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THE CHANGING BUSINESS OF BANDS 1 THE CHANGING BUSINESS OF BANDS: HOW NEW GROUPS START, GROW, AND SUCCEED USING SOCIAL MEDIA For almost 100 years the music and recording industries were seen as synonymous. The decline of the recording industry over the last two decades is one of the most well documented collapses in modern business (e.g. Arango, 2009; Goldman, 2010; Kennedy, 2009; Janssens, Vandaele & Beken, 2009). The ripple effects of consumers’ titanic shift in buying habits away from physical copies of recorded music to downloading single recordings and creating free customized streaming music feeds online have permanently altered the value proposition of recorded music. The situation is a paradox, for while artists find it more and more difficult (and less and less profitable) to sell songs and albums, the public’s demand for music is greater than ever. The consumer-driven reset of the recorded music market, which now pays pennies for songs compared to dollars in the past, has forced artists to seek new revenue sources, without the traditional support of record labels. Fortunately for the countless number of new musical performers entering today’s market, the Internet has made it possible for independent artists to connect with smaller and more passionate groups of fans who become a ready-made market ready to hear (and purchase) the music they create. Inexpensive and widely available digital recording technology and low-cost Internet marketing platforms like Facebook and Twitter have made record labels obsolete for all but the biggest artists. Now, the THE CHANGING BUSINESS OF BANDS 2 music industry is transcending physical boundaries, moving from a commodity-based model to an intellectual property-based one; seismic shifts of power, away from giant corporations and into the hands of individuals and small groups. To understand how artists use the Internet to promote attendance at their live performances, it was decided to take a holistic view of the music industry, exploring relationships between artists, promoters and venues, their individual business models, historic methods of business operation and the impact of the Internet on their shared, but very different business behaviors and decisions. Artists and venue owners have formed a mutually beneficial, but fragile partnership that, when executed properly, rewards both parties. These businesses will be analyzed in the context of the revolutionary changes that have taken place over the last twenty years in the music industry; changes that fundamentally altered the nature of how the industry operates, from which products and services produce profit, to the methods required to generate potential customers. These drastic changes reverberated from the highest levels of the industry, all the way down to every local garage band hoping to achieve fame and fortune. No performing artist and no live music venue has been left untouched by these changes. The music industry’s value proposition, itself, has been permanently altered. The transition from a record label-controlled model, which provided artists with enormous resources and support while exerting total control and limited access; to a free-market system where artists have complete control over every aspect of their business but without access to the resources and expertise necessary to achieve full- time success as performers, has been radical and total. All musical performers, THE CHANGING BUSINESS OF BANDS 3 regardless of status or past success, have had to alter their business models and marketing strategies to acknowledge this new music industry paradigm. To illustrate the impact of these changes, this thesis will profile and analyze three young music groups at different stages of development: a brand new local funk/soul band; an emerging regional rock, funk, Latin fusion band; and an established electronica jam band with a national following. By comparing each band’s marketing strategies to build followings, engage with fans and conversion of those efforts into attendance at live performances, a model can be developed by which live performers at all levels might better understand and use online social media platforms to build sustainable business models. This analysis will be broken into chapters. Chapter I looks at the evolution of the music industry, how it arrived at the current model and the resulting impact on artists, particularly live performers. Chapter II is the comparison of the respective business and marketing models of artists and venues, from how they utilize social and traditional media tools to how each party benefits from the relationship. Chapter III is a description of the research methods used to collect and analyze data. Chapter IV will profile the three bands, chart and compare their online marketing efforts during specific two-week periods and correlate that data to attendance and revenue generated at their live performances during those same period. Conclusions will focus on how to use the insights gathered to develop an ongoing research model to assist artists in developing best practices for marketing and promotion of their live performances. It is important to note that while empirical data THE CHANGING BUSINESS OF BANDS 4 is used to make conclusions, much of the analysis is drawn from my own personal experience as a musician, promoter, and marketer. I have personally worked with all of the bands in the study and have an intimate knowledge of how they conduct their business. THE CHANGING BUSINESS OF BANDS 5 Chapter I: The Music Industry, A Business in Transition Until the early 1900's, the music industry consisted entirely of live performances and the sale of sheet music, now known as the publishing sector. With the advent of recording technology, the industry became almost entirely focused on the much larger and growing market for recordings (Morris, 1994). While only musicians buy sheet music, everyone can appreciate and buy recordings that give people the opportunity to listen to artists from around the world that they could never hope to hear live in concert. Historically, control over the recorded music business resided with a few companies that had the ability to afford expensive recording equipment. Record companies became a necessity for artists who wished to capitalize on the financial rewards. Record companies developed massive distribution and marketing arms to promote and sell the records they made. Artists had to sign contracts with record companies, since almost all the profits in the music business were derived from record sales. Live Concerts: Bands Take Control Up until the mid 1980’s, bands made almost no money playing before live audiences. A concert tour was a marketing tool to sell more albums (which, depending on the deal, gave record companies the bulk of the profits, leaving artists with very little income). Setting up a tour was a complicated process filled with middlemen. THE CHANGING BUSINESS OF BANDS 6 Shows were set up in a string of cities, each with a different promoter who took a hefty cut of ticket sales, as much as 15 percent after expenses. The tour’s manager would then have to collect from every promoter, often an arduous process. In 1989, The Rolling Stones, arguably the most successful rock band ever, permanently altered the touring industry by hiring their own promoter, Michael Cohl, who offered the group a guarantee of $40 million to do a 40 show tour, an amount completely unheard of at the time. “The way Cohl's plan worked is that he would book the entire tour himself, dealing with the venues directly and cutting out the local promoters. He would also produce new streams of revenue by selling skyboxes, bus tours, and TV deals, and by taking merchandising to a new level. He would bring in corporate sponsors like Volkswagen and Tommy Hilfiger. And most important, he would help stitch these operations together, through cross-promotion and the like, to maximize their earning power” (Serwer, 2002). The Stones also revolutionized the staging of arena shows, adding huge set pieces, light shows, and bigger sound systems. This added to spectacle of the stadium show, allowing the Stones to charge more money for tickets and use sponsorship placement in a more creative way. The first Rolling Stones tour proved it was possible to make hundreds of millions of dollars from touring, and all the other major acts followed suit. The decline of record sales made touring even more important for music acts. By 2007, record companies realized the opportunity to tap into touring revenue and implemented so-called “360 deals” with new artists, giving the record label a cut of all revenue from tours, merchandise, record sales and licensing. In this type of deal, the THE CHANGING BUSINESS OF BANDS 7 record label also handled all business related to all revenue streams for the band, consolidating the various business streams into one company (Byrne, 2007). Catering to Fans: A Changing Business Model The legendary psychedelic jam band, The Grateful Dead, pioneered new business models in music that are particularly applicable today with the Internet. According to Green (2010) “without intending to—while intending, in fact, to do just the opposite—the band pioneered ideas and practices that were subsequently embraced by corporate America”. The band did this by delivering a superior value for their most loyal customers. The Dead created their own ticket hotline, capped the price of tickets, and reserved the best seats for the die-hard fans. The Grateful Dead also decided to allow tapings of their live shows. At the time this was considered a very bad business move; however, it allowed their brand to spread quickly throughout the music world. They were smart enough to realize that amateur tape recordings of their shows could not be regulated and would not hurt their business. In fact, the bootleg recordings created such a buzz that the band sold even more tickets and albums.

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