Is it your product or is it your marketing?

Steve Jobs last week created quite the furor when he issued his latest manifesto stating that DRM had failed and should be dropped. Unfortunately for the music industry the messenger got all the attention and the message got lost. Coming from a man whose proprietary platform is only now being challenged by European courts the message came of as hollow and self serving. It was both in addition to being correct. DRM has been a huge waste of time by an industry whose confusion and reluctance to enter the new digital age is staggering. But rather than see the digital age as the iceberg that sank the industry’s Titanic it is important to note that the ship was sinking before it hit. The digital age might just be the life raft.

One of the core assumptions underlying the music industry’s business strategy has always been that the purpose of the organization is to sell records. The scouting of new bands, the production, the packaging and marketing, the distribution is all in the name of selling records. That is why DRM is so important to the labels. If I am all about selling records than I must prohibit people from getting for free what I am trying to sell them. Before I turn this assumption on its head let me note that if this were still the case then there are ways other than DRM to make this possible. Water is freely available in every building and park yet many of us chose instead to pay for a bottle. We can make coffee at home for pennies a cup and yet an awful lot of people pay dollars a day for the same product. The news is available on the Internet for free in close to real time and yet me, along with a large number of folks, buy the New York Times every Sunday. The music industry for so long had a lock on all that a musical act required. The big expensive recording studio, the slick A&R guys to style and shape an artist, access to the all important radio exposure and the distribution to let people buy it. This lock has caused them to become the laziest marketers in the world. This lock is no longer. Not a single link in that former value chain remains as it was. So now if the labels want records to remain the product then they need to get off their asses and market them. Not sit back and watch as their back catalog drops in value. Create a value adding packaging (like the bottle of water), or create some exclusiveness or snob factor with label purchased music (a la Starbucks) or figure out a tie-in to what the listener wants and create a best in class offering (like my lazy Sundays and my NY Times).

But what if the music is not the product any more? What if the music was now the marketing and the listening audience was the product? In this day of fragmented markets and marketers searching for something to replace the mass audience they used to be able to find on television perhaps the most valuable output of the music industry’s business process is the audience it creates. The Grateful Dead were an annual Forbes list contestant despite allowing fans to tape their shows. Many of the jam bands that followed repeated this process and found similar success. Companies like Musictoday now allow artists to monetize the relationship they create with their audience in many more ways. From t-shirts to signed guitars fans can now show their love by credit card. While benefiting the artists the labels, whose work produced the screaming throngs of fans, are often left out. Several years ago Robbie Williams’ record deal sent shock waves through the industry for both its amount (100 million?) and its scope (it included a share of all merchandising as well). Labels need to recognize that rather than waste their time trying to protect something that it can’t (bits and bytes) it should instead focus on adding value to that which can be protected (the artist, the experience, the brand) and monetizing its real product (the audience). In the opening scene of the movie Warriors, the visionary gang leader Cyrus tells the assembled gang representatives that they spend so much time fighting over their pitiful piece of turf that they have missed the big picture. “We could run this city”, he implores the filled park. Label are so focused on DRM they have missed the big picture. They have what everyone wants; audience and the artists that create it. Now if we can just get Steve Jobs to come out and play.

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