Last week, Dave Kusek did a keynote presentation at the ADISQ conference in Montreal, Canada. He spoke about current effective marketing strategies for musicians and artists in the digital age. Business models for success. Here’s the presentation.
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.
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.
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.
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.
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?
The tried and true methods of creating success in the music industry are over and are never coming back. The economics just don’t work for most acts anymore. The greatest risk in the next 5-10 years for music is that no one will want to fund the development and promotion of new musical acts the way the major labels did in the past, until we see a new financial model.
To survive, musicians and their managers need to innovate and break out of the old ways of thinking about the business. The oft quoted conventional wisdom that artists can survive on touring and merchandise income is simply not going to work for most bands. Instead, real blockbuster success in the future belongs to those ready to break the rules and create new engaging musical experiences, and unique products and services that cannot be duplicated.
Music is an inherently social phenomenon and we are already seeing the impact of social media on the way that music is marketed and consumed. We are connecting fans and artists enabling a broad spectrum of musical search (pandora), concert (songkick) and ticketing innovations and direct to fan engagement (topspin and nimbit). But most of what has been developed thus far is in support of the way it used to be, instead of the way it needs to be.
Perhaps the next musical breakthrough will come from some sort of interaction between creators and consumers fueling a unique experience that you just have to be there to enjoy. Nothing to download, just an experience with a limited audience. A creation of value that appeals to the thumb twiddling electronic generation in ways their parents never even dreamed of. A way of engaging with artists that true fans will fight to get access to.
How do we get there? Where is the strategic thinking that will propel the music business forward? I believe innovation will come from outside the mainstream music companies, the way it has over and over again across so many different industries. The automobile did not come from the Horse and Buggy makers and refrigeration did not come from the Ice Kings, so why would the next musical innovation come from Warner or Universal Music, or any other indie label for that matter? Just as theatre evolved into motion pictures, then broadcast television, then video tape and dvds to IMAX 3D emersive experiences, so will music continue it’s transformation, propelled by technology and new nimble entrepreneurs.
Musicians of the future need to face the fact that living a life in music is a privilege that they will have to earn through hard work, preparation, innovation and collaboration. Young artists need to be willing to take risks and push the edges of creative expression by embracing the reality that nothing about music is normal anymore.
The team that may be most compelling for creative artists to form is a strategic business manager, a social marketing manager and a technologist.
We need fresh thinking and risk capital to fund the next wave of musical innovators. The Challenge for the Music Business is to create value in the place of falling revenue and to energize the new generation of music fans to really support music. Do you have what it takes to reinvent the business? What ideas do you have that could light the way into the future?
We will be announcing a competition to award a prize for the best ideas shortly.