The live show and merchandise are becoming more important in the music industry. On top of that, there has been a surge in small indie musicians trying to make it on their own. Many think that merch is out of their budget, but with the right planning and strategy merch can become a profitable revenue stream for anyone.

This article, written by Robal Johnson of PUMP Merch, was originally posted on Hypebot. To read the full article, click here. 

1. Decide what to sell

Where to begin? Start small, be patient, and analyze your early merchandise investments. Get creative. Have an artist friend design your logo: pay them in drinks and guestlist spots. Be conscious of your audience: determine what apparel and accessories are trendy. Understand the demographic: ask how they consume and share music, which can easily be done via social networking. Acknowledge your environment: if its hot, tank tops and ballcaps are essential; if it’s cold, hoodies and beanies are a must. At first, focus on selling more for less: keep designs to 1-3 colors, buy the inexpensive option, and charge fans as little as possible. Remember, you can always upgrade later.

Don’t be afraid to be aggressive. You’re not bothering anybody at the show. I guarantee most of the people there will be excited to meet you and honored you came up to talk to them. They know you’re just doing your job and they actually want to talk to you. I have approached the bar in a small town in Mississippi and sold $10 T-Shirts. I have wandered a club in Nashville asking folks if they’d like to buy $5 CDs. Merch is a souvenir purchased to commemorate a notable experience. Every music fan enjoys the pride that comes with seeing an act “back in the day” and you need to offer them something to take home that night.

2. Convenience

Once you have decided on the right products to sell on tour, your next focus should be on convenience. If you do not accept credit cards while on the road, you are leaving countless dollars on the table. Just ask Laura Keating, Melissa Garcia, and Emily White of Whitesmith Entertainment and Readymade Records: “We have been taking credit card payments in some form or another since 2005 and it always doubles our sales at the merch table.” Now THAT should motivate the hell out of all of you.

Companies like Square and PayPal Here have made it extremely simple for you to accept all major credit cards as long as you have a smartphone or tablet. If you have not already, stop reading this right now and order one of the FREE card readers from either of those companies immediately. It will take you a few short minutes and the results are literally priceless. I can not stress the importance of this enough. In this day and age, you MUST accept credit cards. You will not only sell your merch to more people, you will sell even more items.

At this time Square is only offered in the United States, Canada, and Japan. PayPal Here is available in the US, Japan, Hong Kong, and Australia. For acts touring the United Kingdom and Europe, Team Whitesmith/Readymade suggests using iZettle for your credit card processing needs. iZettle is now live in Sweden, Norway, Denmark, Finland, the UK, Germany, Spain, and Mexico.

3. Get organized!

Third on your to-do list while gearing up for tour should be organization and accounting for your merchandise while on the road. For decades this was done by either the merch guy or the tour manager in a looseleaf notebook with pencils and a whole lot of mistakes. Then came Microsoft Excel, which we ALL love to hate. But I have seen the future of tour merchandising and it comes to us via Orange County, California in an app called atVenu. These guys are changing the game and every single touring artist needs to take note.

I spoke with co-founder of atVenu, Ben Brannen, and he shared his story of what drove him and his partners to create the service. “While on the road, I experienced first hand the inefficiencies of existing methods by which we track and settle our touring merch. Too much money is lost due to inventory issues, poor nightly settlements, limited analysis, or one broken cell in an Excel sheet. atVenu solves these problems by empowering merch reps with a mobile app designed for their needs which syncs to the artist’s web-based account where merch company and management can login and easily access a robust suite of real time analytics and reports.”

This is a game-changer for many reasons, but most importantly it is something that will save artists time and money on the road. As a merch rep myself, I can attest to the great many headaches that go along with inventory, accounting, and restocking of products while a band is touring. It is all about organization and communication. With a system in place that knows when you’re getting low on the green v-necks in small and medium and your merch guy gets a notification, imagine how much money you’ll save on those rushed deliveries from halfway across the country that will hopefully make it to the venue on time. Envision how much easier it will be to do reorders for the next tour because you know exactly what you sold, when, and where.

My buddy Randy Nichols of Force Media Management, who represents The Almost and Bayside, among others, also works as Strategic Music Industry & Product Advisor with atVenu. He sums up the app perfectly, “A tool like atVenu shows me real time forecasting data for my tour so I can both improve my profit margins and be sure to maintain a healthy stock of my in demand items. This can easily mean the difference between 10 boxes of merch in the drummers garage at the end of the tour vs an extra $10,000 in profit.”

 

Photo by DrabikPany

Photo by DrabikPany

The live show is a very important part of your musical career. Today, you can find plenty of fans online, but if you really want to form a relationship you need to go offline and interact. You should put the same kind of dedication into your live show that you put into your music. Use your creativity to make each show better than the last!

These tips came for the Hypebot article, “5 Tips for Improving Your Live Show,” and the Music Think Tank article, “6 Ways to get More People to Your Shows.”

1. Videotape your show and study that tape

These days it’s an incredibly mundane thing to get some footage of your live show so, if nothing else, get a look at yourself from an objective perspective just like you might check out a mirror on your way out the door.

But to really benefit from video, plan to get decent footage that includes your stage entry, stuff that happens between songs and your exit. Those are all part of your show and some acts undermine themselves by only taking the songs seriously.

Check it out with nobody around and check it out with a sharp eye at your side. It doesn’t have to be a complicated process in order to reap high returns for taking this process seriously.

2. Take every show seriously

It’s so offensive to the audience members present when a performer focuses on their disappointment at the size or responsiveness of the crowd. Do the best job you can everytime. Maybe afterwards it will still feel disappointing but, by building with those who are present and by reaffirming your commitment to your art every time you perform, you will still come out ahead.

3. Make the Event Interactive

Think of some new ways to make fans a part of the live show. Maybe you can have a “frequent fan” card where they collect stamps for each show and redeem it for a free t-shirt or unreleased material. Maybe you can invite some other artists who are fans to guest perform during your set. Or maybe you can shoot a fan-made “live video” for YouTube shot entirely with Vine videos on cell phones. Whatever it is, get creative and make fans feel like they’re an important part of the experience so they won’t want to miss out.

4. Find a Different Angle for The Show

It’s easier to get more people to show up if it’s your band’s first show, when you’re releasing a new album, it’s a tour kick off, or when it’s your final gig. Obviously, it’s because your fans realize those as special occasions and want to be there.

So rather than making every local show the same, find creative ways to make them more enticing: film a live music video, let fans write the set list, do special covers, play acoustic if you normally don’t (or vice-versa), record a free download of a live track, etc. In other words, give your fans a compelling reason to show up. Answer: Why will this show be different than any other? What makes this exact show special?

What do you do to make your live show awesome? Share in the comment section below.

The music subscription service, Rdio, has recently partnered with concert promoter Live Nation. As a result, Rdio will provide audio streaming on LiveNation.com and act as a sponsor for Live Nation-promoted festivals including the Sasquatch! Festival and the Watershed Music Festival. The partnership started last weekend and is part of Rdio’s efforts to gain more subscribing customers.

Resulting from Rdio’s recent partnership efforts with terrestrial radios, other services like Shazam and SoundHound, and Live Nation, Rdio has managed to increase its subscriber base. This article from Billboard describes some recent subscriber trends and numbers for the music subscription service:

Embracing live music requires being both online and on-site, CEO Drew Larner tells Billboard. Live Nation’s presence in country music gives Rdio an opportunity to gain visibility in front of country music fans. “It’s a demographic we want to approach and we felt this was a great way to hit that demographic.”

The company doesn’t share specific figures on number of registered users and subscribers, but Larner gives a couple examples of its recent growth. In Brazil, registered users were up nine-fold from June 2012 through June 2013, and up six-fold from January through June. Registered users were up six-fold from June to June.

Larner also points to the ranking of Rdio’s iOS app at iTunes as an indication of the service’s upward trajectory. Rdio rose to #1 among free music apps in June in the United States after steadily ranking between #10 and #20 for much of the year. It has also hit #1 in Australia, Canada, the United Kingdom and Mexico. “We’re killing it in Mexico,” says Larner.

What’s driving this growth? Larner says four factors are behind Rdio’s growth: partnerships, social media, marketing and the product.

Partnerships have been a growing trend for some online radio and music subscription services as they search for ways to add value to the listener experience. Most services already have the capabilities to allow users to buy music they listen to, but this connection with live music may act as a more effective link between the online and the offline experience. Many would argue that downloading music and streaming music are comparable, and many consumers do not find the need to own music if they can easily stream it online from any device in any location. The live experience, on the other hand, is irreplaceable. It cannot be duplicated online or through any music service.

As users browse the Live Nation site for concert tickets, they will also be able to listen to tracks via Rdio if they are subscribers, or listen to 30 second clips if they are not.  This direct connection between music discovery and the live music industry may act as a funnel, driving new, and current fans to purchase tickets to a band’s live show. If this driver proves effective, artists stand to benefit more than they would from a download as touring generally brings in more money. In an article by Bloomberg, Rdio Chief Executive Officer Drew Larner describes this beneficial cycle: “Marrying what we do with streaming and discovery, and promoting artists with live music, is a natural fit. A streaming service like Rdio and live concerts can be a virtuous circle.”

No official date has been set as of yet for the integration of Rdio’s services into the Live Nation site.

What do you think about this partnership? Do you think Rdio could effectively drive listeners through its service to a live show?

Casandra Govor of the music and tech think tank, Sidewinder.fm, shares her reactions to the 2011 UK PRS report “Adding Up the Music Industry”.  In a time when the live music sector represents an increasingly important revenue stream for musicians, it is important to examine the causes and contexts behind the statistics.

florenceThe downward trend is blamed on the decrease in stadium tours, arguably caused by the lack of ‘giant’ acts (like the Rolling Stones, Take That, or Coldplay) touring and downsizing of medium-major artists and bands gigs. Although statistically it might be correct, I believe this approach is slightly simplistic. The way PRS is formulating the issue, it almost sounds like it was “bad luck” that it happened that no major artist toured intensively in 2010. Had this been the only issue, it’s hard to believe there was no such similar year in recent history.

Gover offers her own analysis of the PRS report as well as the current state of the live touring industry.  The full story is also available on Hypebot.

While the recorded music business continues to suffer, the live touring business is holding up rather well, propelled in the short term by legacy acts, but moving forward with smaller bands and festivals well poised to fill the shoes of the legendary bands as they retire. Here are some excerpts from a great piece by Dean Budnick with the Hollywood Reporter.

We’re at a fascinating crossroads. The modern touring rock industry emerged in the late ’60s, during the heyday of such venues as Bill Graham’s Fillmore East and West in New York and San Francisco, respectively, Jack Boyle’s The Cellar Door in Washington, D.C., and Don Law’s Tea Party in Boston. Rock music didn’t move into arenas until the early ’70s, a development that prompted Graham to close his clubs, announcing his decision via a letter to the Village Voice that decried “the unreasonable and totally destructive inflation of the live concert scene.”

So how are the smartest people in the industry preparing for the next big shift?

“We need fresh acts to appeal to new generations,” says Michael Rapino, president and CEO of Live Nation, the world’s dominant tour promoter. “The Rolling Stones was an epic tour, but it’s not a long-term business.” Rapino suggests that this process already is in motion, as six of the top 10 Live Nation tours of 2012 were by artists whose first hit was in the 2000s, including Lady Gaga, Coldplay, Jason Aldean, Drake, Rascal Flatts and Nickelback. “The beauty of this industry is there are always new acts to win our hearts.”

Chip Hooper, worldwide head of music at Paradigm, echoes this sentiment: “Today you’re talking about one group of bands, but what is contemporary and what is heritage just keeps changing as time goes marching on. If you took a snapshot of today, yeah, there’ll be some older artists who won’t be touring in a couple years, but then there’ll be new older artists because younger artists are getting older.”

Still, it remains an open question as to whether today’s concertgoers will continue to follow a singles artist like Rihanna into her dotage and whether they will pony up for the ever-escalating price for a live-concert experience. “As concertgoers age and inflation increases the price of nearly everything, ticket prices will rise in conjunction,” says industry analyst Dan Greenhaus, chief global strategist at BTIG. “When Coldplay play Madison Square Garden with a crowd averaging 50 years old rather than 30 years old, the higher-income-earning crowd will part with more money. The transition from The Eagles and CSN to Bon Jovi and U2 to Coldplay and Foo Fighters might be difficult for some interested parties — but the transition will occur.”

The answer might be to think smaller, says Tom Windish of The Windish Agency, which reps more than 500 acts including Foster the People, Gotye and 20 of the performers at the 2012 Coachella festival. “If I was a promoter, I would be analyzing which markets could use a 2,000- to 5,000-capacity venue and what obstacles are in the way to creating one,” Windish says. “As an agent, there are many cities where there is just not a suitable venue for a band who can sell this number of tickets. It takes time to open a venue of this size for many cities, and it can’t happen soon enough.”

So will all this work? Perhaps a more pointed question is: Can the live music industry survive the coming generational shift? Will young people show the same passion for live music as their elders — and do they have the income to support their habit? Tentative signs point to yes, based on festival attendance as well as the rising popularity of such performers as Mumford and Sons, Zac Brown Band, Bassnectar, Grace Potter and the Nocturnals and Vampire Weekend. At its core, the live entertainment industry is built on a certain ineffable, unquantifiable connection between fan and band, which is also why those legacy acts might not be leaving the stage anytime soon.

Read more from the Hollywood Reporter.

Here is a presentation developed for clothing manufacturer Carhartt as they try and capitalize on the popularity of their products with the youth market. Interesting trends and stats posted by students from Parsons The New School for Design.  “By identifying the forces at play in the world of music and the behaviors that are driving those forces, one can identify particular patterns that support current trends. By looking forward to what the future of music may encompass, this presentation aims to provide Carhartt, with valuable insight that will help the brand as a whole, cater to the future of urban millenials.”

EDM is really just short for “Event Driven Marketing”.

At last week’s Billboard  Futuresound conference in San Francisco, Deadmau5 aka “Joel Zimmerman” gave a candid interview which you can listen to here.  He talked freely about his career, the current EDM scene and where things are heading.

Ale Delgado wrote this great recap of our CMJ panel on merchandise last week.  Thanks Ale!  Here is most of it.  Visit her site for more:

Considering that I’m always looking for the next big thing, I knew I had to go to CMJ’s “Modern Merch: Beyond the Tour T-Shirt” panel. See, merch is a $2.2 billion business and one of the biggest ways an artist can make money. But while most merch is sold at shows, most people at shows don’t buy merch. Tricky, huh?

The basic premise of the panel was that opportunity comes when you marry a point of passion (e.g., a song stream or live show) with a call to action (e.g., a merch sale)– and yes, they had some tips to help you take advantage of any opportunities that come your way.

Moderator: Dave Kusek, co-founder of MerchLuv and co-author of The Future of Music.

Panelists: Zach Bair, founder of RockHouse Live Media Productions and the original CEO of DiscLive Network, which records, masters, and burns concert CDs to be made available to fans right after the show;  Mary Sparr of screen-printed gig poster pros Print Mafia and culture blog Young Mary’s Record; and Alexandra Starlight, funky and spunky indie starlette whose Kickstarter campaign resulted in 205% funding and a rainbow glitter 7″ EP.

 

1.Think of merch as an extension of your brand

As always, the first thing to do is consider your brand as an artist. Once you develop a consistent aesthetic, you can open the door to more innovative merch because fans will recognize it as one of your pieces. For example, Starlight created a one-of-a-kind rainbow glitter vinyl record for her self-titled EP. A record like that had never been pressed before and each one was hand-glittered, so each fan received a unique copy. If you’ve ever peeked at Starlight’s website (or rainbow-dyed hair), you know that a rainbow glitter album fits perfectly with her brand– and it’s damn memorable.

Furthermore, if you think of merch as your brand being integrated into someone’s lifestyle, it opens up even more creative possibilities. For instance, The Hold Steady created branded foam fingers. Y’know, the ones you wave around like crazy when you’re cheering on your favorite team. What do foam fingers have to do with music? Not much, but they’re fun, different, and priced for the college-aged fan. And judging by the fact that they’re sold out, they’re a big hit with fans.

2. Cater to your spectrum of fans

Take another look at The Hold Steady’s foam finger. It’s $10 reduced to $5. Easy sale for a teenager or college student who might have a lot of spending money but is willing to pay for something cool to show off to their friends. Making sure that you have different tiers of merch for different fans is key to building sales. You should have something at your merch table for the fan who just wants to snatch a free download card and for the fan who wants to buy everything. That also means bundling items together (CD, t-shirt, button combo) for a quick sale.

3. Be show-specific

If possible, create show-specific merch. It can be as simple as individual gig posters for each city in which you tour or something a little more involved. Sparr brought up the tickets that Mumford & Sons created for their Gentlemen of the Road Stopover Tour. Each ticket was a commemorative passport that contained a download code for a compilation of songs recorded at each Stopover. Then it got better. Fans could get their passports stamped at the merch tables at each Stopover, personalizing their passports to their experience. Then it got even better. People were wandering around each Stopover with unique stamps, essentially turning the passports into a Pokemon game. (Gotta stamp ‘em all!) Talk about fan engagement.

Next, update your Facebook and Twitter on the day of the show and let your fans know what merch you’re going to be offering, especially if you have something that will only be available at that show. The more people can prepare (or at least consider the possibility of picking up your record), the more likely they’re going to buy something.

 

4. Work your merch like a pop-up shop

Think about every grumpy salesperson you’ve had to deal with. They don’t greet you, they don’t look you in the eye, they don’t care if their store is a mess, they don’t want to help you find anything, or (even worse) they’re way too pushy… Okay, now be exactly the opposite.

Your merch table is your pop-up shop. Have your items propped up nicely so that fans who are moving past your table can see what you have to offer. Greet them as they walk up to your table; don’t badger them, but put on a friendly face like you would if they were customers coming into your brick-and-mortar store. Also make sure that you’re being as meticulous as you would be if you were running a store: keep track of your inventory and double-check any email addresses written down on your mailing list. Remember that the experience doesn’t end when your show does; fans will remember what you were like behind the table.

5. Extend the experience

Well, actually, the experience doesn’t have to stop when your fans walk out of your venue either. There are a lot of ways you can extend your show experience, from the simple to the elaborate. Here are a few ideas from the Panelists:

  • Make sure there’s someone taking pictures of your show, including grabbing a few shots of the crowd. Then post it on Facebook and encourage your fans to tag themselves.
  • Have your fans post pictures of your show to Instagram with a hashtag of your choosing, and then sending them aPostagram thanking them for coming to the show or giving them a discount for your store.
  • Use DiscLive to record, mix, and master a live recording of your show. By the time you’re ready to sell some merch, they’ll have CDs ready to go. DiscLive also allows for preorders, meaning that a) you can bundle tickets and CDs and b) you’ll have an estimate of what you’ll sell at your show.
  • Use MerchLuv to bundle streaming songs with merch items to cater to those new fans who hadn’t heard of you before your show, but want to check you out afterwards. Remember, opportunity lies where passion meets action.

Read more here including a Happy Halloween Bonus Tip!

For artists struggling to make a living in the digital age, a strong merch strategy can be the difference between living life as a starving artist and making a comfortable living.

Yet compared to the recording, publishing and ticketing businesses—which have felt the full effect of technology and the Internet— the merch business today is mostly stuck in the analog 70s. If we are looking to make money in the music industry of the future, why focus our energies on debating the intricacies of Spotify payments or whether licensing terms stifle innovation. Instead let’s examine an area ripe for disruption and revenue expansion.

A Highly Fragmented Environment

Indeed merch seems to be a highly fragmented business ripe for consolidation and transformation. To illustrate, let’s look at some research conducted by a company I work with— Merchluv. We looked at the August 2012 Big Champagne charts and came up with a list of  100 top artists and analyzed their merch availability:

– The 100 artists on the list used 44 different merch vendors (how’s THAT for fragmentation?).

– 75% of artists sold merchandise on their website, Facebook page or through an official supplier.  A surprising 25% of the top selling artists in August did not sell any merch AT ALL.

– 18 artists were “self” merchandisers, meaning they used Topspin, Paypal, Amazon, or a 3rd party services or ran their own commerce site/shopping cart.

– The remaining 57 artists were served by 26 different merch suppliers.

That means to sell merch for the top 100 artists in August you need to make nearly 44 deals with merch suppliers. Clearly a consolidation of merch vendors could help to rationalize the market. Where is the Amazon of music merchandising?

Merch is an Insulated Service

The merch business is largely disconnected from the real heat in the music market today, namely the explosion in digital music services. For example: 45 BILLION songs are streamed or viewed every month, yet there is NO MERCH being sold against this engagement. And that number is just going to BLOW UP to hundreds of billions of streams per month in the next few years.

Imagine if streaming services allowed fans to browse and buy an artist’s merchandise from the same page where they  are streaming their album or buying their tickets? There is a complete disconnect between where most music is discovered today, and the $2.2 billion in annual merch revenue.  The vast majority of merch is sold at the venerable merch table at any given concert. Why not make the effort to expand that experience into the digital realm? An alignment of merch distribution with the direction that the overall music market is headed would serve artists and merch companies extremely well, and potentially unlock a flood of new revenue.

Merch is Analog

Most artists sell 85% or more of their merch directly at live shows at the merch table. As effective as they are, merch tables can stand to be improved on in the digital age.  For example:

– Fans have to know where the merch booth is.

– Why stand in line when you can order from your seat?

– What if the merch guys don’t have your size or color preference at the table?

– When you buy merch at a show you have to hold it and take it home. Do you want it delivered instead?

– What if you want a bundle of something physical and something digital.  Is this easy to buy?

– How about something personalized for you, or something bigger than you can carry home?

There hasn’t been much innovation at the merch table at all, except for perhaps using Square readers to process credit cards. I wonder if the major merch vendors of today are going to be blindsided by technology and the changing habits of music consumers in much the same way that the record labels were hit.  Merch is extremely difficult to digitize.  But the sales of merch are not.

Tons of artists have web stores attached to their web sites and Facebook pages.  Companies like Reverbnation and Bandcamp can help independent artists manage their merch on their web stores and spread the merch offer out via social media to numerous outlets.  There are many businesses such as Bandmerch and Cinderblock, JSR and Bubbleup addressing this niche, providing fulfillment, webstores, warehousing and shipping services.

But the problem with this approach is that fans need to navigate to an artist’s web site and find the merch for sale and be ready to buy.  Today only 15% of merch is sold online.  New companies like Merchluv, which I am an investor in are about to blaze new trails in digital merchandising. The reason to do this? Grow overall revenue.

The large merchandising companies are very aware of the opportunities of snaring a hot band and bringing their merch to market effectively.  The holy grail of this is the long-term sales possible from mega-popular bands over time.  Anyone want to guess how many Dark Side of the Moon T-shirts have been sold?  Companies like Old Glory have been licensing artist merchandise for decades.

Now we can argue whether there will ever be another blockbuster band like Pink Floyd or the Rolling Stones or Metallica – but if there is going to be significant revenue in the music market of the future, merchandise is going to be a huge contributor.  Merchandise might possibly become the single largest revenue generator for artists of the future. You have to think big here and broader to see what I am talking about.

When artists today are being pulled in various directions to run their businesses, create, act, teach, write and express themselves and interact with their audience, what could be better for supporting a career than a good merch strategy?  Think about the merchandising empires built by Jimmy Buffett, Jay-Z, Puffy, 50 Cent, the Grateful Dead.  The merch is the tail wagging the dog and it has made these artists a fortune.

For musicians in the digital age, revenue needs to come from something than other the recording itself.  To some extent this has always been true, but never more so than today.

Creative Explosion

My friend Todd Siegel and partner in Merchluv tells me that these days creating innovative merch and finding things that resonate with your audience is easier than ever, and many clever artists are using fan sourcing and crowd sourcing options like Talent House and Creative Allies to design merch with their fans.  Once you have a design, you can use sites like Zazzle to test ideas for new products without investing in inventory up front.
Bands like Insane Clown Possee (ICP) have created a cult-like brand through the use of iconic imagery and building a strong following by involving their fans.  The Misfits have sold more merch than music because of that iconic skull that people buy because the merch itself is cool and fashonable.

And talk about branding, take a look at what Deadmau5 is doing with the goofy mouse head. This guy has merch everywhere and may just overtake Mickey Mouse in brand awareness across teenagers.  Even if you have never heard him perform, you know who he is.

Beats by Dr. Dre is another example of merch that has gone over the top and transcended the music entirely to become a lifestyle product that in some respects is becoming a big part of the music industry.  This in only a matter of a few years.

The brainchild of artist/producer Dr. Dre and Interscope Chairman Jimmy Iovine, Beats is bringing high-quality audio to fans through their headphones, sound systems, and now the recently acquired MOG digital music service. Dre has taken a brand established as a recording artist and is in the process of turning it into the music industry of the future, through a grand merchandising strategy.

Conclusion

In the face of declining recorded music sales, many of us are looking hard at the opportunities for generating money in music today. Most of the investment from VCs, Angel investors or Private Equity in music has been in streaming music, discovery, ticketing, crowd funding and artist services. Businesses like Pandora, Spotify, Beats, Ticketfly, Soundcloud, Songkick and Indiegogo all have received significant investments in recent years.

There are two ways that bands have always made money. One is by performing and the other is by selling merchandise. Both are tried and true methods, difficult to download or duplicate, and solid and reliable opportunities.

Why have hundreds of millions of dollars in venture capital been poured into online music services in the face of severely declining recorded revenue, when one of the most profitable parts of the music business—namely merch—been largely ignored by investors? Wouldn’t it make more sense try to increase sales of an already healthy and expanding market segment, ripe for disruption?

As the saying goes – when life hands you lemons, you make lemonade. And as we face the reality of the digital music business today, many are finding ways to make digital lemonade.  This is the first in a series of posts about creative thinking in music.

In the face of declining recorded music sales, we have to look hard at the opportunities for generating money in music and get creative. Most of the energy today in digital music investment is in streaming music, music discovery, ticketing, crowd funding and artist services. Businesses like Pandora, Spotify, Beats, Ticketfly, Soundcloud, Songkick and Indiegogo have received significant investments in recent years as investors chase profits in the music space.

Artist Income – Virtual Tours

But what about individual artists and musicians themselves? What can they do to increase their opportunities to profit from their art when it is becoming increasingly challenging to make a living as a musician. Live performance and merchandise have long been mainstays of any carefully crafted musical career. How are these revenue streams fairing in the digital economy? Live shows it would seem need to be experienced and therefore are harder to digitize and share, although some are trying to broadcast live events and take them to the digital sphere. Take Stageit and Liveset for example. Artists can broadcast their live shows and reach a global audience while performing in a studio, living room or other venue.

Like a virtual campfire, these technologies let fans and performers join together in virtual circles enjoying the music and getting up close with the artists. It remains to be seen how influential these attempts will be, but I expect that inevitably some form of digital broadcast of live events will take hold and be a profitable source of revenue. Afterall, in theory, this form of live event takes a lot of the cost out of the tour, makes the artist more accessible and is easy to promote using social media and email.

Artist Income – Involve your fans

The musician Beck is planning to release his next album in the form of sheet music and full color artwork. His thinking is that people can participate in the creation and performance of the songs in this truly interactive record release.  I think this is really smart and another feather in the cap of this truly creative artist/producer.  Why not sow the seeds of your music within your fan base, and see what they come up with?  Perhaps Beck’s genre lends itself to this kind of experimentation, but other artists can take a cue from him on a clever way to draw your fans closer to the action.

Beck’s latest album comes in a primative form—twenty songs existing only as individual pieces of sheet music, never before released or recorded. Complete with full color artwork for each song and a lavishly produced hardcover carrying case, Song Reader is an experiment in what an album can be at the end of 2012.  Beck is inviting his fans to record, mix and produce each track in their own way. If you want to hear “Do We? We Do,” or “Don’t Act Like Your Heart Isn’t Hard,” you will need to bring them to life yourself, by playing the music. It will be very interesting to see what the uptake is on this release when it becomes available in December.

There are already postings of these tracks appearing online such as this cover of “Do We, We Do” from Max Miller on Soundcloud.

Digital Sheet Music

The sheet music business is facing challenges like unlicensed tablature, free files and online video instruction that is making this old-school business look for new ways to monetize their songs. Notation sales have fallen off, though not nearly as rapidly as recording revenues. In this post from Create Digital Music, you can see the transformation of the print music business as it goes digital (as it has been doing for some time now). Sites like sheetmusicdirect.com, musicnotes.com and others are pioneering the distribution of digital sheet music.  Sites like lyricstore.com are taking music licensing into an entirely new direction by letting people create custom merchandise from their favorite song lyrics.

There is lots of room for making digital lemonade in the new music economy beyond iTunes, Pandora and Spotify.  In the coming weeks I will post more about online music education and a quiet revolution in music merchandising, both of which we will discover, are hotspots for growth and revenue creation in the fast moving world of digital music.

I was reviewing this fascinating data from Mary Meeker over the weekend again, and thought I would share it. Meeker, a partner at Kleiner Perkins Caufield & Byers describes what she calls “the re-imagination of nearly everything” powered by mobile and social. For example: News outlets are reimagined on Twitter, note-taking is reimagined on Evernote, scrapbooking is reimagined on Pinterest and music purchasing is reimagined as listening.

Meeker also traces out the story of the mismatch between mobile growth and mobile monetization, pulling together numbers and analysis of one of the biggest weaknesses in today’s Internet industry.

And she gives some context to the state of the global economy. Here’s the full slide presentation:

KPCB Internet Trends 2012

I am often amazed at how much today’s musicians can learn from the past.  We all think that we are in the age of digital music and the old rules no longer apply and that there are only new models to develop and pursue.  Wrong.  Instead, we can all learn a whole lot by looking backwards and trying to map the successes of the past to the future.  Lets take a look at the late Dick Clark’s career and see what we can learn.

Dick Clark capitalized on the integration of music and television long before “American Idol.” But his legacy extends well beyond the persona of the laid-back host of “American Bandstand” whose influence can still be seen on TV today.

He was the workaholic head of a publicly traded company, a restaurateur, a concert promoter and real estate investor. Clark, who died of a heart attack in April at age 82, left behind a fortune and is the model of entertainment entrepreneurship.  He was ahead of his time, creating a business empire built around his personality and interests that led the way for many other musician/ entrepreneurs to come.

“Work was his hobby,” said Fran La Maina, the longtime president of Dick Clark Productions Inc.

La Maina started as the production company’s financial controller in 1966. He estimates Clark amassed a fortune that reached into the hundreds of millions of dollars. “He had this never-give-up attitude. He was a great salesperson and a task master,” La Maina said.

Clark was one of the early pioneers of the idea that a public company can be formed around an entertainer’s personal appeal. By the time La Maina went to work for him, Clark already had three shows on air: “Swingin’ Country,” “Where the Action Is,” and, of course, “American Bandstand.”

He promoted more than 100 concerts a year back when promoters, not bands, called the shots. His roster included The Rolling Stones and Engelbert Humperdinck. In the 1970s, he launched shows like the “American Music Awards” and “New Year’s Rockin’ Eve” – shows that are highly valued by advertisers because fans still want to watch them live in an age of digital video recorders.

At one point, he hosted shows on all three major TV networks, including “The $20,000 Pyramid” on ABC, “Live Wednesday” on CBS and “TV’s Bloopers and Practical Jokes” on NBC. All the while, he was hosting shows “Dick Clark’s Countdown” and “Rock, Roll & Remember” on the radio and running a business.

“He had boundless energy and a remarkable ability to do innumerable things at any given time,” La Maina said.

By the time it went public in 1987, Dick Clark Productions had several thousand employees, had launched a restaurant chain with Clark’s name on it, and ran a communications-promotion business. Revenue exceeded $100 million a year and the company was profitable.

His daily schedule was daunting, even when Clark was in his late 50s and 60s, according to longtime board member Enrique Senior, a managing director at Allen & Co. who helped Dick Clark Productions go public. “It frankly was the schedule of a 20-year-old,” Senior said. “This guy was a dynamo. I’ve never seen anybody who would be so personally involved in everything he did.”

What can be learned?  Work hard, diversify, promote, be personally involved, build a great team around yourself, dream, and go for it.

Read more here from Ryan Nakashima at the Associated Press.

My buddy Bruce Houghton at Hypebot, caught me last week for a quick interview before Rethink Music.  Here is an except from our discussion:

HYPEBOT: Your new focus is on consulting and investing. Are there any sectors, particularly within music and music tech, that particularly interest you or where you see the most room for growth?

DAVE KUSEK: Online education is one of them. This is an area that is already transforming how people learn and gain job skills and it is only going to grow as time goes on. There are big opportunities here that will effect tens of millions of people around the world. Online training is going to be huge. Job requirements are shifting and people need to be able to adapt to changing circumstances that can benefit them. The traditional model of higher education is already under pressure and there are many people and companies exploring alternative models that are very interesting.

The other area I am bullish on is live music and live events. The live concert experience cannot be digitized, yet can benefit enormously from technology. There really has not been much innovation in live music or in music merchandising beyond ticketing. I think there is a lot more that can be done with mobile technology and am actively working in this area. My investment in Tastemate is one way of digging into this potential in a meaningful way. We will be bringing our service to a venue near you, very soon.

I also think that there is potential to expand the reach of live performance using remote technologies. I am interested in ways to cut the costs out of touring to make it more profitable and to reach broader audiences. It is amazing to me that there has not been more activity in this area either, so I am looking for companies and people to work with that are thinking differently about what live music is all about and how to make it even more lucrative.

HYPEBOT: What are some of the things that Digital Cowboys has done in the past or is looking to do now?

DAVE KUSEK: We are focused on business development, marketing and product development, particularly in online and mobile services. We also do strategy consulting for businesses wanting to expand or enter new markets or make acquisitions. I say we, because while I am the managing partner, I also leverage a network of people around the world and with different specialties that I bring together to form a team to address the issues. For example, with a lot of the product work that we have done I brought together a team of visual designers and user experience people to execute on the product vision and do the testing. With business development projects I sometimes work with friends that have particular contacts or relationships that are beneficial to my clients. Sometimes I put together a couple different investors or strategic partners to provide capital or distribution or some other need. The main thing is to get the work done and show results, while trying to have some fun and work on interesting projects that are pushing the envelope.

HYPEBOT: There’s some talk of another tech bubble. Do you see think we’re approaching one in music and media technology?

DAVE KUSEK: I do think that some of the deals we have seen recently are off the charts, like Instagram – but who knows? That has all the earmarks of “bubble” written all over it. But Facebook is also about to go public and at their level, what’s another billion dollars?

But really I don’t think overall that we are at the point of frivolousness and excess that we witnessed in the earlier dot-com bubble, at least not yet. I believe that people are just beginning to figure out better ways to communicate and interact and learn via technology. That is having massive implications on the future of society around the world. Take a look at the stock market trend over the past 100 years and you will see that things tend to move up and people get smarter and more prosperous. I am an optimist.

There are a lot of music startups getting funded these days and certainly they are not all going to make it. I think we will see some consolidation in the DIY space as there are probably more companies addressing that market than the market really needs. The same is true for music streaming and distribution and music discovery. I think the real breakthrough companies will be formed by trying to do something completely different, rather than mimicking the past with technology. We’ll see.

HYPEBOT: Any plans to write a follow-up to the “Future Of Music” book?

DAVE KUSEK: I plan to spend a lot more time posting things to my blog and on digitalcowboys.com. This is a much better way to continue to update original thinking and way more efficient than writing another book. The music industry has gone digital and online outlets like Hypebot really do work as conduits in this business. That is a real bright spot in the transformation of the music industry. So, look for more at futureofmusicbook.com.

You can get the entire interview here.

More coverage from Hypebot here and from Billboard here.


Hypebot reports: Technology has changed a lot about how concerts are marketed, ticketed and produced since Woodstock.  Recently, the greatest driver of change – particularly from the fan perspective – has been the smartphone.  From taking photos to texting friends and song requests, smartphones are changing how concerts are  consumed and remembered.  But early glimpses of projects from Live Nation Labs and startups like  Tastemate show that we’re on at the start of a smartphone driven live music revolution. This infographic above chronicles the journey so far.
Lots more to come…