Two of the biggest changes in consumer behavior are not only complementary, they even amplify each other. These are changes to embrace, not fight. The first change is the move from a product oriented economy, to one that values experiences over products. The second is a shift from isolated individual consumption to social consumption.
Chris Dixon wrote a great piece on the developing experience economy. An excerpt:
An economy of experiences is emerging in [place of an economy of products]. Experiences make people happier than products (a fact that scientific studies support). The popularity of experiences like music concerts has skyrocketed compared to corresponding products like music recordings. Apple, the most valuable company in the world, maniacally focuses on product experiences, down to minute details like the experience of unboxing an iPhone. Customers want to know where their food and clothes come from, so they can understand the experiences surrounding them.
Going to a concert is an experience. Sharing music with friends is an experience. Talking about music online is an experience. Watching a live stream of an intimate performance is an experience. Reading about an artist is an experience. Wearing a band t-shirt and being noticed by fellow fans is an experience. Tailgating is an experience. Music streaming, and broadcasting your listening behavior on facebook is an experience. Contributing to a Kickstarter is an experience, even if you might get a product as a reward. The music business is so rich in experiences that our insistence on focusing on the product, buying a set of digital files to own, boggles the mind.
Ben Elowitz speaks on the need for companies formerly self-identifying as content management companies to more strongly focus on audience development. This includes newspapers and other publications, but it includes traditional record companies.
Media companies have collectively spent billions of dollars on content management systems. As they upgraded their offline businesses to the digital world, they turned to big enterprise systems to organize their content in an orderly digital database. [...] But after so much investment in such important systems, why are media companies still miles away from a profitable model? In part, itâs because these intricately designed systems have been based on one big misunderstanding: that a media companyâs most valuable asset is content.
Companies that are primarily advertisement driven, like newspapers, should realize that content is there only to draw in an audience. The audience is where the value lies, because advertisers pay for eyeballs, not content. Companies that focus on the sale of content, like traditional record labels, should determine whether or not the changes in consumer behavior warrant changes in the way they approach their content and their audience. Artists fall in the middle as they can sell both eyeballs, through brand collaborations and sponsors, as well as content and experiences.
Monetizing an artistâs audience is a key necessity as consumer behavior shifts away from buying the content. Fred Wilson comments and focuses on the newspaper industry:
[...] a few fundamental facts about the internet: First, you need to make your content available for search engines and social media linking. That drives as much as half or more of the visits these days. And if you have an ad model at all, and most newspapers do, then you need those visits and that audience. Its also true that the âdrive byâ visits will bring new audiences, some of whom will become loyal and ultimately paid audience members. The [...] thing I like about the [Financial Time's] model is that its an elegant implementation of freemium. The best freemium models allow anyone to use the service for free and then convert the most serious/frequent/power users to paying customers.
That last point is exactly how music streaming services should work, and the fact that Spotify started like this and Rdio held out and didnât have a real free option early on is the only reason their superior product is losing the battle.* But thatâs an entirely different discussion that I spoke on here. Itâs also the reason that giving away some free music is important for artists, and why pulling your music from streaming services is a bad idea. Artists need a freemium model more than they need piracy protection.
Artists are better served building up an audience and monetizing the experience around their music, than they are building protective walls around their content. Socialize the experience around an artistâs music and itâs distribution, and build up the audience that will support the artist by participating in the experience around the music. Distribution handled in this way will exponentially grow an artistâs audience and their income by monetizing the experience and the audience. Boxing the music in will do the opposite.