Connect or Die.

PHOTO BY EMAYOH ON FLICKR.COM

Digital & social technology are reshaping the music business. Here’s your guide to succeeding in a brave, new Music 2.0 world.

It’s no understatement that digital and social technologies have dramatically and permanently altered the music landscape. A decade ago, few in the industry foresaw the enormous shift that began with the introduction of simple file-sharing technology. Over the past ten years, MySpace, iPods, a slew of social networks, music blogs, and digital music retailers have all played their part in a radical shift that is continuing to transform the way fans discover, acquire, and experience music. This is truly a whole new kind of revolution.

As the marketing agency that coined the term brand infiltration™, Espresso is acutely interested in understanding how evolving technology, demographic shifts, economic factors, and cultural phenomena like those impacting the music industry are reshaping consumer expectations—and helping our clients rise to the challenges that unfold along the way.

For this reason, we’ve created Connect or Die, one of a series of publications that examines the challenges and opportunities inherent in a 2.0 world, and offers one central theory about the future of the music business:

To survive and thrive in a brave, new Music 2.0 world, artists must embrace and utilize the very technology that has caused such turmoil in recent years. Through it, they must cultivate and nurture deep, direct relationships with their fans, engaging them consistently and genuinely.

Those that do so will discover unprecedented opportunities to generate revenue and grow their fan base. Those that do not, well... the title says it simply: Connect or Die.

Jacquelyn Cyr Chief Executive Officer Espresso

SOUND CHECK.

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Sound Check

Welcome to Music 2.0 Bands Getting it Right Infiltration How-Tos Encore Credits

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They say the music business is in trouble. No! The business of selling CDs is in trouble. This is a religion.”

Michael Rapino Chief Executive Officer Live Nation

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Once upon a time, the music business was simple: talent + record label + plastic discs = dollars.

Over the past decade, however, digital and social technology have exploded that formula. As the media landscape has fragmented, CD sales have fallen off precipitously, and the backbone of the record business—the ability to charge consumers for access to music—has crumbled before our very eyes.

Sheer copyright enforcement is no longer the path to financial success and professional longevity. These days, artists all across the board are leaving

the confines of the old record label system behind and eagerly experimenting with new business models and revenue strategies.

From some of the world's biggest performing acts to small indie bands, music creators are realizing more than ever the future of their business hinges on the relationship they have with their fans. In a Music 2.0 world, fans are not just consumers; they are producers, participants, members, promoters, and more. They—not any kind of discs —are the lifeblood of the music industry.

Music, after all, is a social business.

THIS IS NOT THE ‘RECORD’ BUSINESS.

PHOTO BY WILLIAM.K ON FLICKR.COM

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PHOTO: Live Nation

PHOTO BY ANIRUDH KOUL ON FLICKR.COM

In 2007, after 25 years at Warner Brothers Records, which had released all of her albums up till then, Madonna left the label to sign a $120 million “360 degree” deal with Live Nation. In addition to operating the world’s highest-earning female singer’s tours, which it had already been doing, Live Nation would now also be handling her albums, merchandising, film, and TV projects, DVD releases, music-licensing agreements, and more, and getting a cut of all of it. In the three years since, U2, Jay-Z, Shakira, and Nickelback have all followed suit, eschewing the traditional record label route for similar kinds of deals with Live Nation. No doubt more are to come.

In January 2010, the Department of Justice approved the first big merger of the Obama administration, between Live Nation and Ticketmaster, giving the newly formed Live Nation Entertainment the ability to book its own concerts, sell its own tickets, and merchandise and manage its exclusive artists all under one roof. This entirely unprecedented model within the music industry is centered around not any one revenue stream, but rather on one guiding principle:

From tickets to trinkets, success in the new Music 2.0 landscape means owning the complete fan relationship.

ALIVE AND WELL…

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PHOTO: MADONNA.COM

The paradigm in the music business has shifted, and I have to move with that shift. For the first time in my career, the way that my music can reach my fans is unlimited. The possibilities are endless. Who knows how my albums will be distributed in the future?”

In a statement issued at the time of her deal with Live Nation, Madonna said: “

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Hanging out on Facebook. Tweeting about their favorite song. Discovering new music on LastFM. Leaving comments for their friends on MySpace. Sharing playlists on iLike. Posting concert photos on Flickr. Loving your new release on Hype Machine—or trashing your latest video on YouTube.

Every day, music fans are discovering new ways to find, share, enjoy, and even remix their favorite music, and then broadcasting their findings and favorites, their complaints, and their compliments to a global audience that is listening 24/7.

PHOTO: GETTY IMAGES

RIGHT NOW, YOUR FANS ARE...

PHOTO: GETTY IMAGES

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THIS IS THE CONNECTED ERA.

As a species, we are consuming and creating media via social technology at an unprecedented rate. In February 2010 alone, we collectively:

• Watched 12.2 billion videos on YouTube • Posted over 1.5 billion Tweets on Twitter • Shared more than 20 billion pieces of content on Facebook

PHOTO: PEDESTRIANREX ON FLICKR SOURCE: ROYAL.PINGDOM.COM

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According to new research in the Razorfish FEED report, Americans now spend, on average, about the same amount of time online as they do watching television.

In fact, according to Forrester, those under the age of 45 spend

significantly more time using the Internet than watching television.

PHOTO: HTTP://WWW.BANDLEM.COM/XMAS/2006/

THIS IS THE NEW MAINSTREAM.

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In the U.S., 62% of us are listening to music online through services like iTunes and Pandora.

We’re spending 15–20% more each year on digital music, while spending less on CDs in equal proportion.

Meanwhile, 95% of digitally-downloaded music is not paid for.

This year, for the first time in history, revenue from digital music will eclipse CD sales in the U.S.

By 2016, this will be the reality worldwide.

THIS IS MUSIC 2.0.

SOURCES: RAZORFISH FEED STUDY & NPD GROUP 11

PHOTO: BETA KAREL ON FLICKR.COM

OF 16-19 YEAR OLDS WOULD RATHER GO A WEEK WITHOUT SEX

THAN A WEEK WITHOUT MUSIC.

SOURCE: MARRAKESH RECORDS AND HUMAN CAPITA, UK PHOTO: LOVE, KIRA ON FLICKR.COM

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70%

In the past, people would tour to promote their albums; today they put out albums to promote their tours.

The pendulum has swung.”

Guy Oseary Madonna’s manager

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PHOTO: GREENPLASTIC875 ON FLICKR 13

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Sound Check Welcome to Music 2.0

Bands Getting it Right Infiltration How-Tos Encore Credits

RADIOHEAD FINDS A $10,000,000 POT OF GOLD. In 2007, Radiohead blazed new trails with the independent online release of their seventh album, In Rainbows. In a groundbreaking move, Radiohead let fans choose to pay as much or as little as they liked to download the entire album. An astonishing 1.2 million copies were sold in the first week at an average price of $8*. Up until then, the group’s biggest success had been

2003’s Hail to the Thief, which sold 300,000 copies in its first week.

The band later released a CD version of In Rainbows, which sold 1,750,000 units, and an $80 boxed set which sold an additional 100,000 units.

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PHOTO: KRUDO ON FLICKR.COM * IN US DOLLARS

In 2008, Nine Inch Nails released Ghosts I-IV in a number of different formats. Ghost I was released under a Creative Commons license, and was made available at no cost on numerous file-sharing sites across the web. Ghosts I-IV was also made available for $5 on Amazon.com through a distribution deal that cost them a mere $38.

In its first week, the album sold 800,000 units, generating $1,600,000 in revenue and hitting #1 on Billboard’s Electronic charts. A Deluxe Limited Edition version of Ghost I was later released and sold out in three days, grossing over $750,000.

Ghosts I-IV went on to become the top-selling MP3 album on Amazon.com for all of 2008 and the fourth-most-listened to album of the year on Last.fm.

NIN continue to experiment with creative packaging and distribution models such as USB flash drives with “leaked” music left in concert bathrooms for fans to discover, iPhone applications, and more.

NINE INCH NAILS TURNS A FREE ALBUM INTO $2,350,000 IN REVENUE.

PHOTO: EDVILL ON FLICKR 16

That’s right, Twitter, the micro-blogging service that enables its users to post and read text-based status updates of up to 140 characters in length. The band gained 200,000 followers on Twitter in its first 30 days of using the service. According to TopSpin, within a month of the release of 2009’s Clarity Live, Twitter had delivered more than 22% of all traffic to the Jimmy Eat World site and resulted in more than 20% of the album sales.

JIMMY EAT WORLD GETS 20% OF RECORD SALES STRAIGHT FROM TWITTER.

PHOTO: BURKAZOID ON FLICKR

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AMANDA PALMER GIVES HER FANS CONTROL OF MERCH. Launched in 2008, Amanda Palmer’s groundbreaking merchandising concept allows fans to not only support the musician, but one another as well. Postwartrade.com is Palmer’s platform for fans and artists the world over to sell their custom-made, band-inspired “merch.” Offering everything from toothbrushes to pillowcases, each designed and handmade by a fan/artist who shares profits with Post War Trade, this approach not only blows the tired band T-shirt out of the water, it takes the creative possibilities of fan community engagement to the next level.

PHOTO: VONLOHMANN ON FLICKR 18

Never one to shy away from controversy, Eminem turned a 5-year hiatus and a real-life struggle with addiction into a buzz-building campaign that made The Relapse arguably the most highly-anticipated hip-hop release of last year, and led the first single, Crack A Bottle, to a record-breaking first week of downloads (418,000).

Leaning on Twitter and other digital channels to provide a mix of behind-the-scenes and “in character” updates that suggested Eminem was in a fictional mental hospital called Popsomp Hills, Slim Shady created an audacious connection with fans that blurred the lines between his alter ego, his real-life struggle, and his latest commercial work.

SOCIAL MEDIA HELPS EMINEM BREAK RECORDS.

PHOTO: EMINEM.COM

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In February 2010, Damian Kulash, lead singer of OK Go, wrote in a New York Times op-ed that the band’s label, EMI, had tried to increase its streaming royalties from YouTube by preventing users from embedding the band’s videos on other websites. Kulash saw the policy as a serious

impediment to greater exposure for the band. A month later OK Go announced their split from EMI —via a YouTube video, of course. The group plans to release all future material, including a re-release of their new album Of the Color of Blue Sky on their own Paracadute Recordings label.

OK GO GO FOR FREEDOM.

PHOTO BY OK GO ON FLICKR 20

QUEEN OF THE INTERNET.

PHOTO: LADYGAGA.COM

In 2010, there is arguably no greater example of an artist getting “it” right than Lady Gaga. With the clout of a label backing her serious social media savvy, she has garnered over five million Facebook fans, three million Twitter followers, and become the top-selling digital artist of 2009. With a niche-busting sound [and look] that cuts across subcultures and pushes boundaries without crossing them, and a relentless commitment to staying in touch with her fans—sometimes even tweeting from backstage at concerts—Gaga has created a devoted community that eagerly embraces her pet name for them: “little monsters.”

From product partnerships with Polaroid, Estée Lauder, and MAC, to her Haus of Gaga iPhone app, Gaga’s investment in her fan community fuels the success of everything her brand touches. Proof positive: the music video for “Telephone” (co-starring Beyoncé) had been viewed over 7,000,000 times within just three days of its March 11, 2010, release.

Is Lady Gaga a master of the tools and strategies of the digital age? Absolutely. You might even say she is the embodiment of its spirit.

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She's tapped into one of the primary obsessions of our age—the changing nature of the self in relation to technology, the ever-expanding media sphere, and that sense of always being in character and publicly visible that Gaga calls ‘the fame’—and made it her own obsession, the subject of her songs and the basis of her persona.”

Ann Powers

LA Times

PHOTO: LADYGAGA.COM

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Sound Check Welcome to Music 2.0 Bands Getting it Right

Infiltration How-Tos Encore Credits

The internet opens a world of limitless possibility, where the only boundaries are the boundaries of your own imagination.”

Adam Duritz Counting Crows

PHOTO: BATINTHERAIN ON FLICKR

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As many within the music industry struggle to find their footing in this new landscape, one thing is clear: There is no going back.

To succeed in the Music 2.0 economy, the only way to go is forward.

Bands that are exploring and embracing the opportunities of the digital medium are discovering new ways to connect and build relationships with their fans.

On the following pages, we present the Cliff’s Notes to doing just that.

HERE’S TO YOUR FUTURE.

PHOTO: MUSE.MU

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1. LISTEN TO YOUR FANS.

Social and digital technology is helping your fans to connect to each other in more places than you can imagine. They’re talking, sharing, praising, trashing, remixing, discovering, complimenting, complaining, gossiping, speculating, collaborating… and more. You should be part of the conversation.

And what’s the first step to being a good conversationalist? Being a good listener.

Start ‘listening’ in the most obvious places: MySpace, Last.fm, Twitter, Facebook, YouTube, Flickr, Imeem, Hype Machine, Vimeo, qik.

Try one of the many easy-to-use tools to help manage and monitor the conversations, such as Google Alerts, TweetDeck, Addictomatic, SocialMention.com, or Radian6.

PHOTO BY ANIRUDH KOUL ON FLICKR.COM

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2. ENGAGE & EMPOWER THE AUDIENCE. Your fans like to show off their love, so make it easy for them.

Some artists—like Mariah Carey, John Legend, and The Roots—are deliberately encouraging remixes of songs from their new albums by providing fans with the track stems and source files. Others, like Third Eye Blind, are asking fans to participate in their creative process by posting unmixed instrument stems of tracks and inviting fans to tweak, shape, and edit them through a series of contests.

The bottom line? Your fans are your lifeblood. Feed their passion for your music. Make it easy for them to share that passion by providing resources to do so both online and off.

There is no better promotion strategy.

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3. INVEST IN THE LONG-TERM RELATIONSHIP. Your fans want to know EVERYTHING. From what you’re recording to what you’re wearing, to what’s keeping you up at night. Cultivate your connection to the fan community by sharing your stories and personality through blogs, tweets, videos, photos, and more.

Yes, it’s okay for band members, managers, and other members of your marketing and public relations team to post things on your behalf—some of the time. But there’s no substitute for authenticity.

In the Music 2.0 era, it’s the relationship with your fans that drives success. Cultivating a direct connection with your fan base is a long-term investment, but it’s an investment into the sustainability of your own band.

PHOTO: ANIRUDH KOUL ON FLICKR.COM

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4. USE THE NEW TOOLS. From Topspin to Bandcamp to Fan Mail Marketing, the past few years have seen the emergence of a slew of tools aimed at empowering artists to gather, communicate, and sell to their fans directly. These tools are not only allowing artists to elegantly tackle the functions for which they were once dependent on record labels, they are offering artists unprecedented access to information about their fans and, most importantly, control over

exactly how the relationship with their fans is managed.

Three years after its launch, the artists utilizing Topspin run the gamut from music industry veterans who have literally defined the very history of rock and roll, to indie newcomers who have never been signed to a label. The breadth of this roster alone is indicative of how equally appealing these tools are to artists at literally every stage of their careers.

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5. EXPERIMENT.

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The digital revolution has changed the way your fans discover, share, and purchase music—forever. The good news? This shift to digital consumption has created the potential for virtually limitless new revenue streams.

Instead of charging for “access” to your music, let the access be your marketing. Charge instead for above-and-beyond-access: immediacy (priority access or immediate delivery), accessibility (wherever and whenever they want it), and syndication rights (pay-per-use versus pay-per-sale).

Imagine the dozens of new revenue streams that could be created if the gateway to transactions was moved downstream—away from the initial discovery and deep into the premium services that fans are growing used to paying for, like personalization, interpretation, unique experiences, curation, immediacy, and accessibility.

At the end of the day, the music business is a business. Digital and social technology are opening new worlds of opportunity for artists to get creative about their merchandising, product, and distribution strategies.

Now is truly the time to “think outside the [CD] box”.

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Sound Check Welcome to Music 2.0 Bands Getting it Right Infiltration How-Tos

Encore Credits

A decade after Napster, the relationship with music fans is the music business.

Music 2.0 isn’t some flash-in-the-pan fad that will pass like a spring storm; it’s a legitimate revolution. And while it’s hard to predict what the future of music will hold, one thing is clear: this ain’t business as usual.

Together with our fans, the Music 2.0 revolution is pushing us to rewrite the rules of engagement, the rules of commerce, and the rules of ownership.

Those of us who embrace the shift will not only survive, but thrive, by gaining new fans, unlocking new revenue, and discovering new joy in the unfettered ability to share our art with the world.

The time has come.

ENCORE.

PHOTO ON FLICKR.COM BY BITZCELT

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Connect or die.

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Sound Check Welcome to Music 2.0 Bands Getting it Right Infiltration How-Tos Encore

Credits

Connect or Die was researched, written, and produced by a team of music-lovers and avid fans who also happen to work for a marketing agency called Espresso (www.brandinfiltration.com). Espresso uses the new art of brand infiltration to help brands (and bands) use digital and social technologies to get connected with their fan communities, promote their products, and unlock new ways to generate revenue.

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Say hello, why don’t you? ESPRESSO TORONTO Jacquelyn Cyr | Chief Executive Officer jacquelyn@brandinfiltration.com twitter.com/infiltrators 416 620 6773 ext. 0214

ESPRESSO BOSTON Marta Kagan | Managing Director, US marta@brandinfiltration.com twitter.com/mzkagan 617 477 5811 ext. 3

ESPRESSO WWW brandinfiltration.com slideshare.net/infiltrators

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