Seth says it better than I do
Things you can learn from the music business (as it falls apart)
The first rule is so important, it's rule 0:
0. The new thing is never as good as the old thing, at least right now.
Soon, the new thing will be better than the old thing will be. But if you wait until then, it's going to be too late. Feel free to wax nostalgic about the old thing, but don't fool yourself into believing it's going to be here forever. It won't.
1. Past performance is no guarantee of future success
Every single industry changes and, eventually, fades. Just because you made money doing something a certain way yesterday, there's no reason to believe you'll succeed at it tomorrow.
The music business had a spectacular run alongside the baby boomers. Starting with the Beatles and Dylan, they just kept minting money. The co-incidence 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: 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 disk jockeys to play their music on the radio. They 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 digital version is free (and easier).
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 in size (consider Facebook or Basecamp).
Music is social. Music is current and everchanging. 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) of delivering 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. 10,000 people who look forward to the next record, who are willing to trek out to the next concert. Add 7 fans a day and you're done in 5 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 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 seek out groups that want to be connected and he works to become the connecting the point.
By being open to choices of format, to points of view, to moments in time, Bob Dylan never said, "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 switching 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, first few in will find it, the rest lose everything.