User Experience and Business Models in Music

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Acknowledgements............................................................................................................................. 5 Foreword............................................................................................................................................. 6 The Way Out Is Through: An Abstract ................................................................................................ 6 Caught in a Bad Romance: An Introduction ........................................................................................ 7 THE STATIC AGE: A RESEARCHER’S TAKE ON THINGS ..................................................................... 9 How to Dismantle an Atomic Bomb: Theoretical Framing ............................................................... 13 The Greatest Story Never Told: A Research Question ...................................................................... 16 THE 21ST CENTURY BREAKDOWN: TRANSFORMATIONS IN THE ARTIST-AUDIENCE RELATIONSHIP 18 A Bag, a Box and an X on the Floor: The Old Record Business Model and Its Challenges ................ 19 Welcome to the Black Parade: Decreasing Sales .............................................................................. 21 Breaking the Habit, Tonight: Online Music Sharing .......................................................................... 23 Master of Puppets: The Old Recording Artist ................................................................................... 24 One Night of the Hunter…: Enter the New Recording Artist ............................................................ 26 What’s with the Fascination with the Echelon?: Fan Communities Unbundled .............................. 32 I Never Told You What I Do for a Living: User Experience and Revenue Streams ............................ 35 Hey-ye, Welcome to the Real World: Gaps in the New Arithmetic .................................................. 43 ALL THAT YOU CAN’T LEAVE BEHIND: CONCLUSIONS AND QUESTIONS RAISED ........................... 47 Hybrid Theory: Reflections on the Artist-Music-Audience Relationship .......................................... 47 Pull This Pin, Let This World Explode: Conclusions and Further Inquiry........................................... 52 L490: Appendix – A Gentle Introduction to Rockonomics ................................................................ 57 References ........................................................................................................................................ 62

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“Batteries are not included.”

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I would like to thank the few people who have helped me through the very complicated time that was the writing of this thesis. Some have patiently sat down and listened when they didn’t have to.

They know who they are. Others have inspired me to carry forward through their work and dedication. In a way, they know who they are too.

I would also like to thank my supervisor Henry Larsen for taking a chance on a thesis that is no short of maverick, both in form and content.

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I strongly believe in narratives. I also believe in the power of accessible language. This thesis deals with a topic that reaches far beyond the span of some tens of thousands of words and cuts deep into the fabric of an industry. The complexity of the issues that the music business is currently facing are at times almost discouraging to try to fully understand. While this thesis has been heavily researched, I believe it is my duty as an author to shield the reader from that complexity and to make my argument in a comprehensible way. It is for this reason that I use narratives and have chosen to introduce my research data gradually. But with all my efforts to clearly summarize certain trends and mechanisms, it may be at times difficult for a reader unfamiliar with the topic to understand why I consider some things important. I therefore encourage you to refer to the appendix – which is a gentle, if somewhat informal, introduction to what Connolly and Krueger from Princeton University call “Rockonomics” – i.e. the economics of popular music.

This thesis is focused on the relationship between the music artist and the music audience in the context of the online environment. It makes use of the concepts of participatory innovation, user centered design and knowledge of business modeling to understand the relationship between these two entities and the music as the connecting artifact in between. It makes a contribution by explaining the transformations that have occurred in this relationship over the past decade with regard to how an audience experiences an artist, the revenue streams that support the industry and the influence of the internet on those two aspects. It also uses the authors’ research in online communities to better understand this relationship in the digital age and then reflects upon its implications for future development. It concludes by underlining the difficulties in monetizing on the creative process of music making today, but also recognizes the vastly untapped potential of communities in terms of supporting creativity and participation.

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When I was half way through writing this thesis I had an experience that in its simplicity, managed to summarize my entire motivation for tackling the subject of the artist-music-audience relationship in the music industry today.

As some might know, I currently live in Denmark, in a small town called Sonderborg – which sometimes may seem like living on a little island in The Kingdom of Far Far away. But all joke aside, there is something very significant about this little kingdom: firstly, it enjoys a very high standard of living and a healthy, growing economy; secondly, the Danes love music – to the point that a city only as big as 30,000 is the home of a symphonic orchestra and one of the best concert halls I have ever seen. Denmark is also the home of Roskilde festival - which is the biggest outdoor rock festival in Europe. There are many music schools in Denmark and almost everybody seems to have played an instrument at some point in their lives. You would think that music acquisition would be the least of my problems in a country like this. Yet that is precisely one of the issues that I will talk about.

In March 2010, BBC Radio 1 invited alternative rock band 30 Seconds To Mars to cover a pop song of their choice as part of their now famous BBC Live Lounge program. The band chose Lady Gaga’s Bad Romance. The live recording from the studio was posted on YouTube and on the band’s website and rapidly made its way into the hearts of thousands of listeners, counting for over 800,000 views on YouTube alone at the date of this writing. About a year later, the song was finally released as part of the band’s deluxe edition of This is War – their latest album. This is a song that I happen to like very much – and one of the reasons is the guitar and drums, especially the mid-way guitar riff leading to the last bridge in the song. Mind you, this is not a technically complicated riff, but it has an amazing sound. Until then, I had only been enjoying a version of the recording that had been ripped off YouTube and was a 128kbps .mp3 track. Without getting too geeky about it, 128kbps is not a very good bit rate if you want to hear the instrumentation on a song1. Now that the track was released, I was eager to buy it in 320kbps and delight myself with every sound.

Full disclosure: 1) I don’t have an iPod. The reasons are many, but mainly it’s because I am more than happy with my Samsung mp3 player that has great sound quality and considerably better headphones. 2) I don’t care much for CDs anymore – while I used to buy plenty of them over ten years ago, I have successfully made the transition to virtual libraries and don’t see the point of going back. I no longer have a CD collection. I have an mp3 collection that resides on my computer. That being said, it should be very reasonable to want to buy a song in the most popular format of the day and support the artist who produced it. It should be, but it is not.

On a cold and snowy February afternoon, while in the comfort of my home, I started examining my options for purchasing this track. I knew iTunes was one, but I was aware of its many limitations especially the fact that songs are tied to the Apple platform, whether that is the iTunes player or iPods, so I decided to try elsewhere first. I went to Amazon, my usual supplier of books and other items, but was promptly greeted with a message invoking regional constraints: they don’t offer digital downloads outside UK, Germany and a few other countries in Europe. I then went to the

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The more .mp3s are compressed, the more the voice takes precedence in the conversion and the instrumentals are dimmed down. This is the reason why sometimes hard rock, for instance, seems a lot softer when listened to in low quality.

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much praised Rhapsody and a few other US based services. Some of them didn’t even have the Bad Romance cover, but that almost didn’t count since the very same regional constraints kept me away from check out. I tried eMusic – which normally works in Demark – but was reminded that 30 Seconds To Mars are signed with EMI, one of the 4 major record labels that don’t offer content there. Over an hour into my search, I decided to go the other way – local. After a quick investigation, I found a few Danish online shops. But to my utter surprise, none of them offered digital downloads.

The best case scenario was to buy the entire deluxe album on a CD (most of which I already owned), and have it shipped through the post in 2 to 4 workdays. Now, a) I didn’t really need the physical CD, b) I wanted the track then, not the following week and c) there was a good chance I would have to walk through the cold to the post office to get the package. And there was something in my software engineering mind that prevented me from succumbing to that torture. I then remembered the band’s own online store which I thought would save me. Wrong – digital downloads were only available to US customers. Running out of options, I turned to mobile phone operators, who I also knew were in the business of providing digital music. TDC had barely heard of 30 Seconds To Mars post-2005, let alone that they had messed around with a Lady Gaga track for BBC. Seeing no other way, I turned to the much praised iTunes – today’s de facto supplier of music, the market leader, the “future of digital music” and so on and so forth. I made a joke to myself that for the sake of Tomo2 and company I would even go Apple if I had to! While installation and activation were very easy, it’s no secret that Apple software on a PC is not the most stable there is. Two minutes into my experience, I had to shut down iTunes for eating 160MB of my RAM and was hopelessly watching QuickTime being stuck on opening something. At least I had found Bad Romance. And amazingly enough they would sell it to me. So I bought it. But everything that I feared would happen afterwards, did. My attempt to convert it from Apple format to a plain .mp3 with a custom bit rate (i.e. 320kbps) sent me on a Google quest for endless forum threads, dodgy third party applications and shady looking installations that evoked my frustrating days of coding under Linux3. It took me over three hours and the help of a friend to make it work – which inexplicably still doesn’t happen on my personal computer. As I may have mentioned, I have a degree in software engineering.

Dear music industry, I am your customer… Why are you making it so hard for me?

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Tomo Milicevic, lead guitarist of 30 Seconds To Mars Software development under Linux is significantly less user friendly than in Windows or Mac OS. This is not because of the development paradigm, but because the developer needs to be more aware of the inner working of the operating system. The most elementary things such as installing a program, playing a file and successfully compiling a piece of code – which we take for granted in the rich UIs of Windows and Mac OS – are almost impossible to do without specific training.

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Now that I have introduced you to this experience, I would like to attract the reader’s attention towards several aspects of it. They are the points that frame the premises of this thesis.

Firstly, in the year 2011, in the digital age of instant news, virtual communities and light weight video conferencing tools, the experience that I described is the music industry’s value proposition to me as a customer. Concretely, it materializes in many regional constraints and screens that look like the ones below:

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For lack of a better description, it is almost as if the industry has no interest in taking my money.

There also appears to be little awareness of a listeners’ expectations and how he experiences music.

Why is this? And how can it be changed?

This experience and these expectations are precisely what I will further investigate in this thesis.

While Chris Anderson talks about the age of abundance and unlimited choice in the US (Anderson, 2009), where online music services are as frequent as fast foods and operate with no regional restrictions, I dare to ask how that applies to the rest of the world and whether or not some of “the long tail” might be in a different place altogether and served by unlicensed music services4. The industry is invoking big financial difficulties, but at the same time, a song as “exotic” as a hit single covered for BBC (!) is still hard to legally purchase in Denmark – unless you are tied to one provider and one provider alone: iTunes. Before even getting into pricing schemes, search-ability and customized recommendations5, the industry has yet to solve the simple issue of availability and the experience of plain and simple music acquisition. Availability, in turn, links to peer to peer networks, 4

I am here referring to the way listeners are spread throughout the world, which is a point that I speak about at lenght.

5 These are some elements that Anderson identifies as important in the Long Tail economy and suggests that online stores and software music providers should focus on them.

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practices and perceptions. The “cult of free” has engulfed the internet and whatever software products emerge on the music scene have to deal with that burden. While it is true that some avid listeners miss the tangible quality of discs, the idea of music as information has already entered our 21st century data powered blood streams – which requires fundamentally new business models and far better insight into the mind of the listener.

Secondly, beside being a customer, I am a member of a music audience – a “fan”, if you wish.

Needless to say there are easier, unlicensed (also known as “illegal”) ways to procure a track like Bad Romance – together with the entire 30 Seconds to Mars discography, including B-sides, unreleased material, acoustic covers, instrumental tracks and tribute albums, half of which have yet to see the light of iTunes, regardless of the country. Add social networks and YouTube-like providers to the whirlwind and it is obvious that an artist’s exposure is bigger than ever. And so is the potential to connect to their audience. At the same time, reflecting back on my experience, I spent a whole afternoon of my time trying to pay for a track that I could have potentially gotten for free. Music has value beyond a physical artifact like a CD and many listeners, though not all, do care about supporting their top rated artists. One of my research directions is towards fan communities, which are now growing stronger than ever thanks to the internet and which care greatly about their favorite artist. Yet, paradoxically, the mechanisms through which we remunerate artists today have become highly dysfunctional. I can pay a plumber on an hourly rate for his knowledge and skills – since he is the only one aware of the inner workings of my kitchen sink and how to fix it – but I can’t pay an artist for producing a guitar riff that I enjoy. Given the most popular and basic business model in the industry today, which I have mapped out as part of my research, the best way to support a musician is not to buy the music itself, but to purchase merchandise and concert tickets6. But why should musicians be in the business of selling clothes in the first place? As for the price of a concert ticket, that technically rewards a good live performance and the many hours that went into its preparation. The ideation, the creative process and its subsequent artifact – the song – go largely unrewarded in this arithmetic. So do most of the many hours spent on music theory, practice, perfecting techniques and all the other things that make a professional musician. But why should the audience care? Take the current case as an example: Twitter chatter and concert mishaps aside, I have never met Mr. Milicevic of 30 Seconds To Mars – the lead guitarist in the example I used above7. As a fan, I am not interested in the specific details of his bank account. Nor am I interested in what he does with his spare time – and whether he has any, for that matter. I have never even been curious enough to ask for an autograph. All of these aspects go too far beyond my listening experience. But I do care about his current and his future work – and what I can do to directly support it, because I happen to like it and think it is worth my time (and my money). But recent music history is littered with examples of artists who disappear after one record because their corresponding revenue streams are insufficient to support their existence8. There are only so many 6

I will explain this mechanism further in the body of this thesis and in the appendix.

Relating to my point of what makes a professional musician, there is a reason why I picked him out of the three members of the band to illustrate my point. Some research revealed that he is in fact a classically trained violinist who probably scores sufficiently high on the aspects I just enumerated – such as training, practice, technique, theory, composition etc. On a side note, he is currently embarked on a highly successful world tour, so presumably his bank account is just fine regardless of my personal purchases – but that is hardly the case with the artists that are further down in the Long Tail and in the charts.

8 By “existence” I am not strictly referring to something as crude as living costs, but the entire enterprise that supports and propels and artist.

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t-shirts one can buy and live shows are only accessible to a fraction of the audience. Can we not find a way to support the creative part of music making itself?

Thirdly, I am an amateur musician of sorts. This happens to be a song that I play very often on the guitar – to my friends’ delight9. It would never have happened if I had only heard the original Lady Gaga version, which never quite struck a chord with me. But this particular interpretation – with a slow tempo, different lyrics and rock vocals – I can easily translate into my own style. Of course, I sound nothing like 30 Seconds To Mars, but that is part of the point: music as an artifact undergoes transformations on its way to an audience and more importantly, after it reaches the audience. With the “democratization of the production tools” that Anderson talks about in The Long Tail – i.e. everything from accessible music editing software to the possibility to upload your covers online – and the free flow of information – i.e. free online guitar lessons and finding amateur interpretations that one can use to learn – we are moving into a time where the audience is increasingly engaged in music production. Similar to the times before recorded music, when amateur musicians would be more than frequent, music itself is more than ever in the past century a product of participation in between artists and audience (Lessig, 2008, p. 28 - 33).

I will, in the following chapters, connect my experience with the trends in today’s online environment and using my research data – most of which I will introduce in the form of short, narrated case studies – , I intend to analyze the transformations that have occurred during the past decade that have led to this situation. Further on, I will focus on the artist-audience relationship in today’s participatory online environment and underline the most important elements that could, in my opinion, be the starting points for moving further in terms of products and business models in respect to this relationship. As the author is not in the position to single handedly produce a solution for all the problems in the industry, my contribution aims at a better understanding of the current situation and a somewhat unique perspective on the relationships and forces at play. I will draw on my background in user centered design, participatory innovation, business modeling and software development to provide a better understanding of the audience as a user and a customer, the artist as an organization and a product with a user experience, and the music as a creative artifact that connects the two entities. I will in the end propose a mapping for thinking about this artist-musicaudience relationship and raise questions for further exploration.

Reflecting back on this experience, I cannot help but be amazed by how skewed it really is. How did we get here? What can we learn from the past? And what is this limbo that we call “here”? More importantly, how do we get out? The music industry is shifting heavily under the pressure of the online environment, and the old status quo’s are being challenged. Perhaps it is a good time to look at the three fundamental elements that make up a musical experience: an artist, an audience and the music in between. What are the relationships between these elements? How have they evolved and where can they go further?

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I mention this is because I also play other songs – not to my friends’ delight. The point is that music is a communal, participatory experience.

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Perhaps the reader has noticed by now the narrative approach that I have taken in the introduction and might be slightly puzzled by it. There are two reasons for doing this.

The first is that my research methodology is suitable for narratives. It is influenced by Ralph Stacey and Douglas Griffin’s complex responsive processes approach (Stacey and Griffin, 2005) and it argues for using the author’s experience in the form of reflective narrative as the raw material of the research process. From this raw material, “propositional themes emerge for further reflection” and “together, narratives of experience and [the] propositional themes emerging in it constitute the research.”, they believe. They also argue that research and practice are not separate activities and should be considered together, but that there is a requirement for the narrative to be “explicitly reflexive” in order for it to have research value and not become a literary story. “In other words, [they explain], the reflexive personal narrative is explaining why it has the particular focus it has and how the narrator’s past experience is shaping the selection of events and their interpretation. The narrator is making explicit, as far as possible, the assumptions being made and the ideology being reflected, in explaining the particular meaning being put forward in the narrative” (Stacey and Griffin, 2005, p. 9-10). It is this that I will try to do in my analysis of the case studies that I have based my research on.

On a side note, I believe that writing is like designing a user interface that non-designers and nonengineers must be able to use. I believe that narratives and accessible language can very effectively transmit a message. The reason why I believe this is important is because I am working under the assumption that the academic or non-academic reader will most likely be rather unfamiliar with the music industry and the complex set of mechanisms and relationships that govern it.

That being said, I would like to move on to the following theoretical concept that I have been influenced by in my recent academic experience: the SPIRE born concept of Participatory Innovation.

Rooted in the Scandinavian tradition of participator design, and termed this way by Buur and Matthews in 2008 (Buur and Matthews, 2008), it is intended to refer to activities where companies or organizations engage in co-innovation with users of their products or services. Participatory design refers to inviting end-users to get involved and contribute to a design “not simply as critics and evaluators (…) but as co-designers” (Buur, Matthews, 2008). It is also good to note that the name also refers to the practices employed in involving users, as these are not “recipes” that can be applied in an algorithmic manner to every project, but are sensitive to the product and the community in question. Participatory innovation includes a broader spectrum of projects and practices, and takes “people’s practices and needs as a starting point to generate business opportunities in the form of products and services.” It also draws heavily on interdisciplinary work and supports the idea that bringing together people from different sides of the table will fuel innovation and transformation upon the artifact or the practice that makes the object of the project.

While the body of work that supports participatory innovation focuses on physical products and services, the author wishes to hereby broaden the reach of this concept and apply it to music, the events and practices that surround it. I believe that at the core of this discipline lies the need to uncover and foster creativity – and what more creative field is there than that of music?

Another element that I will make use of is the Osterwalder business modeling canvas (Osterwalder and Pigneur, 2010).

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Since this is a non-economic thesis, I have chosen to use this tool because it maps out the most important characteristics of a business model that I would like to refer to. The canvas is separated in nine sections which can be used to describe the characteristics of a business model, but also to map out the relationships that eventually generate value for the organization in question. The ones that I will most frequently refer to are the Customer Segments, the Value Proposition, the Channels and the Revenue Streams building blocks. The customer segments refers to the different groups of customers (or users) that are targeted by the model and that in turn map to different value propositions that the organization is offering. The value propositions are delivered through different communication and distribution channels – one of the boxes positioned in between – and the revenue stream is the collection of ways in which money comes in from the customers10. While in some cases I will use the canvas to illustrate a business model in its entirety, at other times I will simply refer to the building blocks as a way to put my conclusions into perspective, as was the case with the iTunes .mp3 conversion example I used in the introduction when referring to its value proposition.

Throughout the past months, the author has conducted her research in several ways. Firstly by conducting an academic and non-academic literature review, but also by following the important news feeds in the industry – which turned out to be vital in properly understanding the ecosystem of stakeholders and the current and emergent business models, as well as the technological landscape that propels them. At the same time, the author has researched several acts currently active on the international music scene, all of which have a significant audience and hence provide strong material 10

This building block is different from that of Cost Structure which I have chosen not to refer to as much for the sake of simplicity. While cost structure is very important when talking about music provides for instance, it is not the object of this thesis and the author has chosen to leave it out.

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for talking about the artist-audience relationship. In the case of some of these acts, I have also been successful in identifying and studying the online communities of fans that support them, and I have witnessed their activity live during different participatory events that were important for the community. These events range greatly – from live chats with the artists to watching a video go viral in real time to a collaborative music writing experiment11 – and while some of the significant experiences have made it in the thesis, there is hardly enough room to describe all of them12. On the local scene, I have conducted interviews with six musicians that have been kind enough to talk to me about their professional music projects as well as to explain and confirm some of the (very intricate) mechanisms in the industry. While I have learned something from all of them, I have only chosen to present the two ones that I consider to have provided me with the most relevant information regarding the artist-audience connection. In addition, it is worth mentioning that I have been for a long time concerned with the experience of online music acquisition from the point of view of the end user, for which I have conducted some research as part of my academic work prior to this thesis.

Before we move on to the next chapter that introduces my research question, I think it is important to explain what I mean by the terms artist and audience. Firstly, the reader should know that it is important to consider artists primarily as public figures and not just private individuals. While this is not to say that somebody’s personal opinion is not reflected in their public statements and actions, it is important to note that those actions and opinions will be influenced at least by ones awareness that they are public. I regard these individuals more as “organizations with a face”, meaning that one should always remember that there is an entire team of people of different affiliations that contribute to the “product” that appears in the limelight. Perhaps it may seem unnatural to the reader to compare rock bands or pop acts to organizations. But take any artist that has enjoyed some level of success on the international scene, strip down the alluring outfits, the Photoshop airbrushing, the tabloid rumors and the on stage persona – and sometimes the very person impersonating the persona13 – and one finds an entire ecosystem of managers, assistants, producers, executives, marketers, sales staff, lawyers, web masters, publicists, stylists, technicians etc. that are working tirelessly every day of the week. It is important to understand this because relating to an artist is a very personal thing, and there is a difference between relating to a musician as a person and relating to a musician as an organization. Secondly, my use of the word “audience” refers not just to devoted fans that have a great interest in a particular act, but is all encompassing for the entire group of people that have in some way noticed an artist’s music, regardless of whether or not they have a lasting preference for it. It is important to consider the fact that music is part of all of our lives, regardless of the amount of time and energy that we put into it and how we express our passion. Similarly, musicians make music for everyone, not just for the few people that are 11

In the authors opinion this was a bit of a failed collaborative music writing experiment that resulted in a track that had little artistic value. The low innovative value of the musical artifact that resulted was actually one of the reasons why the example has not made the cut for the data to be used in my argumentation, since after much deliberation the author has concluded that it was more relevant strictly from a marketing standpoint than the artist-audience connection.

12 While I have found some examples to be very rich and significant, other case studies have not proved so interesting research wise. Other bits and pieces of online activity only make sense as part of a whole and have helped me get a better understanding of the communities and their members’ way of thinking.

13 I am here referring to the fact that while some artists such as Jon Bon Jovi or U2 are very involved both in the creative and the business and administrative side of their careers, others such as teenage bands like The Backstreet Boys or the Spice Girls are merely skilled interpreters who deliver a product that has been crafted by the team behind the scenes. I am not arguing for or against any of the two approaches.

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willing to freeze to death during snowy evenings, standing for hours in front of concert arenas in order to catch a spot in the front row14. I am interested in the rapport that an artist can create with all members of its audience because I believe someone can understand and relate to a song and an artist’s message without feeling the need to express themselves in extreme ways such as cuing up in the snow.

An overview of the academic literature on the topic of music and audience – whether we like to think of them as customer segments, users of a digital product or listeners, reveals several recurring themes. Firstly, there is a significant body of work that describes the industry from an economic standpoint and describes the stakeholders and old business models and, more recently, speculates on what the new models could be (Hughes and Lang, 2010; Connolly and Krueger, 2006; Lam and Tan, 2001; Tschumuck, 2003; Peitz and Waelbroeck, 2005). In line with this, around the early years of 2000, there was a boom in academic papers on the topic of file sharing, which was approached from an economic, legal and behavioral perspective (McCourt and Burkart, 2003; Bhattacharjee, Godpal and Sanders, 2003; Godpal et al., 2004). There are also papers and books in the legal field which deal with the more complicated issue of copyrighted content in the internet age (Lessig, 2008). There are contributions in the area of celebrity branding in terms of marketing (Hollensen, 2010) and, of course, work that deals with social media whether from a computer science or a public relations perspective. On the other hand, from a design standpoint, when it comes to digital music, there is a significant concern with visualizing large music libraries and music information retrieval – search-ability, if you wish, which sometimes goes into the field of software engineering (Lee and Downie, 2004). There is also a concern for the issue of losing music tangibility with the introduction of digital libraries (McCourt, 2005), and for social sharing practices among music listeners (Brown, Sellen and Geelhoed, 2001), though the latter are more oriented towards the physical artifacts: vinyl, CDs etc. In the field of psychology, a brief overview revealed significant work on how one understands and relates to music at a neural and emotional level (Levitin, 2008).

But the author has been unable to locate any specific work on the long term connection between a musician and his audience, and none that places it in the context of the internet age. In the meantime, as will later be explained, many parts of the industry are less and less supported by music and are increasingly reliant on selling artifacts that have more to do with a lifestyle (merchandise etc) and live events, which point primarily to the audience relating to the artist as a persona and less to the music alone. On the other side of the table, internet communities and crowd sourcing are more powerful than ever. And just to give the readers a taste of what is to come, only recently, Songkick.com – one of the largest websites dedicated to music concerts – has made a connection between the busiest touring artists in 2010 and their fan involvement through the internet and social media websites (Van Buskirk, Evolver.fm, 2011; Songkick, 2011).

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As you may have guessed, there is a story about that too (and it involved paramedics), but the author has chosen to leave it out. It is also perhaps time to mention the fact that the author is not particularly interested in how business models can be changed to cater to that particular type of fan – she believes they have always and will always be there regardless of how the industry changes.

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Perhaps it is a good time to ask:

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If we are to map out the old record label business model on using the canvas tool I introduced before, based on my extensive research on the topic, which one can find references to in the appendix, it would look like this15:

Without going into too many details16, the story is this: a large record company would focus on producing hits, or music that would appeal to a large audience to which it would sell albums in the form of CDs. Only a handful of artists from a label’s roster would successfully produce hits. These 15

This mapping uses, to a small degree, Alexander Osterwalder’s presentation (Osterwalder, 2009) on the old record company business model. The author’s research has however revealed that the mapping is somewhat different – Osterwalder considered manufacturing as being an external partner, when in fact CD manufacturing plants are owned by record companies. There is also the question of how much money a record company traditionally made from touring and concerts – Connolly and Krueger (2006) claim that, while contracts between record companies, bands and concert promoters are heterogeneous, the price of ticket sales are traditionally split between the artist and the promoter. This is also the case with merchandising. This is the generally accepted mapping in the resources that I have consulted. For details, consult the Appendix.

16 Honestly, it’s almost impossible not to go into details – the old business model is broken in very many respects. What makes it even more complicated to ignore the details is the fact that record companies are still clinging to it in even more respects – hence the inverted comas when using the word “old”.

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hits and the artists singing them would be promoted through very tightly controlled channels such as radio stations and music TV stations (must notably through airplay, but also interviews etc), but also strategically allocated shelf space in retail shops. The hits would drive the buying of an album of 12 or more tracks for the price of around $15, which one would have to acquire from a brick and mortar shop. In other words, one good hit could sell you the equivalent of 12 tracks17. Brick and mortar shops would in turn be specialized in delivering hit records too – by having limited physical space, they would prioritize addressing the mass market and promote best selling albums18. Playing a song “on demand” from the point of view of a listener would only be possible by making a CD purchase. I will get back to this aspect. On the other hand, only a handful of artists from a label’s roster would produce big hits and hence become profitable in this model, since there is only space for so many “hits”. Consequently, a label would have to subsidize hundreds or even thousands of unsuccessful artists, apart from covering the production and distribution costs of millions of (successful or unsuccessful) records19.

Rather cumbersome? One could say that, yes. But here is where it gets really interesting.

Enter the Internet! In a paper from 2001 published in Communications of the ACM, Lam and Tan identify the online environment as a game changer in the music business. They begin by quoting Jeremy Silver, who was then vice-president of New Media at EMI: “The threat to the music industry is not MP3s, but the arrival of a consumer distribution channel that is not controlled by the music industry”, he stated (Lam and Tan, 2001, p. 1). In the new environment, the internet is replacing the traditional channels. On one hand, digital content in the form of mp3s means bypassing the brick and mortar shops altogether. Shipping and distributing this content now happens in a heartbeat. So fast in fact, that the problem is not getting content to listeners, but getting their attention.

Traditional TV and radio stations with their programmed listening experience – meaning that your content is chosen for you with little to no input from the user – are rivaled by online providers that are either partially or completely “on demand”. They range from customizable internet radio stations like www.last.fm to the search powered YouTube that gives a user the track that he wants, when he wants it (and also gives it for free, but we will get back to that). To add to the complexity, the web 2.0 environment, as suggested by Tim O’Reilly (O’Reilly, 2005) is a platform for participation where groups of interconnected users upload, transmit and modify content indefinitely. Whether content equals a music track, a recommendation or an opinion about an artist, the result is that not only are the old channels increasingly obsolete, but they are being replaced by ones that are almost impossible to control by comparison.

As Patrik Wikstrom points out in his book The Music Industry from 2010, in the old music economy, “the flow of music could relatively easily be controlled by the music firms, since it was unable to flow between separate parts of the audience” (Wikstrom, 2010, p. 5-6). He illustrates this by using the diagram below (Wikstrom, 2010, fig. 0.2) and explaining that it is nowadays more or less impossible 17

For details, please refer to the Appendix.

I believe the mechanism is rather intuitive, but for a detailed explanation, please refer to The Long Tail [ref: Anderson].

19 This is basically because, despite all efforts, nobody can really guarantee what songs and artists will make their way into the hearts of millions of listeners. Music is, even in its most commercial instance, a form of art.

For each successful record, there are countless others that have flopped despite the promotion, money and support that was put into them. We don’t generally hear about them (evidently!) so we tend to assume they are not there. But just think about Mariah Carey.

18

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to regulate and police the use of every piece information or intellectual property in the music business, given the connectivity of the audience.

Perhaps now, looking in retrospect from the distance of a decade, Jeremy Silver’s early recognition of the internet as a new way to distribute music seems rather ironic. Lately, EMI, who is one of the four major record labels in the world, has been the poster child of the careworn music industry: its past years have been marked by major restructurings and struggles with debt (Wikstrom, 2010; Holton and Davies, Reuters, 2011). While the EMI corporate history is not the object of my thesis, the reader should take it as a clear indication of the severity of the situation and understand the importance of laying new foundations for the music business arithmetic. While much has been written on the issue, given the above stated influence of the internet, the core of the problem can be nailed down to two elements. The first is plummeting CD sales – the most important revenue source for record labels20. The second is online music sharing, whether by free downloading or by the use of copyrighted material online. Some in fact argue that the two elements go hand in hand, but that is a debate for another kind of research21. In order to better understand the argument of this thesis, we need to have a closer look at these two aspects.

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Hence the name record label. After vinyl, tapes etc., the CD is the last physical medium to hold music.

Here is where the rabbit hole goes very deep in news articles, legal documents and academic papers alike.

While some argue that peer to peer downloading is the cause of declining CD sales, others find no connection.

The ones who do see a parallel are the record labels, the RIAA and the various organizations that rely on the CD profits and the mechanisms that provide them. For a light sample of this refer to the link by Ehrlich in the references. While the author will not go into the details of this, she suspects that some academic studies have been published to specifically to support this theory. At the same time, other academics claim that the direct connection “I download freely, therefore I don’t buy” is not only hard to see, but in fact rather unlikely. But their conclusions have also been attacked and are not bullet proof either. Connolly and Krueger (2006, p. 50 63) touch very well on this controversy. I have therefore chosen not to approach this matter directly, but to consider everything “as is” and treat all music providers equally – from iTunes to YouTube and .torrent websites – regardless of their history, affiliation or legitimacy. Too much ink has been spilled over this already, and too much money better invested in rethinking business models, developing IT solutions and restructuring the resources of record companies has been spent on irrelevant law suits. Whatever the reasons may be, it is 21

21

Music has always been linked and influenced by evolutions in technology. The gramophone, the LP, the invention of radio and multi-track recording have all been somehow disruptive to the way music is produced, commercialized and consumed (Hughes and Lang, 2003; Lessig, 2010). The CD is no exception: introduced to the US market in 1983, it was the first step in moving music from analog to digital and it had an immediate economic impact on the industry. Easy and cheap to produce massively (Hughes and Lang, 2003) and featuring a considerably more profitable price tag (Knopper, 2009), it offered the record labels an opportunity to ship new material more easily to costumers, but also to reissue old material into a new format. Financially, this took the record companies into an exceptionally profitable two decades that, for better or worse, gave birth to some of the most famous pop-icons and best selling artists in the history of music. It also helped them grow into large corporations with established business models largely centered around the CD. But at the turn of the century, the glow and star dust would start wearing off. Much has been written about the downward spiral illustrated below.

An overview of the reasons described in books, papers and the very many news articles written on the topic points to several factors: the invention of P2P file sharing networks (Lam, Tan, 2001), the introduction of the CD-burning unit on personal computers (Knopper, 2009) or the fact that listeners might have finished replacing their vinyl and cassette collections with CDs (Hughes, Lang, 2003), to name the most popular ones. History is only clear in retrospect – and as the issue is still on the table and still the cause of much alarm to this day, the author believes we are too close to the matter to understand all the forces at play. What is clear though, are the numbers.

In an article from February 2010 quoting Forrester Research, CNNMoney.com named the 2000s to be “Music’s lost decade” (Goldman, CNN, 2011). “Last decade was the first ever in which sales were time to move on. Or, in the words on The Economist “time to wake up and smell the spilled beer” (The Economist, 2011)

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lower going out than coming in” states the article, using figures from the RIAA (The Recording Industry Association of America) that show an average drop of 8% in album sales, every year, for the past 10 years. "The CD is still disappearing, and nothing is replacing it in entirety as a revenue generator", says David Goldberg, former head of Yahoo Music, pointing at the difficulty to monetize on online content, which he calls “a war of attrition”.

In this troubled context, it is time to tackle the second pain point: the Pandora’s box for some and breath of fresh air for others that was Napster.

The famous online file sharing service debuted in 1999 (Goldman, CNN, 2011) and spread virally to achieve almost 250,000 daily downloads of the software at its popularity peak (Lam, Tan, 2001).

There are two versions of the story of Napster. The first is the rather hippie, anti-corporate version promoting the idea of free content for all. Born in a university dorm from the hands of a nineteen year old programmer and big Metallica fan, the application was the result of a “large underground movement of college students” (Lam, Tan, 2001). They were using compressed .mp3 files to swap music more easily and freely than before using their internet connection. They would connect in chat-rooms and discuss over their downloads and they would provide their own music for others to have out of generosity and the desire to support the community. While there is something seductively righteous about this and the word community should be remembered, it is not the whole story.

The second version is the one painted by writer and music journalist Steven Knopper (2009) who dedicates an entire chapter of his book Appetite for Self-Destruction to the business that was Napster. Firstly, the 90s were marked by the dot com bubble – and as the author unravels, the opportunity to go digital, change the business models and make music available online was pitched by many startup software companies to big record labels during that time. “I met with people until I was blue in the face, from the dot-com industry” (Knopper, 2009, p. 115) recalls John Grady, who was then the head of Mercury Records, currently a subsidiary of Universal. Secondly, it is good to note that the .mp3 format and some free applications to support it (e.g. Winamp) had been around for a long time and had been gaining momentum online among music fans – something that the record companies also knew. But a combination of little technological awareness, large revenue streams and the proverbial “if it ain’t broken don’t fix it” led to practically no changes. “They were making big money. They had the Spice Girls. They had all the time in the world. Why change?” summarizes Knopper (2009, p. 115). In this context, Napster was a Silicon Valley dot-com start-up like any other – in terms of the amount of venture capital and long programming hours that went into it. It just happened to be launched at the right place and the right time, sometime in 1999.

As the story goes, some 60 million users (Goldman, CNN, 2011; Lam, Tan, 2001), tens of millions of dollars (Knopper, 2009, p. 129, p. 136) and one cover of Time magazine later, Shawn Fanning and his company found themselves in a messy copyright law suit enforced by the RIAA. While the details of this litigation require a separate thesis, two aspects are interesting for our purpose. The first is that, while Napster did fall, it created a precedent for easy access to music, the practice of sharing and our 23

perception of what music is. The second is that one of the most vehement speakers against Napster was none other than drummer and founding member of Metallica, Lars Ulrich – a man that Shawn (Fanning, the company owner) and many of his fellow colleagues were big fans of. Not only that, but even more Metallica fans were hiding in the ranks of Napster users – at least 317,377 of them (Knopper, 2009, p. 135). It is sufficient to say that the listener’s reaction to Mr. Ulrich’s actions included a hacked official website and taglines such as “Metallica is suing their fans!”. Among other things. We will get back to that.

Napster was followed by many other services of its kind, such as Kazaa and Limewire, that later got more sophisticated in the form of online .torrent trackers like The Pirate Bay and many more. But the reason why the author has chosen to single it out has more to do with the experience and the practices around it, as well as its disruption of the status quo in the industry. The popularity of Napster basically showed what can be done in a virtual environment when music is no longer dependant on a physical medium to be distributed. One thing is that music turns into a non-rival good (Wikstrom, 2010) which means that lending music to a friend is not the same as lending your bike. If you lend a bike, you no longer have it and therefore cannot bike to university during that time. If you “lend” an .mp3 on the other hand, you just copy it – you still have it and your friend has it too and you can both enjoy it just as much – and he won’t have to return it either. Technically this puts music into the more abstract field of information rather than consumer good, and brings up problems about the value and meaning of a music track to a user. Another point is that ten years later, the practice of sharing comes only natural in our web 2.0 social media rich lives – and music is no stranger it. But the mechanisms that support this practice are still largely unlicensed22. Yet not only do they exist, but have become an important element in creating a different kind of connection with the audience.

In the non-internet era, a listener’s exposure to music would be dependant on the offering on radio and music TV stations on one hand and by peer suggestions on the other. There are several academic papers which deal with the collaborative practice of finding new music through friends, such as the one by Brown, Sellen, Geelhoed. They conclude – evidently in line with the recollections of each and every one of us from back in the days of CDs – that “social methods (…) were very important for how our participants found out about music.” (Brown, Sellen, Geelhoed, 2001, p. 9).

In other words, one would find out about an artist either by listening to the radio and waiting to hear the details of who is singing a track, by watching MTV or, if one was lucky enough to have peers with similar tastes that would lend him tapes and CDs, from his friends. Out of these channels, two would be one way and be controlled by record companies. The third – finding and getting music from friends – would still be somewhat under control because of the difficulty of copying music massively.

And what about the rest of the message of an artist – style, personality, opinions etc? They would reach the audience much in the same manner – a radio interview here, a TV appearance there, a magazine article in between – all nicely packaged, choreographed and reviewed by publicists and

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also know as “illegal”.

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marketing staff at more or less every step of the way. More importantly though, again, channels that are unidirectional.

So if we are to think of the traditional recording artist, one can easily see how dependant he was on the record company. By controlling the ways in which an artist could reach his audience, the label would be the puppet master in the artist-audience relationship. And while they would be responsible for delivering the music and message of an artist, they would also be the only ones able to take the pulse of the audience and register feedback and reactions from their part.

In this context, if we are to consider a best selling act such as Metallica it is understandable why they could potentially be somewhat out of touch with the practices and values of their audience. Their involvement in the Napster story speaks very well for that disconnection. The fan backlash that I mentioned before started when Mr. Lars Ulrich notoriously walked into the Napster headquarters with a list of all the 300,000 user names that were sharing his music online. He reached a settlement with the company by which all of those users were to be banned off the network. As Knopper very well summarizes “*the band+ grossly underestimated its’ own fans newfound loyalties to Napster” (Knopper, 2009, p. 134). Metallica was not the only artist to speak against Napster. Rappers Eminem and Dr. Dre are other two famous examples. And obviously enough, they were not just speaking in their own personal interest, but also in that of the record companies of whom they were highly dependent on and who reacted to how the new found way of sharing music threatened their established business model. But that happened, in Metallica’s case, at the expense of thousands of fans – which is something that at the end of the day could not have benefitted anybody. One can only speculate, but considering the poor, one-way artist-audience communication mechanisms in use at the time, is it possible that the entire controversy could have been avoided by a better understanding of the user’s values and expectations? Ten years later, it is hard to specifically track 25

down the damage done by this controversy any further than a Wikipedia entry: the band is alive and well – all be it speaking to more of a classic metal audience, as is the case with many older rock acts – and so seem to be the fans, generally speaking, since the concerts are still selling out around the world. But at the same time, ten years later, the idea of sharing music over the internet is not all that exotic anymore, proving that the Napster users were most definitely on to something.

I’d like to point out the fact that while, in my opinion, bad communication with the customer/fan base resulted in an uncomfortable situation, this case is not meant to culprit anyone. Perhaps it is hard to empathize with Metallica’s position today, and I personally don’t, but in a world where all music is traditionally paid for with big money, it is hard to see how giving it away for free could benefit an artist, the label, or anybody else from that side of the table.

Yet, despite all the counterintuitive economics, some did see. If you remember the old business model, I mentioned that a record label would have to support hundreds or even thousands of artists at a time, only a handful of which would be heavily promoted through the very limiting traditional channels and turn in a profit. All the rest would remain largely unknown in the traditional top-down approach to artist promotion. But this was before crowd-sourcing, participation and all the words that make web 2.0 what it is meant anything to anyone. To understand the new type of artist emerging from the post-Napster age, I invite the reader to grow more familiar with the act I mentioned in the introduction.

On November 29th 2010, lead singer and founding member of alternative rock band 30 Seconds To Mars, Jared Leto, walked in front of a sold out crowd at Cardiff International Arena and said: “We want to dedicate this next song to every single person who bought and who stole our [latest] album.

We want to thank you from the bottom of our hearts for making our dreams come true.” (Thirty Seconds To Mars, 2010). What followed was the echoing sound of 8000 people singing in the darkness of a dimly lit arena on the acoustic version of Alibi. A rather impressive response. After seeing them in concert then, for the second time, I remember thinking that if I had that kind of power over a live audience, I could easily start a revolution.

While some may claim that Mr. Leto’s speech is just a smart PR move, it actually comes from a surprisingly consistent place (while also being a smart PR move). In an interview for Alternative Press in March 2009, when asked about how he got people to know about his band back in the early days, the front man candidly talked about how illegal file sharing networks played a key role in their rise to success (Karan, Alternative Press, 2009). “We were really children of the Napster age. The great thing about that was that people could find our music and there was this sense of anonymity to it. It was just a file that said, ‘30 Seconds To Mars’ and people were trading that”, he says, hinting at the fact that he chose not to use his already established name as an actor to promote any of his work on the musical scene – a decision that he fiercely sticks by to this day. “We were so grateful to have been born into that world – the file-sharing world. It was a blessing. The internet was much different back then. It was hard to get a picture [online], even less a video. There was a certain level of anonymity there and it was just about the music.” (Karan, Alternative Press, 2009). Indeed, 30 Seconds To Mars was signed as a band back in 1998, right about the time when file sharing was 26

about to take the world by storm. Their debut album from 2002 received little acclaim from the critics and even less airplay.

But as the press was busy dismissing his band as the “vanity project” of an actor (Karan, Alternative Press, 2009) and their record label was busy supporting other acts, in the anonymity of peer-to-peer file sharing networks, a loyal community of Mars fans was building slowly, but steadily. Ten years later, 30 Seconds To Mars would sell out Wembley Arena and be recognized as one of the busiest, most professional acts in the entertainment industry, playing live for more than a million fans over 142 shows in the course of 201023 (Van Buskirk, Evolver.fm, 2011; Songkick, 2011). “Overnight success!”, the front man would joke in an interview for ABC News in 2010 (ABC News) referring to their decade-long strenuous journey towards recognition. Marked by legal, financial, industry and media related battles, the story of 30 Seconds To Mars is also a goldmine of audience support.

“We’ve always been, since the beginning, interested in the listener and we’ve always welcomed participation” says drummer Shannon Leto – who, appropriately enough, plays a custom decorated drum kit featuring hundreds of pictures of Mars fans. Undoubtedly, the internet, online communities and “the file sharing network near you” played a decisive role in that beginning and everything that followed. It must also be moving for a fan to hear that message, but while the Letos’ “welcome participation” mantra sounds like a wonderfully inspiring speech, there’s an underlying significance to it, as we will later see.

But let us keep to this part of the matter for now. Free access to music provides unprecedented exposure and an opportunity for any artist connect to a listener through his work. As different studies such as that of Bhattacharjee, Godpal and Sanders show (2003), many users of peer to peer networks download music that they have not heard before and are curios about. For any artist ready to admit it, this type of presence will guarantee that their music gets to all the people willing to listen to it, hence generating an audience. Chris Anderson is even categorical enough to put in writing, and in numbers, the fact that “the average file-trading network has more music than any music store” (Anderson, 2009, p. 33).

Complementary to that, the online environment also opens up possibilities to support an active community of fans. Indeed, 30 Seconds To Mars have always had a very substantial online presence: they24 have been running a constantly updated website (www.thirtysecondstomars.com) and a discussion forum attached to it from the very beginning, doubled by activity on the different social networks. At the moment of this writing, the main section of their official website is a blog-like structure updated several times a week with fresh, recent content that can give any reader a fairly detailed picture of the band’s projects and activity. It ranges from everything to anything: pictures from the shows, interviews for different websites, radio and TV stations, news, announcements, short clips from the tour, trailers for upcoming videos25 etc. All entries receive from a few dozen to a

23

While some prefer to use record sales numbers to certify the success of an artist, the author believes that for obvious reasons, the tour numbers are far more relevant in this case.

24 By “they” I don’t mean they themselves, the members of the band, as the reader probably understands. All websites need administrators and tech support, of course. But this is not to say that they didn’t contribute to the content to a certain extent.

25 30 Seconds To Mars are know for their highly elaborate music videos that are in fact short films, which would be highly anticipated by the audience, hence promoted with short trailers, in the fashion of full length motion pictures. It is unclear whether they were in fact some of the first to use this method for building

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few hundred comments, depending on their importance and content. The website also contains the traditional bio, a web shop, tour dates, but also, interestingly enough, a large Flickr gallery of pictures and interview scans that appears to have several public26 contributors. More recently, the lead singer has also started a blog of his own (Leto, Notes From The Outernet), which is more like a documental in blurry BlackBerry pictures of his travels around the world, but nonetheless fairly entertaining and registering (tens of) thousands of views and hundreds of replies per entry. The two websites are supported by a YouTube channel with all the official videos, Facebook, MySpace, Ping, Buzznet and (4!) Twitter accounts27, all synchronized with the website entries, not counting the personal Twitter aliases of the three band members themselves28. Does it sound like a lot? Well, it is.

Given the fact that very many bands only keep one hardly updated static website and just a Facebook profile, it’s quite obvious that there is a lot of effort that goes into this.

One can easily imagine that all this outreach generate a lot of traffic from millions of users, a fraction of which also contribute to the conversation on a daily basis. But the online also meets the offline many times. The band’s history is filled with examples of participatory experiments going a lot further than a decorated drum kit. Decorated albums is one: the inner cover of the deluxe edition of their 2005 album A Beautiful Lie featured a long list of names of fans, while their most recent CD had 2000 different covers crafted from portrait pictures sent by audience members29. Perhaps even more experimental, This Is War, which is by all definitions a studio album, features the audience singing on almost every track. These are all samples specifically recorded for the album during a series of events termed “summits” and ended up accounting for more or less half of the backing vocals on the CD. “It’s like the audience is in the band” the lead singer says (ABC News, 2010). Top that with the fact that tens of people are invited to come on stage and sing along at every concert and one can pretty much get their message: they love their fans and are very proud to have them.

Either that or Mr. Jared Leto and his team are all marketing savvy bordering on masochism. In reality, it’s anybody’s guess which one of them it actually is, but perhaps the reader should judge for himself... but only after reading through the entire thesis.

Regardless of the real reasons, the response is nothing short of substantial. The most dedicated part of their audience – appropriately named Echelon, after one of their songs – is now less of a simple fan base and more like an “army” with a life of its own. During the past months, the author has spent time following and understanding this community which is primarily active on Twitter, Tumblr, and the band’s two websites. It is a circle of tens of thousands of people from allover the world, with leaders, followers, trend setters and small side projects run by fans. Some of the most influential members, such as @JoanneEchelon or @amber_6277 to name just two examples, have a few thousands followers themselves and the online side projects include the usual unofficial tribute websites, but also, more interestingly, aliases such as @30STMVOTE and @echelon_vote dedicated momentum around an online video launch, but this mechanism has also been adopted recently by other artists such as Britney Spears and Lady Gaga.

26 This cannot be checked 100%. As one might suspect, the affiliation of different people hiding under different usernames is sometimes difficult to trace in the online environment.

27 The official aliases are @30secondstomars, @thisisthehive, @7726 (apparently the official 30 Seconds to Mars online administrator, though it is not clear if this goes for all their online resources) and @golden_tix.

There are in fact a number of other official aliases, but their activity is low at the moment.

28 For the curious, those would be @jaredleto, @shannonleto and @tomofromearth 29 As a side note, I would invite the reader to consider what it must have taken to persuade a record company to actually do that.

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to encouraging fans to vote for the different online awards where the band is nominated and @30Stm_Quotes one dedicated to funny or inspirational quotes from interviews. Though my time spent around this community has been substantial, it is clear looking in retrospect that my understanding of it has probably only scratched the surface. But even so, I have been repeatedly surprised by the amount of daily activity that it generates. Whether it’s commenting on pictures from the latest shows, discussing rumors, doing covers on YouTube, making tribute videos or simply mentioning song lyrics, most of the people involved appear to have something to say every day of the week.

To illustrate the impact of this community in action, I have chosen two examples. The first is the viral video of a new song that the band performed live in a concert in Mexico City on February 9 th 201130.

First of all, to get the artistic aspect out of the way, this is more of a trial song, to be perfectly blunt.

All artists typically have piles of unreleased material and some research showed that Mars do play unreleased songs rather frequently – either as part of acoustic performances or sneaked in between known songs at concerts, to test the audience response. You can think of this as the design equivalent of user testing a prototype that’s not yet finished and then iterating depending on the user feedback31. A part of the nameless track in question was played during the Mexico City concert, right before the last song. And somebody from the first row, by he user-name of @TheGateKeeper26 recorded it using her compact camera. Two days later, on February 11th, she decided to upload it to YouTube, which is the place where pretty much all fan-cam concert videos reside. The comment that she attaches to the video says it all: “New song. I was surprised Jared was playing bass for this one so I recorded it. Enjoy!”. She tweeted the link to the video to her followers, many of which are Echelon members, and then went to bed. She woke up the next day to find that MarsNewSong was a worldwide trending topic32, that her video had thousands of views, that she had 200 new subscribers to her YouTube channel and about 40 new Twitter connections33.

What had happened? From the author’s observations, at some point during what was nighttime in Mexico, a few of the Twitter users in TheGateKeeper26’s circle watched the video – which was appropriately titled “New Song”— and then started re-tweeting the link to their friends. Little by little, from one user to the next, the word spread fast throughout the community. Some of the more established members, one of which had over 3500 followers, decided to engage people in trending the tag MarsNewSong to accompany the link and the conversation. 12 hours later, the tag was trending worldwide. The video had 3716 views on YouTube. Responses were running high – some fans were tweeting the new lyrics and including the official @30secondstomars alias in their status updates. Reactions were also registering on the two blogs of the band – obviously placed out of context, simply attached to the latest blog posts which in fact had nothing to do with the Mexico show. 15 hours later, the official alias @30secondstomars acknowledged the reaction by tweeting 30

For those brave enough to endure the screaming audience, the video can be found here: http://www.youtube.com/watch?v=Nu7wAD_pMJM 31 The song Hurricane which is on the latest record for instance is a good example of this, as the lead singer revealed in an interview. It was played for an audience long before it was actually recorded for the album and the band subsequently decided to change it to a much slower tempo.

32 Twitter Trending Topics, as defined by the website, are established based on an algorithm that identifies “topics that are immediately popular, rather than topics that have been popular for a while or on a daily basis, to help people discover the "most breaking" news stories from across the world.” (Twitter, 2011) 33 These numbers were determined after she answered a few of my questions about how precisely the event unfolded.

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“Thanks for trending MarsNewSong Worldwide!�, as can be seen in the pictures below (see reference for @30SecondsToMars).

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The video hasn’t stopped growing since. Two days later it had over 8,000 views. Less than three months later, at the writing of this paragraph, it accounts for 109,862! While watching it go viral in real time, I remember having thought to myself: “Not bad for grabbing a bass guitar and singing ‘Go!’ a couple of times…”. Was it efficient? Yes. Did they know it could happen? Obviously. Did they plan it? Hard to say, but probably not – at least not in this particular case. And, of course, we have yet to see if the song actually makes it on an official release, since, by all indications, there’s still much work to be done on it.

Perhaps an even more surprising example came on April 28th 2011 – one day before Prince William married Miss Catherine Middleton at Westminster Abbey in the lavish and intensely covered ceremony that took over the news channels and internet alike for days in a row. Twitter was no exception and it seemed that discussions were running high about the wedding, the dress, the guests, the Prince etcetera. That was until MTV decided to do a live video chat with 30 Seconds To Mars. Several days before, they had asked fans to start sending questions to @mtv using the hash

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tag #ASK30STM34. Half an hour into the live chat, the fast stream of questions pushed the tag as a worldwide trend, ranking among the Royal Wedding35, the dress, the Price etcetera.

Looking at these examples it is obvious that the community and the free flow of content in it is an important aspect in the band’s popularity and success. It also provides a good starting point for interaction with the audience and has the potential to create and maintain a solid base of listeners.

While this community is one of the most illustrative ones, it is, not even by far the single one out there. MTV recently identified some of the most visible and active “fan armies” today as part of its MTV O Music Awards which premiered this year and were dedicated to the online environment. The nominees included fans of the acts My Chemical Romance, 30 Seconds To Mars, Lady Gaga, Muse, Justin Bieber and Tokio Hotel, among others. In line with this inventory, another example that I considered in detail and will speak of later on was the MCRmy “belonging” to alternative rock band My Chemical Romance. It has also been identified as a very strong case in Chris Anderson’s The Long Tail (Anderson, 2009, p. 103-4, 106), has been running strong for a little under a decade and is very similar in size to the Echelon. Secondarily, I also took some time to investigate the community around Lady Gaga’s music. But while its size is astounding and Lady Gaga has more Twitter followers than all the seven members of the two aforementioned bands put together, this community has provided less interesting examples in terms of organization, activities and events and, perhaps because of its youth, seems to have not yet developed much depth36.

It is then perhaps a good time to strip down the inspirational speeches, the jokes and the chatter and try to have a closer look at the backbone of these fan ecosystems.

“Fundamentally it's viral marketing, you could say”, summarizes Jan Due, professional musician and teacher at Oure Music School in Denmark while patiently sipping his coffee and talking about the way growing a fan base is done nowadays. I would spend a few hours with him asking questions about the inner workings of the music industry and how it has changed in the recent years. “In the 90s if you met a person and you asked 'have you heard the new U2 album' and he didn't like U2, then the message didn't go any further, so it was a bit hard to communicate the message of that new fantastic record. But today it's like ‘Bang!’”, he mimics an explosion with his hands, “because today people who come together [online] have the same interests, so they will gladly share information about the new record from band X.” We later start talking about Pendulum, an electronic rock band that his son is very found of. “They are a great example of the modern age and how you can promote yourself without being part of the traditional media”, he says, after being 34

This request was promoted not just by MTV, but also through the band’s own online channels, which, from my observations, was the most significant way in which news of the event spread out.

35 This was in fact mentioned halfway through the interview, a recording of which can be found here http://www.mtv.com/videos/news/647408/what-was-30-stms-favorite-concert-theme.jhtml#id=1662898 36 What is has developed however is the need for a place of its own in the server racks at Twitter, as this picture from the Twitter offices will testify: http://www.businessinsider.com/twitter-royal-wedding-2011-4

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rather surprised that I had actually heard of them. “That’s rare, because I must have talked to sixty people and they said ‘Pendu-what?’. *They are+ never played on the Danish radio stations, it's never been on Danish television, it's hardly mentioned in the music magazines – they didn't even bother to make a review of the band. And they played in Denmark two times last year! So no official media in Denmark wrote one line about that band, but when you go to [their concert at] Vega in Copenhagen, you have hundreds of dedicated fans. How have they learned about them?” Obviously, the answer is “from the internet”. He continues by explaining how this could never have happened twenty years ago when an artist was highly dependant on radio, newspapers and the traditional promos that they required. Today one can “infiltrate” online communities of different kinds, ranging from musical ones to gaming and anything else. “For instance if I like a rock band like The Strokes or I'm in a band that sounds something like The Strokes, maybe I can interfere in their fan base because maybe they'd like to hear my music too… and maybe in this way you could get some fans in Japan, Brazil, India, Poland, Romania, Bulgaria and so on.. just a little there, a little there.. globally that could be thousands of fans that are into that kind of rock music.”, he explains. It’s basically The Long Tail of fandom and it’s unfolding online at full speed.

Over the past years, specialized companies have appeared that deal precisely with online music marketing and can give personalized suggestions for artists wanting to expand their audience base (YourWaves is a good example from Denmark). There are also standardized solutions, such as those offered by ReverbNation and other websites. They basically provide a way to navigate the internet in the hope of attracting new listeners. They also provide tools to make a difference: if everyone is online, then just being online is not enough. MySpace counts millions of bands and whether or not all of them have real fans is a big question, most probably one with a negative answer. In business terms, one could say that attention is the new scarcity37. From a user experience standpoint, much like in real life, when it comes to the connection that is created between an artist and a fan, presence alone will not give you a relationship.

“The main point in building a fan base is the personal contact artist-fan”, Jan told me during our interview. But that may be difficult if you have 3 fans in India, 4 in Denmark, 55 in Germany and a couple of others all around the world, which can be a plausible scenario for a small artist promoting himself online. On the other hand, from the perspective of a bigger act, problems also appear – while it is easy to come meet the public after you’ve played a small intimate show in a club, things don’t scale very well once you’ve passed your few hundred tickets mark. Looking back at the example of 30 Seconds To Mars through this perspective, all that constant activity sure seems like it is in fact one big audience-supporting machine. They tweet, they take pictures, they ask the audience to take pictures too, they invite people to contribute, they ask them to RSVP on Facebook if they are attending a concert, they take it one step further by giving the Echelon missions to print flyers, to make avatars, to draw graffiti triads and break the law, they put out teasers of their upcoming work, they let the world know whether or not they’ve tied their shoelaces38 etcetera. It is 37

I have taken this particular phrasing from Alexander Osterwalder’s presentation on music business models, but I would be reluctant to attribute it to him since it is an idea that is commonly referred to in many contexts, including in Chris Anderson’s The Long Tail (Anderson, 2009).

38 Well, this is actually a joke with a hidden meaning. The lead singer ironically described in an interview how some people typically use Twitter and the egocentrism that sometimes comes with it. It was along the lines of “9:06 I just woke up. 9:08 I tied my shoelaces. One shoelace broke. Is there anybody out there?” Thankfully,

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all about creating and supporting that relationship and at least leaving the impression that the dialogue goes both ways.

So can it actually get personal, not just seem personal? Yes it can. Sometimes. Here are two examples involving the equally Twitter savvy pop-rock band Matchbox 2039. This Grammy nominated band with a long track record of popular songs are currently working on a new album which is set to come out in the next year. They have also recently launched an official Twitter alias for the band in anticipation of their upcoming release.

the world has yet to be briefed about the state of their shoelaces, but all status updates on social networks are bound to become somewhat flat and/or pointless at times, if not plain annoying. And their own Twitter feeds are no exceptions, which is a point to be taken into consideration before one goes to waste precious time on the popular social network.

39 While it would have been far more appropriate at this point to invoke an example involving one of the 30 Seconds To Mars band members, the author is unable to do that since it involved expressions that are unsuitable for an academic paper. From my part, not his, in case the reader was wondering. Well, sorry. I never thought anybody would actually read it and start a conversation. For the curious ones, here’s the tweet: http://twitter.com/#!/tomofromearth/status/52379702941331456 Some people picked up on the conversation and I ended up in the Fender vs Gibson war (which is like Coke vs Pepsi), but it involved too many F words to be quoted here.

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It may not seem like much, but on a “coolness” scale from one to ten, practicing a hit song on the guitar and just then getting an encouragement from the person who wrote it is pretty close to a ten.

Of course, the chords didn’t come out any easier after that, but it’s a little fun fact that I can remember Matchbox 20 by. And that is precisely what making a difference is all about – providing something that a listener will remember you by. At the same time, if one searches through the communities that these artists support, one can find users that actually list the date and times when they received replies in their public profile description. As far as the author can tell, actually getting your tweet acknowledged and maybe even having a question answered seems to be a pretty big deal in these circles. In a way, perhaps this is the new digital version of getting an autograph, and since all profiles and tweets are public, it is even easier to take pride in it and show it to the world, making it a craved scarcity.

So online activity can go a step further than just being a means of promotion and can become part of what I would like to call “the user experience” of an artist i.e. the totality of the different elements through which a member of the audience experiences a musician. But why is it so important to think about this as an experience and why do some acts go through so much trouble to make it so?

This is where the discussion shifts from the very pleasant and entertaining to the very materialistic.

While it has been fun to present these colorful examples, I invite the reader to strip down the rock’n’roll charm and have a look behind the curtain with me. Let us recall the canvas that I drew in the beginning and also recall the fact that those huge sales from CD albums of top artists are no longer there. At the same time, while I have been talking a lot about unprecedented access to music and free content, the pricing mechanisms for all online channels have yet to be properly determined.

For the sake of argument continuity, I would invite the curious reader to refer to the Appendix for a detailed breakdown of the pricing structures of recorded music. The main idea is that at this point in time, unless you are at the very, very top of the Long Tail (i.e. Lady Gaga), there is very little money to be made from actually selling music, especially through digital channels. Unbundling albums through services like iTunes and Amazon and allowing the listener to cherry pick the tracks that he wants instead of forcing him to pay for an entire album has proved challenging for the profits that record labels and artists alike can deduct. Streaming services like YouTube pay close to nothing and proper, viable pricing models for hybrid cloud services like Spotify and GrooveShark are yet to be developed40. Jan Due was very brief to summarize the landscape for me when I asked him how the industry had changed: “Well it has changed in the way that the record companies don't have any money”.

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At the moment of writing, the world of cloud music services looks more or less like the Wild West, both in the US and in Europe. The most notorious deals that are currently under discussion are those involving Google, Amazon and Spotify for the US market, all of whom are negotiating new copyright and pricing mechanisms with the four major record companies. There is much to this discussion, but the author believes it is safe to say that it will take some time before any real progress is made, especially on an international scale.

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So take out the money from CD sales, and what is one left with? Touring and merchandizing. While these used to be revenue streams that a record company would typically have little to do with, they have become increasingly important, which is certified by the new “360 degree” type of contracts that are increasingly frequent (Knopper, 2009). While their terms can differ greatly from one artist to the next, the bottom line is that from the point of view of a label, they basically involve a percentage of “the whole cake” that is an artist’s activity, whether that is ticket sales, digital download sales, merchandising sales, advertising contracts, music licensing revenues etcetera41. And if music doesn’t sell very well, then something else needs to.

If you remember, I chose to introduce 30 Seconds To Mars by using touring numbers from Songkick.com and calling them “one of the busiest, most professional acts in the entertainment industry”. This was not by accident, nor because of being in awe42. In the same article, Songkick identified a connection between some of the people with the most frequent concerts and the acts that are very active on social media (Van Buskirk, Evolver.fm, 2011; Songkick, 2011). While the connection is not scientifically determined, if you look at it from a user’s standpoint, it makes a lot of sense.

First of all, for logistical reasons alone, only a fraction of the audience will get to go to a concert – and most of those would be fans that are more than just averagely interested in the act. So there’s definitely a reason to make that artist-fan connection stronger. Secondly, in order to be aware of whether or not a band is touring somewhere near you, one needs to be plugged into an information stream that provides that kind of data on a regular basis. And while billboards work for Bon Jovi, there are more efficient ways to do it if you have a strong, but highly distributed fan base. Is it an accident that so much of the information put out by the official Mars aliases is about added tour dates and tickets43? Is it an accident that so many of the pictures are from the most recent shows?

Well, the three of them actually are on tour, but the point is that they want you to join them. And hopefully not just once.

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Again, I would invite the reader to refer to the appendix for a better picture of the difference in between the old and the new recording contracts.

42 Yes, some of it does have to do with reputation and the opinions of other professional musicians that I have spoken to.

43 One of the aliases is in fact called @marsgoldentix, which refers to a particular kind of considerably more expensive tickets that involve different levels of access to the show. These can include a meet and greet with the band and access on stage for the now traditional (a.k.a. highly successful) singing of Kings and Queens.

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On the other hand, if we look at merchandizing, some of the same mechanisms apply. T-shirts, jackets and arm bracelets only appeal to a fraction of a fraction of an audience, and those will most likely be dedicated fans, no matter how creative one gets with the apparel. Top that with the fact that clothing and appearance, in a user’s mind, is also frequently connected to a way of expression and influenced by the communities that one associates itself with, and the reasons for building a strong artist-audience relationship and supporting a “fan-army” become even more evident.

If we are to then reflect back on my very “personal” experience of having “talked” to Matchbox 20 and Mars on Twitter, perhaps the reader can now understand why I have yet to start jumping up and down over it. While it might be fun to imagine that Mr. Paul Douchette and Mr. Tomo Milicevic were happy to provide encouragement for a beginner guitarist and, respectively, discuss the sex-appeal of Fender guitars, upon closer inspection, they were, most likely just doing their jobs and very professionally… tweeting. For all of the above mentioned reasons.

But this can go one step further. Alternative rock band My Chemical Romance, typically wrap their albums in an entire world of content that almost invites audience members to immerse themselves in the world that the record is picturing. Their very successful 2006 album The Black Parade is a rock opera that the band supported with a highly elaborate military, if somewhat morbid, attire and an all-dark, almost grotesque style that was a recurrent theme throughout the entire experience that they provided audiences with at the time: the website, the fan competitions, the videos, the tour performances etc. “It felt like a prison, it felt very uncomfortable, but that was the idea” recalls a 44

Can you spot me in the audience?

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now bright-red-haired lead singer Gerard Way for an interview published by Warner Music in November 2010 (Warner, 2010). Their recently released album Danger Days: The True Lives of the Fabulous Killjoys continues their tradition of thematic records, all be it shifting direction into a much more rebellious, yet colorful, joyful universe – an imagined 2019 California that features characters with comic book names like Party Poison, Kobra Kid and Dr. Death. While not being a rock opera itself, the album is high on concept, courtesy of the vocalist’s long time background in visual arts and drawing comic books45.

But while thematic albums and musicians with art school training are nothing new, what is new is how this can translate into the fan-experience. Especially the merchandising part of it. Danger Days was available for preorder before its launch in November 2010 in a special box set that included a whole range of collectible items: a “ray gun”, a colorful carnival-like “Killjoy” mask — imitating those worn by the band members in the video for the first single, Na Na Na —, a “Bad Luck Beads” wooden bracelet, a 48 page photo booklet entitled “Art is the weapon”, an EP with three exclusive tracks, all packaged in a thematic box featuring the logo of Blind Industries, the corporation that is one of the “characters” on the album. Oh, and also the actual album on a CD.

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Mr. Way was actually awarded The Will Eisner Comic Industry Award for the series The Umbrella Academy which he co-authored in 2008 (Comic-Con, 2004-2011)

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My Chemical Romance is obviously not just about the music – it’s an entire package, much like the box above. The MCRmy, or “The Killjoys” as they are commonly referred to on the internet, have a dedicated section of the band’s website to themselves, receive missions through viral videos featuring impersonations of the album characters and proudly carry the symbols of their community both in the real and the virtual world by wearing thematic clothing and using user names that evoke Battery City. While not quite as participatory as 30 Seconds To Mars when it comes to the creative aspect of their work, the band also makes sure to include a fair share of community contributions to their ensemble. One good example is the video for a re-released version of the track Sing, meant to support the efforts of the Red Cross in the aftermath of the Japan earthquake. The video included

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thematic short clips and pictures sent by the fan community to inspire the fight for recovery46 and now accounts for almost half a million views on YouTube alone.

But as a result of all that effort, are the fans actually buying into the California 2019 world? They most certainly are. One post from March 23rd by the official My Chemical Romance Twitter alias (@MCROfficial) contained nothing but the link to a picture of two jackets – which to some might seem like the most pointless thing in the world, probably close to the shoelaces joke. But upon closer inspection, this turned out to actually be a signal to the community that branded jackets like the ones wore by Kobra Kid, Party Poison and the other characters impersonated by the four band members will soon be available on sale47. This is in reality viral promotion at its best and it most certainly translates in a consistent revenue stream for the band.

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The video can be found here: http://www.youtube.com/watch?v=B-CpQ_fJeK4&feature=player_embedded In all honesty, the author is half giggling herself while writing about this example. But this is no laughing matter. It is actually how people do business nowadays. Stop giggling!

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Giggling aside, if we were to map out the new “Community artist� business model on the canvas , in my opinion, it would look like this.

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While there are hidden complexities to the business model above, this simplification encompasses the provocation that free content is posing to an artist and the reliance on touring and merchandising revenue48. It is important to note that this sketch does not mention an artist’s affiliation to a record company and defines the revenue streams for a singular artist, regardless of how he might fit into an artist rooster. Looking at it in this way, it almost seems as if acts like 30 Seconds To Mars and My Chemical Romance are more in the business of supporting a music community rather than simply playing music, which, in turn, needs to translate into a different approach to interacting with their audience.

In an extensive interview for Digg.com from 2009 (Rose, Digg, 2009), main producer, singer, songwriter, and instrumentalist of industrial rock band Nine Inch Nails, Trent Reznor, talked precisely about how the online environment opens up new possibilities for communities to support artists.

Nine Inch Nails, which has been operating independently of any major record company since 2007, is a notorious example of a community powered artist, and one who has not shied away from giving its music away for free over the years. In this case, the group of loyal fans is less of a chatty Twitter village and more of a creative society centered around nin.com and YouTube, where different fan

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If one refers to the Appendix, then one care easily see that revenue streams can be very diverse and include licensing, advertising contracts etcetera, which in turn could also be address towards the community members. But my attempt is to illustrate the backbone of the business model of an artist who is supported/supporting a community, regardless of the variations.

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remix and fan video projects have unfolded in the past years at the initiation and support of Mr. Reznor himself.

“Our business model, as I see it, is not so much selling physical and digital goods anymore. Since we’ve been independent and off record labels, everything is now in one pot – so records, concert tickets, merchandise, publishing, licensing, all of that now becomes the brand of Nine Inch Nails. (…)

So everything can now support each other a little better.”, he began describing their current business model. “I can give you free music and in my opinion that may contribute to more people showing up to a show” he continues and then adds: “When I say I give you free music, it's not really up to me to give you free music, it's free anyway, for anybody that wants to admit it, pretty much every piece of music you want is free on the internet anyway. So we try to mass good will and give you what you want and bring you to the – I hate to talk in these terms – the brand of Nine Inch Nails.

And then it might get monetized in a concert ticket, a t-shirt purchase, a deluxe physical product of some sort.” In other words, this is the new philosophy: when music is widely available for free for the wide audience, the money comes from the loyal fan base who support it by making other types of purchases.

But as Mr. Reznor would also acknowledge, this is not a definitive status quo: “We're in between business models [right now]. The old record labels are dead. The new thing hasn't really come out yet.” Indeed, Wikstrom (2010, p. 1-2, p. 163-164) talks about the act as being a rather fortunate exception and points out that while the core of the Ghost I-IV project49 is “Reznor’s relationship with his fans”, the act has been an established international brand for a very long time, even much prior to its independent career. The problem that I would like to point out here is that while this model is interesting because it calls for a tighter connection with the audience – in whatever shape, form and level of authenticity that may come – it is a model that downscales very poorly. While there may be something unnatural in the picture of having to buy a t-shirt to support an artist, things become even more denaturized as we move further down the Long Tail.

The reader might have noticed by now that I have made use of case studies that are popular to a great extent, namely international artists that have enjoyed a great deal of success on the international music scene and for which any quick Google search will generate millions of results.

The reason why I have chosen these examples to illustrate the transformations in the artist-audience relationship is precisely because in order to study a business model that involves a community, one needs to have a substantial community to begin with. But if one remembers the Bad Romance example from the opening of this thesis, there was also something about the author making a cover 49

Ghost I-IV was their seventh studio album and the first that was released on Trent Reznor’s own record label, The Null Corporation, and for which nin.com was the official channel. The project included two phases, the first one being the actual launch of the record, the second one being an invitation for the listeners to upload remixes of the tracks and their visual interpretations of the songs in the form of YouTube videos (Wikstrom, 2010, p. 1-2).

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of the cover of the track herself. While I am by no means a real musician, one of the characteristics of the web 2.0 culture is that it encourages user generated content coming from pretty much anyone with an internet connection, real musician or not. At the same time, anybody willing to spend a few hundred dollars on a guitar, an amp and a microphone can now learn how to use them and do a mix in GarageBand given the tons of information now available online. Lawrence Lessig, in his book Remix from 2008 (Lessig, 2008) calls this a read-write culture and argues that the audience is coming back to the times when, recorded music being non-existent, the line between professionals and amateurs was very blurry50. These factors together contribute to a rise in the number of potential musicians out there that are willing to create, publish and find an audience for their work, as Anderson explains in detail in The Long Tail51 (Anderson, 2009). This is even more relevant, he underlines, as the hit culture is crumbling and listeners are more and more interested in niche acts that will satisfy their particular tastes. While there is some criticism to The Long Tail theory in terms of its actual profitability and the behavior of the population in the non-dominant part of the distribution (discussed by Hollensen, 2010), for the object of this thesis perhaps it is only important to acknowledge that it is increasingly important to consider smaller music producers that only appeal to a small audience at a given time – whether they are amateurs, beginners or simply very niche oriented.

In order to do that, I would like to introduce you to the last example: emerging electronic band Bubbaloney. Consisting of Danish duo Søren Oliver Due and Daniel Toudal Johansen, this young new act has just recently released two albums, MachineHead Part 1 and MachineHead Part 2 with independent Australian record label FiXT and is the proud holder of a single that ranked 3rd on the Danish iTunes Electronic chart. During a sunny March afternoon, Søren was kind enough to spend time with me talking in detail about his project and to introduce me to his work.

"I think I probably have in between 10,000 and 15,000 people from all around the world that have heard my music. I even have people using my songs in their YouTube videos”, he says and begins to tell me the story of his short, but surprisingly intense music career, unveiling in a world where “everything happens online”. The name Bubbaloney can be easily found on Facebook where his page has 473 fans, MySpace and most notably ReverbNation where it counts 915 connections. "I'm working with different people from all around the world and I'm also having listeners from all around the world" he tells me. Indeed, his promotion, his record deal, his fans, his music contacts, his remixing partners are all centered around the online communities of better known independent electronic artists, communities which are spread throughout the world, from the UK to the US and Australia.

Only 15, Søren is more of a professional musician than one would expect: experimenting with remixing from the age of 6, playing drums from the age of 7 and piano from 9, he now spends most of his time studying and working on music. “There's a lot of pressure because I'm using a lot of time 50

The explanation is simple, namely that before the gramophone, if one wanted to listen to a song, he would have to sing it himself or be around somebody who knew how to sing it. It seems incredible nowadays, but that was indeed the case. Lessig is one of the ones to talk about the fact that recorded music has made this necessity obsolete, which has in turn led to less people generally singing and performing music and more focusing on simply listening to it, which he calls the read-only culture. He argues that the tools being again very accessible for generating digital artistic content, we are in a sense coming back to the read-write culture.

51 For that to work in any way though, the author suggests that one should perhaps look into the guitar, the amp, the microphone and the tons of information a little earlier than the age of 23. Just a thought.

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on it. I've calculated it to six to eight hours every single day (…), so I feel it's like a job more that a hobby because it's what I like and it's what I do all the time and it's all I think about.” Needless to say he is going for a music career full speed ahead and, for that, he is listing the need to build a listener base as one of his top priorities. On a smaller scale, he does his part to be active on the various social networks, work on “the user experience” of Bubbaloney and also ask for fan feedback whenever it makes sense to do so. "Every time I make a new song I put up a short preview of it, one or two minutes of it on MySpace, ReverbNation or SoundCloud so that people can listen to it", he explains and says that the listeners’ input is the main reason for doing this. I tell him about participatory innovation and draw him a picture illustrating designers who, in my metaphoric words “need to come down from their ivory tower and speak to some of their users” and he points at my drawing of the users and says: “That is the main thing you have to worry about. It's not the musicians that are your fans, but the normal listeners that don't know [anything] about playing a chord”. “These are the really important people and these are the ones that we get our money from”, he adds. Most certainly.

So how does he get his money from his carefully built community of online fans? Well, his high charting iTunes single has so far made him an astounding… 150 dollars52. The number of hours that he spends on a track can easily reach 100, and that’s only for the songs that him and his band mate choose to pursue until completion – the hundreds of rejects that will lead to those few valuable tracks account for too many hours to count. “We think that we've been really nice because at Christmas we gave away four songs for free. It's also because we know there is not a lot of money in this anyway – in the downloads. The only way to make money is by playing live, selling t-shirts, selling merchandise. That is the way you earn money in this industry, this business… and I think you already know that. ", he tells me smiling wearily. His wrap up of the revenue stream conversation is very to the point. Bubbaloney is doing all the right things from the stand point of a community powered musician and his fans are happy and engaged. But he can’t sell t-shirts. He can’t sell Killjoy masks. He can’t sell $300 artist signed Ultra Deluxe Limited Edition Packages53. And he has yet to sell out Wembley Arena. Community pays, but it doesn’t really pay.

My point is that if we are to accept that there is more opportunity and demand for smaller, niche artists then perhaps it is important to better understand the ways in which those artists could be supported in the future. Today, that is a losing battle of long unpaid working hours. The intriguing thing is that in a way that is also true for some of the more established professional artists who are no longer being repaid for making music, but for cultivating a brand, or supporting a community, which is in fact the overtime they have to do on top of the actual music making. From a listeners’ standpoint, there are also many things that have yet to make sense in the new arithmetic – and one of them is perhaps the realistic use of a Killjoy mask. While the teenage fan might think of carnivals and robberies as the obvious answers, what of all the other types of listeners who are perhaps less tempted to engage in any of the two?54 As for the live experience, it is unrealistic to put all artists 52

This is in fact very in tune with Mr. Trent Reznor’s blunt answer to an upcoming musicians’ question “Can you make money and live off iTunes?”. The answer was “Not that I’ve seen, personally. No.” (Rose, Digg, 2009) 53 This was the highest priced item that one could get in Nine Inch Nails’ campaign for Ghost I-IV, which included downloads, CDs, DVDs and glossy booklets, all autographed by Mr. Reznor (Wikstrom, 2010, p. 2).

54 I am being purposefully ironic, but that is part of the point: there is no use for most merchandising outside of a specific audience and it is wrong to assume that all music acts ranging from techno, to jazz, to opera and everything in between can incorporate this element into their “brand”.

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into the same pot of great live performers with energetic audiences willing to travel for them and book their personal schedules around a concert55. I will, as part of my conclusions, further discuss these issues and present a different way to think about them that can hopefully be used to assess the implications of different business models.

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Consider the example of my father, a comfortable man in his 50s and a hypothetical Jean Michel Jarre concert for which he would have to take two days off from work and go through the hassle of a five and a half hour drive to the capital.

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Throughout this thesis, I have outlined the way the relationship between an artist and his audience has changed in the past decade and have positioned it in the context of the new participatory technologies offered by the internet. I have also considered the degree of authenticity in this transforming relationship and have considered the business implications of it. While the investigation and understanding of this transformation is a contribution in itself, I would like to take the discussion one step further and try to map out this relationship, as I have come to understand it.

There is one thing that I would like to attract the reader’s attention to, as far as the writing of this thesis is concerned: my very extensive utilization of footnotes and the many occurrences of phrases such as “as we will later see” and “we will get back to that”. While they are to some degree a matter of style, they also say something about the very content that I am presenting and the essence of my theme. Perhaps the reader can see by now that with all my efforts to structure the content in a linear way as is required by an argumentation, the music industry, its history and evolution are intricate and there are many forces that need to be taken into consideration when one attempts to understand a business model or a product. The main reason for this is that everything is very tightly interconnected. In Sir Ken Robinson’s words “Life is not linear. It’s organic.” (TED Talks, 2007) and linearity is indeed a obstacle when dealing with complex problems, as is the case here.

Going back to my method, I’d like to reflect on this further. Throughout the process of writing this thesis, one of the major challenges was to structure the data, the actors and the relationships between them, as well as to edit the content and select the most relevant issues in the artistaudience relationship. I first took this as an inability to summarize, or perhaps a lack of organization on my part. Given my previous background in software engineering, which is by definition a discipline that deals with the structuring and mapping of the natural world into abstract, orderly, programmable entities, I found this very frustrating – to say the least. But I later realized it was in fact something else. When going through my notes for some months, I was astounded by how many times I would lay out web-like diagrams to illustrate the relationships between the artists, the listeners, the community members, the music services, the music, the internet, the live events and all the things that make the music scene. In the heavily connected digital world of music today, one cannot map out linear connections without running into inconsistencies and variations. For example, when one talks about the revenue streams of an artist, they can not do so without instantly mentioning the word audience and their relationship with the music. When trying to understand how a viral video from a concert accounts for tens of thousands of views on YouTube, one cannot isolate it from its author – a member of the audience –, from the people who generate the views and from the artist in the video, who’s audience made it viral to begin with. While I have been more 47

concerned with the audience, the artist and the relationship between these two, the reader has probably noticed how much attention I have paid to music acquisition and distribution. Starting with the iTunes buying experience and going through the Napster example, I have spent a considerable amount of time talking about these channels and how they differ from the CD. The reason is this: while trying to map out the connection and points of contact between a musician and his fan base, music was always something that didn’t quite easily fit into the picture among concerts, meet-andgreets, twitter conversations, blogs etcetera. The reason is that while music is indeed a means of communication, it is primarily and art form and not a channel per se. It also occurred to me that while I was immersed in studying fan communities that know much about their favorite artists, there are listeners out there, and in fact very many, who only relate to the music alone and the message that it conveys and do not necessarily spend time researching anything about the artist who plays it.

That is when I realized that music is in fact a standalone entity that one can understand, love, sing and want to buy independently of who produced it.

That being said, I have come to think of the relationship in the form of a triangle:

Regardless of the technological advances, the hierarchy in the industry or the more or less profitable business models that it employs, the only three elements that remain constant are the artist, the audience and the music. And they are interconnected at all times.

The parallel that I wish to make in order to explain this triad is with the time-cost-scope triangle used in project management (Project Management Institute, 2009)56 which one can see illustrated below in two of its most common graphic representations.

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While I have used this resource to reference the diagram, I do not believe that its origins necessarily trace back to the Project Management Institute. This is a very commonly used framework that one can probably find in more or less any software project management book, with some variations, such as “Features� instead of

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This is basically a paradigm that one can use to think about a project and its most important elements in terms of successfully bringing it to completion. The relationship is simple, but essential: the more you want to add to the scope of a project, say the number of features that you want implement, the more time it will take to do it and the more resources one will have to put in it, say developers and quality assurance engineers one will have to allocate for the implementation. The point is that the three increase and decrease in size proportionally of each other and cannot be separated i.e. one cannot hope to complete the same amount of work if his resources or schedule is suddenly cut down. In order to deliver a project on time, on budget and competed in its entirety (which contrary to common belief happens a lot less often than one may think), a project manager would have to permanently consider these three elements and adjust them in order to fit together in an equilateral triangle. What I would like to underline is the fact that, while this is a useful way to think about a project, it is not a recipe for success or a magic potion that, after mixing, will crystallize into a solution for all the troubles of the team. But it can increase one’s chances of understanding those troubles and thinking about the project in manner that is relevant for its hypothetical completion.

This is similar to the way I have come to think about the artist-music-audience relationship too, in terms of the deterministic connection that exists between these three elements and also, at times, even their proportional “size”. An artist plays music for an audience. A piece of music needs a producer and a recipient to be an appreciated artifact. An audience, in turn, relates to the music, but also to the artist creating the music, because the music is a form of expression for the artist and because they can directly relate to the artist’s persona. You cannot have one without any of the other two In terms of how the three elements proportionally link to each other, the connection is rather straight forward, same as in the case of the time-cost-scope triangle. The more an artist grows more popular or more successful, the more its audience grows too – in fact the “size” of these two elements determines each other. At the same time, the more popular an artist is and the bigger the fan base, the more popular the music is, so the “size” of the music is also proportionally dependant on the dimensions of the other two. Perhaps that for an illustration of this proportional connection it is easier for the less experienced reader to visualize the triad with the three elements placed on the sides of the triangle, like in the picture below: “Scope” and perhaps added dimensions of Quality, Risk etc as is the case in the Microsoft Solutions Framework, for example.

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In order to formulate the conclusion of this thesis, I would like to invite the reader to visualize the transformations previously discussed through the use of the triangle and provoke some thought on how these could be illustrate. Firstly, if we are to think of the old record label business model, which relied on selling CDs and carefully controlled communication channels with the audience, then the triangle would be characterized by a strong connection on the two sides involving the music, respectively in between the artist and the music and the music and the listeners.

The communication between the old type of recording artist and his audience, though, would be significantly less than it is today. The other two relationships would be strong, and in terms of the revenue streams, they would also be the ones where the most significant portion of the money would come from. The audience would pay for music on a regular basis and the artist would be supported by the music revenues, whether directly from the CD sales or indirectly by the record company that would support him as a result of high album sales.

By contrast, the new community powered artist would be primarily interested in creating a strong relationship with his audience, which would also be the main source of its income — that is if we are

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to consider live performances more like events shared between musicians and the public and less of a place to simply listen to the music57.

In the new arithmetic however, while the audience is tightly connected to the music – if we are to think of the vast choice and easy access that is characteristic of the new online environment –, the artist is paradoxically enough the one partially cut out from the equation, since he is not directly profiting from his recorded music, but at the same time the one who puts the most time, effort, love and energy into it. Though he receives the audience growth and appreciation for it, this does not pay his bills. He then has to make a living in some other way, respectively by directing his “services” on the other side of the triangle, hence profiting from the audience connection more than the music connection. The merchandising is a way to do this. But is this not putting a strain on that connection? Can the audience feel “monetized upon”? In some respect, if one has in mind strictly the financial aspect of the triangle, then the audience-music side should also be illustrated as dotted, since there is no massive money flow to speak of from the audience to the music. This variation is in fact interesting, because it shows how the relationships can be understood differently depending on the “unit of measure” that is applied – whether it is money or something else.

Perhaps the most important thing to notice when looking at these two mappings of the old and the new business model is the shift from more of a music centered ecosystem to more of a community centered one. In this respect, one could even say that the artist-audience relationship is shifting from being more artifact focused towards being more human focused. But regardless of how one wishes to draw the sides of the triangle – and perhaps this is a direction for further research in using this visual mapping – the essence of is that these there elements go together and are inseparable, perhaps now more than ever in the highly connected online environment.

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The reason why I make this distinction is firstly because when I refer to music in the triangle, it is a reference to recorded music and secondly because the main “feature” of a live performance, if one can call it that, is the fact that the artist is actually present in the room to interpret the songs live.

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The triangle mapping is of course, my own, and somewhat experimental. Looking at the artistaudience relationship with this proportional mapping in mind, and tracing back the main transformations that I have talked about throughout this thesis, there are several things that I would like to point to in the conclusion.

The first thing that strikes out is the simple fact that it is today possible for a non-hit artists to have a relationship with a global audience. That in itself is rather extraordinary and would have been practically impossible over ten years ago. While there are problems when it comes to supporting a fan base that is located allover the world, it is still no short of remarkable to have listeners spread across three different continents, as was the case with Bubbaloney, for example. Provided that the artist moves forward in his career and puts time into expanding that initially small fan base, then community power can definitely pay off on the long run, as most of the examples that I have looked at demonstrate. The challenging point that I would like to bring up though, is precisely the distribution of the audience versus the way that the merchandising business model is proposing one should monetize upon it. While the internet is freeing us of physical constraints, the t-shirt selling business is in a way trying to enforce them back in: if you have instantly reached a fan from a different continent with your music, why try to sell him a piece of merchandise that will be anything but instant to deliver? It is in a way the problem that I described in the introduction with the CD delivery options – while I had been “reached” by the song already, its actual purchase would have had to be delayed by a few days because of the physical constraints of actually having to take a boxed CD, package it, put it in the mail and then pick it up. Is there no way to monetize on this relationship using the same principles that have created it in the first place, namely the quality of being instantaneous and geographically unbound? On the same argumentation line, music has become a truly global phenomenon, but it is still bound by regional restrictions in copyright, which in turn cripples the audience reach. As the many frustrated comments on www.thirtysecondstomars.com at the release of any new videos will testify, this can provide a very irritating user experience to listeners that are frequently not given a licensed alternative to enjoy their preferred artists. Perhaps simply trying to cater to that immense unmet demand might be a good place to begin fixing what is broken.

This is in fact one of the reasons why I have previously stated that, in my opinion, more than enough has been written and talked about in terms of the effect of pirated music on sales. While this may be too awkward a statement for an academic thesis, to my mind, the litigations, the finger pointing and the many articles on how it all happened and why, are kind of like talking about condoms after you’ve already had the baby. Free content has already happened. It is already here and regardless of how big of a Pandora’s box it is, it is impossible to close. While it has brought many problems, it has also brought the opportunity for anybody, regardless of where he is in the world, to download tracks of anybody else, regardless of where he is in the world. Metallica may have hated Napster, but if it hadn’t been for the file-sharing heaven it initiated, they would have never sold out a concert in Bucharest, Romania (my home country), where for the most of the past decade, the legal options for purchasing songs have been notoriously… non-existent. In the same line of reasoning, and this is something that I point to in the very beginning when talking about Bad Romance, if we are to 52

consider the Long Tail, then is there not a long tail of countries too? Sure, Denmark is just 5.5 million people and Romania is 22 million, which compared to the US is insignificant, but selling a small number of units of a large number of things should be just as profitable as focusing on, say, the US alone which is at the top of the tail. More importantly though, what can we learn from the file sharing networks that the industry is so eager to blame for its demise? On one hand, the sense of anonymity that the Mr. Jared Leto was talking about has more to it that just hiding a face. It is also about judging a song purely through itself, without it being attached to a personality, a product, a brand, a physical CD that somebody has paid money for. Are you not influenced when judging the value of something when you have already paid money for it already? Maybe you were expecting more and feel disappointed for having paid $15 and then might be influenced in how you perceive the music. Maybe, on the other hand, you like the photograph of the guitarist on the CD cover and are more inclined to think that he is better at playing guitar. Getting an .mp3 file that has nothing else associated to it might then lead you to search for the artist’s website or his tour dates, but if that is the case, then you will have done that because of the music and the music alone.

I mentioned that an artist grows together with the audience and the music, proportionally. But what makes an artist grow these days? Well, piracy and free content for one, as was the case with 30 Seconds To Mars. And then “digital word of mouth” as we have seen happen with their video with the lead singer playing the bass guitar on stage in Mexico. The problem with this is that neither are direct revenue generators, which as we have seen, force artists to find other ways to support their craft which are primarily set on the artist-audience relationship side of the triangle. Mr. Jared Leto58 can fortunately sell millions of concert tickets and he can also sign a contract, probably involving a six or seven digit number, to be the face of Hugo Boss – which he recently has –, but Søren Due of Bubbaloney can do neither. But there’s a problem with monetizing mainly on this relationship in both cases: can it add a strain on it to the point that it is no longer accepted by the fans? What happens when the merchandising, the advertising, the clothing lines actually start damaging the relationship? While this is not the case with the examples that I have discussed, I have on the other hand seen fans complain about obvious product placements in Lady Gaga, Avril Lavigne and Britney Spears videos. What is too much? Where is the line between selling a t-shirt that a fan will proudly wear as a symbol of belonging to a community and trying to push an entire clothing line into a community that is otherwise just there because of the music? There are also bigger implications of this when it comes to stars that are more tightly managed by the record companies. Is it an accident that Lady Gaga, one of the biggest names in the industry today, who appeared in the limelight long after any of the rock bands I mentioned, has from the very beginning been singling out her fans by calling them “Little Monsters”? R’n’B star Rihanna, a typical example of a manufactured pop icon with a predetermined life cycle, whose songs are written and produced by an entire team of people behind the scenes, apparently also has a “fan army” of her own. Is this not turning away from a bottom-up naturally emerging community to a top-down marketing enforced one that is meant to lead to buying, buying and more buying? Sure, there’s marketing in what 30 Seconds To Mars do, 58

To be perfectly honest, he’s actually a very complicated example. But for simplicity, and the sake of the argument, we should just focus on this part of it. Some research showed that he has way too many projects that he is involved in, including his own film production company which primarily deals with the short films that 30 Seconds To Mars is famous for and that he directs himself, though only recently admittedly so, but also with other series… and he also does the “occasional” film by Oliver Stone/David Fincher/Darren Aronofsky/<insert your favorite big movie director here>. Which is probably why he often jokes in interviews about being a little high on sleeplessness and “not having a life”. Oh well.

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but given the decade-long life of their community, it cannot be solely based on that. And if anything, it is primarily meant to bring you to a concert, which is more of an experience than a product.

But regardless of how naturally emerging or how profit driven these communities are, it is obvious that what I have previously called “the user experience of an artist” is becoming increasingly important and complex in the online environment. While before, an artist could just smile nicely for the cover of a magazine and attract a fan base, the exposure that the internet has brought also implies a much more revealing, but also richer way to transmit your message. Whether it goes as far as creating virtual worlds as is the case of My Chemical Romance, or it is just on the level of frequent “tweet-fests”59, it is more and more evident that one has to do more than just be a good musician to engage an audience. However, this raises a very interesting question, one that Jan Due pointed out for me, respectively “what happens if you’re not good at tweeting?60” And should you spend precious music time on it in the first place? If you take after Matchbox 20, then yes, you should. But is there no space for people who are simply great musicians with no inclinations for PR? Are we not getting into the branding discussion again? Surely, one can employ a PR person to do all this for him, and I am sure that many acts in fact do that, but what then of the personal relationship that we were talking about? Can it be that, as Scott Berkun is keen to observe, it is only because of the novelty of social networks such as Twitter that we are able to create these connections (Berkun, 2010)? Social networks are surely popular, but they have yet to be used by absolutely everybody. When that happens, communication will need intermediaries and management just like anything else. This is already happening – twitter feeds counting more than a few thousand connections are impossible to read in their entirety by one person alone. What of the ones that count hundreds of thousands or even millions? In this respect, one cannot but wonder whether or not the relationship is prone to become just as distorted as it was back in the old days, whether we are referring to the communication of an artistic message such as California 2019 or the reception of feedback.

But here is where the problem of authenticity arises with the personal connection that I was talking about earlier: is it still personal if it’s your job to tweet? Looking back on my brief twitter conversations, they are not disappointing per se, but they are questionable in terms of the real rapport that is established. These are not stories I would necessarily mention to my friends, unless they specifically ask. But a story that I have found myself telling with great pleasure was the time when Mr. Tomo Milicevic of 30 Seconds To Mars, half way through their Copenhagen concert last year (Thirty Seconds To Mars, 2010) had a mishap when starting to play The Kill on a very beautiful and very… out of tune black Gibson Les Paul Custom guitar. He looked straight at me and the people around me in the crowd and reacted with the funniest “Hold on a second!” face that got us all laughing under the harsh looks of his two band mates. I don’t know what he must have said to his guitar tech after the concert, but to my mind, that created a real connection. I was there, he was there, everyone else was there and we all knew what everybody else was doing and why. The problem with communication online is that it is in most cases asynchronous. You put messages in the cloud and then hope that someone will read them. You might have had your comment read, but 59

This is a fun term that I have seen used by fans for naming the times when artists would do short Q&A sessions in real time, obviously by just picking a comment or a question from their feed and shortly answering, which is a bit of a different way to do things than politely having to answer to an MTV moderator who asks you selected questions that have been filtered and re-filtered before getting to you. On a side note, that’s how one ends up with many examples one cannot quote.

60 By this he was referring to generally communicating through social media.

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you may never know, you might get a reply, you might not, but you hardly ever have the same feedback and understanding of a situation as you have by being in the same room at the same time with somebody. Can you really be as funny as that on a 140 character long twitter feed? And if you are, is it because you are spontaneously funny, or is it because you are trying to be?

But asynchronous as it may be, every day is a good day for feedback in the online artist-audience relationship. While it might have been hard in the old days to know what your listeners fancy and what they could live without, today there is almost no excuse for not knowing. Imagine Metallica, ten years ago, coming out on Twitter and asking “Which ones of you are using Napster?”. One can only speculate, but they might have received responses that would have turned them around from going to pursue their fans in court. Speculations aside, the great thing about having your fan community one comment away is that when in doubt, one is free to ask and when not asking, one can simply add up the trends and requests that users constantly make. And this is perhaps one of the most valuable elements of this new, tight online relationship, one that Mars for instance are using frequently to determine new places where there is a demand for a live concert. Efficient. But I have yet to see an artist that gathers real user feedback online, much in the same way one can do for a prototype in user centered design. Music tracks and live performances are products like anything else and receiving input on them is just as important. There is an interesting discussion here however, because while the practice of putting a song on SoundCloud and asking for suggestions is already used by many, as in the example of Bubbaloney, some might argue that for some artists music composition is too much of a personal experience to let it be influenced by outside opinions, and this is a valid point. But concerts for instance are a completely different matter61. What is important to mention, and this is an aspect that has struck me very often during my time spent researching online fan communities, is that mass comments from people who are in love with a band no matter what are in fact hardly useful. As Søren Due of Bubbaloney told me, there is much more to be learned from a bad comment than one that says “This is amazing! I love it!”. Sure, it is good to see that people are responding positively to your work, but similar to what happens in product design, a simple thumbs up gives you nothing in terms of further development of a prototype. But because of the fandom noise that music communities imply, in order to actually get constructive feedback, perhaps one needs to find ways to indentify and cultivate a relationship with the users that are able to better formulate that input. Having an active group of fans surely helps when wanting to beat the twitter trends, but it also brings enormous clutter to the picture. For example: all the acts that I have mentioned have great live shows, generally. But they also have less than great live shows. Rooms can have bad acoustics, audiences can be difficult, sound engineers can be lazy, song lists can be inappropriate for what the public was expecting, etcetera. I have not yet seen one band specifically ask for feedback from a concert – how did it look and feel from the point of view of the people in the audience? Is there not a poll of knowledge that can be used that is not being tapped into? Sure, most people will tell you it was great, but then you might have the occasional music fan who also knows something about acoustics and will tell you that maybe you 61

In one of the interviews that I had with Mikael Vestergaard, lead guitarist of cover band Stella Nova, a case study that has unfortunately not made it in my current line of argumentation, he was more than interested to hear my input on how the sound mix on one of their concerts was in fact unflattering to the base line of the songs. This is a small example, but one that is actually very illustrative, since, as he himself admitted, artists in fact don’t get a lot of constructive feedback from their audiences in that respect and what happens on stage and what happens in the audience during a performance are in fact two different realities. But that is yet another great story never told.

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should drop the synthesizer on that first song because it made you sound like a five year old kid.

How many concerts can you go without knowing that? Probably many.

Lastly, I would like to attract the reader’s attention upon a parallel that frames the problem in a far bigger area: that of the business models used by today’s popular social networks themselves. Some of the biggest names in the industry (Facebook, Twitter) have only recently started turning a profit.

The million dollar unanswered question of how online communities can actually generate revenue is still on the table. And this is precisely one of the questions that we have been dealing with on a more particular scale.

What music communities are generating though, is a special breed of participation that is centered around art and creativity – which can materialize in the form of anything from a user made video to finding an online partner to start a band. And although the digital age has proved difficult for the business of making music, as 30 Seconds To Mars would put it, “creativity is alive and well” (ABC News, 2010). But since putting dollar signs on the artist-music-audience triangle is still complicated, the challenge is to actually keep it alive. And, like the song says, batteries are not included.

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This section uses numbers and explanations that have been mainly summarized from Connolly and Krueger’s Rockonomics: The Economics of Popular Music (2006), Patrik Wikstrom’s The Music Industry (2010) and Steve Knopper’s Appetite For Self-Destruction: The Spectacular Crash of the Record Industry in the Digital Age as well as a few other relevant internet resources, quoted appropriately.

Why is the CD such a profitable artifact?

Firstly, because it introduced a new pricing scheme from the cassette and the LP – it cost double the money, but not necessarily because it takes double the money to produce, but because it can be sold as a new, superior technology – in other words, it was more expensive only because customers were willing to pay double the money for a recording. Secondly, because back in the old days, if you liked one song by an artist, you would have to buy and entire 12 track CD to get it – which was around 15 dollars. Which, in simple terms, means that a record company would profit from one or two good songs as if they were 12 songs. This is a very simplified explanation and it may seem somewhat biased towards making the record companies look malicious. But these economic principles apply to very many consumer products.

Why is the CD – and its decline – so important for the music industry – and for this Thesis?

Precisely because of the reasons stated above. The CD was for two decades the most successful and profitable consumer product that the music industry was selling. This is also the reason why the record companies are trying hard to keep it alive by offering deluxe editions that include material that is otherwise unavailable, bonus DVDs, special packaging etc. It is only when music is tied to this physical medium that the profit margins can be so high, or at least this has been the case so far.

How much do artists get from CD music sales?

It depends very much on the artist and the contracts that they have with their record company.

Artists who are singed to one of the big record labels (i.e. Sony, Warner, Universal or EMI) and sell very many CDs (tens of millions of units, that is) get a lot of money. The ones who don’t sell staggering numbers, but are still signed with one of the major 4, get very little from music sales and have to have other sources of income. The rule of thumb is that the artist gets 5% from the price of a CD. This excludes the advance for actually producing the record – which is usually paid by the record company beforehand and is meant to support the artist during his recording period. An average album generally takes a year and a half to two years to produce – but again, this varies considerably depending on the artist.

Artists who gain recognition over time are obviously in the position to renegotiate their contracts – meaning advances, share of the sales etc. But that also varies a lot. The general rule is that if you’re Britney Spears or the Beatles, you make a staggering amount. If you’re not, you have to do something else to make a living. Some will even argue that Mrs. Spears is not a very good example either and that most of her fortune is a result of celebrity branding.

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On the other hand, independent artists, can obviously get a bigger cuts from selling a CD – but on the downside, that doesn’t give them enough exposure to sell enough CDs in the first place. So they have to have other sources of income too. It’s also notable to mention that while it is now easy for anybody to get CDs printed and packaged, 10 years ago, that just wasn’t the case and an artist needed a record company for it. But more importantly than that, it’s not making the CD, but getting it sold that is the challenge. While you can freely sell your “home made” CDs to your local jazz festival – and many musicians still do and will keep doing that – a few hundred units at best will not get you anywhere near supporting a living. Big numbers – i.e. platinum selling albums – automatically imply big music stores that work with big distributors that are in turn connected to big “promotion machines” that used to go hand in had with (surprise!) big record companies.

As a footnote, this explanation does not go into sales of single CDs – which is a different beast, but one that has been killed by the record industry a while back and does not run high with music listeners anymore.

What about digital sales such as iTunes? How much do artists make from those?

The pricing mechanism for digital sales was put in place by Apple back in 2003 and it is generally used by most services who offer digital downloads. According to the typical price breakdown of the 99 cents that is an iTunes track, a record company gets around 70% of the sales of a track. The artist gets a percentage of that – if he is signed with a major record label. If he is an independent artist, he gets the whole 70%, or even as far as 92% depending on the middle-distributor that he uses to get to iTunes - because there’s nobody else involved in making and promoting that record, but himself. The situation is somewhat similar to that of the CD, you might say. Yes, and no.

The first difference is that digital music stores such as iTunes have introduced a game changing rule to the equation: buying a single track instead of an entire album. As previously described in question number 1, selling 12 tracks every time the listener wanted to buy just one was a very important element in what made the CD so profitable. By contrast, simplifying, one can say that in a digital store, each track is only worth its own value and not that value multiplied by 12.

The second difference is that in the past ten years, music on demand has been made increasingly available through channels like YouTube, to take the best example. By music on demand I mean listening to the track that you want, when you want it and as many times as you want. This is very different from “programmed” listening which is what happens when you turn on a traditional radio, for example. On the radio you can’t chose what song you want to hear and when, and even when a song does play, you can’t hear it again. Some years ago, if you wanted a track on demand, you needed to buy the entire album – there was no way around it. Now you can just go to YouTube.

Though it’s dangerous to establish a relationship of causality here, a relationship does exist. The point is that somebody who wants to hear a track no longer needs to necessarily purchase it.

In conclusion, iTunes sales are not as big as CD sales. So whatever royalties artists used to get from CDs are even smaller in the case of digital downloads. Some artists even think that they’re almost not worth minding about. And that’s in case anybody was doubting why some artists don’t mind you stealing their album.

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What about streaming services like Grooveshark? How do they work?

As a general rule, the record companies get a “pay per listen” fee for every track. This means that every time a track is played by somebody, the streaming service has to pay the label around $ 0.0001 (which is an estimate) (Jackson, 2011 in IT World quoting Big Champagne). Again, the artist gets only a small percentage of that. Obviously, this is a far cry from $15 for a CD or even $1 for an iTunes track. One can argue that collectively, the number of times that a track is played should compensate for that difference. But it appears that this is just not the case. One famous example is Lady Gaga – one of the most successful artists in today’s music industry. Her music videos have just reached over 1 billion views on YouTube (who also pays the same kind of royalties to record companies as other streaming services). A rough calculation goes like this: 1,000,000,000 x 0.0001 = 100,000 dollars.

While that may seems like a big number for people like you and me, in the entertainment industry it barely covers the costs of two small budget music videos. As for Lady Gaga herself, she probably got a fraction of that amount. Some websites even claim it was as little as a few hundred dollars, but it is unclear how they have come up with these numbers. If this is the case with the most popular names in the industry, then one can only imagine how little streaming services pay for the average artist.

There are three side notes to this answer. First, it is important to mention that there are some services that offer a combination of streaming and selection – in order to simplify the argument, I have kept those out of the discussion, but let’s just say that the earnings from those are of the same order of magnitude. Second, some “on demand” streaming services are yet to be fully licensed – as is the case with GrooveShark. This means that they don’t pay royalties to record companies for every song available on their website – although, technically, they should. And third, just because online streaming doesn’t pay very well today, this is not to say that it never will – streaming services are a young business and it is expected that the right pricing mechanisms have yet to be developed.

So then where do artist get their money from?

There are many other revenue streams. But how much they are exploited varies from one artist to the next. I’ll try to describe the main ones.

The most important is ticket sales form live performances. In fact, the concert business has been, by contrast, steadily growing in the past decade. The biggest concert organizer in the world is LiveNation, which is responsible for around 70% of the live events. This is also where artists get a far bigger share of the profits: around 70-80% of the price that you pay for a ticket goes to the artist – but that is not to say they don’t need to cover the costs of touring, from that revenue. The costs of touring, in turn, are a different matter and can go from very little to very big – depending on the size of the crew and the complexity of the show that the artist puts on. Lights, props and equipment, all cost money to transport and to install. Drum technicians, guitar technicians, sound engineers and supporting musicians on one hand as well as people that do everything else from putting up the stage to operating the lights on the other hand, all cost money to support. This is also why ticket prices sometimes vary and go hand in hand with the artist, the venue and the place where the show is held. A big name such as Bon Jovi would have as many as 22 guitars, 1000 road cases, 20 trucks and 68 crew members on tour with them – not counting the local crew of 80 (bonjovi.com, 2010).

One other important source of revenue is music licensing. For the sake of simplification, let’s accept that this is different from selling music. To understand licensing, it is better to think of a music track 59

as a piece of intellectual property rather than a song. To license something basically means to give somebody else the permission to use that piece of intellectual property that you own. Also part of licensing is radio airplay. The revenues from that are not traditionally managed by record labels, but by publishers and PROs – performing rights organizations. Again, as the story goes, people with popular hit singles can find a good revenue stream in licensing their songs for airplay. Big, classic artists like Paul McCartney can still collect royalties from that because of the longevity of their tracks. The requirement to get airplay is that the track flies high enough in the charts. This is because most traditional radio stations are fixated on the “top 40” system of delivering only the major hits that will generate as much advertising exposure as possible.

Another kind of licensing happens when somebody else wants to cover an artist’s song, when they sample it or when they want to use it as a soundtrack. The latter is the most lucrative of options. To use a song in a movie, a video game or a TV commercial, the producers have to pay record companies for that right. The numbers can range from a few hundred dollars for use in small budget film shown at a festival to as much as a few hundred thousand dollars for a blockbuster film score or a successful video game soundtrack, but they depend largely on how the contract is negotiated. How much the artist gets from that also depends largely on the contract, but it is usually 50%. In the past years, licensing revenues have also been growing and having a song in a video game such as Halo or a movie franchise like Twilight can be a major financial break for an artist. But while touring works for everyone, licensing is generally not very profitable unless you are somewhat established.

Another equally important source is merchandising. Not long ago, this was a very small business that an artist would run on the side of everything else. Merchandising includes everything from t-shirts to signature drum sticks and it has become a very important and straight forward source of revenue.

Generally, the artist can get as much as 100%. Again, this depends on the contract, the manufacturer and the way it is distributed and sold, but as a rule of thumb, it’s a great source of income. (And also a great way for fans to support an artist). The first catch is that in order to actually sell merchandise, the artist already needs to already have a community of fans. The second catch is that wearing and using artist branded things hardly appeals to all of the listeners and generally people will only pay money for their top favorite artists.

Some established names that make use of what is called celebrity branding have extended this practice to branded product lines. This is the case with superstars like Jennifer Lopez or Madonna who have their own clothing lines and perfume fragrances that are developed in collaboration with other companies. As one can easily imagine, this can be a major source of income. While the details of his are too intricate to go into, the point is that you can see it as an elaborate extrapolation of selling hoodies and signature picks. In this case though, it is vital that the artist is not only known, but also has a well defined image in the public eye. It’s also important that the products fit well into that image and that they have at least some value by themselves, even without the brand. It is not uncommon for clothing collections, for instance, to flop – just ask Lindsay Lohan.

Last but not least, advertising contracts and product placements are also not to be neglected. Quite the opposite. Advertising contracts speak for themselves and can, again, be very lucrative, especially when a star is asked to be the image of a fashion house for instance. But the same rules from above apply. Product placements on the other hand are more accessible. This occurs most frequently in 60

music videos and it happens when a company like HP, for instance, pays to have an HP monitor featured in a specified number of shots. Depending on the artist, the product placements can be more or less subtle, but they are becoming increasingly frequent in an effort to compensate for the fact that record companies are allocating smaller and smaller budgets for music videos.

This sounds a lot more complicated than I though. Is that really the case?

Not only that it is the case, but the answers above are only scratching the surface. They are meant to give the reader only a broad understanding of the mechanisms in the industry. It’s actually far more intricate. Firstly, there are many simplifications in the explanations that I gave. One of them is the assumption that the performer of a song is also the song writer. While that may be the case in rock music for instance, in other genres, such as pop, it is in fact becoming increasingly rare – at most, a pop artist would co-write a song. As you can imagine, this adds an extra level of complexity.

Secondly, contracts with record labels have evolved very much in the past years, as a response to the transitions in the industry. Traditionally they would be along the lines of “artist is contacted for these many years, artist must deliver these many albums for which he will be paid this much and get a cut of this much from the record sales”. More recently though, the ‘360 model’ – pioneered by Robbie Williams’ management team – is becoming increasingly popular. It is more artist centered and says that it is the record company who gets a share of the artist’s revenues, not the other way around. These revenues include live performances, advertising, merchandising etc, but the percentages vary greatly from one area to another and from one contract to another. This is obviously good for the artist since it gives him more power and creative freedom, but bad for anybody who even attempts to understand the money flow. To further complicate matters, there are even some artists who have chosen to take the record companies completely out of the loop and are now signed directly with LiveNation (yes, the big concert organizer, who also does artist management, promotion, e-commerce solutions and many other things) who acts as a record label, but sometimes without owning copyrights. The more daring artists, such as Trent Reznor prefer to be completely free of any recording contracts and release their music via their own personal record label and personal website. Is the reader utterly confused by now?

To put it in a nutshell, yes things can be quite complicated. And it is made even more so by the fact that the industry is in between business models. This is why artists need managers of different kinds, assistants, accountants, lawyers and an entire team of people around them. Depending on the level of creative control that they want to have over their work – and their bank account – , they need to be more or less involved in deciding on the points described above. And this is before one even gets to the creative side of music making. As for the legendary “bohemian musician” – he still exists. He just needs to have a day job.

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Liked this thesis? Didn’t like it? Found it on a shelf around the ITPD studios? Email me at smaranda.calin@gmail.com and tell me about it. I’ve been talking extensively about participation and the value of feedback, and I’d like to get mine.

As a side note, I promise to give away free chocolates to everybody who can properly identify all the song references I have made in the titles of my chapters. You will now go back to the table of contents and read them again. I know you will.

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