In the first part of this series, I wrote about the need for a new business model and more specifically rethinking where artist’s revenue came from. The big challenge is that all roads point to needing a loyal and engaged digital fanbase. In a world of constant distraction and a never-ending stream of content, how do you actually build an engaged digital fanbase?
One version of the answer lies in an unlikely place, a 1997 book written by Wired Magazine founder Kevin Kelly. Way back before the dot com bubble, he wrote a seminal piece titled ‘New Rules For the New Economy’. Many internet entrepreneurs such as David Perell (Write of Passage) have referenced this book as being the founding principles upon which they have built their businesses.
NEW RULES FOR THE NEW ECONOMY
The one constant that is expressed about our digital world is its rapid pace of change but the enduring nature of what Kevin Kelly wrote came from the fact he didn’t zoom in on the specifics that were ever-changing but instead zoomed out to the underlying concept of ‘The Network Economy’.
“The Digital Revolution gets all the headlines these days. But turning slowly beneath the fast-forward turbulence, steadily driving the gyrating cycles of cool technogadgets and gotta-haves, is a much more profound revolution - the Network Economy.” Kevin Kelly, New Rules for The New Economy, Wired Magazine
The most important development of recent decades, according to Kelly, is the increasing connections made between us and all the things around us. Computers, phones and connected devices all act as nodes in a huge system that has become increasingly more interconnected. These advances don’t just enable obvious functions, such as communicating more frequently, but also more subtle changes to how our economy functions and how we should build our businesses. With that Kelly defines 12 laws (or principles), some of which could unlock the answers to how artists should start building their online fanbases.
THE LAW OF PLENTITUDE GIVES MORE
The first law to highlight from Kevin Kelly is ‘The Law of Plentitude Gives More’. With this Kelly is referring to the network effects that have governed our lives over the last few decades and the diminishing cost of reproducing digital goods. In terms of individual artists, it would be easy to assume there is no real benefit gained for each fan by the total number of fans increasing (aka network effects). When thinking more broadly there is a distinct value we, as humans, derive from being part of a community. Experiences such as live events and competitions all become increasingly more enjoyable with the more people that engage in them, therefore aiming for some level of community (or network) will increase the value of each individual fan.
Beyond these network effects, Kelly also talks about the flip from the value being in scarcity to plentitude. With the cost of distributing music (and other digital goods) going down near zero, it makes sense to use as many different platforms to attempt to distribute your digital goods (recorded music, recorded live shows and other digital content) in a way consumers expect to receive them. More to come on this point.
THE LAW OF TIPPING POINTS PROCEEDS MOMENTUM
The next law I wanted to reference is ‘The Law Of Tipping Points Precedes Momentum’, which directly connects to the cost of digital goods going down to near zero. Although the time and effort to record new music or create new content will never be near zero, it is substantially cheaper in monetary terms than it ever has been. This enables music, video or other content to be more widely and regularly distributed without incurring extra costs (there are no DVDs or CDs to press to distribute). This regular and wide-reaching distribution is essential to achieving success in a networked economy. However, this approach can feel like shouting into a void with little or no response or acknowledgement for all the work and effort put in. Your fanbase or virality doesn’t grow incrementally over time but instead doesn’t grow at all until all of a sudden grows exponentially. No better place have I seen this described than on Jack Butcher’s Visualise Value (see below). Some may accuse this of being ‘hustle porn’ but just before the new year, countless people shared their own version of this chart.
This may not happen for everyone but very few manage to achieve success without a constant stream of music, content or other digital goods being pumped out consistently. There was a big backlash to Daniel Ek’s comments on how artists should adapt but he didn’t make the rules, he’s just pointing them out.
“You can’t record music once every three to four years and think that’s going to be enough. The artists today that are making it realise that it’s about creating a continuous engagement with their fans” Daniel Ek, Spotify CEO - in Music Ally
THE LAW OF GENEROSITY FOLLOW THE FREE
The networked economy working on the principle of exponential growth tightly aligns with another of Kelly’s laws ‘The Law of Generosity Follow The Free’. When describing this example Kelly references software with the business model being to monetise via services or upgrades to the existing free product. If we directly apply this to music then there isn’t really an opportunity to offer an ‘upgrade’ on the initial music, however, the interpretation of the word ‘services’ can be used more broadly and offers an opportunity to artists. If an artist distributes their music for free (or perhaps the interpretation is that streaming revenue isn’t their sole revenue stream) then there is an ever-increasing opportunity to connect with these new fans to offer them new ‘services’. Linking back to my previous article around the synergy map for artists, this is where the other products (as well as services) can be used to further monetise the fans acquired through music. The more people who listen to your music, the more people there are to offer these additional products and services (gigs, merch, brand partnerships etc) therefore it pays to try and build as big a fanbase as possible, on as many platforms as possible, without too much of a concern about the direct revenue back from that music.
THE LAW OF THE ALLEGIANCE FEED THE WEB FIRST
This is possibly the most interesting and challenging principle to execute from an artists perspective. The best example to draw from is computer games company Epic Games and their ‘Unreal Engine’. It offers particularly generous terms to people who could be considered their competitors in a bid to make the overall market bigger. If there are more games made there will likely be more people playing games, if there are more people playing games then the overall pot of revenue available (or total addressable market) increases.
When we think about this in terms of music there have been several advances into the digital space in the past few years. When Marshmello did the first-ever gig inside Fornite there was no possibility that he would benefit from Travis Scott’s future appearances in the game, however, finding new ways to explore and exploit the digital economy that improve the overall industry can only be good, according to Kelly. As we see more entrants into this gaming space (don’t say a metaverse - yet), including Lil Nas X into Roblox, these types of opportunities become more standardised and expected by consumers, therefore opening up more opportunities to everyone.
THE LAW OF DEVOLUTION LET GO AT THE TOP
One of the most challenging business problems is knowing when to move on from a good thing. Just because a business model or product worked at one point in time is no guarantee that it will continue to work, quite the opposite according to Kelly. The mindset required by all members of the network economy will be one that looks forward, not backwards, in an attempt to find new ways to engage their army of fans. As we saw in the continued resistance to the digitisation of the music industry, the longer you try to hang on the worse it can get.
CONCLUSION
There is are still many similarities with the pre-digital era, especially the uncertainty of being able to successfully grow a fanbase. There were playbooks and models that helped artists before and there will be many that will be documented as things evolve. Although these playbooks and models can’t guarantee success, they show the need to shift from the models that drove an artist’s success in the previous heyday to one of a whole range of new opportunities.
To summarise my interpretation of how artists can take advantage of Kelly’s advice on how to build a business for the network economy:
Distribute your music as widely as possible on as many platforms as possible with less concern from the immediate return for that music
Make your own synergy map and use it to monetise your music
Release a consistent stream of music and other content to build a fanbase without expecting a short term return
Explore new platforms and opportunities to grow and normalise the opportunities for artists in a digital world
Think about your fanbase as a community and try to connect them
References:
Kevin Kelly - New Rules for the New Economy
https://www.wired.com/1997/09/newrules/
Daniel Ek in Music Ally
https://musically.com/2020/07/30/spotify-ceo-talks-covid-19-artist-incomes-and-podcasting-interview/
Goldman Sach on the future of Music Streaming
https://www.goldmansachs.com/insights/pages/infographics/music-streaming/