Under a new deal between the two companies, Netflix users won’t just have to wait 56 days to rent Warner Bros. movies on DVD. They’ll have to wait 28 days to add the movies to their queues.

From Marco’s point of view this will not have the desired effect, and I certainly agree with him. In his own words:

If I’m adding a movie to my Netflix queue, I’ve already decided not to buy the DVD. I’m adding it because it looks mildly interesting and I’d like to watch it sometime. If I can’t add it to Netflix, I’ll just forget about it and probably never see it.

We find a clear parallel in the music business. There are plenty of examples of specific releases being kept off of certain download or streaming services for ideological reasons or perceived business advantages. Kid Rock famously doesn’t allow his music on iTunes. Our friend Ingrid Michaelson decided against making her new album available on Rdio and Spotify, in favor of pursuing physical and digital sales only. That’s their prerogative and in the case of Ingrid I see the value there, so more power to them for being in charge of their own destiny.

In the short run, this strategy will indeed likely lead to more income related to direct music sales. However, in the long run I think it will hamper an artist’s growth in terms of audience and ticket sales. If future fans do not have the opportunity to listen to the music in their preferred place, and trust me streaming destinations will race to dominance in the next three years, then future fans will not listen and never become fans. Unrealized potential.

Anecdotally I have come across an increasing number of people that, upon discovery of a new album’s absence from Rdio, just shrug and move onto to the gazillion other new releases. The enormous amount of new and old music available make it so that the perceived importance of consuming a new album, and doing so upon release, is quite a bit more elastic than it use to be.

The existing fans will be there for you. They’ll want your new album on the day of release and possibly in multiple formats or deluxe editions. For the casual fans or new music seekers, it’s very different. If it’s convenient to them, they may end up listening. If not, they’ll forget and move on. The way we handle this for new Family Records releases is that we do a soft release through our own store to our existing fanbase a few weeks in advance of the release going up on iTunes and the streaming services. Later there is a release for press and third party retailers, which then serves to further grow our audience and tap into those markets. This helps those who want to support our artist the most by giving them an option that gives them very early access, with additional content only available to them, and the knowledge that more of their dollar goes to the artists than on iTunes or any other service (by a lot).

This is not much different at all from what Marco described. Some movies we’ll want to see badly and go to the theatre for to support, some we might have an interest in and add to our queue for later, and the rest we may one day catch on cable tv or never at all. Currently there is still a value in doing a phased release that serves super fans first with the higher income releases, but it’s absolutely absurd to do what Warner is doing now by handicapping people’s ability to add movies to their queue for later viewing. By choosing to by-pass the second level consumer, you land your product square in the middle of the long-tail of “maybe one day” consumers, which more often than not means forfeiting income in the long run. I propose a simple rule of thumb: Help your customer consume your quality product. Make it easier, not harder. If you’re not thinking of helping your customer, and instead focus on controlling their consumption behavior or even fighting them, you just lost.

Related Reading:

• The Importance Of Free Music (Or Give ‘Em A Taste First) (read)
• The Benefits Of Streaming (Or How I Learned To Stop Worrying And Love The Bomb) (read)
• The New Way Of Consuming Music (Or A Dollar Less To Rihanna Means A Dollar More To Tegan And Sara) (read)
• Fans Would Love To Pay For Music(Or The Tale Of The Reluctant Pirate) (read)

Singer-songwriter David Gray has a few great insights when it comes to motivation and the emotional roller-coaster ride that follows success:

“What helped me is that I’d been making music for a while when the success came,” he says over the phone from Italy, where he is on holiday with his family. “I could handle it better. But the period after the success is always very difficult. If Radio 1 or Radio 2 don’t playlist your record, it has a profound impact on your sales. When the BBC decided to play Babylon, all hell broke loose, but if you don’t keep that up then you end up back in the Borderline – and when you’ve got used to the Hammersmith Apollo, that can be very depressing.”

“[...] it’s amazingly exhilarating,” he says with a laugh. “But success like that blows your compass completely, it’s so heavy, so all-enveloping. You do begin to think that perhaps you are God’s gift. I spent three years touring White Ladder, but when the festivals and the champagne and the private planes suddenly stop, when reality kicks in again, the shock is numbing.”

An artist has to be an incredibly strong and steady soul to be able to deal with going from being a no-name to everyone blowing smoke up your butt and treating you like a famous person. Do not underestimate how difficult it can be to keep grounded and focused when you’re pulled in different directions by different people, all interested in a piece of you. There’s a great quote from an XXL Mag interview with the Wu-Tang Clan’s RZA on the period in which he created the group’s seminal debut album, and two of the first Wu solo albums that followed by Raekwon and GZA, also venerable classics:

The only two albums I did with nobody f*cking with me was [Only Built 4 Cuban] Linx [by Raekwon] and Liquid Swords [by GZA]. I was on a mission. To make all those early albums took three and a half years of my life. I didn’t come outside, didn’t have too many girl relations, didn’t even enjoy the shit. I just stayed in the basement. Hours and hours and days and days. Turkey burgers and bluntes. I didn’t know if it was working. But nobody could hear or say nothing, no comments, no touching the board when I leave. Everything was just how I wanted it. (full article here)

Fully undistracted, focused on the work itself, RZA created a bunch of classic albums in his Staten Island basement. That was the mentality. No partying, no opportunity for others to distract him with fancy parties or crazy thoughts and changes. Later of course RZA moved to LA and the period of Wu dominance, creatively, ended a few years later. But he’ll always have the legacy he built in his basement and he can coast on this forever more. This is not to say you can’t have fun while you’re putting in all the hard work of touring, song-writing and more. Just that ones focus and motivation has to be right. Everything in moderation.

Getting back to the Guardian article, the author shares some interesting comment on Welsh singer Duffy’s experience after becoming a huge success with her first album:

“Duffy is an interesting case,” a music industry lawyer says, “because her story applies to a lot of artists. Buoyed by success, they immediately think, ‘Why am I giving 6% of record royalties, a third of my publishing and a 20% management commission to other people? I am a genius! I will do it myself!’ [Duffy parted company with her manager, Rough Trade's Jeanette Lee, and with Bernard Butler who produced Rockferry, and co-wrote and played on much of it] And then make a bad record without any guidance from professionals. And then they wonder why it’s all gone wrong.”

An artist’s personality, attitude and work ethic is so key to their success. It takes true talent to get there in the first place, but it takes the right personality to stay there for a long time. It takes the right personality to resist all the people that will start whispering things into your ear once they see your successes. People will try to poach you, convince you they can do better, or make it all go faster. And if it’s not others, then it might be the artist themselves, like in the case of Duffy above. I feel very fortunate to only work and have worked with people in the past that I feel have the right attitude to accompany their amazing talents so that when they get to a bigger level of success and grow into national and internationally successful artists they will be able to stick around. That being said,  it’s time for me to get to the office and help make that happen with our amazing team by putting in another day of hard work!

Related Reading:

• It’s Not Always The Major Label’s Fault (Or Artist’s Motivation) (read)

Seth writes:

“Some things are bought–like bottled water, airplane tickets and chewing gum. The vendor sets up shop and then waits, patiently, for someone to come along and decide to buy.

Other things are sold–like cars, placement of advertising in magazines and life insurance. If no salesperson is present, if no pitch is made, nothing happens.” – Seth Godin

Not even the biggest stars in music can rely on being in the first category anymore. Not with concert tickets and not with album sales. There is simply too much new music out there, and too much competing entertainment in general. To be able to cut through the noise the quality of the music isn’t enough anymore. Marketing is just as important and needs to be integrated into a release from the start. Know your audience, know how to speak to them, and make them part of your process.

If there’s a new and lasting credo from the Big Shakeout, it’s this: people will continue to pay for quality. They will be less and less inclined, however, to pay for bullshit. - A. Bourdain

This is the new axiom of being a product-based company in the new age of engaged and empowered customers. Interestingly it was also the old axiom. We’re about to exit the short period between the old and the new. The period where mass media allowed for genius marketeers to sell “bullshit” by the boatload. This period will be over soon, and in many ways it already is. Enjoy and please continue to push companies to see its truth reflected in their bank accounts.

Related Reading:

• What If Danny Meyer Worked In The Music Business? (read)
• Hospitality In The Music Business (read)

Gotye is based in Australia and when the album came out, it was exclusively released there. When I checked for it on US-only streaming service Rdio, I found nothing. But I knew it was out there. I checked on my European Spotify account and my iTunes US, and again found nothing. But I knew it was out there. There was no clarity on a US release date and the whole situation was driving me crazy. You can probably guess how I ended up satisfying my craving for the full album, and how my evangelizing failed to have the positive effect on my friends that were interested but not quite as motivated as myself to jump through some hoops and dig up the album. Lets call this experience a set of “lost transactions”.

There is a world of lost transactions out there. In part, due to artificial market separation and distribution delays based on geography, and in part because of release inefficiencies per distribution channel. The latter is most glaring in the world of movies, which often still operates with different release dates per market. I stumbled upon “I Love You Phillip Morris” on iTunes UK in early 2010 while traveling, but wasn’t allowed to buy it on my iTunes US account until early 2011. That seems silly. The movie industry also distinguishes between distribution channels and offers extended periods of exclusivity to those channels perceived to lead to greater value (mostly movie theaters). Fred Wilson wrote about a frustrating experience in his aptly title post “Scarcity Is A Shitty Business Model“. A choice quote:

“Film executives [...] insist that they need their windows. They argue they need to manage access to their films to extract every last dollar from the market. That just doesn’t make sense to me. If they went direct to their customers, offered their films at a reasonable price (say $5/view net to them), and if they made their films available day one everywhere in the world, I can’t see how they wouldn’t make more money.”

I subscribe to this point of view, both for movies and other forms of digital entertainment including music. Beyond the fact that many execs are rusted into place and unwilling to change, the challenge here lies in the fact that part of the food chain will strongly opposed this idea as they stand to lose a lot of money. This lobby is so strong that they have come very close to pushing a bill through congress that would potentially break the internet and limit freedom of speech. You better believe if they go that far to “fight piracy”, they will protect their windows of exclusivity with just as much vigor.

If you take away the window of exclusivity, movie theaters will be exposed for what they have become: a mostly mediocre entertainment experience. The window of exclusivity = the emperor’s clothes. Without it theaters would have a much harder time pulling the crowds necessary to maintain their levels of income. Most mainstream theaters no longer provide a superior experience to watching a movie in your home on a big flat screen. Aside from semi-relevant technology** like 3D, the only thing that really keeps them in business is exclusivity. Sure, people also go to a theater to be part of a group experience, and because some movies look much better on a really big screen, but in the big picture*** it’s mostly because of an antiquated set of rules and not because theaters provide an undeniably awesome service we cannot wait to consume.^ That’s when you know you’re in trouble.

As a business and technology geek  I experience lost transactions, even when they save me money,  as ugly and inelegant happenstances caused by the failure to provide a quality experience around content that I am eager to pay for. When we fail as companies to provide these quality experiences we turn fans into reluctant pirates, and we lose their support. I hope that the ever-louder voice of the consumer can push us along to accept that we now live in a single market world when it comes to digital entertainment. It’s pretty great actually, and we should take advantage of it rather than fight it.

* (I actually reached out to his management to see about a US release on Family Records, but they had it locked in already.)
^ Let me emphasize I am talking about most mainstream theaters, and that there are also some great independents out there that provide a much better experience like the Alamo Draft House chain in Austin (TX) and Nitehawk in Brooklyn (NY).
** Semi-relevant because it only really makes sense for a certain type of movie.
*** Get it?

Related Reading:

• “The Importance Of Free Music (Or Give ‘Em A Taste First)” (read)
• The Incumbent Almost Always Loses (Or Earning Your Spot) (read)
• Fans Would Love To Pay For Music (Or The Tale Of The Reluctant Pirate) (read)

“I’ve long believed that piracy is largely a business model problem not a human behavior problem. If you give people a legal way to consume the content they want, they will pay for it. But when you make it impossible to legally consume the content they want, they will pirate it.”

Fred hits the nail on the head and identifies exactly what went wrong with the music business as well. Every customer knows this to be inherently true. If you don’t believe that, just look at the numbers. In countries where legal streaming was launched and allowed to prosper, like Sweden, illegal downloads are way down. We might not be happy about the drastic reduction in income when customers move to streaming, but that doesn’t change the actual point of this argument. And it doesn’t mean we should drive customers to piracy. If we provide a convenient and affordable alternative to illegal consumption, customers will pay for our products. And sure there will always be some that will refuse to pay, but that was no different before. The grand majority will pay if we make it possible for them to do so. It is our challenge as an industry to figure out how to best execute this, and not the fan’s challenge as a customer. So let us stop complaining, let us stop blaming customers, and lets get this right in 2012. We’re not the victim unless we choose to be.

Related Reading:

• The Benefits of Streaming (Or How I Learned To Stop Worrying And Love The Bomb (read)
• The New Way Of Consuming Music (Or A Dollar Less To Rihanna Means A Dollar More To Tegan And Sara) (read)
• The Best Does Not Always Win (Or Why Spotify Will Beat Rdio) (read)
• Music On The Move (Or How We Listen) (read)
• The Importance Of Free Music (Or Give ‘Em A Taste First) (read)
• Digital Retailers, Revenue Per Song (read)

Radio and Mobile Retail

• I predicted that radio stations would enter the music retail market, enabled by smart phones and mobile sales platforms that have a direct playlist feed including one-click buy links. Exclusive bonus material for these purchases would be content generated by the radio station, including on-air freestyles and interviews. We’re not there yet but I still think it should and can happen. #NOTYET
• One of the digital retail predictions included instant synching of music upon purchase between my mobile phone, cloud music locker and my iTunes at home. Since then Google has launched Google Music, which works with an cloud-based Music Locker. Apple also recently launched their iCloud service, which works exactly like I described. #YES
• A third prediction involved the fictitious start-up Not.es, which provides mobile/online liner notes and credits. Not.es was also later fictitiously to be purchased by Apple and integrated into iTunes. This is a huge part of the listening experience for a music nerd such as myself, and there still isn’t a good solution. #NOTYET (Note: I own the domain albumnot.es and if you are a developer interested in exploring this idea I could make it available. E-mail me.)

Direct-To-Fan:

• I predicted that a massive legacy artist forgoing his many decades long relationship with a major in favor of a direct-to-fan model. We’re seeing this happen right now with a few classic legacy artists, but not yet someone of the caliber of Bob Dylan, my example in the original post. I think it will happen in 2012. #SORTOF
• While I predicted it would be Sigur Ros that would release a concert movie direct-to-fan, with unlimited streaming permissions, it actually ended up being comedian Louis CK that just this month pushed the envelop in this exact way. Expect more of this #YES

From a consumer’s point of view, having access to all this music for a cheap monthly fee is a winning value proposition. Beyond increasing your library to near infinity, it’s also much more convenient and easy to consume. No waiting, no cataloging, just search and click play. As high speed wi-fi access grows, and smart phones become the norm, it’s hard to deny that streaming will be the dominant way in which mainstream casual music fans will consume music. (Hardcore fans will follow an alternate consumption pattern, and more on this difference here: “The New Way Of Consuming Music”.)

From an artist and manager’s point of view, streaming represents a scary and radical shift in consumption. It includes a massive loss of income on a per customer basis. This shift changes all the financial aspects of releasing music. (For details on the difference in income between streaming vs downloads check out “Digital Retailers, Revenue Per Song”.) Rather than the typical music industry doom talk, I’d like to suggest that we look at how this shift could actually benefit artists. Once we get past our knee-jerk fear-based reaction, we see that streaming could actually be seen as a much needed breakthrough technology and shift to lead to industry growth after a decade of imploding. Benefits include the simplification of income tracking and accounting, lower overhead, the enormous amounts of new customer data and improved metrics, increased access for a larger audience, distribution efficiencies, and more.

The loss in income from digital downloads is very real of course, but we can look for ways to offset this loss, at least in part. This can happen through the benefits that come from improved metrics and properly measuring an artist’s influence and audience. This will be easier in the near future than it ever has been. It will be very similar to how a newspaper measures their circulation, and a TV show it’s ratings. With the right team and model, the modern artist becomes a multidisciplinary creator and curator, with an audience that rewards them by giving dedicated moments of attention, permission to market, and the purchase of tickets, merch and music. This attention is valuable to others who may want to partner with the artist on a project.

A second benefit is the artist’s ability to expand their audience faster and more easily through streaming services. The lower the effective monetary price to check out a new artist based on a friend’s recommendation, the more it will happen. In streaming this perceived cost is $0. We also see that streaming services have integrated all the easiest ways to stimulate people’s natural inclination to share what they love with friends. If an artist and her team capitalizes on this increased level of attention by providing more quality content and opportunities to see the artist perform live, the income will follow, often times faster than from the aged royalties on record sales model. Great examples of watching this in action at The Weeknd, Mac Miller and Drake during the lead up to his first album before he signed with Universal Motown.

Most established artists and companies would rather stop the audience’s move to streaming than adjust for it. Adjusting to this new consumption pattern takes a lot more grind and guts than the old way. Being an incumbent will be less and less beneficial as the gatekeeper roles change as well. Seeing that we can guarantee that consumer progress is impossible to stop, we shouldn’t waste any time complaining about it. Instead we should look to improve our business models to be more in line with our customer’s wishes and needs. Living through this evolution will certainly prove challenging for most of us, but much more so for those who insist on holding onto the old model. Those of us that embrace the challenge will also see better positioned to identify the opportunities it brings. That’s how we see it at Family Records at least.

Related Reading:

• The New Way Of Consuming Music (Or A Dollar Less To Rihanna Means A Dollar More To Tegan And Sara) (read)
• The Best Does Not Always Win (Or Why Spotify Will Beat Rdio) (read)
• Music On The Move (Or How We Listen) (read)
• The Importance Of Free Music (Or Give ‘Em A Taste First) (read)
• Digital Retailers, Revenue Per Song (read)

“There are two kinds of music acts. There are artists, folks who started long before thinking that anyone might pay them $50 for doing it. Obsessively in the bedroom night after night, skipping school, honing their own version of music. They need it. It’s the lineament they rub on their bruised and sensitive skin.

Then there are the artistes. They think of music as a series of career moves. They are in it for the fame, the travel, the money, the glory, the fans, the trinkets, the adulation. They started by looking at stars on tv and in magazines and saying ‘I want some of that’.

It’s artistes that major labels are there for. Majors are not art institutions. It’s all about the bottom line. It doesn’t matter if they love what you do or hate what you do. If you sell, you’re in, if you don’t sell, you’re out. If you sign to a major and expect to be cherished, protected, nurtured and developed you’re an idiot or you have very bad people around you advising you. If you go to the right indie guy like Daniel Glass, Richard Russel, Laurence at Domino and a few others you will be loved and you will be cherished and you will be promoted.” – Robin Millar

And:

“I have come to realize two things: one, most artists DO NOT want to do it themselves, maybe they just aren’t wired that way, maybe they’re lazy, maybe they think they need big money to make it really happen, maybe they are getting bad advice. Two, they don’t care about making a bad deal, they want to be FAMOUS. They want fame so badly they will sign anything. I mean anything. They don’t believe guys like you and me when we tell them it’s stupid. They want to be FAMOUS! Gaga did it an so can they. Katy Perry did it too. So can they.

When you show them Pomplamoose and The Weeknd, and others, they just yawn. How about Julia Nines on Kickstarter? Nah, They want to be in Spin and Rolling Stone and all of the other old media pubs whose time has come and gone. They want to be on NPR and in the NY Times. They want to say “Hey look at me! I made it mom!” If they have to be poor to get that, so be it. Maybe some day they can even be on Letterman or SNL. And as far as being poor, they don’t believe us, Gaga looks rich! – Todd Murphy, entertainment lawyer,

There is nothing wrong with wanting to be in a big magazine, performing on SNL to increase your reach, or signing with a major label. There’s not wrong with wanting to reach millions of people and sell as many albums. However, when artists are primarily motivated by celebrity status and adulation, rather than the genuine connection their music can make between people, or even just the therapeutic value of creation for themselves, then they do risk falling into the above mentioned traps. I’m just saying, whatever you choose, do it for the right reasons and with the right expectations.

If someone does things for the wrong reasons, they can end up with unexpected results. When looking to fill a certain void within through celebrity, the best case scenario is getting that success but feeling unsatisfied. The worst case scenario includes bad choices, disappointment, entitlement, and in the very worst cases substance abuse and early death. Celebrity doesn’t right any wrongs, it amplifies what is already inside.

Below is a video showcasing someone who engages in his craft for the right reasons, and is now benefiting from it.