Nettwerk: Digital Marketing

Background: Music Industry

Artist’s support by a music labelMusic industry: wary alliance between art and businessPublishers

Majors Universal, Sony, Warner and EMI Commercially oriented and fully integrated

Independants (‘indies’) a few thousands Focussed on musical niches

Law and Custom in the industry Mechanical Royalties Performance Royalties Synchronization Royalties

Music Industry contd…Music Label Revenue model

Contracts with an artist Pays the artist for touring, publicity etc and would

incur recording costs Artist would receive 6-18% of the sales of the

physical product after the label company had recouped its fixed costs.

Major label albums needed about 1 million unit sales to break even

Led by the major labels and with the introduction of the Compact disc, the music industry flourished in the last half of the 20th century.

Evolution of a new industry

Standard digital format MP3CDs could be ripped and transferred into digital filesRetailers like Tower records, Musicland etc downsized and Walmart, bestbuy etc kept only bestseller recordsPiracy Problems: NapsterApple’s i-Tunes

By 2009, i-tunes was the single largest retailer of Music in the US

360 deals Labels had the rights for revenue sharing from

sources such as cocerts, fan clubs and merchandise

Evolution of a new industry

Youtube, MyspacePandora, Spotify etc for online streaming of music‘If you liked that, you may like this’ conceptMarketing tools became so ubiquitous that some artists broke their contracts with the music labels and handled the business side of the industry themselves

NettwerkIndependent music labelLed by Terry McBride, who was passionate about British and European musicSarah Mclachan

Teaming up of Sarah and Nettwerk Nettwerk built awareness about Sarah

geographically, from one local market to another By the launch of her 4th album, she was a success

story By the city-to city marketing, Nettwork got to know

not only its retailers, but its fans as well

Nettwork's Response to the Digital TransformationTerry McBride proposed a radical reshaping of the companyThe goal

Market to fans wherever they spent their timeShift from Radio and television towards the web

“I’m more interested spending the time and money servicing the top 500 bloggers than MTV. My bet is that those bloggers will have more effect in the long run than MTV will. I’m interested in the tribal leaders.”

– TerryMcBride, Nettwerk

Nettwerk's Response contd..

Nettwerk started exploring social media sites to involve in fan engagement‘Collapsed Copyright’

Initially three different copyrights With this concept, all the rights required to license,

sell and publish were housed in a simple structure‘Long Tail Argument’

Digitization enabled marketers to serve small pockets of demand far out on the tail of the sales, which had previously been less profitable

Squirreling the TailNettwerk took advantage of brief “awareness bumps” (natural result of appearances, sponsorships, features on mainstream media, etc.) and made profit from transitory spikes in demand for niche music

Promoted the band during and after the bump and used various channels to help fans find the band

Television Placement Ad Placement Cause-related marketing Niche tastes Promotion

The Polyphonic Venture

In 2009, music industry under extreme profit pressures start shedding artists that hit less than 100,000 unit salesTurbulence in the industry – an opportunity for the experimentalistsPolyphonic :

Advance of about $300,000 to new bands or bands dropped from their labels to manage all their expenses from recording to marketing and promotion

Net revenues to be split 50:50 between artists and Polyphonic Artist to retain the ownership of copyright, Polyphonic would

have the right to exploit the copyright during the term of contract

ConclusionAdapting to technology accordingly and at the earliest, forms a factor for success

Understanding Consumer trends and buying behavior is elemental in a changing environment

Profit sharing between artists and labels should be done in a balanced manner to ensure long term collaboration and success