COVID-19 caught the music industry with its pants down. Few can argue that. We’ve been driving fans down the same three-lane highway that we built 50 years ago: buy my music, buy my tickets, buy my merch. And now that much of that highway has been shut down, we’re scrambling.
We came out of the coronavirus gate like a sky full of airplanes with no air traffic control, completely canceling each other out (and at times canceling ourselves out). With little strategy, cadence, creativity and revenue model, especially when it came to virtual shows and live streaming. We saw some of our favorite artists perform more than 20 times in the same location of their house while others disappeared completely. We couldn’t decide whether or not to charge for tickets. We still can’t decide. Feels a bit like history repeating itself: undervaluing ourselves the way we did when we let music be downloaded for free, or more commonly today, giving it away for exposure. That’s not to say we shouldn’t have been doing our part to help the world during this hard time, but it’s critical that we think long-term about the effect our reactive decisions will have on our business and revenue streams down the line.
No one could have predicted what 2020 has thrown our way, but moving forward we have little excuse to not think about tomorrow today.
The music industry spends billions every year investing in finding and developing artists yet we spend only a fraction of that time finding and developing the necessary tools, platforms and marketplaces to maximize the value of our music. Why? Because investing in our future doesn’t pay today.
While we’ve focused on what pays now, others have invested into our future for us. The social and music streaming platforms have built billion dollar houses on our soil, utilizing our songs, our artists and our audiences. And when we politely knock on the door, they have no interest in letting us in. But you know who they will invite over? Our fans. Come to think of it, are they really even our fans if we have to pay Google, YouTube, Facebook, Instagram and Twitter to reach them? Something is wrong with this picture. Wrong and hauntingly familiar (hint: MTV).
So what does getting it right look like moving forward? How do we stop the metaphorical carousel that lets the music industry continue to repeat our mistakes?
We have to make a ruthless commitment to return on investment (ROI). We currently spend billions on marketing with minimal expectations or knowledge of our returns. We do so to such a detriment that we often lack an understanding for how our own artists are breaking and, therefore, we don’t have a formula to do it again. We simply have zero understanding of our CPF (cost per fan). Some might argue that there are too many variables to determine that number. Yes, scaling an artist requires a marketing mix of substantial variety. But, architecting accountability is possible in some regard, so we need to do better. We’ve been operating blindly for so long that you’d think we were doing it on purpose. This is simply not tolerated in any other industry but ours.
We have to truly be able to reach our fans with precision and have a direct relationship with them. The current system of renting our audiences from social platforms was designed to benefit them… at a recurring cost to us. It is the main reason we have limited ROI when it comes to marketing. We don’t have access to the bottom-of-the-funnel data in many cases (like streaming, for example). How many conversations have you overheard or been a part of that include “if only we knew exactly who was listening to our songs and for how long?” Too many. Even if we wanted to pay Spotify (or Apple or Amazon or Google) for this information, we couldn’t. We have zero idea of exactly who listens to the music we spend countless dollars creating.
The fix starts with breaking our “leasing” behavior and investing into being the landlord of our own audience banks through new data platforms that help artists scale their fanbases by directing marketing dollars more effectively to reach highly engaged individuals and bank them in one place, once and for all. This allows artists to reach out to those fans again and again to promote singles, albums, merch, tickets, etcetera, to drive revenue and build sustainable businesses.
By being the landlord of our own houses, we can maximize our relationships with brands for both their benefit and ours. Think about that. There is money to unlock when you can leverage your name and likeness or synch deal beyond the standard endorsement or license fee. But you can’t do that when you don’t own your own audiences. The time has come to start thinking about our marketing dollars as an investment versus a spend. If every dollar you spend puts a fan in your bank you’ll build considerable value (interest) over time.
Additionally, we have to actively build lanes four, five, six and beyond for engaging our fans and monetizing our assets and rights. This will require committing to innovation in both vision and technological execution. The last decade has given birth to thousands of new digital/social businesses that would greatly benefit from incorporating our music into their platforms. But our current framework makes this downright impossible for either side (potential clients nor the music companies) to have an intelligent, quick and reliable solution for painlessly licensing songs and mass-monetizing them (and no, streaming is not mass-monetization for the music, it’s mass-monetization for the platform). That’s a multi-billion dollar opportunity waiting to be captured.
We see a world where social apps, messaging services, creator tools and a slew of newly formed digital companies are able to license commercial music at a scale and efficiency we haven’t seen before. Companies that can bring our music to the masses no longer need to wait in an 18-month line to secure music rights.
Speaking of music rights, our friends in the video game sector have built a more than $150 billion industry filled with rabid music fans (in the form of gamers) waiting anxiously for an innovative offering from music companies and their favorite artists. In-game concerts are just a taste of what can be created. We are guiding the music industry towards a reinvention of its relationship with the gaming world in a way that fast-tracks and cements multi-platform virtual performances, digital collectibles and in-game experiences.
Our fans want next-level content. Content that jumps off the screen. Content that talks back to us, tells us stories, previews music, sells us an exclusive experience and so on. Passively watching videos and Instagram posts of our favorite artists will be a thing of the past before we know it and instead, artists will utilize gamified technology to offer fans interactive content that feels truly personalized and highly immersive.
It’s time to pull up our pants and prepare for the new world. It’s been coming again and again, but this time hopefully the wake-up call actually gets us out of bed.
Shara Senderoff is president/partner and Zach Katz is CEO/partner of Raised In Space, a Santa Monica-based investment group that funds entrepreneurs with tech solutions for the music space.