“The Buyer and the Beats,” a study unveiled by Nielsen at SXSW 2013, cites between $450 million and $2.6 billion incremental revenue in the music industry. While the industry has already begun the shift towards models such as crowdfunding and direct to fan, this study suggests a demand for additional experiences, content, and engagement not yet available. This study presents much-needed optimism for indie musicians trying to make a living off their art.
Nielsen surveyed 4,000 music consumers of different degrees of dedication. “Aficionado fans” are the big-spending music connoisseurs, dedicated to many genres of music ranging from popular to obscure, with an understanding of the music industry. They are your superfans. “Digital fans” are fanatic social media users with a tendency to use the free versions of internet radios and other similar services. “Big box fans” generally associate themselves with pop and country and are strongly influenced by discounts and deals. Together these groups account for 40% of music consumers, but are responsible for 75% of all music spending!
Despite the groups’ purchasing differences, across the board fans expressed a willingness to pay for content given the opportunity. Nielsen concluded that if music fans were to buy additional exclusive content from one band the music industry stands to make $564 million, but if these fans buy content from all their favorite bands, there is a possibility for $2.6 billion. The true number probably lies somewhere in the middle, but either way, you can and harness this unmet demand.
According to Chief Analytics Officer at Nielsen Entertainment Measurement, Barara Zack, “Fans want more… There is a desire to engage at a different level than what they have.” So where are you going to find this untapped revenue? Crowdfunding and direct-to-fan platforms have shown that “fans really want are 55-dollar signed CD’s, hand-written lyric sheets, and access to the making of the album.”
The recent overwhelming success of artists like Amanda Palmer has solidified crowdfunding as a viable fund raising platform, however, it’s related functions as a direct-to-fan platform, presale tool, and exclusive content provider are often overlooked. Currently, many artists view crowdfunding as a tool to fund the creation of an album, and any presales are just an added bonus. This is methodology backwards and not sustainable.
CEO of Pledge Music, Benji Rogers believes fans will begin to suffer from “donor fatigue” if donations are constantly requested of them and time sensitive goals are pushed in consumers faces like big flashy advertisements. If this path is pursued, crowdfunding has the potential to follow advertisements down the road of consumer indifference. For this reason, Pledge Music does not display any financial target.
Nielsen reported that 53% of aficionado fans and 34% of digital fans are willing to pay for content and access, meaning many indie musicians miss out on potential income when content is given out free. Additionally, 59% of aficionados and 55% of digital fans want to know more about their favorite musicians. “What really kills me is that I watch these big artists tell the story, and give it away through Facebook posts and on Twitter, but I can’t buy in and be a part of it,” says Benji Rogers. While many “aficionado fans” may find this pay-for-content model is perfectly viable, it has the potential to alienate the average music consumer – a balance must be met between free and paid content in order to target and monetize both casual and dedicated fans. Every one of your fans are different, so different products will appeal to each.
Crowdfunding’s true calling lies in its ability to sell many different products at many different price points at an earlier stage than a typical release. You can target more casual fans and begin bringing in presale money earlier on, while simultaneously offering hardcore fans exclusive access to the making of the album. Effectively executed crowdfunding not only brings in money earlier, it keeps you at the front of fan’s minds through constant updates and interactions.
Direct-to-fan bundling is also emerging as a viable model for tapping into additional revenue. Fans have expressed a want for additional content, and in many cases that content exists but fans are unaware. For example, 35% of aficionado fans and 25% of digital fans were interested in crowdfunding, but unaware of its existence. How can indie artists tie in direct-to-fan notifications for new products and live shows into the platforms their fans spend their time on like Spotify and YouTube?
Since 1999, the music industry has lost billions in revenue, falling from $27.8 billion to $16.5 billion in 2012. While many blame the internet, it has perhaps added more value than it has taken in the form of exclusive content and more personal relationships between fans and artists. Today fans have the opportunity to see what goes on behind the album, and fans are proving time and time again that they are willing to pay for this content and information on their favorite bands. Crowdfunding and direct-to-fan platforms are certainly steps in the right direction, but fans are indicating that they still want more, and that is an encouraging thought for the music industry.
(Check out an article from Nielson here.)
How will you harness this untapped revenue potential? What can you sell to your superfans?