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How to Design Testand Build Business Models and Value Propositions
“I just want to sing and perform.”
?So how does one come up with successful business models?
How does the music industry create, deliver and capture value?
BUSINESS MODEL
CANVAS
THE
Business Model Canvas
to describe, challenge, design, and invent business models more systematically
74
!innovative business models may unlock new opportunities or enable things that were just not possible
with the traditional models
OFFER
DISTRIBUTION CHANNELS
CUSTOMER RELATIONSHIPS
CUSTOMER SEGMENTS
REVENUE STREAMS COST STRUCTURE
KEY ACTIVITIES
PARTNER NETWORK
KEY RESOURCES
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The Music Industry
The Music Industry
A dynamic market a global industry characterized by many players and fierce competition
!
Companies are quick to adopt technologies that support their business model but are slow to adopt technologies that disrupt it. - Clayton M. Christensen, The Innovators Dilemma
“
iTunes
The “traditional” music industry gave us the choice of buying singles, albums or
compilations. The digital service most favoured by
the music industry gives us the choice of buying….
singles, albums or compilations. In other
words, the music industry has offered consumers a
‘solution’ that is most like the one that went before.
Change in 10 years
2007
2008
2006
2006
2006
2013
If something is going to happen in the end, you may as well do it in the beginning.- Henry Kissinger
“Consumer trends, such as streaming and mobile phones should be seen and acted
upon. Too often companies look to the past and say, “Well, that has worked well for us” rather
than in to the future and make the changes that may be necessary to their business.
The total number of streams (UK) in 2013 (3.7bn) is more than the total number of singles sold in 60 years.
26% of all entertainment revenue is now access to content
Millions of consumers are showing entertainment industries the way they want to consume their products by signing up with
‘on-demand’ services.
BrandAmp study, Millward Brown, 2007
“Music is something most people love, that no one dislikes and that touches everyone throughout their lives”
The role of music in peoples’ lives
Who is my customer?
What does he or she wants?
What is he or she willing to pay for?
Different needs
CUSTOMER SEGMENTS
images by JAM
Customer in charge
VALUE PROPOSITIONS
images by JAM
Firms that record, produce, publish, distribute, and market music.
Shift from ownership to access
?what is your main target customer trying to get done?
CUSTOMER RELATIONSHIPS
images by JAM
Goals of Customer Relationship Management
1) Identify, attract and win new customers 2) Retain existing customers 3) Re-invigorate relationships with former customers
It doesn’t take a genius to realise there are clear parallels between the value of CRM for a brand or business and CRM CRM for a band or artist.
In order to have a successful music career (“business”) you need to have fans (“customers”). And those fans won’t come unless you work hard for it.
1. Identify, attract and win new fans and supporters
Most independent artists don’t have money to spend on ‘push’ advertising or PR to reach a mass audience.
Your best chance of success lies in ‘pull’ marketing where you supply your fans with compelling content and they promote you to their networks.
YYour ultimate audience is not your ‘Friends;’ it’s the ‘Friends of your friends.’ If you can burst out of your network into each of theirs, your potential audience will suddenly rocket.
So encourage and incentivise them to share your posts.
2. Successfully retain existing fans and supporters
On social media: Sometimes it’s important to remind yourself why you are growing a fanbase on Facebook or Twitter. Many bands seem to spend all their waking hours collecting new ‘Likes’ and ‘Followers’ but never interact with any of them.
FFacebook uses a system called Edgerank to prioritise the news in your feed. If you don’t interact with you fans you’ll become invisible very quickly. So when a new ‘Like’ or ‘Follower’ arrives, you have work to do.
This is important: social media quantity should always go hand in hand with quality. WithoWithout engagement those ‘Likes’ quickly become meaningless.
With mailing lists: Mailing lists are another key tool for retaining fans, but only if you use them in a smart way.
Lazy mail-outs containing a summary of old news are pointless.
Set rules for your mail-outs: “I will only ever contact fans when I can reward them, oor offer them something exclusive.” “I will never just repeat news I’ve posted on Facebook.”
Tip: The tool FanReach has made it very easy for emerging artists to grow their fanbase through newsletters.
Always be critical of the communication you send. If it doesn’t genuinely interest or excite you, why would anyone else care?
You don’t build relationships by spamming people.
Finally, don’t forget to ‘Surprise’ & ‘Delight’ your fans; it’s a proven brand tactic to retain interest.
HHow about you surprise the next three fans that contact you on Twitter with a free t-shirt or free remix?
Also, you should be able to personally name your biggest fans.
Who are the people that engage with you the most on Facebook?
Who are the people that come to all of your shows?
Who buys your music?
BBy identifying these advocates you can start to create tailored rewards to encourage continued support.
You could offer exclusive previews to a select group of Top fans.
Always be critical of the communication you send. If it doesn’t genuinely interest or excite you, why would anyone else care?
You don’t build relationships by spamming people.
Finally, don’t forget to ‘Surprise’ & ‘Delight’ your fans; it’s a proven brand tactic to retain interest.
HHow about you surprise the next three fans that contact you on Twitter with a free t-shirt or free remix?
3. Reinvigorate relationships with former fans and supporters
Make full use of the analytics provided to you by Facebook and YouTube. If you don’t already know, take time to find out (learn more about Facebook Insights and YouTube Analytics):
Find out which 10 Facebook posts had:
The greatest ‘Reach’ in the past three months The most ‘Engaged Users’ Were the ‘Most talked about’ The highest levels of ‘Virality’
What are your most engaging (based on % of video watched)videos on YouTube?
Next, note down the commonalities to identify what an engaging post looks like. E.g.,
Posted on a Monday morning Personal, warm friendly style Contain a question Include a good quality photo Contains a video
Once you understand the rules of engagement you can repeat the trick, and hopefully win back some of the people who have switched off in response to your less engaging posts.
Bonus tip: Get organised.Create a basic Excel database, to collect and manage your relationships. Start with a separate tab for:
Artists Blogs Labels P Promoters Publishers Radio stations
Then whenever you come across a new contact, add their key details: Name, Company, Job Title, Email, Phone.These 3 additional details take this from being a flat database into an active, useful CRM tool:
When: Date last contacted Why: Reason for last contact What: Outcome of last contact
Keeping a track of when, why and what ensures you can tailor your response and follow up in the most appropriate way, only sharing information which is relevant to them.
Don’t be afraid to follow up. If someone really has no interest they will tell you so.
Don’t assume a non-reply is a no; it is often just a sign they are busy or disorganized. As a blogger I welcome reminders “Have you had a chance to check out our track yet?” Often a reminder will be enough to guarantee you a review (if the music is great).
A little thought and planning can really help improve the effectiveness of your ffan communication, so don’t be in a rush to promote until you are ready.
RECURRING REVENUES
Is every sales a new effort or will it result in follow-‐up revenues and purchases? How evenly distributed are your revenues through the year?
CHANNELS
images by JAM
Channel1. Awareness
2. Evaluation - How do we help customers evaluateour value proposition
3. Purchase - How do we allow customers to purchase specific products and services
4. Delivery - How do we deliver a value proposition tocustomers
5. After sales - How do we provide post purchase customer support
REVENUE STREAMS
images by JAM
44 SONGWRITER AND COMPOSER REVENUE STREAMS
1. Publisher AdvanceBulk payment to songwriter/composer as part of a publishing deal.
Paid to songwriter/composer by publishing company.
2. Mechanical RoyaltiesRoyalties generated through the licensed reproduction of recordings of your
songssongs — either physical or digital. Paid to songwriter/composer by publisher, label, Harry Fox, or digital aggregator like CD Baby or Tunecore.
3. CommissionsTypically a request from an ensemble, presenter, orchestra or other entity for a composer to create an original work for them.
4. Public Performance (PRO) RoyaltiesRevenue generated when your songs are played on radio, TV, in clubs and rerestaurants. Paid to songwriter/composer/publisher by ASCAP/BMI/SESAC.
5. Streaming Mechanical RoyaltiesRevenue generated when your songs are streamed on on-demand services (Rhapsody, Spotify, Rdio). Paid to publisher by Harry Fox or other mechanical licensing agent. Publisher then pays songwriter/composer.
6. Composing Original Works for BroadcastTypically a commercial request to compose an original jingle, soundtrack, score, oor other musical work for a film, TV or cable show, or an ad agency. Paid to songwriter/composer by agency requesting the work.
7. Synch LicensesTypically involves licensing an existing work for use in a movie, documentary, TV, video games, internet, or a commercial. Paid to songwriters/composers
either via publisher or record label, or via a direct licensing deal with the licensee (movie studio, ad agency, etc) if you are self-published.
8. 8. Sheet Music SalesRevenue generated by the sale or licensed reproduction of songs/compositions
as sheet music. Paid to songwriter/composer by publisher, or directly from purchasers if you are selling it on your website or at performances.
9. Lyric DisplayRevenue generated by the licensed display of song lyrics. Online lyric sites pay publishers, which then pay songwriter/composer.
10. Ringtones RevenueGenerated from licensing your songs/compositions for use as ringtones.
PPaid to songwriter/composer via your publisher, your label or Harry Fox.
11. ASCAPLUS Awards ProgramAwarded by ASCAP to writer members of any genre whose performances are primarily in venues outside of broadcast media.
12. Publisher SettlementPayment from publishers to writers for litigation settlements.
PERFORMER AND RECORDING ARTIST REVENUE13. Record Label AdvancePaid to artist as part of signing a deal.
14. Record Label SupportMoney from label for recording or tour support.
15. Retail SalesRRevenue generated from selling physical music in retail stores or via mailorder. Paid to artist/performer by your label, or services like CD Baby or Bandcamp that help musicians sell physical product.
16. Digital SalesRevenue generated from selling music digitally/online. Paid to artist/performer by your label, or digital aggregators like CD Baby or TuneCore, or directly from fans via services like Bandcamp.
117. Sales at ShowsRevenue generated from selling recordings of music at shows/live performances. Paid to artist/performer directly by fans.
18. Interactive Service PaymentsRevenue generated when your music is streamed on on-demand services (Rhapsody, Spotify, Rdio). Paid to performer by your label, or digital aggregator like CD Baby or TuneCore.
19. Digital Performance RoyaltiesRevenue generated when your sound recordings are played on internet radio, SSirius XM, Pandora. Paid to performers by SoundExchange.
20. AARC RoyaltiesCollected for digital recording of your songs, foreign private copying levies, and foreign record rental royalties, distributed to US artists by AARC.
21. Neighboring Rights RoyaltiesCollected for the foreign performance of your recordings.
22. Film Musicians Secondary Markets FundPPaid to performers on recordings used in film, TV and other secondary uses by the Film Musicians’ Secondary Markets Fund.
PERFORMER SESSION MUSICIAN REVENUE
26. Salary as Member of Orchestra or EnsembleIncome earned as a salaried member of an orchestra, band or ensemble.
27. Shows/Performance FeesRevenue generated from playing in a live setting (for non-salaried players). Paid by concert promoter, presenter or venue to performer.
28. Session Musician28. Session Musician/Sideman Fees for Studio WorkPayments to studio musicians/freelancers/sideman for work in recording studio. paid by label, producer or artist, depending on situation.
29. Session Musician/Sideman Fees for Live WorkPayments to studio musicians/freelancers/sideman for work in a live setting/on tour. Paid by label, producer or artist, depending on situation.
30. AFM/SAG-AFTRA PaymentsPPayments from the AFM/SAG-AFTRA Intellectual Property Rights Distribution Fund, which distributes recording and performance royalties to non-featured artists.
KNOWLEDGE OF CRAFT: TEACHING AND PRODUCING
31. Music TeacherRevenue generated from teaching your musical craft.
32. ProducerPayment for producing another artists’ work in the studio or in a live setting. Paid by labels, featured artists, studios, presepresenters, or foundations, depending on situation.
33. Honoraria or Speakers FeesPayment for conducting a lecture, workshop or master class. Usually paid by school, conservatory, or presenting organization.
BRAND-RELATED REVENUE40. ActingPayments for appearances in TV, commercials, movies.
FAN, CORPORATE AND FOUNDATION FUNDING41. Fan FundingMoney directly from fans to support or pre-sell an upcomingrerecording project or tour (Kickstarter, Pledge Music, IndieGogo, Patreon).
42. SponsorshipCorporate support for a tour, or for your band/ensemble.
43. GrantsFoundation or public arts grants to support your work/project from foundations, state or federal agencies.
OTHER SOURCES OF REVENUE44.44. Arts AdministratorMoney paid to you specifically for managing the administrative aspects of a group that you are a member of.
See these revenue streams organized by Existing, Expanded and New
What are we missing? Email us.TweetArti
What do customers want (tomorrow)?
Spotify
Spotify aggregates content from right holders, distributes it to consumers through the technical platform and monetizes both through a free, ad funded service, and a subscription service.
The business model of Spotify
The Business Model of Spotify
OFFER
DISTRIBUTION CHANNELS
CUSTOMER RELATIONSHIPS
CUSTOMER SEGMENTS
REVENUE STREAMS COST STRUCTURE
KEY ACTIVITIES
PARTNER NETWORK
KEY RESOURCES
Access to music via
streaming and download services
Pla@orm development
and maintenance
Licensing agreements
SoGware and network engineers
Rightholders (labels and publishers)
Adver:sers
Internet + PC
Ad fees Subscrip:on
fees PC
Subscrip:on fees PC + mobile
Royal:es to rightholders
Salaries
Bandwith costs
Automated online
rela:onship
Global music fans
Adver:sing
Pla@orm and brand
Internet + mobile
3rd party APIs Communi:es
OFFER
DISTRIBUTION CHANNELS
CUSTOMER RELATIONSHIPS
CUSTOMER SEGMENTS
REVENUE STREAMS COST STRUCTURE
KEY ACTIVITIES
PARTNER NETWORK
KEY RESOURCES
Mass market Hits and
wannabee hits
Tours and concerts Huge sales
from a few ar:sts’ albums
Merchandising
Marke:ng & promo:on
Detec:ng & building talent
Por@olio of star ar:sts
Copyrighted content
Distribu:on channels
Manufacturers
Marke:ng & promo:on Subsidizing
unsuccessful ar:sts
Royalty payments
TV
Radio
Retailers
Digital
www.londonfusion.org.uk
Checkout a new platformcoming soon to help performerscreate new revenue streams
www.performanceroom.com@performanceroom
facebook.com/performanceroom
THANK YOU!BusinessModelGeneration.com