Manage for Success: The State of the Business, Newsletter #83, March 2008


"Manage for Success" is a free monthly newsletter for record label executives who want to operate their companies efficiently and successfully. It's published by Keith Holzman of Solutions Unlimited, a management consultant, troubleshooter, and trusted advisor, and is based on his many years as a senior executive in the music industry.


Copyright 2008 by Keith Holzman, Solutions Unlimited. All rights reserved.


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A lot of ink (actual and virtual) is being spilled these days regarding the state of the music business. It seems that every other person sees himself as a pundit with a handle on where the industry is, and where it's headed. That and four bucks might buy you a cup of whatever Starbucks is offering these days.


In fairness, a few of these folks actually know what they're talking about.


One such person is ace marketing guru Seth Godin who recently gave a talk about our crazy business that you're likely to find not only provocative, but helpful in your own label's marketing. He's had the talk transcribed, and a PDF of it is available at the following site:

<http://sethgodin.typepad.com/seths_blog/2008/03/the-live-music.html >


After a preamble describing the excellent business it used to be, he goes on to discuss where we're at today. He mentions Chris Anderson's book "The Long Tail" originally published in Wired Magazine, wherein Anderson extols the virtues of building (and making available to music buyers) a deep catalog of your particular musical niche.


Godin goes on to decry the idea "of suing the very people you're trying to" sell to, apparently referring to the RIAA. But he firmly believes music isn't in trouble, at least not in the long run. He believes more people are listening to music than ever before. He thinks that there "is a new music business that might even be more perfect than the last one. It's not the same business, the waves are shaped differently, and you need different skills but someone is going to win big in this business."


"People don't listen to companies, they listen to people. And there's something magical about the way we treat celebrities....There's a large number of people who want to be led...who want to connect...who want to join a tribe," he writes.


I'm simplifying his thoughts for this piece, but it's something I've written about myself in previous newsletters. Godin says it's incumbent upon music marketers to make some of these connections happen -- to make their music widely available as short samples so listeners can make a decision to buy. Then, they should maintain an active database of previous customers, using it to make them aware of their newest releases -- motivating them to make a purchase, either at their own website, or from iTunes, Amazon, etc. Labels should endeavor to turn their customers into everlasting fans of their artists -- not just liking their music, but loving it. In short, Godin advises artists and their labels to cultivate their targeted niche audiences.


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As a matter of course, label executives and managers have to deal with a great many crises. Contact me if you're one of those having trouble coping with running your company. I've had many years of record industry experience at labels large and small, and have solved many such problems. Let me help you as I've helped so many other labels "manage for success." My email address is
keith@holzmansolutions.com.


If you're thinking of starting your own label, take a look at "The Complete Guide to Starting a Record Company," available as a downloadable eBook in PDF form, or as a printed, spiral-bound volume. Download the Introduction and read the complete Table of Contents at <
http://www.recordcompanystartup.com/>.


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A complementary suggestion to Godin's was made by Kevin Kelly, Senior Maverick (as he calls himself) of Wired. In a recent blog, he encourages individual artists to find and cultivate 1,000 True Fans. "A True Fan is defined as someone who will purchase anything and everything you produce. They will drive 200 miles to see you sing. They will buy the super deluxe re-issued hi-res box set of your stuff even though they have the low-res version. They have a Google Alert set for your name. They bookmark the eBay page where your out-of-print editions show up. They come to your openings. They have you sign their copies. They buy the t-shirt, and the mug, and the hat. They can't wait till you issue your next work. They are true fans." Concurrently he advises "you need to convert a thousand Lesser Fans into a thousand True Fans."

<http://www.kk.org/thetechnium/archives/2008/03/1000_true_fans.php >


Is giving your music away the answer? I think not for indie labels. Yes, major hit acts such as Radiohead and Nine Inch Nails can afford to provide free downloads because a sufficient quantity of their numerous hard-core fans are willing to buy expensive collector-attractive packages of CDs and LPs (yes, LPs!) And, as free agents, they make a lot more than they did when tied to major labels -- approximately 1.6 million dollars worth to NIN in less than a week!


By the way, according to recent Forrester Research estimates, fifty percent of all music sold will be digital downloads by 2011, and a year later more than half of all sales will be downloads. Forrester projects digital sales to grow at a compound annual growth rate of 23 percent over the next five years, but that they won't make up for a decline in CD sales.


I attended a Jupiter Research webinar last week that provided a lot of useful information. For example, the hottest prospects for digital music represent one third of all online adults. Real music fans prefer to pay for individual downloads rather that for subscriptions, and they tend to do it online rather than through their cell phones. The computer is becoming a "de facto" media hub and will not be replaced, even by so-called "smart" phones. The download market is of course dominated by Apple, but they predict Amazon will be a significant player. Rhapsody, Napster, and Zune are experiencing sluggish growth.


To summarize, while music retail and retailers continue to shrink, it's imperative that labels and artists find as many ways as possible of getting their music to the public, through effective use of online resources, selling CDs and merchandise at artist performances, developing new ways of making the public aware of their music, and making it easy for them to effect a purchase. Above all, make them fans -- and repeat customers.


Until next month,

Keith Holzman -- Solutions Unlimited

Helping Record Labels Manage for Success.


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Copyright 2008 by Keith Holzman, Solutions Unlimited. All rights reserved.