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Music As A Service Part 2 – The Transition To An Experience Model (Community Over Content)

Ny1Part 2 of a guest post by Wesley Verhoeve (@wesleyverhoeve), artist manager, producer, curator, and founder of Family Records. Read Part 1 here.

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, it’s because these intricately designed systems have been based on one big misunderstanding: that a media company’s 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 artist’s 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 ‘drive by’ 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 didn’t have a real free option early on is the only reason their superior product is losing the battle.* But that’s an entirely different discussion that I spoke on here. It’s 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 artist’s music and it’s 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 artist’s audience and their income by monetizing the experience and the audience. Boxing the music in will do the opposite.

READ PART 1: Wesley Verhoeve: Music As A Service Rather Than A Product

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  1. May you have a Hit song and gain some life experience when someone steals it and
    posts it and you make ah zee SQUAT!!

  2. Here are some facts that come from a company that is not a shill for a particular service.
    Consumer Groups
    According to the report, music consumers can be broken into five segments: “Committed,” “Convert,” “Comfortable,” “Casual,” and “Content.” “Committed” consumers are the youngest group, with a mean age of 32 (20 percent are age 13 to 17; 42 percent are 18 to 35). They represent 10 percent of all consumers who listened to or purchased music within the prior three months. “Committed” consumers also account for 46 percent of per-capita spending on music, and they are the most engaged consumers in the report. While they use a variety of discovery sources – including radio, video, streaming, and movies – they also value ownership, and they are the most open to discovering new artists. They find their current means to discover new music is good, but still wonder if they are missing something.
    “Converts,” who make up 30 percent of musically active consumers and account for 34 percent of per-capita spending, are the second youngest group, with a mean age of 34 (13 percent teens; 23 percent are 18 to 25 years old). They also listen to music in a variety of ways and are more likely than the average consumer to purchase CDs or digital downloads. They are generally satisfied with their means of music discovery, but they would still consider other options.
    Those in the “Comfortable” group make up 30 percent of musically active consumers and account for 15 percent of per-capita spending on music. With a mean age of 50, they are considered the mainstream segment. These individuals mostly listen to music on CD or on AM/FM radio, and they prefer to discover new music from familiar artists. They also rely primarily on television and radio to find new music, and they feel those methods are adequate for their needs; they are not interested in new ways to discover music.
    “Casual” listeners, who make up 14 percent of musically active listeners and account for 3 percent of per-capita music spending, have a mean age of 43. They are also lighter listeners than average, they rarely buy music, and they have low interest in digital sources and discovery.
    The “Content” group, which make up 11 percent of musically active consumers and account for 2 percent of per-capita music spending, have a mean age of 55. They are the lightest buyers and listeners, and while they periodically buy CDs, they do not find current music engaging.


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