Web Logs
10/17/2005 - Music Business Observations #1: The Musician's Product
I've been reading many books and asking anyone who I suspect might offer good advice on crafting a business plan for the band. Next year is going to be a make or break time so I have to get this right. I don't have any real conclusions yet, just a bunch of general observations, the first of which, concern the product a band creates. Most bands apparently make 90 percent of their income from selling CDs. So it could be said that a musician's product is:
- costly to make - low profit margins
- inexpensive - usually takes in less that $20
- a non-repeatable sale - Is only purchased one time by each customer
- infrequent - most bands release an album only once every two years
All this means that the prevailing model has been a numbers game. Every two years a band will release a CD that has cost them a fortune to create, is sold for very little, and each fan will only buy one.
That last part is interesting. Think of your absolute favorite band and how much you've spent on them in the last 10 years Even if they've released an album a year and you bought that and a ticket to see one of their shows they've only made about $40 bucks gross per year from you. I make almost that for one hour of Web design. Once you look at the band's net earnings, which are a fraction of the gross, you're looking at a very, very small amount of income per customer -- even over the span of a decade.
So, it seems that a band must either sell millions of records OR somehow effect changes in the four points listed above. My band, the Mesmers, has managed to circumvent #1 by recording an album for well under 10 percent of the going rate. I think we can get this cost down even lower as we learn to be more efficient.
Point #2 - This is somewhat malleable. Consumers aren't going to pay much more that $15 for a CD, but you can do add-ons with posters, signed CDs, t-shirts and the like. The main barrier here is the point of distribution -- no retail or online store is going to push your add-ons when a customer buys your CD. You can do this at show or on your own Web page, but nowhere else.
Point #3 - Remixes, live versions, compilations, and alternate versions provide a bit of a workaround for #3. The most difficult and valuable part of a song is writing it, and if it can be re-presented to the audience in a new and quality way then I think everyone wins. It's not really selling the same thing twice, but it is a way to stretch the value of your efforts.
Point #4 - This is a tough one. I do thing people would buy albums more frequently, but this means an artist has to create them faster AND somehow promote and distribute them much more quickly.
