Wednesday, February 17, 2010

Important Insights From Unlikely Sources

Management Secrets of the Grateful Dead??!!

Check out The Atlantic article below:

Management Secrets of the Grateful Dead

Rich with valuable insights and relevance for the current classical music world. I particularly loved this quote:

Much of the talk about “Internet business models” presupposes that they are blindingly new and different. But the connection between the Internet and the Dead’s business model was made 15 years ago by the band’s lyricist, John Perry Barlow, who became an Internet guru. Writing in Wired in 1994, Barlow posited that in the information economy, “the best way to raise demand for your product is to give it away.” As Barlow explained to me: “What people today are beginning to realize is what became obvious to us back thenthe important correlation is the one between familiarity and value, not scarcity and value. Adam Smith taught that the scarcer you make something, the more valuable it becomes. In the physical world, that works beautifully. But we couldn’t regulate [taping at] our shows, and you can’t online. The Internet doesn’t behave that way. But here’s the thing: if I give my song away to 20 people, and they give it to 20 people, pretty soon everybody knows me, and my value as a creator is dramatically enhanced. That was the value proposition with the Dead.”

Why is it so hard for us, today, to see and act on the truth revealed so long ago?

Monday, March 9, 2009

Requiem for a Pioneer will cease operations on March 13th. The following was posted on their home page today:

Fabchannel Stops

After nine passionate and beautiful years of sharing the most amazing concert recordings with you, Fabchannel is stopping. A great number of record labels still won't allow us to record their artists. This prevents us from offering what we need to keep Fabchannel alive.

We want to sincerely thank you for all support through the years! It has been an amazing time, but unfortunately this is where it ends.

With a bleeding heart we're pulling the plug of our online archive Friday 13th of March. Until that time, enjoy your favorite concerts and who knows… we'll meet again.

Justin Kniest, CEO

Everyone who loves music should observe a minute of silence. The future is put on hold again. The visionless Luddites who have driven the music industry to the very gates of Hell have claimed another victim. I would urge anyone with a financial interest in or a passion for music to read Justin's final blog entry:

Justin's final blog

Fabchannel made its share of mistakes. They scaled too early and they let their costs get too far ahead of their revenue. Many years in the venture capital industry taught me that being too early can be as fatal as being too late. On the other hand, their vision for the industry is absolutely spot on.

Live music is the future. As I noted in an earlier blog discussing Shepard Fairey, there is a complex relationship between using your art to promote your art and using your art to make a living. The modern audience is too technically sophisticated and nuanced to be reached by the ham-fisted approach of "charge for everything" and "pay for everything". There is an old saying, "If the only tool you have is a hammer then everything looks like a nail." Unfortunately it appears that (most of) the recording industry has only a hammer when the times demand a more sophisticated tool kit.

Music - writ large - is going to survive the death of the traditional recording industry. Music will re-emerge in a format that embraces internet technology. It will rise from it ashes of the 20th century model. Music is too much a core part of the human spirit to die.

Unfortunately there is no guarantee that classical music will make this journey. We are fragile. We cannot afford to be followers. The loss of the promotional power of the recording industry could be fatal. There is a very real danger that the audience will vanish before a new promotional engine is created. Classical music could become a museum exhibit instead of a lively and thriving art form. Let us all hope that we can collectively seize the initiative before it is too late.

Friday, February 27, 2009

Barack 2.0

Are you an executive with a classical music Arts Organization? Are you suffering from a decline in your audience? Are you struggling to determine how to keep your donations at the level necessary to sustain your quality and presence? Are the old mechanisms for audience development and fund raising failing you?

Perhaps you should "get with the times"! Barack Obama was a black man who's middle name was Hussein. He was a one term senator with much less that 10% name recognition. He was competing against Hillary Clinton who had over 95% name recognition, a list of major donors a mile long, the support of the entire democratic establishment and was a prohibitive favorite to win the democratic nomination. Against those odds, in a period of 18 months, Obama raised more money than any candidate in history, won the nomination and became the 44th President of the United States. How did he do it?

A new book has just been released by It is sub-titled "Barack Obama's Social Media Lessons for Business". A brief excerpt:

"Barack Obama's victory was due to an extraordinary internet presence and a solid policy for engaging his potential constituents."

"What was truly historic in a different way was that this was the first time a digital community was a prime mover in a successful election. In the Barack Obama campaign the internet housed a community that helped drive his victory. The tools - the social media like blogs, texting, podcasts... outreach programs aimed at external communities and social networks...led to the record millions in donations and the enormous volunteer armies that did the sweat work day in and day out to make Barack Obama POTUS." (President of the United States).

Politics will never be the same! You can find this invaluable guide on Check it out by following the link below:

Barack 2.0

In these days of economic crisis it is critical that Arts Organizations engage their constituents in the same way that the Obama campaign engaged their voters. The audience must be promoted from their historic roles as listeners and attendees to their new role as classical music missionaries. They must be made to understand the crises faced by the classical music that they love. They must be recruited to become part of the campaign to save that music and the arts organizations that make it possible. You - their local Arts Organization - must motivate them to engage in audience development by reaching out to and recruiting the "fans who don't know they are fans". You must also motivate them to donate the small sums they can afford and to solicit their friends and colleagues to do the same. Only the internet can make such solicitations cost effective. You will be astonished by how fast these donations can add up. The social networking tools needed to drive this kind of program are well understood. They are, however, useless unless they are marshaled by a dedicated, focused, sustained and inspirational program. To accomplish such a program, Arts Organizations need to staff a full-time position which is exclusively focused on building these sustained internet campaigns. This position should be staffed by someone under the age of 30 - someone who has lived the new media experience and understands it down to their very core. I have often heard that organizations cannot afford such a position. Baloney! 21st Century Arts Organizations will not survive without a focused new-media program and the dedicated leadership to drive it!

There is some help! Most organizations cannot afford to build the infrastructure to deliver this campaign from scratch. I hope that the tools we have created at can make such an effort affordable and successful for a wide range of classical music participants. Check us out:

I will be sharing success stories and promoting a dialog on how to really make this work in future posts. Good luck to you all.

Thursday, February 26, 2009

A Real 21st Century Artist

Shepard Fairey has recently become front page news as a result of his Obama “Hope” poster. Fairey started as a street artist who regularly got arrested while painting his work on buildings and in other public places. Before the internet he would Xerox his work and hand it out on the streets and at events. He would encourage the recipients to copy it again and distribute it further. After the internet he became a master at viral distribution of his work. In the process he has managed to keep a counter culture image while becoming the image designer for such commercial icons as Saks.

Fairey is a classical example of the 21st century artist who uses his work as the primary tool to expand awareness and to promote his commercial career. The cognitive dissonance of giving his work away and charging for it at the same time is not a mystery to him, it is his natural process. There is a wonderful interview with Terry Gross at Fresh Air which illustrates his strategy in his own words. If you are interested the link to the interview is below:

Fresh Air Interview - Shepard Fairey

There is much that can be learned from this and applied to classical music.

Someone alerted me to another great piece from 60 minutes:

Sixty Minutes Interview

Tuesday, January 20, 2009

95% of music downloads are illegal!!

An interesting analysis from the UK. If the conversion of music sales from CD to digital downloads results in payment for product going to 100% to 5%, the total revenue has to drop catastrophically. This is consistent with the revenue curve we showed in the last post. Check it out:

Wednesday, January 14, 2009

Another Nail in the Coffin

The largest remaining CD store in America is closing. Virgin MegaStore in Times Square.

Looks like a good CD buying opportunity. This was one of the last retail outlets in the US with a reasonable classical selection. Get em while they're hot!

More Radical than Moi??

Driving into work today I heard an interview on Fresh Air with Steve Knopper, a reporter with Rolling Stone and author of the recent book Appetite for Self Destruction - The Spectacular Crash of the Record Industry in the Digital Age. I only forecast that the Labels will drop classical. He predicts their imminent demise!! I can't wait to see his hate mail :-). The interview is well worth the time to listen. The classical artist and fan will find many useful observations. How does an artist make money? Perform! What is the role of recording? To promote performances! How did Bruce Springsteen promote his upcoming tour? He released free music for download on the Internet! How has the model changed? Touring was used to promote the sale of recordings. Now recordings are used to promote the tours.

The New York Times reviewed the book here:

I have the book on order (I haven't read it yet) but the review warns that an interesting subject is not done any service by the clich├ęs dominating the prose. Perhaps you can get all you need from the interview. If the book is really valuable I will report on it later. The audio for the Fresh Air show is not up yet but you can check out the Fresh Air site here:

I will post a link here to the audio after it goes on-line.

Update on Recording Industry Economics

I recently acquired an up-to-date graph of the sales of recording media through 2008. I have revised the graph in the earlier blog on the supply chain to include this information. It shows CD sales have dropped to less than half their numbers at the peak of the market in 2000. Some people point to the rapid rise of download sales to make the case that the recording industry is still OK (despite the daily barrage of news to the contrary). I have made some pretty conservative assumptions about the average sales prices of CDs, cassettes, LPs and single and album downloads and plotted the total industry revenue in the graph below:

As you can see the download revenue has come no where near to replacing the lost revenue from physical sales. Total revenue has dropped by more than $6B or nearly 50%. Downloads do not represent the economic salvation of the industry!