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Can 1,000 fans replace the music business?

Kevin Kelly's recipe for broken dreams

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For the sake of round numbers, let’s say that all of the $100,000 came from iTunes, so the artist sold a nudge over 100,000 unit sales. Under a conventional record deal, those true fans will have returned a fraction, maybe as little as 10 percent, of that sum to the artist, after costs, deductions and recoupment. An even smaller fraction would be collected on behalf of the publisher and writer. Now of course Kelly is referring to the artists’ option of going it alone, but this form of independence will inevitably be dependent on other "aggregators". Even in the digital world, you need these to get product to, and collect revenues from the market - and they take commission that will often be priced at the margin. Someone, somewhere, takes a cut.

A Monopoly of Obsession

According to Kelly, your 1,000 "True Fans" could each give you $100 a year. No doubt some fans do just that - if not more - but most of us are not such obsessive compulsives; we reward lots of the artists we're passionate about with the limited resources we have.

No artist therefore has a monopoly on the fan, no matter how obsessive they are. Competition takes place both in the market for artistic creation, and in the market for the fans' attention. For sure, having fan clubs is a great way to try to monopolize those markets (the rock band Kiss mastered this trick way back in the seventies and continue to do so today) but is this really the way "fans" and "artists" could or should interact? Surely the artist should, if he or she is any good, need to compete for those 1,000 fans every time they sit down to pen and perform their new album. If the money (or fans) were guaranteed, would that actually impair the level of creativity that would otherwise have taken place?

Similarly, if a portion of the fans’ musical budget was "ring fenced" to one artist, then that would hinder the ability of the fan to discover and reward other new artists, and vice versa. And besides, what sort of artist would be 'content' with just 1,000 fans anyway? Again, once you start thinking about n+1, the marginal costs and benefits kicks in.

Fast and cheap means more fans are needed

It does no harm to shed some light on the practical challenges in accommodating the "Long Tail” that broad-brush generalizations like Kelly's tend to ignore. Indeed, on reading his much-hyped blog, I wondered at times if he was applying yesterday's "unit price" to today’s market place. At the basic level, if the "duplication and dissemination" of small quantities of stuff becomes, as Kelly states, "fast, cheap and easy", then if price tends towards marginal cost, then it will be sold cheaply too, suggesting that you need higher volumes to make up for the reduced price. Which means you will need increasingly more fans, not fewer fans!

At a more detailed level is the issue of cross-subsidisation which is embedded throughout the music industry, and how that holds up (or breaks down) when you have a tail as long as the one we’re currently dealing with and a head that ain’t hitting like it used to. Concepts like "micro payments" have been banded around as a panacea for years, but ultimately the market will provide a role for intermediaries, be they labels, digital aggregators or collecting societies, who seek to apply economies of scale. In many ways, the fact that the long tail leads to lots of granular transactions from lots of retailers to lots of niche artists makes the case for collective licensing stronger, not weaker.

The role of the 'rational' mediator

In a rare acknowledgement of reality, Kelly concedes that "not every artist is cut out, or willing, to be a nurturer of fans” and therefore need a "mediator" to manage their fans for them. Presumably, those artists to which he refers present a bigger challenge to "compete" for those fans, than those who would otherwise have been an "instant hit".

Given the relative toughness of the task of managing someone who was "not cut out", a rational ‘mediator’ would surely be seeking marginally more than the market average in terms of commission, or more in terms of upfront investment – advances, to you and me - to get them to this nice round number of 1,000 true fans. Either way, more cash up front or more cash in terms of commission again affects Kelly's overly simplistic math - and questions his view that expenses will be "modest".

At this point, it’s worth reminding ourselves of another (Scottish) economist’s reference to the ‘invisible hand’, and wondering if this brave new Web 2.0 give-it-all-away-for-free world has come full circle, only to be undressed to reveal the same old rules of supply, demand and economies of scale.

Perhaps it’s about time the new school got to grips with the old rules - if the long tail is to really succeed in significantly affecting demand, not just supply.

Build a business case: developing custom apps

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