The music industry is in trouble. Shocking news to everyone, I'm sure.
The depth of the problem and where investment should be focused is still under huge debate. Will the music industry have to continue its diversification path into selling stuff around music such as concert tickets and merchandise? Or is there still money to be made from selling music itself? Sean Parker - of Napster, Facebook and Spotify fame - believes so, recently stating that "We're on our way to a place where the intrinsic value of music is once again monetisable" (MusicAlly). So, what are the tools for today's music artists that will allow them to make money from their music?
The decline in sales of recorded music is immense. Ten years ago the average American spent almost three times as much on recorded music products as they do today (Business Insider). Internet killed the radio star and the focus of the industry has now, rightly so, switched from finding the best possible DRM (digital rights management) to more innovative paths to creating revenue streams and engaging fans of music.
Venture Capital investments in music tech are on a trajectory to hit 1 billion dollars in investment this year (give or take a few dollars, because of some slight recent economic meltdown). Music sales are down, but investments are up. 1bn is a significant number, regardless of the way you look at it. The music industry is now going through the biggest monumental change it will ever face. Investments in music tech of today are defining the music industry of tomorrow. Very exciting times!
The thin red line running through these investments could be summed up being focused on: music discovery, music trial, music purchase and fan engagement. New business models (discovery, trial and purchase) are being thrown on the wall to see what sticks. There are an abundance of new business models forming at the moment. In terms of the most interesting part of the industry: the artists themselves - what do these new business models actually have to offer? Not that much, in reality. These are macro-level takes on changing how music is consumed, rather than models for individual artists, or indie artists to get on top of their game. Spotify, for example, - has it changed the rules for musicians? No. Spotify has underlined what always was important: write good and engaging music; catchy tunes. With that you drive revenue. Or in Spotify's terms you drive "repeat streams".
So, what are the technologies being developed and invested in that will change the life of musicians, who after all are the bread and butter of the whole industry? The answer lies in social media and fan-engagement.
Fan-engagement and "treating fans well" isn't anything new in itself. The Grateful Dead were masters of early social media behaviour by activating their super-fans in the 60's - and went on to become one of the most profitable bands of all time. The way they set out to spread their music back then are directly comparable to how many both up & coming and already established artists do it today. The techniques they applied are found today within social media tools and technology for the music industry. Through VC investments and entrepreneurial innovations there is a "technology and app-smorgasbord" forming for artists to drive fan-engagement. And best of all - a lot of them are free to use!
So, musicians - choose your weapon!
Many of the weapons are tied to the elephant in the room, Facebook, but definitely not all. Some very interesting tools run from activating both artists (Gigswiz) and fans (Posse) to become affiliate marketers and sell event tickets through social media, to whole suites of social media marketing tools that range from promotion of fan-pages to building a database of fan emails (Reverbnation). Other exciting tools bring fascinating ways to amplify the social footprint (FanRank, Fanbomb) by activating fans to "spread the good word". What about building a dedicated mobile app for an artist? Well, this can be done fairly cheaply and easily today (MobileRoadie, Steam Republic). The question becomes whether an individual artist is sticky enough to make their fans stay with the app.
The list of tools goes on and on - the exciting part here is the innovation and ideas being tested. This is a space in which everyone is allowed to experiment and try out new things! No one has come up with the ultimate winning formula to drive fan engagement and results - key here is to try out different ways to reach an individual artist's goals and test whether they work.
With MySpace on a downwards spiral, we at Flowd believe there is a void being formed in the social networking space for music lovers. While Facebook fills the gap for a group of people, it isn't the place where fans meet each other or fans of a 1MM+ artist feel especially connected to their favourite artist. Flowd provides that space and it's built with the music industry (fan + artist) in mind. Our data is showing particularly high engagement across the network, together with the ability to track ARPU of fans. Flowd runs a robust and turnkey social commerce platform, Flowd Frequent Fans, which allows for marketing across the network. Through it, artists are able to incentivise fan behaviour and reward such behaviour. With rich data analytics, artists are able to twist and turn the platform to their liking and measure the results. Undoubtedly, The Grateful Dead would have been grateful for such a network during their heyday.
Social media and music technology is having a big impact on the lives of musicians and artists. The question "where do we take it from the like or the follow?" is now being answered through social commerce tools. This is the natural progression of social media tools for any business, and especially for something as intimate and fan-related as music. This is a buzzing space with many new tools and innovations launching every week.
To date, no-one knows exactly which tools are going to stick around, and which tools will fail to capture consumer's attention. However, it's a very interesting time for the industry that until recently was believed to be in terminal decline. No-one can predict what will happen to it during the next ten years, but with increased consumer and investment interest, I believe that the music industry is no longer struggling in intensive care but starting to take its first steps in rehabilitation.