Friday, March 26, 2010
5:14 PM | Posted by | | Edit Post
    In this article, we shall take a look at three strategies to utilize social networks to increase promotion and sales of music including one example of promotion of live music shows.  We will investigate and uncover how these new strategies and systems emerged and are regulated. 
    
    Today, advanced technologies are harnessing social dynamics to promote cultural products. These social interactions are now being automated, crowd-sourced, and leveraged to play an increasing role in how we find, buy, and consume musical entertainment. We begin by enquiring about how we arrived at this place in time where the old record stores and the over the air broadcast radio stations are taking an ever-decreasing role in providing music to the masses.  Finally, we will take a look at three social networks, Meetup.com, Imeem.com, and Gowalla to see how these social platforms are used by the music industry today and what it means to the independent musical artist. 


Change in the State of Music distribution 


    Before we can discuss MeetUp, Imeem, or Gowalla we need to address secondary facilitators with the rise of technology and the use of social networking platforms like FaceBook. These include various exogenous shocks to the music industry, such as changes to the legal landscape, new technology, and new technology entrants. 


    We begin with the passage of the Telecom Act of 1996. This unleashed the broad use of the Internet, the consolidation of radio/television entities, and broader competition over telecom services. 
    Prior to the introduction of the Telecom Act, Internet use was primarily the domain of universities and large corporations.  The act allowed a “New Era” of connectedness (Bridges 2001) of various broadcast and telecommunication companies to compete. For example, local exchange carriers were empowered to provide data services as well as cable operators, who were also endowed to provide data access to the Internet. A key provision was “Universal Access” which helped companies through subsidies to build out their communication networks. 


    Yet with the increased competition, also came deregulation cutting back on the ownership restrictions initiated by the Telecom Act of 1934. Whether consolidation of ownership creates less choice in the public is debatable, but its perception of lack of choice is still apparent. Radio Corporations like Clear Channel, control over a 1,000 radio stations, though as Professor Rossman detailed in lecture; the Hotelling theory tells us that monopolies in markets are intrinsically motivated to provide a variety to cover all segments of the market in which they dominate. 


    Finally, the Telecom Act did not provide regulation of large technology firms.  An attempt was made to wrangle in the expanding power of new digital content distributors via the Digital Millennium Copyright Act 1998, this act’s main impact has been to give power to the copyright holder over digital distribution of their work (Myers 2009). In reality, it simply created greater consolidation of web distribution by creating higher licensing fees of music and stricter enforcement of those licensing fees, thus allowing the copyright holders to simply take over the distribution. This occurred because to the streaming content rate hikes which squelched the business of streaming media. CBS’ take over of Yahoo’s Launchcast and Last.Fm are prime examples of this effect(NYTimes 2007). 


    A technology review affecting music industry of the last 100 years is a paper if not a book itself. Suffice to say, the cost of production has decreased, but the cost of distribution has shrunk even more dramatically. The fact that Moore’s Law, Metcalfe’s law,(Pang 2000) or Cooper’s law(ArrayCom 2010) have remained true simply mean that integrated circuits, networks, and bandwidth have continued to speed up, make less expensive, and expand capacity to provide fast reliable production, distribution, and consumption of digital content. 


    These technological changes enable new entrants to challenge the older guard of Warner Bros or CBS or NBC which are nearly 100 years old. (Rossman Lecture) (Knopper 2010)Companies like YouTube/Google, Facebook or Apple now play a critical role in how digital content will be distributed or consumed. 


    Massive changes have occurred to the record industry in terms of technology.  Apple computer is now the largest distributor of digital music in the world at nearly 70%(TG Daily 2008). Its iPod device is ubiquitous in terms of music consumption. Despite this apparent monopoly, the use of say the Herfindahl index to measure and reign in Apples’s apparent monopoly is difficult as digital downloads only make up 60% of all music sales in the US(TG Daily 2008). 


    Interestingly, despite efforts to control online media, the most popular site on the web is not owned by AOL/Time Warner or Fox Interactive but is privately held FaceBook. FaceBook boast over 300 million users(CNN 2009). To give you an idea of that kind of power, due to the changes in cable ownership, expansion of channels via satellite and the web. Fox or CNN boast at best 1-2 share or one to two million viewers for their top rated shows(bythenumbers 2009). Facebook has an audience of 200-300 times that. 


    Thus the rise of social networks has been the focus of media companies for some time. Fox purchased MySpace for “Users”(BBCNews 2005) as did Warner Bros’ merger with AOL(CNNfn 2000). But eyes are not enough as both have seen their investments flounder with various schemes to synergize those networks. Though the players have changed, their strategies have not, so we will now look at how the players in the music industry have adapted (BusinessWeek 2006). 
Same Strategies New Environment


    As any industry matures, over the last 100 years the record industry has been part of the media business community struggle to find ways to consolidate its power. Early entrants into broadcasting after deregulation such as Warner Bros, Disney, NBC/Universal,  all today have various radio and television divisions which produce their own content and distribute via their own networks. In fact, NBC/Univeral and Fox have their own web distribution site called Hulu.com as well (Hulu.com 2007). Though there are no direct record labels that own any radio stations networks. The pattern to consolidate production of content with distribution of that content has not abated with the introduction of the Internet. 


    And so, the rise of social networks, like MySpace or Facebook has signaled a dramatic change in the way music would be delivered. It appears that the old media companies have tried to adapt primarily using three standard strategies: “pay for play aka payola”, vertical consolidation of corporate properties, and pursuing synergistic opportunities. 


    So the first round of music distribution came with attempts to do pay for play. One of the first major entrants in this scheme of old strategy / new environment was Yahoo’s  Launchcast.  Launchcast which is now owned in part by CBS, initially offered a personalized radio channel based on the users musical tastes. But it soon became apparent that a portion of the songs you listened to did not fit in. The Launchcast Private Policy document (YahooLegal 2010) openly states that it shares your information with affiliates and other entities for marketing and promotion. Note, as the Internet radio provider, it is not held to any FCC standard like regulation. Regardless, CBS can hide the details in limbo within its legal privacy policy text.  But note, a new entrant to Internet radio Jango, actually offers labels pay for play upfront without any fear of legal recourse(TechCrunch 2009). 


    Regardless, the synergistic approach and consolidation is not limited to just old media players like CBS or Fox. Apple has recently purchased social music network Lala.com(WSJ 2009). As the largest digital distributor of music, even Apple needed to extend and combine its musical distribution muscle beyond the confines of its iPod device and iTunes application user interface to reach directly onto the web in any web browser. Thus, Apple is combining synergistically its iPod, iTunes Library, to the entire reach of the web.


    So both new and old companies are looking at social networks to extend their reach . Do the same strategies of the past work? And what are these companies doing to utilize these social networks to distribute their products? 
Network Externalities, Social Dynamics Prevail for the New Gatekeepers
In the past, due to regulatory restrictions record companies have focused on the surrogate gatekeepers. Those being initially the radio programmers or DJ’s of the station were the primary targets. As the industry moved from a cycle of payola scandals, new regulations created “Indy promoters” or a third party to handle the interchange of record companies needs to pander and radio station needs to increase profits. 
But as radio continues to decrease its audience, a new gatekeeper has emerged. This new surrogate takes two forms; the online community organizer and the social network platform itself. As these social networks grow, again record companies are willing to pay to gain access to their audiences. 
Let’s look at three recent strategies and their effectiveness in reaching their target. 
The Influencer


    One approach was to use “Organizers” embedded in social networks to promote the album. Recently, Bruce Springsteen released an album “Working on a Dream”. There are many networks to choose from. The author of this paper has first hand knowledge of this, as the author is a member of Meetup.com. Thus, the author has personal knowledge of this promotion. The label approached Meetup to promote the album. Here is their approach:


    They offered $50 dollars to each online organizer of various online groups. For example, my good friend Ken Heyden has a group called “Drinking with Strangers”. It is important to note, it is unknown what the age, sex, or musical preference of this group is as neither the Organizer nor the MeetUp network collect such data. Mr. Heyden has a group of over 3,000 active members. He was given $50 dollars for a banner ad link on his group’s site for 90 days and 4 free CD’s, as were many other organizers with similarly sized groups around the country. 


    This approach is clearly identical to what record labels do with “Indy Promoters”. The idea being that Mr. Heyden would promote this album to his audience, just as in the same way the “indy” would give the CD’s to various radio station programmers to promote. The author spoke to Ken, and he had no idea what to do with just 4 CD’s of the album. He is not a program director or DJ. Thus other than the link to Bruce Springsteen’s promotion site, this old strategy was apparently ineffective. 


    Another approach of which this author is personally familiar with was with the promotion of U2’s “No Line on the Horizon” album. In this case, the record label used another social network Imeem, which was recently was purchased by Fox’s MySpace(Billboard 2009) another attempt to synergize the features of the shrinking community social network.  In this scenario, “Buzz Agents” or online promoters working for U2 posed as the Imeem members calling themselves “U2” on Imeem. 


    A few weeks prior to release of their latest album, they apparently searched for persons who had either uploaded U2 songs, tagged U2 as a group they like, or possibly listed groups associated to U2 like the Alarm (another 80’s rock band).  They then proceeded to ask to be a “Friended” . “Friending” is an act in which one participant requests to share information of a personal nature with the other. It is doubtful that U2 band members would spend hours or days adding friends. So we must assume this was a promotional team. Then on the day of the release of their album, they utilized their “Friends” by sending them a link to a special Imeem page that included their entire new album of songs. Each song could be listened to in its entirety. And, each song had a link to purchase it via iTunes or Amazon.  


    We can see by comparing these two, which was more effective. Obviously getting your songs into the ears directly of fans is the most effective use of a social network. Imeem being a music based social network has the data profile that would make best use of targeting consumers of music.  


    But these are online uses solely, can social networks be used to persuade social action off the Internet? Just as a point of fact of social networks being used directly by promotional arms of major media corporations, this author has been approached by major book publishers and movie studio promotional arms to help market their products. Penguin asked the author’s Generation X Meetup group to attend an 80’s genre book signing and Sony Picture’s used their street promotion team to promote the Gamer Film to the author’s bar group. In each case they used the social network to get people offline to participate or interact with their product.  But, newer technologies have extended that reach even farther. 


    Gowalla a smart phone / GPS based social network has recently begun promoting musical shows via its social network. Recently during the South By Southwest Tech Convention in Austin, they added a Smokey Robinson “Badge”(AustinChron 2010). The concept with GPS or proximity based social networks like Gowalla or Foursquare is to use actual locations and rewards to persuade people to interact with the sponsored product. Gowalla does this by offering badges to persons who complete location based tasks. These badges are stored in their smart phone in the Gowalla phone application. In some cases the badge can be shown as a coupon for that venue as was the case for the Smokey Robinson Show.  Recently Warner Bros Valentines Day film used Foursquare to make users travel to all the locations in the movie to gain a “Valentine’s Day” badge(Foursquare 2010), which could be used at participating theaters for a discounted ticket. 


    So despite the new technologies, the strategies have basically remained the same. Use surrogate gatekeepers for promotion of recording artists. In some cases the surrogate gatekeeper has been the social network platform. And in other cases, the gatekeeper has been an online organizer of communities embedded in that social network platform. 
Future Strategies and Directions


    These three social network instances are just scratching the surface of how the recording industry and media conglomerates in general are beginning to use social networks.  The author foresees three issues gaining greater significance in the coming years. These deal with information cascades, human capital investments, and greater reliance of network externalities. 


    As there is a continual need to build momentum for recording artists, greater and greater reliance on rank in specific social networks will gain greater importance. Thus the concept of information cascades, or herd effects will be increasingly used. Whether the behind the scenes manipulation of this will create another scandal is not known. But most users assume that “magical algorithms” place an artist at the top of a list by popularity of their talent not random choice or undisclosed sponsorships. As these destinations gain in stature the lists will too. 


    As the need to find what Malcolm Gladwell calls the “influencer” increases, we are already seeing media networks invest in human capital. From American Idol to Style TV’s Design Star, the use of a manufactured “Tournaments Model” for an artist to reach a level of “Super Stardom” exists today. But in terms of human capital investment we have yet to see it in terms of social networking stars. Today companies are already paying celebrities to co-op their Twitter feeds to inject ads (TechCrunch 2010). The time to create social network influencers is here, it stands to reason that the investment should naturally follow. 


    Finally, as we become more connected, the importance to be continually connected increases. In the first years of MySpace and Facebook, these networks were closed data silos. But increasingly in the last few years efforts have begun to share data(Wikipedia 2010). This cross-seeding of socially networked information is only going to make network effects ever more powerful. In fact, currently many sites use Facebook updates and twitter feeds in their content. New tools are enabling audio to be aggregated across networks as well.  


Conclusion: The Fate of the Independent Musician


    Thus even though the major players have changed little, the strategies have changed slightly, the platforms or technologies, and results continue to evolve. As changes in laws changed the landscape of the major media players, little has been done for the independent non-signed artist. They remain stuck in self-subsidy and jousting to miraculously unseat the super star. And despite the decreasing cost of both production and distribution, artists still need to gain access to these social networks where the lists are gamed by conglomerates, ads are controlled by labels, and the resources to hire “buzz agents” to be-friend millions remain in the same hands for the most part as they did over nearly a century ago. 


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