(This was originally published as a section of today’s Monetizing Media newsletter)
This crisis is an opportunity for the music industry
Music has been hard hit by Covid-19 because live events comprise such a large proportion of artist earnings. But working from home is forcing artists and their teams to confront how under-developed their business is in engaging core fans online and monetizing them through more than just concert and merch sales.
Music has largely ignored longtime best practices for e-commerce and media brands like capturing customer contact info and engaging those customers with newsletters (targeted by customer segment) to pull them farther down the sales funnel. There’s very little action beyond posts on social media to buy concert tickets or listen to new music (and marketing campaigns by labels and concert promoters to the same effect).
Monetizing an online audience should be a higher priority for artists/managers regardless of this crisis, since concerts are constrained by geography, time/date, and frequency of when they occur in a given locale. The industry is bad at price discrimination outside of ticket sales, offering ways for devoted fans to pay for additional access or benefits.
Last summer, Cherie Hu and I analyzed the websites of 57 top recording artists across genres and subscribed to all their newsletters for 3.5 months. (Our data is here) Five didn’t have newsletters, 27 never sent a newsletter, and only 5 sent more than 10 emails. More importantly, only 3 artists newsletters were normally written in first person and only 2 sent newsletters that weren’t entirely transactional (George Ezra and Nick Cave). Nearly every single newsletter for every artist just blasts out advertisements to buy merch or concert tickets. They are spam even to devoted fans, offering less substance that what is already gained from following the artist on Instagram.
Only 2 artists — Justin Timberlake and Luke Bryan — had calls to action on their websites to join paid memberships for exclusive content and other benefits. (In both cases they were the 4th-ranked calls to action on their websites, after CTAs to listen to music, follow on social media, etc.)
Managers usually give the artist’s website and newsletter to their record label to manage, viewing it as generic marketing work. Managers I’ve spoken to have highlighted that artists typically have a social media addiction with a compulsion to see how many likes and celebrity comments their posts get relative to others’ so they don’t want to create content elsewhere. And from the manager’s standpoint, the opportunity cost of time spent creating content off social media isn’t worth the comparable money gained from focusing on growing social media followers (that impacts endorsement deals, etc.). It’s all top of funnel growth.
Artists don’t even control the ability to reach their existing social followers: algorithms de-prioritize artist’s posts in the newsfeeds of followers who haven’t been highly engaged. Artists have no CRM of their fanbase, knowing who has bought merch, paid for concert tickets, paid for VIP passes, etc.
The Covid-19 crisis has shown that if you take away in-person concerts, artists are doing very little to monetize their core fans. The rise of free performances on Instagram Live has engaged artists in thinking about their digital product offerings more seriously than before. What is a compelling virtual concert and how much would fans who can’t make it to real-world concerts pay for the experience?
I predict this temporary exercise in contemplating a digital-only business model will have a lasting impact in 3 areas:
- Virtual events – producing ticketed, online concerts and other special events for fans (not mere live-streams of in-person concerts). Unlike a normal tour, this will be about one show that is its own unique production, making it a pop culture moment (a live experience to attend with friends) that’s worth paying for. Ticketing platforms like Veeps are providing infrastructure for this already, plus there’s the emerging trend of concerts within the virtual worlds of games.
- Owning the audience – whether through newsletters or SMS models like Community, actually having fans contact info will be recognized as important to cost-effectively drive them to digital events. Newsletters and SMS enable artists to segment fans, sending spending opportunities to super fans who want them without promoting them to other fans. (The growing # of celebs making huge $ through co-founding consumer product brands will only accelerate this realization.)
- Memberships – an effective way to engage many devoted fans will be through memberships that offer some mix of exclusive content, virtual concert attendance, and other benefits for a few bucks per month or year. This hasn’t been tried very effectively yet in music. While Patreon is viewed as panhandling, white-label solutions like TopFan are growing and social platforms like Facebook, YouTube, and Twitch are bringing membership and tipping models into the mainstream.