopping site. Prior to that, he was the Director of Engineering for mySimon. Dennis first cut his teeth at Andersen Consulting, and holds a B.S. from Cornell University. Dennis authors his own personal blog, eponymously at dennisyang.com.

Dennis can be reached at dennis.yang@floor64.com or on Twitter as @sinned.

Floor64 is an insight company. Our goal is to develop unique and innovative ways for compa-nies to connect, gain insight and move forward. Over the past decade, Floor64 has developed a series of insight platforms that inspire, inform and help companies innovate. In the process, we’ve gathered a world-class team of analysts and technologists and have worked with compa-nies spanning Fortune 500 leaders to newly formed startups from a wide variety of industries. Currently we maintain and manage two insight platforms - the award-winning technology and business analysis blog, Techdirt, and the exciting new marketplace for connecting companies with a diverse community of expertise, the Insight Community.

About Floor64

About MIDEMTaking place since 44 years every January in Cannes (France), MIDEM is the event where music, digital and brand professionals from across the industry meet face to face to do business, analyse trends and build partnerships. A unique opportunity to make deals with your partners and identify new business opportunities, network with key music industry players, boost your company’s international and learn from the industry’s most talked-about senior executives and experts at a series of conferences and high-level meetings.