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Ones and Sixes and the Economics of Success in the Streaming Age

01/08/2014 16:59 | Updated 30 September 2014

A wise man recently introduced me to the idea that fans of bands can be measured on a score of 1 - 6. Kind of like a musical dice or an adapted Net Promoter Score.

A '1' will watch your video on YouTube - for a while a short while at least.
A '2' will like your Facebook page and / or one of your status updates.
A '3' might watch your whole video on YouTube, comment on it and even buy a track from iTunes.
A 4 will come to a gig and buy a t-shirt. Once.

And on it goes until we hit the meat-and-potatoes of 5s and 6s.

You see 5s and 6s will not only buy your track on iTunes but they'll buy a ticket to a show, and then another show. They'll buy a t-shirt, a badge and a hat. They'll tell their friends about you in real life and they'll go nuts about you on social media.

5s and 6s are good business for all concerned. Their average investment into an artist's future (emotionally and financially) is huge.

And if an artist is really lucky they'll have 5s and 6s in several countries - not just the country they're from. That means they can tour in confidence in several countries and they're gonna sell a ton of t-shirts too.

But, we're in an interesting time. We're moving rapidly away from a world where people 'own' music and towards a world where, for the most part at least, people only access music from a server and stream it to their devices.

The big-win from streaming music is if we reach mass adoption and for example 500 million people are paying circa $10 a month for unlimited access to music. Meaning $60 billion a year to divvy up amongst the tech companies, rights holders and crucially musicians. But, we're along way from that now and getting there is far from guaranteed. I hope we do.

And so the economics of what it means to be 'successful' in music are changing rapidly. Right now, the payments made by streaming services are such that in most cases they're a tiny component of an artist's income.

So, the income generated from 1s, 2s and 3s is disappearing. They're not buying singles for $0.99 anymore - they're contributing a fraction of a penny to stream a track a few times or watch it on YouTube. And the album? Well, if they get that far then they'll stream that too as opposed to splashing $9.99 on it.

If you want to make money from streaming right now you had better be massive - and you better be massive in plenty of places.

So, for almost every artist and band 4s, 5s and 6s are where it's at. If you're not appealing to those guys you're in big trouble and the music business certainly doesn't owe you a living.

Write a 'hit' and you'll be fine because you have 1s and 2s in massive numbers (and the money from radio play alone will be significant). If you can't write a hit you better be able to sell t-shirts or special edition albums or gig tickets or whatever to 4s, 5s and 6s..

What is strange to me is many music industry professionals' obsession with pursuing bands that have as many 1s, 2s and 3s as possible. It counts to them that a band has 50,000 fans on Facebook vs a band that has 10,000 - and it counts that a band has 100,000 views on a YouTube video vs 20,000.

But this is a misleading indicator of interest in a band and these numbers are manipulable and can even be bought. There are tons of examples of artists or bands generating 'false' Facebook likes, Twitter followers and YouTube views + comments and I've seen artists do all of these things in the belief that will it matter to decision-makers at media-outlets who place huge emphasis on artists' social-media metrics.

Artists like Pharrell and Beyonce are in the enviable position of having 1s right the way through to 6s - and in huge numbers. But the assumption that within a given fanbase there are guaranteed to be large numbers of 5s and 6s is wrong. Robin Thicke has 5m people who 'like' him on Facebook but to my eyes he also had almost entirely 1s and 2s which is why very few people gave a hoot about his new album. Most didn't like Robin - they liked Blurred Lines - and his 5m fans on Facebook could only sell 25,000 albums in the US in its first week - and infamously 54 copies in Australia.

So, for the time being at least, I've stopped worrying about 1s and 2s and the false promise of inflated social-media numbers. What matters is plenty of 4s, 5s and 6s. And that's why Jack White, with a social media audience a quarter the size of Robin Thicke's sold more copies of his new album in its first week in the US on vinyl (!!) than Robin Thicke did across every format.