Changes in the business warrant for new monetisation and ownership mechanisms
Across the globe, we are witnessing radical shifts in the music industry’s landscape. One of the biggest challenges the music artist faces now is to monetise the content they create. While this is not a new challenge ever since the artist started to work in the contractual obligations with the corporations, aka record labels, publishers, and/or talent agencies, Monetisation and Return on Investment continue to remain an area of concern.
There are many reasons why music cannot create new business models, both in emerging markets and developed markets. The largest of them all is the factor of control and enforcement by the investor groups. For the most prolonged period, the investor groups have come with the ability to control the audience’s reach, make financial investments, design marketing communications, and enforce copyright usage, thereby controlling the artists’ lives. While it remains to be seen in time whether this traditional work for hire and exclusivity was an authentic model for the long run, what comes out clearly is that in shifts of technology, distribution, and consumption patterns, the current enforcement approach will only create rebellion.
Therefore, the changing landscape of the markets warrants for new-age thinking, and the critical aspect is to address the problem of Monetisation and Return on Investments.
Breaking the Wall of Royalty
For the most extended period, the creative business, especially music business, has followed a linear track of royalty mechanism for the content through its financed and controlled IPR. While the royalty tool worked great in the realms of licensing opportunities and the management of the IPR remaining within the controls of the corporations/ labels, this business model has come of age. The union between the Artists and Labels has surpassed the peak of their relationship’s comfort zone. Its primary relevance was in the physical assets driven business ecosystem.
Technology adoption, digital customers, digital engagements, social media, digital currency, and active fanbases make way for new dynamics in content-based commerce. While royalty and advancing against royalty is the primary tool for licensing at this point in time, it is limiting for the artist and their creativity. With more and more avenues opening up for decentralisation in technology, collaborative works, and open source applications, it is evident that new mechanisms for monetisation need to be thought through in the context of the use of technology, applications, or creative works.
Thus, it is imperative to bring down the royalty wall and break the mindset barriers of the traditional record label style of thinking.
What are we selling: Music, Product or an Experience
The music business is quite interesting within the creative industries. The reason for this is the number of opportunities and failures it goes through. The complexity lies in the fact that the way the creative works get protected under the copyright acts worldwide. In many cases (specifically in the Indian market) the length of copyright ownership goes beyond the lifetime of the original author, composer, creator. If we create a comparative analysis between a software business or a physical product — which can be acquired, molded, and reconstructed, including a change in ownership. Thus, Equity and investors play a large role in the expansion and rapid scale. The businesses accordingly classify as mechanical business models.
Creative Industries and Music, in particular, are emotionally connected businesses. So the success and failures variable lean more towards fan economics. These are more of transaction-based economics rather than sustained value creation mechanisms. Music does qualify to be an appreciating asset class rather than depreciating.
The pertaining issue in monetisation is about what is on offer and where does the value and residual value accrue in ownership. In the last century, ever since the corporations started to invest in the artistic works, it’s been about control, enforcement, perception building, and creating short term, high-valued commercial transactions and few big successes.
What’s on sale, and what do the music fans buy? It relates to the commercialisation of the copyright works. Typically, selling music is either the function of a distributor, wholesaler, or broker. We don’t sell music (meaning the rights get granted for limited use, and the entire copyright is not transferred). Hence, it is fair to assume that we always sell and engage audiences on a product or an experience.
This distinction is vital for artists and their fans to understand. Their primary relationship is the foundation that creates labels, publishers, distributors, aggregators, and PRO’s in the creative ecosystem. On the other hand, the sale of music means an acquisition of copyrights in perpetuity.
M&As in the music industry are continuing and operate on two levels — continued consolidation of labels, publishers and PROs. Second, being digital marketplaces with embedded libraries within the production software. The creative artists can list their assets for potential buyers.
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Listen to the Fans
For a creative artist, this is one of the most important relationships. The fans are contributors to the artist’s journey, but they are also investors who engage in buying various artistic products. Ever since the monetisation mechanism of creative works & recognition of IPR started, the lifeline of artistic success (material or emotional) hinges upon the fans’ depth of loyalty.
In the last couple of decades, there is an incredible advancement in technology and data analytics. Insightful data has helped financial investors in the creative industry across the value chain of record labels, publishers, distributors, promoters, and agents. Data insights are an integral part of what the fans expect of their favourite artists. In some instances, sentimental analysis demonstrates their attachments or fanaticism.
Perhaps, Sports and Music Fans are among the elites to demonstrate engagement and commercialisation with the creative works. Classified as super fans and invested fans, they form the core of an artist’s success. On the other hand, fans of live entertainment and movies have a similarity in engagement driven by their previous experiences.
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The gaming sector is becoming an innovative segment for creative artists, especially music producers and visualisers, as new business models of redemption and loyalty programming emerge. Quite an exciting space as the gaming platforms allow multiple content usage levels, including diverse artistic expressions, avatars, and varied commercial opportunities. There are three focus areas for the creative community — musical works, image rights, and background music production.
The last two decades showcased many artist-fans direct campaigns, and some stand out for their dramatics:
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The music business also witnesses a wave of dedicated fan bases when the fans become marketers of the artist’s works and consider themselves an extended family, e.g., KatyCats, monsters, Beliebers, the Beyhive, BTS Army. They are essential and self-invested aspects as the premium voice of the artists.
The most significant currency an artist can ever create resides in the loyalty of their fans. Their emotional investment and financial support create reputed artist brands, which become attractive propositions for advertisers, marketers, and distributors. It is interesting to note that while the fans form a sustainable foundation for return on investments in the creative assets, their (fans) ROI lines in appreciation and memorabilia.
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With the rise in user-generated content on social media, there is a birth of newer narratives, community building, and incremental commercial opportunities for the artists. Loosely called Influencer Economics, for a few successful ones, this profoundly impacts the traditional marketing costs due to the factor of virality built-in. Virality, Fan Loyalty, when combined with Data Analytics & Sentiment Analysis — social commerce, and engagement, create a paradigm shift in the way artists conceive the ideas of their copyright works.
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Echonest is one such company that created interactive playlists, unique recommendations, and bought the music fans closer to the artistic vision’s original emotions. Many data analytics ventures like Chartmetric followed this approach. Aggregators and Distributors like Believe have developed integrated analytics dashboards to provide real-time intelligence to the artist on their music usage.
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Markets like India, driven by diversity in content across languages and genres, make an exciting glocalisation thesis. While there are overriding factors like Film Music and Pop, which cuts across 50% of the country, the driver of usage and monetisation is the local language, genre, and content. While there is acceptance of the English language across the country, a range of creative works come about, the fans do split 50:50 while consuming content. It could be a mainstream language, genre of language content.
The Indian music market has many other unique perspectives, such as language compatibility and Hindi-English content. Language catalog consumption gets followed by regional languages Tamil, Telugu, Bengali, Marathi, Punjabi, etc. Many of these languages are also globally spoken due to being a second preferred language or due to the NRI population’s size in a specific location.
The variety of music exists in >52 languages and 30 genres. The 80:20 and 20:80 rule applies to the content consumption in the new releases. Post the initial hype and four weeks initial adoption window; the long tail effect is visible in commerce. With an average of 1.50$ consumer ARPU and 25$ customer acquisition cost, the Indian market is one of the top content production, consumption markets globally. However, yet to become one of the largest revenue drivers.
As the music markets continue to consolidate in the next decade, fan participation, monetisation, and the inclusive relationship between artist-fans shall play a vital role in the market’s growth. At present, the Indian Music Market operates on three broad segments — Films, Non-Film, Independents with approx. 50:30:20 being the reflection on commerce.
Fixing the Vision and Consumption Gap
One of the immense complexities in the creative business lies in the fact that there is a gap in the incubated seed-stage creative vision and its eventual consumption in the market. For the longest time, the decision-makers and the legal frameworks have kept the thought and expression in isolation.
It is difficult to mount them within the same framework, but progressively, the elasticity between them shrinks. While the business continuously talks about the value gap in consumption, there is hardly any evidence on fixing the vision- consumption gap.
There are many reasons why such problems need a fix. They directly link to the value of creative assets (music tracks, videos, or literary works). Below are a few aspects and their importance:
- When the markets move between concepts of the works and enable them for distribution — Relevance becomes key.
- The length of ownership of copyright works is way longer than technology lifecycles — It is essential to reinvent as audiences change.
- Between the Traditional Media landscape and New Media ecosystem, there is a lack of intellectual capital and insightful information for the artists. This void cannot be filled only by data stemming from usage of the audiences’ content or predictive behaviour or sentimental analytics. There is a compelling need to grow the intelligence of the artists.
- Every song in its incubation stage has a vision in the creator’s mind: a mini market and a marketing blueprint. The artistic image is abandoned as the creative works complete and move into the recording or distribution stage. The result of these is high-cost marketing campaigns, thereby minimum guarantees. A back story of the creative works, the inspiration behind, is as important as the asset itself. Abandoning it means an incomplete package.
- Due to such gaps, marketing and monetisation tend to focus on tactics leaning towards ‘blocking time-band.’ Hence we see a lot of effort at the initial adoption cycle of music, but little on the long tail. However, far and few remixes, covers, collaborations, or sync opportunities create new niches.
Such matters started to happen as the Record Labels began to control the licensing and artistic creation process via their financial investments. At this point, the markets witness the creators’ aspiration to go independent and revolting against the terms that are not favourable. Kanye West calls controlled contracts as ‘Modern Day Slavery.’
Therefore, it is crucial to create an all-inclusive ecosystem — from idea generation to execution, resulting in developing much more music/ creative entrepreneurs.
What’s in it for the Creative Artist in this The New World
‘Ownership’, ‘Equity’, and being in control of their ‘Destiny’ are the most critical aspects of the new world. Capital plays a vital role in this mechanism from two perspectives — asset creation and investment return. The projects’ economics of the future are not looked at in the artist ecosystem, especially in the Independent Music Business. The practice of a ‘Cyclic Economic Business Model’ is one of the key reasons for this.
The Cyclic Economics works in the emerging creative markets due to a top-down effect. Most of the music and creative revenues link to celebrity economics, which means the same money pool is in circulation. It is the race to grab the maximum share by demonstrating the position of power. A tactic in use for a long time, reflective of a control mindset. Markets witness a dramatic change as the business’s realignment continues. Progressively, there is a shift of power back to the Artist and the Artist Centric economy’s emergence.
There is a compelling need for a new economic framework to combine three core aspects of the creative business — Creator + Fans + Technology. Technology has an exciting role to play in the aspirations of the artists. On one level, it is about enabling creative works & performances; the other lies in building sustainable fan engagements. Such structural mindset shifts can potentially create new markets and a ‘Creators Economy.’ Advertisers and Marketers will find this or premium value.
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Creative Intelligence, alongside the creative works, are the new dynamics of the emerging economic models. While royalty shall continue to be one type of creative works instrument primarily driven by a traditional top-down approach, creative Intelligence is where the future growth shall lie.
Creative Instinct and Intelligence with equitable interests leading to a diversified portfolio of products superimposed over the artistic framework shall form the bottom-up approach for enhanced revenue streams.
Monetisation, therefore, does not end at the mechanics of traditional royalty based transactions and practice. It begins with the recognition of the value the assets create alongside royalty. Copyright Royalty in the future business models can foreseeably become a ‘just’ validation checkpoint for the content asset class — Premium, Semi-Premium, and Generic.
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A significant shift is taking place at this point for creative artists. The importance lies in understanding the ‘Assets and Mechanisms Value Creation’ signalling towards future monetisation methods. All the artistic aspects, be it Artist Brand, Creative Works, or Creative Intelligence, are valuable appreciating assets.
However, the dichotomy between monetisation and aspiration is the desire to hit multiple milestones and goal setting. Therefore, think about the Moonshot.