It's All About Me, Man: [ItsAllAboutMeMan] Re: Change

Tuesday, August 23, 2011

[ItsAllAboutMeMan] Re: Change

Hey Bob

My wife and I went to a wedding in Chicago. Due to our frantically busy lifestyle, I had my suit, but no shoes or tie.

Sunday, the day of the wedding, we started hiking around. We went to Nordstroms, seemed like a familar safe haven from my Seattle days.

Shoes: $195.00
Ties: $197.00

As my friend, the great songwriter Rod Downburst Johnson (I figured you wouldn't mind me dropping the name of a famous person I know, you do it all the time) said, "how is that even possible?"

My wife said we should just take a mortgage out on the house and bite the bullet. I said "No, dammit, I am not going to do it. I have to stand for something, and this is something I won't stand for."

I got a tie from The Gap, they were nice people, they treated me very well, now I'm on their mailing list. I got some perfectly reasonable shoes at a discount place. I save about $360.

Now what were you saying about how smart Nordstroms is?

And the help behind the desk at Apple's "Genius" Bar are still sub-Howdy Doody.

On Tue, Aug 23, 2011 at 7:41 PM, Bob Lefsetz <bob@lefsetz.com> wrote:

1

I read a "BusinessWeek" article about selling shoes at Nordstrom. Used to be if they didn't have your size, the salesman would get on the phone and call other stores. How eighties you say! And that's what Nordstrom realized, they were losing sales. So they put the chain's entire inventory at the salesmen's fingertips. And on the very first day the system was implemented, the register receipt in one store was 21 feet long, sales had surged. But in order to make this happen, power had to be removed from the merchandisers, who ran their divisions like fiefdoms, who held on to power and information with an iron fist.

Macy's and Saks are still light years behind on this inventory system, but our next story is HP. Carly Fiorina believed success was linked to size. In order to triumph in the marketplace, HP purchased Compaq and soon had the number one market share in personal computers. The only problem was that margins were thin, and there were huge inventory problems and now the new CEO wants to spin off that enterprise. Ms. Fiorina was looking at today, not tomorrow. And she believed scale is the only thing that counts. Scale is important, dominance is not.

Which brings us to the iPhone. Trumped in market share by Android handsets, Apple is laughing all the way to the bank. Because the iPhone is uber-profitable, much more profitable than Android, and it's part of an ecosystem, including iTunes and the iPad. Buy one and you buy the other, people are infected by greatness.

And then there's Hyundai. A laughingstock twenty years ago and a dominant player today. They slowly got better and word of mouth turned it around, sold their cars.

And all of the foregoing is an illustration of the sea change in the music business. If you're looking at today, you definitely won't see tomorrow. And tomorrow will be vastly different from what has come before.

The major labels were beholden to the retailers, the merchandisers in the Nordstrom story. As long as they were tied to the past, they couldn't enter the future.

And like HP, record companies believed market share was king, irrelevant of the cost of achieving that scale. They had a pipeline they wanted to fill. Now Jeff Price at Tunecore can do this for bupkes, their advantage has been lost.

Apple knows it's about profit. About creating something so insanely great that people bond to it and keep giving you money. The music business is all short term thinking, like HP.

And Hyundai knows that great products are not developed overnight. It can take decades to achieve success. And great products sell themselves.

2

The sea change the major labels missed out on is the power of the artist. The artist is the epicenter today, just ask a concert promoter, who gives performers the lion's share of the gate receipts, if not all of them. To try and maintain a paradigm wherein you profit while the artist starves is to be locked into a past that no longer exists. We live in an era of transparency, your mobile handset will tell you how many minutes you've used but you can't get an accurate royalty statement, never mind one that's up to date.

And old school artists believe it's all about finding a tit to suck on, someone to pay the bills and play daddy, someone to tell you what to do and give you an allowance. They don't want to be free, they just want to be paid, badly. Whereas new school artists know you must do it for yourself. Scrape up the money to buy a Pro Tools rig, distribute via Tunecore or CD Baby. And sell yourself.

The majors' distribution monopoly has been shot to hell, it's gone.

Their stranglehold on radio and television still exists. But those media mean less than ever before. They're only good for selling the most mainstream, bland stuff, which has the shelf life of a burrito, at best. This market-driven product is expensive to sell and is diminishing in returns. Leaving the landscape open to new entrepreneurs.

3

Acts need development and marketing. That's it. Focus on providing those two.

There will be musical experts who can inspire acts and help them grow, producers, even songwriters who will light the path.

As for marketing, it'll be about giving the public the tools, empowering fans to spread the word. It took a decade to demolish the old CD model, to make streaming de rigueur. It might take as long for radio and TV to become completely marginalized. But they're going, don't let anybody tell you otherwise. As exposers of music they're incredibly inefficient. Why wait all day for the video on the TV or the song on the radio when you can pull it up instantly online?

But the question remains, what to listen to?

4

The money is in telling people what to listen to, being a filter, a trusted authority. It's the MTV of tomorrow.

And it's much more complicated than a Spotify playlist. There's trust involved. And monetization. You're creating an ecosystem as sticky as Facebook. So far, this doesn't exist. Companies don't realize that people don't want everything, just the right thing. That music is human and recommendations must be so. And we're all time-challenged, we're immune to crap and hype.

Which brings us full circle. Those losing power today still believe that crap and hype can triumph.

Those who will win tomorrow know this is not so.

Grandpa is running Sony Music. Major labels want no young 'uns involved. They just want to keep driving until their license is pulled.

If you're starting out today, align yourself with talent. Make yourself invaluable. Be in it for the long haul. And know one success leads to many more, people are looking for great acts and acts are looking for great managers.

But there are few great acts to go around. Sniffing them out will be key. Signing and keeping them will be the next step. And the relationship will be about trust more than contracts.

5

All of the foregoing is going to happen no matter what. Focus on the public, not the industry. The public is leading. The public stole on Napster, embraced MP3s sans copy protection years before the industry acknowledged their dominance. The public finds acts and builds them, not string-pullers. Apple would mean nothing if the products weren't great and no matter how much advertising you do, no one wants a TouchPad or a Zune. Underlying quality is key.

But that's the only thing that won't change.

Quality will become even more important. Along with honesty and trust. The businessman will report to the artist, not vice versa. And the whole system will be reliant on long term bonds with the audience. Even the wii is fading. Fads have a shorter run than ever and it's best to leave some money on the table, to invest in tomorrow. A fan who gets a good seat at a fair price is much more likely to spread the word than one who had to buy from a scalper or had to sit in the back.

Fairness rules in the new world. How come the music business doesn't understand that?

Embrace fairness and you're on your way to success.

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