Tuesday, September 25, 2018

"Today's hit is tomorrow's niche." | Water & Music

Happy Tuesday—and for those who celebrated, happy belated Mid-Autumn Festival (中秋节)! :)

I spent most of last week in Hamburg for my first-ever Reeperbahn Festival, where I moderated a Q&A with Sulinna Ong (Global VP of Artist Marketing at Deezer) as well as two panels about streaming fan behavior and music data monitoring tools.

Since the last newsletter, I also published my first articles for Pitchfork, Goldthread and Crack Magazine, in addition to some more articles for Billboard. Scroll down to the “My writing” section to check them out!

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The title of today's newsletter is taken from Chris Anderson's influential book The Long Tail, which I finally read earlier this month. The origins of the book lie in an article that Anderson wrote for WIRED almost exactly 14 years ago, in which he argued that an Internet-driven world "unfiltered by the economics of scarcity" would

  1. Encourage consumers' tastes and demands to travel further down the long tail of content (i.e. away from hits and towards niches), and subsequently
  2. Transform the way media & entertainment companies do business, away from prioritizing a handful of blockbusters and towards selling smaller quantities of several niche products—or, as the book tagline puts it, less of more.

Understandably, many entertainment professionals and researchers have since criticized the Long Tail theory, with evidence in tow. Business school professors at Harvard and Wharton have argued not only that blockbusters still rule entertainment business models, but also that an economy of abundance only further solidifies the demand curve in favor of hits, instead of shifting it away—what some call the "paradox of choice," or wanting more of less.

After I tweeted that The Long Tail was required reading for anyone in digital media & entertainment, MIDiA Research managing director Mark Mulligan tipped me to his report "The Death of the Long Tail: The Superstar Music Economy," which found that the Long Tail theory was essentially inapplicable to the music business from a revenue perspective. According to Mulligan, the top 1% of musicians consistently accounted for 70% to 72% of total annual music revenue (combining record sales, publishing, live and merch) between 2001 and 2017, despite drastic changes in technology over that time period.

[Note: Mulligan also published a separate study claiming that the DIY/unsigned artist sector was the fastest-growing segment of global recorded-music revenue in 2017, increasing by 27.2% year-over-year to $472 million. Importantly, this does not conflict with Mulligan's argument that the long tail is dead; that $472-million figure still accounts only for 2.7% of the total market.]

All of these accounts are valid in unveiling the stubborn imbalance of commercial power between the corporate and indie/DIY music worlds. But I think the more transformative story behind the Long Tail theory lies less in the balance of power, and more in the potential longevity of a cultural product.

99% of today's niches will not become tomorrow's hits, but 99% of today's hits will become tomorrow's niches.

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A major label's marketing budget has historically been divided into two parts: "frontline" (creating demand at the head of the curve for a potential hit record in its first 18 months of release; majority of budget) and "catalog" (reacting to demand for a dormant or declining record in the tail of the curve post-18 months; minority of budget).

One of streaming's most significant impacts on the music business is in extending, if not blurring, the frontline/catalog boundary. Spotify's Director of Economics Will Page illustrated this concept in an op-ed for Music Business Worldwide last year, in which he argued that the music industry needs to expand its catalog threshold twofold—from 18 to 36 months—to mirror the proportional share of demand on physical sales in a streaming environment.

And it's not just streaming services blurring the lines: several other recent trends in music creation, consumption and distribution arguably have catalog revival baked into their DNA. Yes, the corporate music industry may still be hit-driven, but look at the rise of music podcasts, the institutionalization of sampling as a creative practice and even the guilty pleasure of '80s rock-themed fitness classes. Such trends don't rely just on frontline records to build a compelling music experience; they’re also giving a potent, respectful platform to niches that otherwise would be gathering dust in the music industry's metaphorical storage room.

This new reality is changing the way catalog marketers at major labels do their jobs. In a recent interview with Music Ally, Atlantic Records' VP of Marketing Catalog Tom Mullen discussed how he is helping current hit acts like Charlie Puth prepare in advance for key anniversaries and other catalog-driven milestones, instead of retroactively spending several man-hours sifting through unstructured memorabilia and data.

The overarching goal of preemptive catalog marketing prep, in Mullen’s own words, is to help “tell the story for people in the future”—future meaning 10 to 15 years from now. For example, Puth almost threw away one of his original lyric sheets, but Mullen and his team asked the artist to archive the sheet instead, as it could still be valuable in the long run (i.e. once Puth’s music becomes a niche product in the long tail).

Mullen's outlook demonstrates a catalog approach to frontline marketing, which I think could be an ingenious move in today’s digital landscape if executed well. You could go the other way around as well, taking a frontline approach to catalog marketing—i.e. presenting back catalog to new listeners with a fresh, frontline tone, for which channels like fan-oriented podcasts and energetic fitness playlists can be especially helpful. Anderson would argue that both of these approaches are not only uniquely possible in the Internet era, but are also sound, lucrative business decisions.

Of course, this two-directional strategy exchange is much easier said than done, in part because of the contrasting, entrenched value systems on which niche versus hit customers and companies operate. In my first blog post in the "Artist as Technology" series, I talked about how emerging artists can't give the same pitch to the mainstream as they gave to their early niche customers and expect the same level of buy-in. While niche customers are more open to experimentation and are passionate about the product, mainstream adopters are more risk-averse, seek a direct line to revenue and are passionate about the market.

Let's imagine how this discrepancy might play out when one takes a "catalog approach to frontline marketing" for a budding star at a major label. In the corporate label sphere, frontline marketing arguably equals mainstream marketing, so those in charge are targeting the mainstream channels: flagship Spotify playlists, terrestrial radio tours, endorsement deals with corporate brands like Coca-Cola and Citibank, late-night TV appearances and so on.

In contrast, back-catalog marketing is arguably more akin to niche marketing, in how it taps into more deep-set fandoms that exist beyond the remit of a current, mass-broadcast mindset (e.g. diving into Charlie Puth's archived lyric notes). The best channels for this approach include long-tail communities on platforms like SoundCloud, Bandcamp, Reddit and DatPiff, lean-in media formats like podcasts and partnerships with niche-driven brands like Red Bull Music Academy and Converse Rubber Tracks.

Hence, taking a "catalog approach to frontline marketing" could mean working more niche markets and platforms to promote a standard pop album. But this would immediately present an internal conflict with major labels' financial incentives and entrenched modes of operating, which are predicated on maximizing first-week sales, chart placement and global market share. Today's hit may indeed be tomorrow's lucrative niche, but music corporations arguably aren't thinking as much about tomorrow because their own version of success depends more on today.

I would love to hear your thoughts: How do we resolve this dilemma? In a world where 99% of today's hits become tomorrow's niches, is it possible to foresee and monetize future niche tendencies more effectively without compromising current, hit-driven financial priorities? In general: Do you think Chris Anderson’s Long Tail theory applies to the music business, or not? How do you think the relationship between frontline/hit and catalog/niche music marketing is changing?

Simply reply to this email and let's chat!

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