With all the hype in the media recently about illegal downloading through peer to peer networks, it often emerges that the solution to the problem might very well lie in viewing it through completely different lenses – and encouraging the use of these technologies to tap into peripheral revenue streams which could prove to be profound to artists from all dimensions.
During a time of “enormous upheaval and transition” as proclaimed by the president and chief executive of Warner Music Australia Ed St John, the music industry, namely, is moving closer to embracing the internet as traditional revenue streams continue to dry up. The internet presents a “kaleidoscope of potential outcomes” for the big four of music business companies (Sony BMG, Universal Music, EMI and Warner Music) through alternate distribution channels underpinned by potentially innovative subscription, community or trusted campaigns.
The need for tapping into these alternative methods of distribution is imperative, with a music industry 2007 report outlining that despite unit sales jumping by 23.4 percent – due to a boom in sales of digital albums and single tracks – wholesales sales tumbled by 9.7 percent to $511.8 million. This is compounded by the fact that the surge in digital music sales did not compensate for the drop in the physical music market – despite the establishment of portals such as iTunes which has boosted the digital music scene.
Further adding to the pressures on incumbent music companies and record labels to radically change their marketing and distribution strategies is the lingering conjecture around legal actions targeted at ISPs which is perpetuating in a cycle of cultural retaliation. One on hand – we have a huge web 2.0 emergence of the peer to peer culture living through open sharing models of distribution and networking and on the other hand we have music industry groups and even the French and British governments pressuring the service providers to shut down websites.
Objectively, looking at the emergent forces at play, it can only be agreed that St John’s outlook on “finding new business models and strategies and creating music related products” will be the only way to tap into peripheral and complementary revenue streams around internet communities and social networks. The demise of one-way broadcast methods of marketing and communication (such as banner advertisements and album press releases) needs to be fundamentally challenged and transgressed by novel, interactive communication modes to build awareness of artists and new products in a way that reaches out to fans to get them involved and engaged.
Empirically – this view is being embraced by Warner Music by integrating traditional marketing mediums with “new media” strategies such as including a two-week internet and mobile phone promotion to drive an extensive online ad campaign and offer exclusive artists tracks through Bigpond or iTunes. This challenges the underlying paradigm to run big ad campaigns, as with plummeting sales and polarizing changes to music preferences with target markets, costs associated with traditional mass marketing campaigns no longer warrant investment on a cost-benefit basis.
With this in mind, it’s obvious that in the current digital music landscape – building and maintain trusted networks of fans is important if music companies were to embrace the emerging social network space. The proliferation of social networks such as Facebook and Myspace has radically changed the marketing landscape with many artists setting up their own ‘fan pages’ or profiles with previews of their latest releases. This fosters a close sense of interaction with fans and creates self-propagating fan communities that are powerful word of effect multipliers for distributing information on any new releases or activities of the artist. These social networks, in turn, drive trusted recommendations within, across and beyond fan and peer community circles. Such platforms for participation enhance the economic value of the music artist in question by creating passionate senses of immediacy and direct relationships which may result in increased fan loyalty to purchase additional merchandise or even enhance the proclivity to propel artist’s sales of live events and special gigs.
Therefore, in order to really embrace – as Sony BMG executive Thomas Hesse says – “transformation from being a CD company to a multi-revenue stream, multi-business company”, fundamental paradigm shifts in marketing and business strategy to capture peer to peer information flows need to be considered. Innovative campaigns that target the heart of fan communities to drive trusted brand awareness in self-sustaining ways should be at the forefront of marketing strategies for all music companies, record labels and artists alone. One of the authors of a highly recommended book on my wish list titled Net, Blogs and Rock’n’Roll – centered on the dynamics of discoveries we as digital consumers encounter serendipitously – David Jennings writes an excellent review of a unique and novel innovation based on biological and ecological paradigms of social systems and group dynamics which embraces the innovation required in the music industry on his blog titled “Building Swarms of True Fans”.
The strategic underpinning of the community engagement system SwarmTribes which is sponsored by a UK body NESTA integrates the very essence of multi-channel communication which drives these conversations on the internet within and across social networks about the latest trends and fads. Interestingly enough, SwarmTribes is positioning itself as a complete social media engagement marketing platform integrating all channels (SMS, instant messenger, RSS and future web formats) across social networking sites to create vibrant ‘swarm communities’ of fans of bands registered for the program.
Personally, I strongly believe one of the challenges, which resonates to the media industry here in Australia and where I also discuss it extensively in another article Digital Media Stumbles On Audience Measurement , will be transferring this idea of engagement into practice and verifying if the biological communication traits that underpin the engine of the system really brings tangible, bottom line results (either through direct sales or complementary value added revenues) to the bands and labels signed up in an environment where physical and digital sales of music artists is being cannibalized by peer to peer networks and a culture of sharing.