(MSc) Sebinomics

The Advanced Business Strategy class for the MSc in Innovation Management at FFHS requires us to read the book Contemporary Strategy Analysis by Robert M. Grant and work on different cases from the additional cases-book. The first case we will discuss is about Madonna and the successful strategy she employed to become the star she is today.

By now, everyone involved or just slightly interested in the music business knows that Madonna is a hardworking, disciplined, and successful businesswoman. She got to New York in 1977, at age 19, with only $35 in her pocket, and 31 years later, in 2008, her “Sticky & Sweet” tour brings in $230 million in revenue, making her the biggest moneymaker in the music industry, according to Billboard Magazine. Madonna didn’t become who she is today by simply being lucky. When she started off, she had a vision with long-term goals, a deep knowledge and understanding of the music industry (the competitive environment), she knew exactly how to exploit her strengths and how to protect her weaknesses (objective appraisal of resources), and she knew how to effectively implement her strategy and respond to changes in the music industry.

Madonna’s vision

Dick Clark, American Bandstand’s presenter, asked Madonna at the beginning of her career, “What do you really want to do when you grow up?” “Rule the world,” Madonna replied. That is a rather bold statement, or vision, for a newcomer with basically no connections and financial power. Back then no one would have thought that that grungy mid-twenties rebel would become the Queen of Pop one decade later. Madonna had a clear vision. She wanted to rule the world, or at least the world of entertainment. In order to reach the throne of the Queen of Pop she knew that she had to be disciplined, continuously driven, and other dimensions of her life had to be either subordinate or absorbed into her career goals.

Deep knowledge and understanding of the competitive environment

In order for Madonna to get fished out of the vast pool of new-coming music artists, she had to understand how the music industry works. There was no Internet with MySpace and YouTube in the 1980s and the “Big 5” record companies, namely Sony, Warner EMI, Universal, and BMG, ruled the music business. If an artist wanted to become a popular act, she needed a record deal and it was key to know influential people and being introduced to powerful executives. But that alone would not be enough to persuade major labels to give you shot. A remarkable product was (and still is) a key ingredient for success. After the disco era, flashy and colorful pop artists such as Cyndi Lauper, The Cure, and Culture Club defined the music landscape of the 1980s. Madonna understood the trend and created a grungy, rebellious, and sexy pop singer look with room for adaption. Hence, Madonna was perfect for MTV.

With MTV becoming the heartbeat of the pop culture of the 80s, it was crucial for any artist to be played, liked, and especially talked about on MTV. Madonna pushed the limits of sex and pornography with every video she made. Finally in 1990, enough was enough and MTV banned her video Justify My Love. When artists hope to turn MTV airplay into a small profit, Madonna turned a MTV video ban into a very large profit. Justify My Love was rush-released into retail for fans to buy on VHS right after the ban. Obviously, the ban and the sale of the video was great promotion for the single that topped the charts after that. Another remarkable product was Madonna’s photographic art book Sex that came in an unusual size and packaging, and included her then-latest CD Erotica.

Madonna understood her competitive environment very well and created products that marketing-whiz Seth Godin would call a Purple Cow. Madonna’s products were remarkable and made early adopters stop to get a closer look at them and spread the word. Furthermore, she knew exactly whom to work with to value-up her product.

Objective appraisal of resources and effective implementation

Right from the start, Madonna teamed up with the right musicians and producers and with popular DJs. Steve Bray developed the first demos and dance club singles with Madonna, DJ Mark Kamins introduced her to the Sire Records executives, where she landed her first record deal, and John “Jellybean” Benitez, the hottest DJ in New York in the mid-80s, was central for the promotion plan of Madonna’s music.

Her willingness to make it ‘no-matter-what’ without compromising her ideas, is shown by her ruthless decisions. As soon as Warner Bros. showed interest in her music and character, she dumped Steve Bray and Mark Kamins, and teamed up with Warner Records’ house producer, Reggie Lucas, for further releases. Also, she brought Freddy DeMann, who was managing Michael Jackson, to drop the future King of Pop in favor of managing Madonna.

Madonna knew exactly whom to choose to add value not only to her music but also to her glamorous image as a star. She started very early to develop her look with the help of jewelry designer Maripole. The “Boy Toy” belt buckle she used in her beginning years, was an eye-catcher and a symbol of her grungy, rebellious, and sexy pop singer look. Jean-Paul Gaultier’s metallic, cone-breasted costumes, made exclusively for the 1990 Blonde Ambition tour, became an iconic symbol for the tour and for that whole period of Madonna’s career. In addition, her relationships with actors Warren Beatty and Sean Penn, and director Guy Ritchie gave a heavy touch of glamorous Hollywood to her image.

Another milestone in Madonna’s quest for stardom was her role of Eva Peron in Andrew Lloyd Webber’s 1996 big-screen adaption of the musical Evita. Robert Grant writes, “Madonna achieved a status that was no longer defined by her work. By the 1990s, Madonna was no longer famous as a rock singer or an actress — she was famous for being Madonna.” After her roles in the movies Desperately Seeking Susan, Dick Tracy, and Body of Evidence, where she always incorporated the character she was promoting at that specific point in time with her music, she finally persuaded critics with her singing and acting ability. But most important, she was able to project her own life in the character of Eva Peron. Madonna came from the worker class, like Eva Peron, and had to fight all her life to make it to the top. Both Madonna and Eva made it from rags to riches.

With every new album release and tour, Madonna reinvented herself. If electronic beats were hip, she went dance. If world music was trendy, she used henna temporary tattoos and incorporated world music instruments in her music. And she did it in such an authentic way that not only her old fans would keep following her, but also new ones that were not even around when she released her first album would start following her.

A good hand for business

Madonna is known for being a great entertainer and for having a good hand for interesting and (for her) great business deals. Her remarkable ideas with the banning of the Justify My Love video and her unusual book release with the name Sex are prove that Madonna is not afraid to try new things, and that she can recognize a good deal.

In April 1992, Madonna founded Maverick Records in collaboration with Time Warner. She signs deals with Alanis Morissette, The Prodigy, Michelle Branch, and Sasha Cohen Baron, among others. The roster shows a wide variety of talents from the entertainment business, who were successful thanks to strategic planning from Madonna’s Maverick team.

In 2007, Madonna ditched her record label, Warner Music Company Corp., to sign a $120 million, 10 year deal with concert promoter Live Nation, because, “The paradigm in the music business has shifted and as an artist and a business woman, I have to move with that shift,” she said. She recognized the trend of the changing music business. Artists are not making any money from CD sales anymore. The money is made with experience packages including live concerts, merchandising, and exclusive releases. The old guard of record labels can only offer distribution and traditional marketing and promotion, where as the new breed of live promoters like Live Nation know exactly what music consumers want and how to entice artists and their following to create a unique, so-called 360 degree experience. Madonna’s deal with Live Nation is once again proving her intuition for trends and business opportunities.

And as if all of this wasn’t enough, she published two children’s books, and one of them was printed in 42 languages and distributed through Gap stores.

One of my favorite Swiss blogs, Website Marketing, posted a great article called “The Good Pirates Part 1 – Hyperdistribution.” It discusses how “Hollywood is trying to kill the very thing that it has created.” Read the article in English, here.

Since this is a topic I’m very much interested in, and I discuss this issue with basically all classes I teach to, I’d like to share my thoughts with you:

Very well said, “piracy should not be feared and fought, rather harnessed.” First of all, according to CNN The Screening Room, 2008 was one of the most successful years for Hollywood, ever. And digital movie piracy is at an all-time high. So, why battle those who made production companies big? The music and movie industries work in similar ways and have similar attitudes, so let’s think back to the Napster trial. Metallica’s Lars Ulrich fought Napster and exactly those people, who made him a multi-millionaire. He went on a crusade against the MTV and Internet Generation and as soon as Napster shutdown, eMule, Kazaa, and later on BitTorrent emerged to cause even more damage to the music (and movie) industry. By now, the movie and music industry should have understood that if you cannot beat them, you should definitely join them. Some artists, like Nine In Nails and Hawthorne Heights, understood the situation and became more popular and were able to make better money than ever before.

As for how to make money with FREE: Advertising is obviously one way to generate some money. Nonetheless, many internet users have become blind for banners. I sure am, and many of my peers as well. One way to generate money that has been proven effective by different artists in the entertainment business is selling merchandising and live events. Take all those reunion tours from Phil Collins with Genesis or Sting with The Police. One can find all the classic songs online on legal and illegal platforms. Music in CD or MP3 format has become a commodity. But experiencing music in a live setting has (almost) become a luxury good. Not everyone has the money to buy two tickets for $90+ each every other week, and I’d consider that a cheap ticket. And once you’re at the gig you might want to buy a T-shirt as a souvenir, for another $30+.

Wong Fu Productions, a young team of Youtubers and filmmakers, create clips that get distributed on Youtube for free. They solely generate money by selling a lot of merchandising and making professional music videos for newcomers. A perfect example of how free leads to money.

Lester William Polfuss, also known as Les Paul, is seeing by many as the Father of Modern Music. Besides making the sound of rock and roll possible, Les is also known as the innovator of multitrack recordings and other effects for guitar. The most visible trademark of his legacy are Gibson Les Paul guitars, built after Les’ 1940s The Log model. The Les Paul models have been played by many popular guitarists (i.e. Slash) and stand for the sound of rock and roll, defined by Les himself. 

It is amazing to see what Les has accomplished in his lifetime. Without him music would not be what it is right now. Even though, I love studio-live recordings of rock bands, I’m very happy to listen to bombastic multitrack productions that can only be produced like that thanks to the innovation of Mr. Polfuss. Les was a genuine inventor. He played and lived music and spent hours thinking about how to improve his sound and the productions he was working on. And THAT is a true innovator: Create a tool or process that gives additional value to what you have or do. 

Dear Les, thank you for everything you gave to the world of music. Your genius will be missed.

Posted via web from (MSc) Sebinomics

I was shocked to read the news that Michael Jackson died yesterday after suffering a heart attack in his home in Los Angeles.

Despite all the controversy in the past decades, Michael Jackson was a true music business phenomenon. Kick starting his career with the Jackson 5 at the young age of five, then moving onto release the most successful album of a solo artist with Thriller and selling out tour after tour, Michael Jackson become The King of Pop, an iconic brand in the business. Whatever he touched turned into gold. The King of Pop didn’t need a big marketing machine behind the brand to sell albums and concert tickets. Michael Jackson was the marketing.

Source: lancedrummondsmusic.wordpress.com

Time Magazine proclaimed Michael Jackson, “A one-man rescue team for the music business.” Okay, that was in 1984. But still, Michael sold 750 million albums throughout his career. His planned tour for July 2009 had set a new record as the fastest selling concert of all time. Tina Kells wrote on NowPublic.com, “Selling at a rate of 11 tickets per second all shows sold out completely at a startling rate prompting Ticketmaster director Chris Edmonds to comment, “this week we have witnessed a live entertainment phenomenon.” 360,000 tickets were sold by pre-sale before buying was opened to the public on Friday morning.  More than 750,000 fans from around the world purchased blocks of seats for the London shows.”

The only time I saw Michael Jackson live was in 1997 on his History Tour in Basel, Switzerland. I remember it was a rainy day and Michael’s gig was in an open air stadium. Right when his show started the sun came out and his 150-minutes show amazed an audience of about 50,000. It was pure A+ entertainment like I had never seen before.

Michael Jackson will be remembered as The King of Pop. The man who did the Moonwalk. The dancing zombie in Thriller. The artist with the funky gloves. The singer who wanted to Heal The World. And the human being who said, If you’re thinking of being my brother it don’t matter if you’re black or white.

Last week, my friend Warren called me to talk about bringing a solo-bass artist to Switzerland for a concert dedicated to bass players. Being a full-fleshed bass player myself, I promised him our help. We at NEO*DMC believe that the smaller a niche is, the more interested and supportive its followers are. A logic consequence is to give followers a reason to meet and share their passion. Like in Warren’s case, a concert by solo-bass artists.

For more than 10 years so-called “bass day” events were organized all around the world with considerable success in regard to the market size of its niche. Bass players seem to be even more eager to visit bass workshops with world class bassists such as Billy Sheehan, Michael Manring, and Markus Setzer, than going to concerts. The bass niche seems small compared to the guitar market. But like all small tribes, bass players are connected through a very unique bond — similar to the ukulele players tribe.

Seth Godin writes in his marketing-classic Purple Cow, “[W]hat’s missing isn’t the ideas, it’s the will to execute them. … [I]t’s safer to be risky.” Very true. This is why NEO*DMC is supporting Warren with his project. There are already many music agencies bringing popular bands and artists to Switzerland to fill large mainstream venues. Hence, there is no need for us to do the same. My friend Theo and I share the opinion that it is rather difficult to make short-term profits with niche concerts, but if set up right, it is more rewarding in the long-run. Why? Because you attract innovators and early adopters in the beginning and they will tell their friends to join next time, and their friends’ friends will join the next-next time, and a sustainable growing tribe will build up.

Sure, this is the best possible scenario and it takes a lot of time and effort to build up such a tribe. Nonetheless, it is the most sustainable way to foster a relationship between a brand and its followers.

I like searching for songs on YouTube, because I keep finding material I would never had thought of searching for, like Hamasaki Ayumi’s Rule, the Dragonball Evolution theme song. Unfortunately, most Rule videos have no audio, because AVEX Entertainment, Inc., a Japanese major record corporation and owner of the rights of the song, have ordered anyone to take down the song. I know, I know, they are entitled to ask for that, because they own the rights and “those YouTubers” simply stole the song for making a great fan video. But having fans making these videos, wouldn’t that be free promotion, especially since I couldn’t an official music video to Hamasaki’s song?

After clicking on three different videos tagged as Dragonball Evolution theme song that had no audio, I thought for myself, “This is an idiocy! AVEX just lost a customer. Why should I buy a song on iTunes that only gives me a preview of 30 seconds?” I kept searching, just for the sake of it, and after a while, I found the song in full-length. Most probably, AVEX didn’t find that one yet. Otherwise it wouldn’t be up.

In my opinion, record companies shouldn’t try to fight YouTubers. Fan videos are among the best promotion an artist can get. Fans spend hours giving their best making the great fan videos and want to share them with their friends and anyone who is interested. If you order your followers to take down part of their creation, they will be hurt. I am disappointed to see companies not recognizing the work and input of their fans. Particularly, because these fans are usually very loyal customers as well. I say, “If someone wants to work for your company for free, let them!”

As posted on NeoDMC.com. 

The Ultimate Fan Experience

I posted the following questions in the Music and Marketing group on LinkedIn and a great discussion started: Since physical CD sales are steadily decreasing, what can we do? Sell music only in digital form? Or, give it away for free to promote concerts and merchandizing? – Executives in the music industry have been discussing these questions on and off and it seems that no one has been able to come up with a sustainable business plan that fits all needs. Here a few comments I would like to share with you:

Free Music
“I agree with creating more content for mobile and increasing the number of products available for merchandising. I also think that one or two free tracks in exchange for contact information or another action fro the consumer is worth doing, “ replied Jamison Antoine from Universal Music Group. Bill Murphy, owner of Purple Crayon Direct, an arts-marketing agency in Grand Rapids, Michigan/USA, comments that giving away music for free is a massive mistake, since one establishes a precedent: Once free, always free. Only artists that are wealthy beyond the dreams of avarice can afford to give away products and hope to recoup money via concerts, he states. 
          As discussed in The Starfish and the Spider, the music business is coming back to its original decentralized structure. I’m talking about 1890, where musicians didn’t belong to any label and earned their money by playing live. In my opinion, music has become a commodity and every song can be acquired for free sooner or later. Especially if it is a popular song. Fighting makes the situation worse. Napster was shut down and eMule emerged. Try to shut down BitTorrent and something else will be created.

Remarkable Packaging
“As for CDs, I would suggest that presentation matters a lot,” writes Abbas Alvi, Marketing & Sales Manager at Ooober.com and states the example of Tool’s “10,000 Days” CD, which comes in a unique 3D cover with built-in 3D lenses. Abbas concludes, “I know people who had the complete digital collection of that album but still ordered that CD because it was worth it.” Marcus Turner, President/CEO at Alien8 Entertainment, wrote, “I say develop a highly innovative packaging and fill it with much more content. Basically, the ultimate fan experience.” He continues, “Fans want to know everything about their favorite artist and I’m willing to bet that they’ll pay top dollar for it. But it can’t be packaged in the same boring way.” Sam Katz , Co-owner and Vice President at Geniass Productions suggested adding a DVD and selling it for $10. That’s what many artists have been doing for the past 5 or so years and in my case it worked for a while. Consumers kept buying those physical albums, because of the DVD. Not anymore, though.
          Packaging has to be remarkable, because otherwise there is no need to get a CD twice the price of a digital download. The motto here is Worth Making A Remark About. And thinking about Seth Godin’s Free Prize Inside idea, make the CD packaging fashionable or fun or surprising or delightful or sad. It has to deliver something extra worth seeking out and buying. Since the packaging rarely delivers more of what we were buying in the first place, it has to arouse the feeling of wanting to possess that very CD and wanting to brag about it.

The Business Model
Marco Monfils, Owner-manager at Riverside Talent, sees only a few alternatives for the lost income of physical record/CD sales, 1) sponsor support (as Larry Weintraub wrote in his Brand Sponsored Music article), 2) government support, 3) fan support, 4) personal budget. Godfrey Meyer, Gm3 Productions, says, “You can no longer have just the music, you need a WHOLE picture from software / hardware / websites and then the music is just the reason for people to be there and keep coming back.”
          And that is where the music industry is still struggling finding the right business model for the Internet age. I don’t think there is a “one idea fits all” business model, but thanks to the Web 2.0 bands and labels can get in touch with their followers easily and shape their business model according to their customers wants and needs. They can work something out that makes their fans happy and brings in revenue for sustainable growth. Time will tell, and case studies such as NIN, Hawthorne Heights, and Julia Nunes, show that no matter what genre, the Net Generation is ready to spend money on music, but not necessarily for simple physical or digital music.

Thank you, everyone who participated in the discussion on LinkedIn.

As posted on NeoDMC.com. 

We all know about ghost writers on Twitter and people who pretend to be someone they are not online. Even viral videos that can be found on YouTube are not necessarily real. This is why being authentic is increasingly becoming a crucial part of who you are. Being the real you is what will make potential business partners, early adopters of your products, and fans want to connect with you and your brand.

Authenticity is the key word I have been encountering most in regard to branding lately. Blogger Michelle Tripp let her disappointment out in a post when she discovered that Marketing-guru Guy Kawasaki’s updates on Twitter are not all written by Guy himself (read here). Even Heidi Klum tells her soon-to-be top models in her Germany’s Next Top Model TV-show that they have to pave their road to success with authenticity.Kevin Kelly said it best in his Better Than Free article, “You might be able to [get a service or product] for free, but even if you don’t need a manual, you might like to be sure it is bug free, reliable, and warranted. You’ll pay for authenticity.“

YouTube has become my first choice when searching, promoting, and discussing music. In the past six months many videos have been suggested to me. The ones that got my attention were not the videos that were made with a large budget, not at all. I kept viewing the videos that were made by amateur musicians without any budget. You may ask: Why? My answer: Because those videos are authentic and genuinely honest. 

Sam Hart got more than 2 million views on his Mario Kart Love Song within two months. All you can see in the video is a guy playing his guitar, singing a great love song with a reference to pop culture. And it was recorded in one take. You cannot get more real than that other than playing live on a stage. But you won’t be able to reach out to a 2 million audience then. Or, everyone who makes those wonderful ukulele video-songs. All of them are authentic, honest, and happy to share their music with the world. Sure, the videos are raw, but honest. There is also no budget involved. I am convinced that many active ukulele artists on YouTube would be able to record a world-class album with the right production team and a budget of only a couple of thousand dollars, and I am confident that profit would be made. There is obviously a niche market for that kind of music and followers are very eager to know more about it and to be involved.

My friend Theo and I have been discussing this topic on and off. We both agree that authenticity is key to build a lasting and nurturing relationship with anyone online. One issue Theo always addresses is that if you want people to watch your authentic videos on YouTube, read your updates on Twitter, and read your blog posts on WordPress, you need to be remarkable. He claims that a one-take video of an acoustic cover of Tool will not make an upcoming metal band popular on YouTube. At least not just like that. I agree, but many acoustic covers of different metal bands will increase traffic on that band’s channel and eventually find fans that keep coming back and finally start spreading the word. As we know by know, a video’s viral potential increases with its uniqueness. Nonetheless, it is important to start somewhere.

Take it one step at the time until one day you produce that very unique and authentic video that will pave the way to your online success.

As posted on NeoDMC.com.

After years and years of playing bass in bands and performing on stage and on records, I found a new way to express myself with music, through multi-window video-songs on YouTube. Funny how it all started (read it here).

By now, I have to admit that I get much more satisfaction from playing on the digital stage that YouTube offers compared to playing offline. Sure, playing live is a rush no matter what the size of your audience is. I played everything from audiences of 4 listeners to a sea of people. Nonetheless, I have never been closer to an audience than now. In the past 6 months more than 60,000 people viewed my ukulele and bass videos, which in my niche world is a very large number. I have been able to improve my music skills and work on my creative attitude thanks to the love-and-hate comments I have received on YouTube and other social media platforms.

In addition, virtual collaborations with fellow YouTubers, like the You and I cover with Jason in California, Kelsey in New York, and me in Switzerland, can be very rewarding. You get to play with musicians you have never met and you might never ever meet in your life and you create something very innovative, a virtual band. Check out my favorite virtual band, here, Virtually Rush. Playing in a virtual band will give you the possibility to reach a far wider audience than by creating something yourself. Each musician can tap the following of the other members and hopefully find new followers.

I’m not suggesting not to play offline. Club gigs (usually) pay you good money if you attract a large audience. But if you can reach an audience of 100,000 with niche music in just a few months, like some YouTubers do, you might be able to fill clubs and bars with 400 seats easier after playing online. Especially if your followers are all into you.

Here you are my 20th multi-window YouTube video, The Big Bang Theory Theme by the Barenaked Ladies:

Some music labels have by now understood that file sharing is not necessarily a bad thing for the music business, since it can open up other channels of revenue from concert tickets to t-shirts and other merchandise. Jeff Howe explains in his 2008 book Crowdsourcing: Why the Power of the Crowd Is Driving the Future of Business how a band called Hawthorne Heights managed to avoid falling into a major label’s debt trap with a big help of the Internet and them being reachable and touchable for their fans. This is what I highlighted in chapter 3 of Crowdsourcing:

Distribution used to be the point in the supply chain at which big companies could control the market. If smaller players couldn’t get their product to retailers, they couldn’t compete. The Internet turned this upside down by making distribution as easy as hitting Send on an e-mail. Hawthorne Heights didn’t need the bank or the trucks. Instead it had the crowd. (p. 92)

But [Hawthorne Heights drummer Eric] Bucarelli wasn’t looking for a big check. “We could have gotten a million dollars up front and all lived large for a while,” he says, “but we’d have spent the rest of our careers trying to recoup.” That’s the way a standard-issue major label contract works: Any label’s outlay associated with the band–from studio time to radio promotions–is billed against the band’s advance. … Hawthorne Heights needed a cheap way to build demand for their June 2004 album release. Enter the crowd. (p. 93)

[O]n tour, each musician would spend four to five hours [on MySpace] every day, engaging their fans in banter and generally making themselves accessible. “the fans loved it,” notes Bucarelli. “They can’t believe they’re getting a response. You’ve got a fan for life.” (p. 94)

Electronic word of mouth becomes a marketing strategy that doubles as a distribution strategy, as more and more potential customers download the group’s music and in turn–the band hopes–share it with their friends as well. … In a digital ecosystem, the music becomes a loss leader whose purpose is simply to create more fans, more evangelists, more ticket buyers. Most up-and-coming bands don’t regard illegal peer-to-peer file sharing as piracy; they view it as a promotional and distribution channel. (p. 95)

Hawthorne Heights is not the only band that cut off the middlemen. Many artists figured out how to reach their fans through different social media channels. One of my absolute favorite songs “Mario Kart Love Song” by Sam Hart reached two million viewers within a couple of month from its upload on Youtube and eventually found its way to iTunes and CD Baby. Sam receives a way bigger share from every item sold on these platforms than if he had a deal with a major label. Well done, Sam!