Ok Go Explains There Are Lots Of Ways To Make Money If You Can Get Fans

from the everything's-possible dept

Over the last few years, we've covered many of the moves by the band Ok Go -- to build up a fanbase often with the help of amazingly viral videos, ditch their major record label (EMI), and explore new business model opportunities. In the last few days, two different members of Ok Go explained a bit more of the band's thinking in two separate places, and both are worth reading. First up, we have Tim Nordwind, who did an interview with Hypebot, where he explained the band's general view on file sharing:

Obviously we'd love for anyone who has our music to buy a copy. But again, we're realistic enough to know that most music can be found online for free. And trying to block people's access to it isn't good for bands or music. If music is going to be free, then musicians will simply have to find alternative methods to make a living in the music business. People are spending money on music, but it's on the technology to play it. They spend hundreds of dollars on Ipods, but then fill it with 80 gigs of free music. That's ok, but it's just a different world now, and bands must learn to adjust.

Elsewhere in the interview, he talks about the importance of making fans happy and how the band realizes that there are lots of different ways to make money, rather than just selling music directly:

Our videos have opened up many more opportunities for us to make the things we want to make, and to chase our best and wildest ideas. Yes, we need to figure out how to make a living in a world where people don't buy music anymore. But really, we've been doing that for the last ten years. Things like licensing, touring, merch, and also now making videos through corporate sponsorship have all allowed us to keep the lights on and continue making music.

Separately, last Friday, Damian Kulash wrote a nice writeup in the Wall Street Journal all about how bands can, should and will make money going forward. In many ways the piece reminds me a bit of my future of music business models post from earlier this year -- and Kulash even uses many of the same examples in his article (Corey Smith, Amanda Palmer, Josh Freese, etc.). It's a really worthwhile read as well. He starts by pointing out that for a little over half a century, the record labels had the world convinced that the "music" industry really was just the "recorded music" industry:

For a decade, analysts have been hyperventilating about the demise of the music industry. But music isn't going away. We're just moving out of the brief period--a flash in history's pan--when an artist could expect to make a living selling records alone. Music is as old as humanity itself, and just as difficult to define. It's an ephemeral, temporal and subjective experience.

For several decades, though, from about World War II until sometime in the last 10 years, the recording industry managed to successfully and profitably pin it down to a stable, if circular, definition: Music was recordings of music. Records not only made it possible for musicians to connect with listeners anywhere, at any time, but offered a discrete package for commoditization. It was the perfect bottling of lightning: A powerful experience could be packaged in plastic and then bought and sold like any other commercial product.

But, he notes, that time is now gone, thanks in large part to the internet. But that doesn't mean the music business is in trouble. Just the business of selling recorded music. But there's lots of things musicians can sell. He highlights Corey Smith and Smith's ability to make millions by giving away his music for free, and then touring. But he also points out that touring isn't for everyone. He covers how corporate licensing has become a bigger and bigger opportunity for bands that are getting popular. While he doesn't highlight the specific economics of it, what he's really talking about is that if your band is big, you can sell your fan's attention -- which is something Ok Go has done successfully by getting corporate sponsorship of their videos. As he notes, the sponsors provide more money than the record labels with many fewer strings:

These days, money coming from a record label often comes with more embedded creative restrictions than the marketing dollars of other industries. A record label typically measures success in number of records sold. Outside sponsors, by contrast, tend to take a broader view of success. The measuring stick could be mentions in the press, traffic to a website, email addresses collected or views of online videos. Artists have meaningful, direct, and emotional access to our fans, and at a time when capturing the public's attention is increasingly difficult for the army of competing marketers, that access is a big asset.

...

Now when we need funding for a large project, we look for a sponsor. A couple weeks ago, my band held an eight-mile musical street parade through Los Angeles, courtesy of Range Rover. They brought no cars, signage or branding; they just asked that we credit them in the documentation of it. A few weeks earlier, we released a music video made in partnership with Samsung, and in February, one was underwritten by State Farm.

We had complete creative control in the productions. At the end of each clip we thanked the company involved, and genuinely, because we truly are thankful. We got the money we needed to make what we want, our fans enjoyed our videos for free, and our corporate Medicis got what their marketing departments were after: millions of eyes and goodwill from our fans. While most bands struggle to wrestle modest video budgets from labels that see videos as loss leaders, ours wind up making us a profit.

Of course, that only works if you have a big enough fanbase, but that doesn't mean there aren't things that less well known bands can use to make money as well. He talks about an up-and-coming band in LA that doesn't even have a manager that was able make money:

The unsigned and unmanaged Los Angeles band Killola toured last summer and offered deluxe USB packages that included full albums, live recordings and access to two future private online concerts for $40 per piece. Killola grossed $18,000 and wound up in the black for their tour. Mr. Donnelly says, "I can't imagine they'll be ordering their yacht anytime soon, but traditionally bands at that point in their careers aren't even breaking even on tour."

The point, Kulash, notes, is that there's a lot of things a band can sell, focusing on "selling themselves." And, the thing he doesn't mention is that, when you're focusing on selling the overall experience that is "you" as a musician or a band, it's something that can't be freely copied. People can copy the music all they want, but they can't copy you. "You" are a scarce good that can't be "pirated." That's exactly what more and more musicians are figuring out these days, and it's helping to make many more artists profitable. And, no, it doesn't mean that any artist can make money. But it certainly looks like any artist that understands this can do a hell of a lot better than they would have otherwise, if they just relied on the old way of making money in the music business.

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Maybe I’ve been wrong all along. Maybe it really is time for a third party.

Though Mr. Kirk and other Republicans thundered against pork-barrel spending and lawmakers’ practice of designating money for special projects through earmarks, they have not shied from using a less-well-known process called lettermarking to try to direct money to projects in their home districts…

Lettermarking, which takes place outside the Congressional appropriations process, is one of the many ways that legislators who support a ban on earmarks try to direct money back home.

In phonemarking, a lawmaker calls an agency to request financing for a project. More indirectly, members of Congress make use of what are known as soft earmarks, which involve making suggestions about where money should be directed, instead of explicitly instructing agencies to finance a project. Members also push for increases in financing of certain accounts in a federal agency’s budget and then forcefully request that the agency spend the money on the members’ pet project…

New York Times review of letters and e-mail to government agencies from members of Congress shows that the practice is widespread despite the fact that both President George W. Bush and President Obama have issued executive orders instructing agencies not to finance projects based on communications from Congress.

According to the Times, there’s basically no way to track these requests short of using FOIA to demand correspondence between Congress and various agencies. Another fun fact: Both Obama and Bush issued executive orders instructing agencies not to fund projects based on requests from individual congressmen — and yet, oddly enough, the Times claims the practice is “widespread.” Why do you suppose that is? Why might an agency head, whose budget depends on congressional appropriations, feel compelled to comply with “requests” from individual representatives for a few million dollars of pork here and there?

What’s most depressing about this, I think, isn’t the betrayal of transparency or even the hypocrisy of being loudly anti-earmark yet quietly pro-lettermark, it’s that it’s yet another example of government trying to do an end-around recently imposed limits on its own power. In this case, that limit was self-imposed by the GOP’s pledge to end earmarks; in the case of last night’s post about countermeasures to executive regulations, that limit was imposed on the White House by voters who chose divided government in November. And yet the GOP presses ahead with lettermarks and Obama presses ahead with pursuing his agenda by ignoring Congress to whatever extent he can. Nothing illegal about either, but they’re proof that not even a giant midterm landslide is enough of a signal to convince some pols to change their ways. Some “representation.”

Incidentally, since we’ve been arguing lately about whether the House of Representatives should be expanded, take a minute to read this smart Jay Cost post about how a bigger House could also mean more pork. The more districts we have, the smaller and more parochial they’ll get, which could be a huge benefit to incumbents who are willing and able to deliver lucrative earmarks back home.

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Tuesday, December 28, 2010

Ways of Making Money

Ok Go Explains There Are Lots Of Ways To Make Money If You Can Get Fans

from the everything's-possible dept

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