An 18th Century Music Model Applied To A 21st Century Revenue Problem

Joseph Haydn: The original subscription model?

When we discuss how artists and musicians make money, we tend to think of a transactional economic model where there is an exchange of money for goods. This is because recordings have long been a dominant revenue stream in the music business. However, music is intangible, and so musicians are technically selling multiple products: recordings, concert tickets, merchandise, publishing, etc., all based on their art and the engagement it drives in fans. Musicians must learn how to monetize these products—as well as completely new ones—by focusing on fan engagement and individual brand identifies. Selling subscriptions is just such a new strategy.

Netlifx and Spotify are well-known examples of media companies using digital subscription models. Netflix built a movie subscription service that was instrumental in disrupting the movie rental business. Spotify, which launched in the US only about a year ago, is doing the same in the record business. The emergence and burgeoning success of these companies is helping the subscription model to take hold as a new revenue source for record labels and individual artists as well.

I’ve been thinking about this lately in terms of arts patronage. What if artists connected directly with supporters in ways that were less like transactions and more like relationships?

Arts patronage has a long history. When one studies music, one learns about Joseph Haydn, the Austrian composer who lived from 1732 to 1809. Haydn was one of the most prolific composers of the Classical era, writing more than 100 symphonies, essentially inventing the string quartet form and influencing both Mozart and Beethoven.

One of the important elements to learn from Haydn’s career is the impact of patronage on his livelihood.  After many years of trying to scrape by, his work became noticed by aristocrats, and he was ultimately hired to provide music for the Hungarian Esterházy family. As Kapellmeister, he was a full-time employee, composing all of the music for family events and entertainment, hiring and conducting the orchestra and singers, and managing the music library. He held this position for 30 years, and took part in several orchestral concerts and opera performances each week.

Haydn would not have had such success without this position; it provided full-time employment and served as a way for him to constantly refine his skills. As he learned after leaving the service of the Esterházys, his work for them made him recognizable throughout Europe, further enlarging his success.

While Haydn’s subscription model is one of the most famous from the last couple of centuries, some modern versions of arts patronage are emerging using crowdfunding and subscription models.

Among the most well-known crowdfunding services are Kickstarter and United States Artists. Both of these services help artists and musicians appeal directly to fans to raise funds for a specific project. They manage the subscription process and provide a framework for patrons to invest. The agreement by which they host the project and help facilitate the transfer of money creates structure, accountability and legitimacy, ideally providing both creator and patron with a successful project and an enjoyable experience. No conversation about crowdfunding would be complete without mentioning the incredible success of Amanda Palmer, whose legendary Kickstarter campaign raised $1.2M dollars. (Yes, that “M” is for “Million”.) This sets a pretty high bar, but serves as proof that this kind of project-specific funding can be a viable solution.

A different offering closer to the Haydn-era patronage system is that of trumpeter and composer Dave Douglas’ label Greenleaf Music. Greenleaf offers three levels of annual membership, from $25 to $125. A basic subscription provides a player that streams all of the label’s music. Higher levels provide even greater benefits: exclusive downloads, discounts on merchandise and tickets to events, including meet-and-greets with the artists themselves. While not used to fund complete projects, it is an innovative way to build an on-going relationship between the label and fans that goes beyond the traditional transactional model. It is also forward-thinking in its strategy of cultivating new revenue streams.

Lastly, a recent addition to this conversation about modern, DIY arts patronage is Drip.fm, a platform specifically created to aid in the mechanics of setting up and managing a subscriber service. While currently in closed Beta, Domino Records has announced a subscription program using this service. As they describe themselves, Drip.fm represents a way for a trusted label to regularly supply content to subscribers. As Domino's head of digital, Kurt Lane, explains: "What we liked about the idea of Domino Drip is that it combined the direct to consumer philosophy with the ongoing relationship that a subscription model provides." It will be interesting to watch this company develop, as it signals that the subscription model is seen as viable enough that startups specifically interested in entering the subscription service space are attracting funding.

Patronage and subscriber programs have always been integral to arts funding. While they may not currently provide all of an artist’s revenue, when implemented inventively, they can definitely provide an additional and sustainable revenue stream. These multiple revenue streams will be the key to every artist’s future endeavors.

It's Always Been About Engagement.

I’ve been thinking lately about what consumers really want. My conclusion is that they want experiences; in fact, they are even willing to pay for them.

What provoked this was a reply I read from Nick Bilton, NY Times technology reporter and lead writer for the Bits blog, during a Twitter conversation about his piece on internet piracy. Here’s his comment:

New music business models are about monetizing the experiences that consumers actually want, whereas old models were about the opposite: getting people to pay for content that allowed them to have those experiences.

The difference here is important. Old models forced consumers to purchase a substitute for what they wanted. New models allow consumers to purchase what they wanted in the first place. This change results from the democratization created by the internet and has wreaked havoc on many industries. We are all aware of how the internet has eliminated the middleman; this is just another case.

This is not solely music-related. The 2012 London Olympics will be remembered in part because of the Twitter hashtag, #NBCFail. This meme emerged out of the dissatisfaction of viewers who felt they were prevented from engaging with the Olympics in ways they wanted to. People watch the Olympics because they want to take part in a special, worldwide spectacle, and are fascinated by the emotional stories surrounding those with abilities that they don't have. However, many felt that they were limited by NBC’s schedule and unable to participate in real time with what was taking place worldwide. Woe to any company unable to provide the experience their consumers now expect. NBC paid a price for this dissatisfaction.

The same is true of musicians. Part of what attracts fans is that they want to feel an emotional connection to activities that are not commonplace. Like Olympic athletes, musicians have highly specialized skills most people don’t have. Not only are they revered for the qualities they embody, but their music and lyrics allow fans to identify with them on multiple levels. Fans are only able to experience these traits vicariously, so feeling that connection is what is most important.

Music has always been a medium where the relationship between the audience and the musician is an important experience. Since the dawn of time, music has been a means of communication. It is used to express emotion, to tell stories, to relive history. It's how we learn, how we share our ideas, and how we build communities. Shared experiences are the underpinnings of all of these actions, needs, and desires, and they are possible because of the relationships that music creates.

In modern times, many of the experiences that fans expect have been enabled through the use of technology. Devices have been developed through which we connect to each other, and of course, our connections through music have changed as a result.

Major labels perfected mass marketing and distribution of music because of their ability to control all the channels and pay the high cost of music-making at this level. Despite being able to purchase only what was offered, consumers longed for something else: the experience. However, the scale of these businesses obscured this fact. But when given the opportunity to vote, consumers did so with their wallets, leveling the record business.

What Nick Bilton says is true. What the 2012 Olympics teaches us about consumer behavior is true. What we have always known about music is true. Consumers never wanted just content, it was a means to an end, and they paid for it because they had no other choice. What consumers actually want is engagement, and successful businesses will learn how to bring those experiences to market.