Whatcha Gonna Do With That Duck?: And Other Provocations, 2006-2012 (47 page)

The music business had a spectacular run alongside the baby boomers. Starting with the Beatles and Dylan, they just kept minting money. The coincidence of expanding purchasing power of teens along with the birth of rock, the invention of the transistor, and changing social mores meant a long, long growth curve.

As a result, the music business built huge systems. They created top-heavy organizations, dedicated superstores, a loss-leader touring industry, extraordinarily high profit margins, MTV, and more. It was a well-greased system, but the key question is: Why did it deserve to last forever?

It didn’t. Yours doesn’t, either.

2.
Copy protection in a digital age is a pipe dream.

If the product you make becomes digital, expect that the product you make will be copied.

There’s a paradox in the music business that is mirrored in many industries: you want ubiquity, not obscurity, yet digital distribution devalues your core product.

Remember, the music business is the one that got in trouble for bribing disc jockeys to play their music on the radio. Music execs are the ones that spent millions to make (free) videos for MTV. And yet once the transmission became digital, they understood that there’s not a lot of reason to buy a digital version (via a cumbersome, expensive process) when the peer-shared or pirated digital version of the same song is free (and easier to get).

Most items of value derive that value from scarcity. Digital changes that, and you can derive value from ubiquity now.

The solution isn’t to somehow try to become obscure, to get your song off the (digital) radio. The solution is to change your business.

You used to sell plastic and vinyl. Now, you can sell interactivity and souvenirs.

3.
Interactivity can’t be copied.

Products that are digital and also include interaction thrive on centralization and do better and better as the market grows (consider Facebook or Basecamp).

Music is social. Music is current and ever changing. And most of all, music requires musicians. The winners in the music business of tomorrow are individuals and organizations that create communities, connect people, spread ideas, and act as the hub of the wheel—indispensable and well compensated.

4.
Permission is the asset of the future.

For generations, businesses had no idea who their end users were. No ability to reach through the record store and figure out who was buying that Rolling Stones album, no way to know who bought this book or that vase.

Today, of course, permission is an asset to be earned: the ability (not the right, but the privilege) to deliver anticipated, personal, and relevant messages to people who want to get them. For ten years, the music business has been steadfastly avoiding this opportunity.

It’s interesting, though, because many musicians have NOT been
avoiding it. Many musicians have understood that all they need to make a (very good) living is to have 10,000 fans. Ten thousand people who look forward to the next record, who are willing to trek out to the next concert. Add seven fans a day and you’re done in five years. Set for life. A life making music for your fans, not finding fans for your music.

The opportunity of digital distribution is this:

When you can distribute something digitally, for free, it will spread (if it’s good). If it spreads, you can use it as a vehicle to allow people to come back to you and register, to sign up, to give you permission to interact and to keep them in the loop.

Many authors (I’m on that list) have managed to build an entire career around this idea. So have management consultants and yes, insurance salespeople. Not by viewing the spread of digital artifacts as an inconvenient tactic but by viewing it as the core of their new businesses.

5.
A frightened consumer is not a happy consumer.

I shouldn’t have to say this, but here goes: suing people is like going to war. If you’re going to go to war with tens of thousands of your customers every year, don’t be surprised if they start treating you like the enemy.

6.
This is a big one: the best time to change your business model is while you still have momentum.

It’s not so easy for an unknown artist to start from scratch and build a career self-publishing. Not so easy for her to find fans, one at a time, and build an audience. Very, very easy for a record label or a top artist to do so. So, the time to jump was yesterday. Too late. Okay, how about today?

The sooner you do it, the more assets and momentum you have to put to work.

7.
Remember the Bob Dylan rule: it’s not just a record, it’s a movement.

Bob and his handlers have a long track record of finding movements. Anti-war movements, sure, but also rock movies, the Grateful Dead,
SACDs, Christian rock, and Apple fanboys. What Bob has done (and I think he’s done it sincerely, not as a calculated maneuver) is to seek out groups that want to be connected, and he works to become the connecting point.

By being open to choices of format, to points of view, to moments in time, Bob Dylan never has a reason to say, “I make vinyl records that cost money to listen to.” He understands at some level that music is often the soundtrack for something else.

I think the same thing can be true for chefs and churches and charities and politicians and makers of medical devices. People pay a premium for a story, every time.

8.
Don’t panic when the new business model isn’t as “clean” as the old one.

It’s not easy to give up the idea of manufacturing CDs with a 90% gross margin and switch to a blended model of concerts and souvenirs, of communities and greeting cards and special events and what feels like gimmicks. I know.

Get over it. It’s the only option if you want to stay in this business. You’re just not going to sell a lot of CDs in five years, are you?

If there’s a business here, the first few in will find it; the rest lose everything.

9.
Read the writing on the wall.

Hey, guys, I’m not in the music business and even I’ve been writing about this for years. I even started a record label five years ago to make the point. Industries don’t die by surprise. It’s not like you didn’t know it was coming. It’s not like you didn’t know whom to call (or hire).

This isn’t about having a great idea (it almost never is). The great ideas are out there, for free, on your neighborhood blog. Nope; this is about taking initiative and making things happen.

The last person to leave the current record business won’t be the smartest and he won’t be the most successful, either. Getting out first and staking out the new territory almost always pays off.

10.
Don’t abandon the Long Tail.

Everyone in the hit business thinks they understand the secret: just make hits. After all, if you do the math, it shows that if you just made hits, you’d be in fat city.

Of course, the harder you try to just make hits, the less likely you are to make any hits at all. Movies, records, books—the blockbusters always seem to be surprises. Surprise hit cookbooks, even.

Instead, in an age when it’s cheaper than ever to design something, to make something, to bring something to market, the smart strategy is to have a dumb strategy. Keep your costs low and go with your instincts, even when everyone says you’re wrong. Do a great job, not a perfect one. Bring things to market, the right market, and let them find their audience.

“Stick to the knitting” has never been more wrong. Instead, find products your customers want. Don’t underestimate them. They’re more catholic in their tastes than you give them credit for.

11.
Understand the power of digital.

Try to imagine something like this happening ten years ago: an eleven-year-old kid wakes up on a Saturday morning, gets his allowance, and then, standing in his pajamas, buys a Bon Jovi song for a buck.

Compare this to hassling for a ride, driving to the mall, finding the album in question, finding the $14 to pay for it, and then driving home.

You may believe that your business doesn’t lend itself to digital transactions. Many people do. If you’ve got a business that doesn’t thrive on digital, it might not grow as fast as you like. Maybe you need to find a business that does thrive on digital.

12.
Celebrity is underrated.

The music business has always created celebrities. And each celebrity has profited for decades from that fame. Frank Sinatra is dead and he’s still profiting. Elvis is still alive and he’s certainly still profiting.

The music business has done a poor job of leveraging that celebrity and catching the value it creates. Many businesses now have the power to create their own micro-celebrities. These individuals capture attention and generate trust, two critical elements in growing profits.

13.
Value is created when you go from many to few, and vice versa.

The music business has thousands of labels and tens of thousands of copyright holders. It’s a mess.

And there’s just one iTunes music store. Consolidation pays.

At the same time, there are other industries where there are just a few major players, and the way to profit is to create splinters and niches.

14.
Whenever possible, sell subscriptions.

Few businesses can successfully sell subscriptions (magazines being the very best example), but when you can, the whole world changes. HBO, for example, is able to spend its money making shows for its viewers, rather than working to find viewers for every show.

The biggest opportunity for the music business is to combine permission with subscription. The possibilities are endless. And I know it’s hard to believe, but the good old days are yet to happen.

And CNET hates Google.

And newspapers hate Craigslist.

And music labels hate Napster.

And used-books stores hate Amazon.

And so do independent bookstores.

Dating services hate Plenty of Fish.

And the local shoe store hates Zappos.

And courier services hate fax machines.

And monks hate Gutenberg.

Apparently, technology doesn’t care whom you hate.

A workaholic lives on fear. It’s fear that drives him to show up all the time. The best defense, apparently, is a good attendance record.

A new class of jobs (and workers) is creating a different sort of worker, though. This is the person who works out of passion and curiosity, not fear.

The passionate worker doesn’t show up because she’s afraid of getting in trouble; she shows up because it’s a hobby that pays. The passionate worker is busy blogging on vacation, because posting that thought and seeing the feedback it generates is actually more fun than sitting on the beach for another hour. The passionate worker tweaks a site design after dinner because, hey, it’s a lot more fun than watching TV.

It was hard to imagine someone being passionate about mining coal or scrubbing dishes. But the new face of work, at least for some people, opens up the possibility that work is the thing (much of the time) that you’d most like to do. Designing jobs like that is obviously smart. Finding one is brilliant.

Brand management is so 1999.

Brand management was top down, internally focused, political, and money based. It involved an MBA managing the brand, the ads, the shelf space, etc. The MBA argued with product development and manufacturing to get decent stuff, and argued with the CFO to get more cash to spend on ads.

Tribe management is a whole different way of looking at the world.

It starts with permission, the understanding that the real asset most organizations can build isn’t an amorphous brand but is in fact the privilege of delivering anticipated, personal, and relevant messages to people who want to get them.

It adds to that the fact that what people really want is the ability to connect to each other, not to companies. So the permission is used to build a tribe, to build a group of people who want to hear from the
company because it helps them connect, it helps them find each other, and it gives them a story to tell and something to talk about.

And of course, since this is so important, product development and manufacturing and the CFO
work
for the tribal manager. Everything the organization does is to feed and grow and satisfy the tribe.

Instead of looking for customers for your products, you seek out products (and services) for the tribe. Jerry Garcia understood this. Do you?

Whom does this work for? Try record companies and bloggers, real estate agents and recruiters, book publishers and insurance companies. It works for Andrew Weil and for Rickie Lee Jones and for Rupert at the
WSJ
. But it also works for a small Web development firm or a venture capitalist.

People form tribes with or without us. The challenge is to work for the tribe and make it something even better.

Gavin Potter says in
Wired
, “The 20th century was about sorting out supply, the 21st is going to be about sorting out demand.”

Think about that one for a second. Not about maximizing demand, but about
sorting it out.
When your messages reach the right people at the right time in the right way, magic happens. It’s not about forcing or pushing or attacking or targeting or closing.

This is a huge step forward in how you can think about your customers and how they act.

Henry Ford left us much more than cars and the highway system we built for them. He changed the world’s expectations for work. While Ford gets credit for inventing the assembly line, his great insight was that he understood the power of productivity.

Ford was a pioneer in highly leveraged, repetitive work, done by relatively untrained workers. A farmer, with little training, could walk
into Ford’s factory and become extraordinarily productive in a day or two.