Over the course of the last two years, I've been intensively researching and writing about the new music business for my bachelor thesis about this topic. My main frustration with most advice I saw (and still see) popping up on the web, is that it's incomplete. Some of the advice is good, some of it not so good, but none of it is as good as it can be, because the entire framework is missing.
I set out to develop a proper framework, as a way to fully acknowledge the reality created by the web and to use it to its full potential. I've titled it 'the ecosystem'.
In the tech world, we already speak about ecosystems when it comes to developers, APIs, et cetera. However, I think it can be applied very well to the 'business-to-consumer' side of the equation as well.
The reality of the web is intense non-linear communication. This non-linear communication has destroyed the control record labels had over the market (peer-to-peer filesharing is non-linear communication for instance), however it has also enabled content to go viral and artists to get discovered.
Instead of talking about an artist and a fanbase, which suggests a distance between the two, an artist (or label or brand) should now aim to be part of the interaction, by placing themselves in the center of the ecosystem.
Now that we have at least a loose definition, let's move on to the steps (which should be executed simultaneously, not chronologically):
To make optimal use of the web's reality of non-linear communication or word of mouse (as Gerd Leonhard puts it), the key is to be worth talking about, to be a 'purple cow'. Artists like Madonna, Lady Gaga, Die Antwoord, but also less mainstream artists are a good example of this. You don't necessarily have to be as extreme as the examples mentioned. Dutch music manager Niels Aalberts says the basic formula for defining your story is that you have to be able to complete the sentence "[Artist-/bandname] is the [artist/band] that…" (eg. "Lady Gaga is the singer that always shows up in the most fantastic outfits")
I recommend staying genuine. It's too hard to keep up appearances these days and you really don't want to be kept on your toes 24/7. It will exhaust you and bring you down.
This is where you start stimulating the non-linear communication. Treat every listener as a guest to your house party. If you don't introduce them to others, you'll be the center of attention all the time, but you can't talk to everyone at the same time, so people are likely to get bored and leave. The key to a successful party is connecting the strangers, so they can have fun together. You're still the center of the ecosystem, but you're not the only person to communicate to. The communication becomes non-linear!
Exciting things happen following that. The party can help amplify your original message and if it makes enough noise it can pull in more people. Derek Sivers has written some great things about starting a party (check it out).
Building a connection
You need to keep connecting with this ecosystem. There are many ways to do this. Via social media, concerts, etc. Much has been said about this already.
One of my favourite case-studies on this is Mike Masnick's talk about Nine Inch Nails' Trent Reznor. Another great example of the ecosystem in effect is that of Twisted Music, Shpongle and Younger Brother.
Nurturing the connection
The key is basically authenticity and consistency. Be clear, and when things go wrong; fix it.
Listening to the ecosystem
To me, this is where the real value of the ecosystem model can be seen. I believe all business models should come from listening to the ecosystem.
This means that you have to really be a part of it. You have to understand the desires of fans and offer fans what they want. The suggestion that people only want things for free is a myth. People understand that they might have to pay for something that is not easily reproduced and if we're offering the right package, they'll be glad to pay for it.
Basically, it's a matter of connecting with your fans through passive and active observing and acting on the observations. The most profound result of this is that the business models originate from the ecosystem, by giving the people what they want. As said before: it's about communicating to find out what product to develop for the ecosystem, instead of finding a market for your product. It is important to remember the fact that the music itself is no longer the product (and perhaps never has been).
Be remarkable, be easy to discover, turn your fanbase into a party, connect, listen.
The (free) public release of the thesis is due soon. It is currently being redesigned and developed as a website by Ryan Van Etten.