Is politics a dirty word in business? Should someone writing a
business plan stay away from controversy? Yesterday, here in Metromode,
I blogged about the a
GLEQ business plan competition where my company
promoVUZ
took second place. Feedback from one of the judges warned me to not
refer to the exploitation of artists by the big labels. Another comment
said I should get off my soapbox. In meeting with my team, we realized
that what we did wrong in the plan was not the inclusion of music
business politics, but our failure in clearly identifying why the
politics are so important.
Good sales people will advise you
to clearly define your target customer and identify their pain point.
Our customer is the emerging artist who feels exploited by enterprises
like the big record labels and also wants more control over their art
form than a big label will offer. Given that one-tenth of one percent
of artists who try to get on a big label end up being successful and
that an artist might sell 500,00 CD's but still not make any royalties,
we share the politics of the artist who feels exploited.
However,
the way we covered this for the investor should have had less focus on
our conclusions and more evidence that this is what the emerging
artists think. An investor doesn't really care if artists are being
exploited, but they should care that millions of artists will spend
money to avoid this pain.
The value of the big label in the past
was the money they spent on marketing for an artist. There is a
tremendous shift going on in the way an artists can now market
themselves. In subsequent posts, I'll go into disruptive technologies
like podcasting. Here, I'd like to describe a bit about the changing
nature of the relationship between the artist and the fans.
Two summers ago I attended a party at the home of Sam Valenti, who runs
Ghostly International,
an independent music label based in Ann Arbor, Michigan. I went up to
Sam and told him how great is was that they had a fan group on
Last.fm.
Sam looked at me with a puzzled expression. Apparently, neither Sam nor
anyone at the label had even heard of Last.fm at that time. For those
of you who still don't know, Last.fm tracks listener behavior and helps
you to discover music you've never heard, by helping you browse through
the playlists of others, whose musical taste overlaps with yours.
Like
other social networking sites, they also have the concepts of "friends"
and "groups." So, a number of "friends," mostly in Europe has
apparently formed a Ghostly "group." In the old business model a big
record label would have spent a lot money creating fake fans so that
they could eventually recruit real fans into a club. In the new music
industry, fan groups seem to now form on their own with the artists and
labels finding out after the fact. Note that the Ghostly label includes
tech savvy staff and not many people knew about Last.fm two years ago.
Last.fm is part of a general movement away from "taste makers" to
folksonomy based music discovery and this phenomenon extends beyond just the music industry.
And,
as is the case with research and development across many industries,
small business innovates and then large companies buy them to gain the
benefits. Last.fm was recently acquired by CBS for $280 Million. Read
the
press release.