Popular Business Models in the Music Business

Previously, I wrote a little about what a busines model is and how to use a Business Model Canvas. (read here). Now that we know the basics, lets look at some of the popular Business Model concepts in the music industry. Freemium Free + Premium = Freemium. The math is easy and understanding the concept isn't that hard either. You see this concepts most popular with streaming sites be it for music, sports or even film and TV. The concept basically lies in the fact that people want to spend money only on what they value. You start off with a month of free subsciption where you open up all the benefits of the service. A month later you go into the free model where some of the best features are taken away. The benefits are the accessible but at an aditional cost. his concept is very close to the popular 'in-house purchases' that many online games use. The most popular use of this business model comes from Spotify. They offer a 3 month free subsciption which opens you to all the 'solo'use' benefits. Once that is complete they a free, freemium and premum subcription package. Many end up paying freemium because it's budget friendly and they have experienced the value of the service and product.  

Direct To Fan (D2F)

Direct-to-fan is a business model in which artists operate outside of the traditional music industry framework and focus on communicating with (and selling to) their fans directly. This business model bypasses the traditional major record label business model that historically controlled radio, venue, and distribution channels. Direct-to-Fan lets the artist, or the management team that supports that artist, create interest in their music directly with their fans, identify those fans, market directly to and develop relationships with those fans, sell directly to fans and monetize those relationships, and use those relationships to expand their fan base. One very important component to the Direct-to-Fan business model is the ability to collect data on your fans; customers including name, address, email, telephone number and other demographics needed to build a marketing campaign geared specifically to the artists following based upon prior purchases.Base components of this model include music discovery sites, and Direct-to-Fan music sales, marketing, and business solutions. Direct-to-Fan models encourage engaging directly between the artist and their fans, keeping the fans engaged, knowing who they are, building the artist’s brand, and developing the artist-to-fan relationship over time. Here are some D2F tools to implement this model:  

• Band website and storefronts
• CD/DVD manufacturing
• Digital music distribution
• Download cards
• E-Tickets & Mobile-Tickets
• Fan email marketing and messaging
• Fan marketing solutions
• Merchandise
• Music discovery
• Music festival submissions
• Payment processing
• Physical warehousing and fulfillment
• Poster and print services
• Storefronts
• Pre-sale ticket and album options
• Integration of social sites, such as Facebook and Twitter
• Fan-funding capabilities
• Sell Digital Media
• Sell Digital Goods

Becoming the Market Place

In today's world what we lack the most is 'TIME'. We prefer large chain grocery stores so we can go buy a month of supplies in one go and save up on a lot of time. We buy jumbo boxes because it's convient but more important, value for money. That is what the music industry is set up to create too. This phenomenon seems to be most common in live music today. First, let''s understand what a market place is. Simplistically, a marketplace is a place where buyers and sellers meet to conduct commerce. In the online setting, that definition still holds true?—?online marketplaces give buyers a choice in what they would like to buy and sellers a variety of people to sell to. Airbnb classifies as a search marketplace, where the guest selects where they will stay, choosing what to “purchase” in the marketplace. Many new tech start ups have started to create a virtual live music market place. What does that mean? You have artists and their entourage of managers and agents on a common platform with multiple venues across the country. It's a place venues can shop for artists with all their required info as well as a place where artists can seek opportinies and grab them. The best part aout a marketplace is that the start-up requires no inventory. They do not own any venues or artists. They take the existing ones and connect them. The world's most succesful online market place today is probably Amazon.