CHAPTER 12

Industry Trends, Starting and Growing Your Business as an Entrepreneur

I was driving in my car one night, listening to an interview with a successful serial entrepreneur on Bloomberg News. The interviewer asked what seemed like a simple question: What was the most difficult part of launching this new business?

The entrepreneur paused for a moment and answered the question with one word: everything. She went on to describe various aspects of the preparation and launch, and how nothing was ever easy or went smoothly. Her answer epitomized the challenges faced by any budding entrepreneur. Nothing about business is ever easy. Hey, if it was easy, everyone would be doing it!

The fact that it’s difficult doesn’t discourage the entrepreneur, because they’re attracted to doing hard things. The rewards are high in the winner-take-all cutthroat world of business. Even if you’re wildly successful, this will encourage competitors to come into the market. Getting to the top is one thing, staying there is a whole different game. In this chapter I’ll highlight some challenges and opportunities every business owner will likely face in meeting current and future trends.

Your Mission: Look Around Corners to Anticipate Industry Changes

To succeed in starting your music business, and to stay successful, you’ll need to constantly be on the lookout for changes in our industry and in your market. It’s crucial to follow the news, read books to increase your knowledge, and have sensitive feelers out so you are prepared for the inevitable change. While there are countless uncertainties, and no one knows what the future will hold, we do know the only constant is change.

To stay on top of a rapidly changing business landscape, there are times when you should play offense, and other times you should act defensively. The entrepreneur must do their best to look around corners to anticipate the coming changes and to be ready for those new developments. Some entrepreneurs seem to have a special kind of vision that allows them to do this.

Knowing the road ahead can give an incredible advantage in business. The winds of change can shift at any time, and businesses must stay agile to survive. This could mean many things, from constantly putting out new music, choosing the right marketing channels, and adopting new technology, to changing how you interact with clients, customers, and partners to develop and grow new revenue streams. The larger an organization gets, the harder it will become to do these things. Once you have launched your music business, to continue to thrive, you should look for ways to expand the business and grow your revenues, while anticipating and managing change.

Following are some current trends that impact the music industry, and will likely continue to do so.

Action Step:

As you consider each of these trends, imagine how they might impact or interact with your own business idea.

Streaming

The biggest change in the music industry over the last decade has been the mainstream adoption of streaming music and video as the primary means of consumption. For recorded music, the progression from physical products (vinyl, cassette, compact disc) to digital, which started with file sharing in the 1990s, and then downloads, seems complete. iTunes has stopped offering paid downloads, and subscription services like Spotify and Tidal now rule the day. This has negatively impacted the bottom line for artists, record companies, and publishers, as streaming pays much less than previous sales of physical copies and downloads did.

New legislation such as the Music Modernization Act of 2018 (MMA) has attempted to protect artists and producers from losing their livelihoods, but the fact is that revenues from recorded music have fallen precipitously over the last two decades. This means the revenue pie has gotten much smaller. We’ll take a closer look at music streaming in the next chapter.

Social and Business Platforms

Music artists have adopted social media platforms to promote their music, putting traditional music publicists out of business. There’s a new job title in the industry: social media manager. Many artists choose to do it themselves, either to save money or because they prefer to connect directly with their fans. Effective use of social media has become an indispensable skill for artists.

With the rise of social media over the years, the landscape appears to be flattened so anyone can break through to fame and fortune by putting out quality content on sites such as Instagram, SoundCloud, Twitter, Facebook, YouTube, and TikTok. This is true to an extent. Because of this, more people are trying to do just that, making it even tougher for new artists to cut through all the noise.

Since earning any real money from streaming recordings is difficult, many artists became resigned to giving their music away for free or allowing fans to pay whatever they wish, sometimes through crowdfunding sites. Artists have looked for other ways to earn money, such as through live performances, or by offering other services and products. Most artists give concerts and sell branded merchandise to make ends meet.

Artists have always found a way to survive, and will continue to do so. Effective use of social media platforms has been a boon for the self-promoting musician, and can open doors to other earning opportunities. Business platforms like LinkedIn, Wix, Squarespace, Bandzoogle, and Patreon offer more ways to promote your music and to connect with fans and other businesses.

Cobranding

Many artists seek to cobrand with other companies, using their image and music to sell products and services from which they receive a portion of the revenues. For example, having a clothing line, cosmetics, perfume, alcoholic beverages, or even tourist excursions in the market has become de rigueur for artists. Examples abound, especially in pop music; it almost seems that everyone is using their image to sell something besides music.

People seek to enhance their self-image through association with brands. This is a well-known tenet in the psychology of marketing. From the artists’ perspective, if they love my music, they might love other products associated with my brand. Just like sports figures are paid huge sums for endorsements of products, musicians can harness the power of their image in order to earn huge sums of money.

Music Aggregators

Music aggregators have become more and more important to artists seeking to get their music out through all channels: social media, streaming, physical sales, licensing, and syndication. Aggregator sites allow musicians to distribute their music globally through online stores and streaming platforms, usually charging an up-front fee or sharing in the revenues from sales and licensing of music. They also help musicians manage their websites, ticket sales, merchandise, fan clubs, newsletters, and tour calendars.

Aggregators such as Bandzoogle, TuneCore, CD Baby, DistroKid, BandCamp, and SonicBids have carved out an important niche in the music industry. The competition is fierce, keeping the cost to musicians relatively low. Most artists now use some sort of aggregator for managing their music business. Choosing the right one is a matter of identifying and comparing the different ones to see which works best for your own situation.

GeoFencing, VR, AI, e-Commerce, and Holograms

Imagine you bought a ticket to see your favorite artist and are driving to the concert hall in a neighboring city or town. The artist has set up a geofence with a one mile perimeter around the venue. A geofence uses triangulated cell tower technology to know when you, the ticket holder, have crossed the perimeter. Once you do, you receive a push message through your smartphone app telling you to reserve your parking space at the venue, with a substantial discount. Of course, you do it, and enter the garage showing your phone at the entrance, secure in the knowledge that your spot is reserved and already paid for. At the end of the night, you can just drive out, without worrying about waiting in line to pay for your parking.

Next, as you walk from the garage to the venue, you get another message telling you that the concert doesn’t begin for another 45 minutes, and the pizza shop across the street will give you a free pitcher of beer with your order of a large pizza, which is already cooked and waiting for you. You are hungry and thirsty, don’t know what else is going to be available to eat and drink inside the concert, so you go feed your face and drink the free beer. No need to ask for the check, or leave a tip, it’s all been handled on your smartphone.

During the concert, you select and pay for your merchandise on your phone, which gets handed to you as you leave the hall. This is not the future I am writing about here. Technology makes this possible, today, and everything we need to do this has already been available for some time. I should mention that the artist receives a percentage of all revenue their fans spend on parking and food on the way to their concert. After all, they are coming to see you, so why shouldn’t the local vendors be willing to give up some of their revenue for the extra business? The money they keep is money they wouldn’t have had otherwise.

This story gets even better. Since the artist now has access to you via the app on your phone, they know what town you live in. They might be able to use that information to help book a show in your town and can then advertise the show directly to you and other fans via the phone. There are people who might opt out of this scheme for privacy reasons, but your die-hard fans will be happy to be connected this way, and hear directly from you about upcoming shows. e-Commerce, AI-AR-VR, holograms, robotics, and geofencing, as I’ve just described, are not the only futuristic technologies artists can use to enhance the fan experience. Combined with artificial intelligence (AI) and big data mining, a computer algorithm can learn all about your buying behaviors, with the goals of predicting exactly what you will want next, and putting it in front of you at the exact moment you want to buy it. Combined with other technology, like geofencing, social media analytics, and search engines, AI can become a powerful e-commerce tool.

AI and augmented reality (AR), along with virtual reality (VR), are all becoming important weapons in the artist’s arsenal for delivering a unique compelling entertainment experience. Algorithms determine the playlist of songs you listen to on your streaming platform. They can choose the next song based on your mood, time of day, the weather, or your location.

Wearing a headset, you might be able to watch a music video in 3D, or integrate your own sense of reality into the video by moving your head, your eyes, or other body parts. Your music might be integrated into your favorite video game. You can immerse yourself in different experiences, changing your perspective at will. For example, maybe you’d like to watch your favorite concert video from behind the artist on stage. Or conduct the orchestra.

Once you add holograms into this picture, it really starts to get intriguing. Imagine being on stage in New York and having people watching you in a theater in Tokyo. This is now possible, although the technology to make it happen is still quite expensive. There have been some shows that used holograms of deceased performers, mixing them on stage with real live performers. From the audience perspective, it’s hard to tell which performer is real.

The Japanese seem to have taken the lead with building humanoid robots. There are now extremely lifelike robots that can give lectures to students in a lecture hall, while being simultaneously controlled from a remote location. With this emerging technology, it really is possible to be in more than one place at the same time.

Search, SEO, SEM

Search engines on the Web have become more important for promotion, marketing, and all kinds of research. In the west, Google is the predominant search engine, yet others such as Bing and Yahoo have remained relevant. In Asia and other parts of the world, different search engines are in use, like Baidu in China.

Search Engine Optimization (SEO) is the practice of using various tactics (coding, content, website structure enhancements) to attract website visitors. Part of that includes purposefully creating useful content on the web to achieve organic reach, meaning that the content will show up in searches using specific keywords. Creating content specifically to appear in searches conducted by people in search engines has become a specialty in marketing and computer coding. Not all musicians and artists are up to speed on SEO, I’ve found, but marketing people certainly are, because it’s a crucial technique to understand and employ for anyone in business today.

Using the Google Ads Keyword Research Tool, or another keyword planner, for example, one can see exactly how many times a given term has been used in a search over a set time and in which specific geographical locations. One can also see how competitive search keywords are, based on the percentage of advertisers who are using them in paid advertisements online. The purpose of SEO is to get your content or website in front of people when they are searching for something you offer in your business.

For example, if you are offering guitar lessons, you could use the keyword research tool to determine which phrases people enter when looking for lessons. You might find that they use the phrase guitar instruction far less than how to play guitar. In this case, you should create your content using the latter phrase if you wish to appear in more search results from prospective students in your area.

The prior example illustrates the mechanism of organic reach by using SEO. The aim of the search engine is to return the most useful and appropriate content in search results, so it will help you to appear in search results for prospective customers if you are creating useful and relevant content for the various queries they use.

Action Steps:

Search Engine Marketing (SEM) is a broader technique that includes SEO, but incorporates paid advertising or pay per click (PPC) techniques. For example, if you are a blues player giving a concert in Minneapolis, you could pay Google to have your ad pop up on the side of the page when someone is watching a blues artist on YouTube when in Minneapolis (YouTube is owned by Google).

SEO and SEM are forms of inbound marketing, meaning the advertiser is trying to get their content in front of a prospect at the moment they are looking to buy something online. It’s different from outbound marketing, which is what we normally think of as traditional advertising, for example, television ads, billboards, magazine ads, and any other type of advertising that broadcasts messages out for all to see and hear.

Action Step:

Decide if you want SEO and/or PPC ads to be part of your marketing.

Vinyl, CDs, Analogue Tape, and Downloads

Let’s go back to the future for a moment, and consider that what goes around, comes around. A hit song from 20 years ago can make a return to the hit parade with a fresh version. In the same way, older technologies seem to never die, and may even have a resurgence in popularity. Although vinyl records (LPs, EPs, and 45s) faded from the mainstream decades ago after the introduction of the compact disc (CD), there are still die-hard vinyl fans and collectors, and some independent artists still release new music on vinyl, whether exclusively or as limited editions. Highly collectable vinyl records can fetch large sums of money. There are still music stores selling vinyl records, and the manufacturers of vinyl records are stretched to capacity.

Analogue recording studios haven’t disappeared, either. Many musicians and engineers swear by the warmth and fullness of analogue recordings, compared to digital recordings, which can sound harsh and cold. They create all their recordings in a studio using technology from 50 years ago, and at the very end convert it to the digital format for mastering, distribution, and sale. This isn’t unusual and highlights that there will always be a niche market for past styles of music and technology. CDs are nowadays used by musicians as calling cards, either given away for free or sold at concerts and clubs. Some musicians have started offering their music on credit card-sized USBs that fit in your wallet and plug easily into a laptop computer or smartphone.

Downloads haven’t disappeared. Many people prefer to have their music in the form of a downloadable file (MP3) so they can listen while not connected to the internet. Downloads work well for networked services, for example, where many devices are connected to a central computer allowing music to be played remotely without internet access. Everything old can be new again.

Technology and Music Production

Of course music technology has come a long way since the days of analogue recording. Computers play a big role in all aspects of music creation, from composing to production. What previously took a recording studio full of heavy equipment can now be accomplished on a laptop computer. Musicians today must be knowledgeable about the possibilities and limitations of the most current technology, which evolves constantly.

The turning point for the digital musical revolution came around 1980. That was when MIDI (Musical Instrument Digital Interface) was widely adopted, the compact disc replaced vinyl, and analogue tape started to be replaced with digital recording. Today, most music is produced using sequencers and synthesizers, with recording, notation, and mixing software programs such as Logic, Pro Tools, Sibelius, and Finale.

As mentioned, some artists prefer the warm sound offered by analogue tape recording and will still lay tracks on tape recorders, “dumping” them into a digital program such as Pro Tools to be mixed and mastered. Interestingly, there have been minimal advances in sound production technology used in amplifiers and speakers, at least when compared to the digital revolution in music technology and production.

Musical Services: Work for Hire

Is music a product or a service? While artists tend to consider their songs and recordings as a product to be marketed, sold, and licensed, music is also used for many other purposes, as we discussed in the first chapter. We might create music to be used in a movie or video game or to be played in the background at a spa or a healing center. We hear music as advertising jingles daily. Music as a component of visual media is of course nothing new: Silent movies were originally accompanied by a pianist or small combo in the theater while the movie played, and film scores for iconic movies such as Star Wars (by John Williams) have become legendary. Video game music is its own category.

The composer, producer, arranger, and performer are often hired to provide a service. We call this work for hire as recognition that the musician is not entitled to future recurring revenues, or royalties, from the work. A general business band performing at a wedding is understood to be performing work for hire. For the session musician, the bulk of their work might be work for hire. If they are self-employed, they will sell their performance to the highest bidder, as a service for fee. It’s a useful example for some musicians, as not all musicians can earn passive income from royalties.

When a musician does work for hire, it should pay a reasonable amount of money. Sometimes, as with scoring a film, the composer may not have a choice of how the working agreement is structured and compensated. The preference and budget of the film producer will indicate whether or not it makes sense to create the music as work for hire or as a product that the composer will continue to profit from. If the movie is a blockbuster, it’s always better for the composer to retain ownership of the score, as their earnings will be exponentially higher. But if the movie is a flop, they might be better off taking a flat fee as work for hire. The fact is, nobody can predict whether or not a movie will be successful.

In a completely different setting, music therapy is an ancient practice which uses music for healing. More recently, it’s become an integral practice used by clinical treatment teams in modern hospitals.

Horizontal Versus Vertical Expansion

I’ve found many musicians aren’t aware of the distinction between horizontal and vertical expansion. These terms describe ways in which a company can expand their offerings of products or services.

A vertical expansion is when a business sells new products or services in the same category or expands into another area of their supply chain. For example, a car company could decide to build trucks, or go into the tire business. A suit designer might decide to offer accessories, hats, or shoes.

In music, concertizing could be a vertical expansion for an artist who has previously only created recordings. Or a musician could start a booking agency or a record label.

Horizontal expansion is when a business offers new products or services that are from a different category. For example, a pop star starts a fashion clothing or fragrance line. Rapper and entrepreneur Jay-Z expanded into the sports consultancy business, recently signing up the NFL as a client. The concept of horizontal and vertical expansion can be a useful one for music businesses and for musicians.

CRM Software

CRM, also known as Customer (or Client) Relationship Management, is a critical aspect of marketing and sales in the business world. Imagine you have several prospects for hiring your band for events. Likely you will have no problem remembering who you spoke with last, when you spoke with them, and what you discussed. Now, multiply the number of prospects by a factor of 10 or 100. You will need a system to keep track of when you last spoke, and where you left things in the process. We discussed this previously in the chapter on networking, with the tickler file.

For bands, artists, writers, agents, managers, and other intermediaries, a regular newsletter delivered by e-mail is a way of staying in touch with fans, collaborators, and partners. Social media messaging should be integral to your promotional strategy. This is where CRM software comes in handy. There are many choices for this, such as Bandzoogle, Hubspot, Survey Monkey, Hootsuite, Constant Contact, and Salesforce. CRM software is usually offered on a freemium basis, meaning there is a free version, but to scale up or get access to all features you must pay a monthly subscription. Some programs work better for smaller or larger business models. You will need to do some research to find out which is the best solution for you.

Blockchain Technology

There’s been a lot of hype about blockchain technology and cryptocurrencies in the last years. While we are still a ways off from realizing the potential of these new mediums of exchange, blockchain does hold out the promise of consolidating the transfer of digital music and the payments for it into a single channel. It’s possible, and maybe even likely that this technology will solve the problem of not having a central clearinghouse for global music rights and payments. We shall see. Cryptocurrencies as a means of payment, while gaining in popularity, is still relatively controversial due to questions of security and lack of government controls.

This list of trends is not complete; it’s meant to show a representative smattering of recent possibilities and challenges that will change over time. Ideally, you’ll consider what other new developments could be just around the corner. We can’t know what the future holds, but we know it will be different.