Can Artists and Labels Change Behavior With Technology?

I was recently reading a piece that Slack Founder & CEO, Stewart Butterfield wrote to his team during a pivotal moment in 2013. Being that this was 2013, it was well before the company's $2.8B valuation and the thousands of clients for whom they now power communication. From Butterfield's vantage point, Slack was an extremely useful product that once adopted, enhanced communication significantly. Ironically, Slack filled a market need before the industry members realized the need existed.

As a recent co-founder of a startup that empowers creators, this story, and Butterfield's direction hit close to home. At Disruptive Multimedia (DMM), we're building technology that helps creators interact and "own" their audience. The challenge we're facing is not a technology issue, but rather, an education issue.

For years, the music industry has been slow to adapt to change. While the technology has existed, radio is only now entering the digital age, surrendering analog for digital. The evolution of the album from ownership with Vinyl, Cassettes, CD's, and MP3's to access with premium subscription services is just now starting to take off (Americans streamed 135 billion songs in the first half of 2015) even though companies like Rhapsody have existed since 2001. Additionally, in most cases, labels still release albums on Tuesday's, use radio as a gauge of future album sales, utilize first week album sales as the metric of success, and do mass marketing for projects. Habits have always constrained innovation.

The most startling aspect of all of this is that labels don't know who is buying their artist's content. Retailers such as iTunes, Amazon, Google, etc have privacy clauses that prohibit them from sharing data about precisely who their consumers are. This means that not only do the labels not know who is buying their product, but moreover, there will always be a disconnect between artists and their fans. Under this arrangement, artists truly work in the dark because they do not know who their fans are or how to reach them.

Obviously, artists can interact with their "fans" through social media. However, this is often a medium of very low engagement and likewise, there is no way to differentiate who is actually a contributor to an artist's projects on social media. Furthermore, instead of owning their audience, artists are actually enriching third party platforms. Third parties are legally able to "shield the audience information", thus depriving the artist from potentially lucrative contacts.

Artists have been living in the dark and perhaps equally frustrating/disappointing from a business point of view, is that they are signed to labels who are also living in the dark. Live Nation and Ticketmaster know who is attending shows, but artists and labels don't. iTunes and Google know who is buying albums, but artists and labels don't.

Times have changed and so must recording artists. Artists need to start managing their business in the same manner that Fortune 500 companies do. Imagine for a moment, in today's cutthroat business environment, a company hoping to succeed without a market research component.

When I look at the 2014 Temkin ratings for customer service, companies such as USAA (bank), Amazon (retailer), and Publix (Grocery Chain) are all listed in the top 10 overall. The remainder of the list includes airliners, insurance companies, software companies, mobile carriers as well as internet service providers. Nowhere on the list is there a record label, an artist management firm or an artist. So what are these most successful companies doing that makes them noteworthy? For starters, the aforementioned companies all have a commitment to the following:

The company is accessible;
The company is able to identify who their customer is;
The company is able to identify the amount of money spent by the customer;
The company is able to direct inquiries by the context of the inquiry; and
The company is able to provide solutions to problems

USAA knows how much money their customers keep in their checking and savings accounts. Publix knows if their customers make more grocery purchases on weekdays or weekends. Amazon knows if their customers like ground shipping or overnight shipping. Delta knows how many miles their customers have amassed in the air. Verizon knows if the majority of their users consume more or less than 8GB of data per month on their mobile plan, and Comcast knows the speeds of their users when browsing the internet.

When you know more about your customer, you can provide better service to your customer.

Delta knows exactly how often I fly with them and offers me incentives for being a customer. They are able to assess whether or not my seats should be upgraded or if I should be a member of their Delta Sky Club. Delta is also able to thank me for my purchase, solicit feedback from me about my experience, and offer me an incentive to fly with them again.

Often, artists don't even know who their supporters are so how can they supply any level of customer service? For instance, as an avid music fan who wants to support artists whose music I love, I've gone so far as to buy fifty copies of different projects to help support those particular artists.

Do the labels know that I did this? No. Do the artists know that I did this? No.

Was I offered a discount on my purchase for being such a large supporter? Was I given a thank you for such a large purchase? Was I asked how my buying experience was? Was I notified when the artist had a new project coming out since I was such a big supporter of the last project? Was it communicated to me that the artist would be performing in my area in the next few weeks? Zero, zilch, nothing.

Since labels have no idea who is supporting their artists' projects, they have to spend ridiculous amounts of money marketing to the same people over and over again. They are doing mass market spending trying to reach people that have already transacted with them. And they just don't know it.

This trickles down and affects the artists on these labels. The more labels have to allocate towards an album's budget, the more money that needs to be recouped for the project to be successful. The current music business is about Blockbusters (buy & read Harvard Business School Professor, Anita Elberse's book: Blockbusters).

As Elberse points out in the 2011 publication, 97.1% of all albums available sold fewer than 1,000 copies. Translated, this means that out of the 880,000 albums that were released and sold at least one copy in 2011, 854,480 albums didn't sell 1,000 copies. Furthermore, two years earlier in 2009, 6.4 million unique tracks were sold; of those 93% sold fewer than 100 copies and 27% sold only one copy.

Clearly, it's tough to make it as a musician. But what if I told you that an artist can increase their chances of having a sustainable career and they don't have to be on the radio or have ten's of thousands of fans? It's possible!

There are a wide variety of tools in the marketplace for artists to use which enables them to a have a more direct relationship with their fans, while also allowing them to build revenue streams. Here are a few of my favorites:

Patreon - Allows artists to obtain funding on a recurring basis from fans. In 2014, backers gave $10MM back to creators through Patreon. Amanda Palmer is a great example of an artist who has created a great community of backers on Patreon and is now receiving in excess of $33k every time she posts a piece of content.

Gumroad - Enables creators to sell their work directly to their audience while providing powerful analytics. Over 10k sellers used Gumroad in 2014 and Gumroad also provides the ability to sell in a tweet with a simple "buy" button. Musicians that have used Gumroad include Wiz Khalifa, David Banner, and Taylor Swift.

Tilt - A platform that allows people to crowdfund anything. No one gets charged unless the target (aka "Tilt) amount gets reached. This allows people to pool money without any risk. Snoop Dogg has sold three different t-shirts through Tilt and has also run a contest where the university that achieves the most points, gets a DJ set from the Doggfather himself.

Bandsintown - The Bandsintown manager allows artists to connect with their fans and update them on their latest touring dates. Additionally, the tool allows artists to send geo-targeted posts on their social media sites. With this tool artists can keep in touch with the 11m+ users that utilize Bandsintown.

Superphone - Superphone is a product from Disruptive Multimedia (DMM) which provides creators with a phone number so that their fans can reach them directly. To enhance the relationship between creators and their fans, Superphone asks each person who reaches out to provide precision data as to who they are. This enables the artist to know exactly who they are communicating with while also providing insights as to if the fan has purchased from the creator before, where they are located, and how to reach them.

Given the tools listed above as well as other emerging technologies that are released every day, it's possible for artists to offer the same level of customer service as their favorite brands and build a following of loyal supporters. An old adage states that we only change our behavior when we have a reason to do so. Technology has just provided the impetus for change. Human behavior should follow suit!