Future Sound Presentation: Nov. 2012

Hello.  My name is Ian Rogers and I’m the CEO of Santa Monica-based Topspin.  We build software that helps artists grow their fan base and make money.  Thanks to Bill, Antony, and all of Billboard for bringing us all together and for the opportunity to speak today.

I’ll start today with a theme I first started talking about in 2006, Media 1.0 vs. 2.0, then discuss what I believe the key innovations of the last fifteen years are as they relate to artists, and finally describe the characteristics of the new value chain that’s emerged and what kind of companies are best situated to serve artists in this new value chain.  This is a presentation of ideas, not an advertisement for Topspin, but at the end I’d like to spend thirty seconds making an announcement closely related to these ideas.  

I’m forty years old.  I grew up in Media 1.0.  Distribution was limited and largely controlled by huge companies.  As the industry grew, we evolved from buying vinyl at a local record store to buying our CDs at Best Buy and Wal-Mart.  We learned about new music from FM radio, nationally-distributed magazines, and MTV.  

The result was blockbuster success driven by blitzkrieg marketing, peaking in 1999.

The Internet brought us a new paradigm.  Getting music to fans no longer required manufacturing and distribution of physical products.  Digital file sharing led the way to digital stores, where music could be infinitely replicated and downloaded.  Every artist could relatively cheaply and easily find their way to store shelves.

A few specific innovations bear mention.  In the Media 1.0 world, an artist was reliant on mass media to let consumers know about new product, tours, or to build up their persona.  The Internet has brought countless ways for fans to connect directly to the artists they love, from email lists to social media.  Take a look at FanPageList.com.  The number of direct connections between artists and fans is astounding.  Each of these connections, technically unavailable just a few years ago, allow artists to disseminate news without needing mass media gate keepers.  Once they’ve made the fan connection, they control the means of marketing and communication to a greater degree than they did in the past.

Piracy gets blamed but many studies have shown unbundling has been the primary driver of lost revenue in the music business.  What used to cost $18 has now become $0.99 or in many cases, free.  I’m increasingly convinced when people buy digital music the value in the transaction for them is in convenience and curation, not the digital music itself.

But the music has been rebundled in new, higher-value packages.  Where we used to visit a different retailer for each type of product, fans have come to expect everything an artist offers to be available on an artist’s Web site, and have shown a willingness to pay for high-value items including tickets, vinyl, and collectibles.  Fans are generous when it comes to direct patronage and value that direct connection to an artist.  

Beyond just the unbundling, the act of music listening has moved to a fundamentally different point in the discovery process.  Consider the funnel as your potential audience graduates from not knowing you exist to being a paying customer.  When I was growing up, the act of listening to recorded music was firmly in the “paying customer” strata; if I wanted to hear an album my options were to borrow it from a friend, wait for it to come on the radio, or buy it.  Today, the act of listening is firmly at the “awareness” strata.  Customers know if they want to hear something, they can.  Via YouTube, downloads, or services like Spotify.  Music has become “no purchase necessary”.  It would be impossible to overstate the implications of this shift, and we’re only at the beginning of this shift as an industry.

As a result of these fundamental changes, we’re going to see more organic success driven by fan passion.  Mumford and Sons seemed like an anomaly?  What do you have to say about Lumineers following fast on their heels?  How about Odd Future going from hanging around the Supreme skate shop on Fairfax in LA to MTV’s Best New Artist after releasing more than 10 records via Tumblr (not even available on iTunes)?  Or Seattle’s Macklemore, who has been growing his “out of nowhere” success organically for twelve years.  

The physics of Media 2.0 state the quality of the music and its ability to touch people is worth more than blitzkrieg marketing.  Unlimited consumer choice also means that “pretty good” is not good enough to win (“the difference between an 8 and a 10 is the difference between failure and success” - Eric Galen, Music 180) but when you have a 10 you can take it all the way with less investment than in the past.

As Al Teller said, “There are two people who matter in the music business, the artist and the fan.  The rest of us are in the way.  We need to either provide value or get out of the way.”  Today’s value chain takes artists from ideas to funding to development to aggregation and distribution to data about an artist and their music to marketing to consumer applications and retail out to fans.  There are two layers, one for platforms providing tools for everyone and another for the service layer where individual attention is given to specific artists and projects.  All of us “in the way” fit into one or (usually) a couple places along this value chain.

But none of us solve the artist’s (or fan’s) needs end-to-end.  It’s interesting to consider where the incumbent scale players (major labels) are playing today.  They only fill a couple of roles in this new value chain, and only at the service layer.  

In the Media 1.0 context, major companies were gate keepers to each step in this value chain.  As an artist, you would give up rights to get access and support at every step along your path.  Recording music in expensive studios, manufacturing, distribution, and marketing cost significant money artists didn’t have and big companies were needed to risk the capital to provide basic access to the value chain.

In the Media 2.0 world everyone can get basic access at every step in the value chain without much capital risk and without giving up any of their rights.  Access to the tools has been democratized.  

But this by no means amounts to success.  Artists need experts in each of these areas to help them succeed.

In many ways this is the most exciting part of what the Internet has done.  It’s given artists leverage to choose the right partners under the right deals.  The conversation changes from “I’m going to make you a star” to “I’m going to add value beyond what you could do on your own in this specific way.”  Artists get to say to companies in the value chain: Provide value or no thank you.

So, what will the next scale player in Media 2.0 look like?  I believe they will solve the platform line of this value chain end-to-end (or most of it).  There are companies all along this line today, but the space is extremely fragmented.  Over time, these functions will consolidate into a single platform capable of servicing all artists but identifying content which resonates with fans and helping get it to the next step in the process.

Topspin fits into a few places in the value chain today: aggregation and distribution, media data, marketing, and retail.  But it’s just one piece of what an artist needs, the direct-to-fan marketing and commerce component.  

Often artists come to us with many pieces solved and they’re just looking for the direct-to-fan component, but increasingly artists are coming much earlier in the process and looking for an end-to-end solution.  We work with literally hundreds of companies to this end (and will continue to) but we wanted to be able to offer artists a single solution where they know everyone is excited to work together and will all collaborate on a plan to maximize fan growth and revenue for the artist.  We’re extremely excited to announce today a collaboration between Topspin, fan-funding platform Pledge Music, distribution and artist services powerhouse INgrooves Fontana, merchandise company Firebrand, and musician business tools Artist Growth bringing artists the most comprehensive suite of services available along the Media 2.0 value chain.  If you’re interested in taking advantage of this new set of partnerships, please visit TopspinMedia.com and click Creative Services to get in touch with us.

Thanks!  See y’all soon.
ian

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