New business models for the music industry?

Last week I was at the Eurosonic/Noorderslag festival in Groningen and at the more low-scale, guerilla-minded, do-it-yourself and do-it-together Unconvention. It took me some time to digest my experiences and to take up writing on this blog more in general. But the good news is that it might offer me inspiration for a couple of blog posts.

The international gathering in Groningen is about music first of course. Misplacing your car keys (which I did) can bring you nice surprises, like meeting some wonderful Dutch musicians, who happen to make also great music: check The Secret Love Parade and The Black Atlantic. Apparently, you need the Dutch-ignorant Andrew Dubber to discover the more interesting Dutch-language acts. I was happy to hear Flux and Roosbeef on the Andrew Dubber’s Dutch Radio Show. Unfortunately, I didn’t see these bands live, but I was happy to attend the shows of Three Trapped Tigers, The Choir of Young Believers and Maria Timm.

But the title of this post was about business models in the music industry, right? Indeed,for me one of the most thought-provoking sessions at Eurosonic was the keynote of Alex Osterwalder about Experimenting with Business Models in the Music Industry. The starting point of his session was a portrait of a prototypical customer of the music industry: the Swiss teenage girl Ana. She listens to music, is online all the time, is connected with her friends via Facebook and other networks, spends money on cds, but also on buying a new iPod, on software and on downloads. She wants to listen to music via the new hip services like Spotify and Vevo, but gets frustrated about the fact that the service is not available in her country. And she talks with her friends… about boys of course, but also about her admiration for artists like Trent Reznor, who rebel against the traditional music industry.

The main question is: do we understand this type of customer? And can we shape a business model which fits this type of customer?

To help us thinking about this, Osterwalder offered a business model canvas. You can review the core thinking of his session in his slideshare presentation:

If you go through the slides, you can see how he analyzes the weaknesses of the old record company model. Do we use the right channels to reach our customers in a digital age where distribution is a commodity and where the real problem is creating awareness and attention? The biggest problem might be the total absence of customer relationship management. The mantra of new music business thinking is the importance of the artist-fan relationship. Indeed, until recently dealing directly with the end users, the fans, was a non-existent practice. Social networks will play an important role in developing these customer relationships and services like Motion Music Manager might help you in managing them wisely. Considering all this, music business players should also rethink their ‘bloated’ cost structure and re-evaluate whether their huge marketing budgets are well-spent.

Osterwalder supplied us with enough food for the brain. But he also insisted that we should approach the problem with the right attitude. We should work like designers (he showed a video with Philippe Starck). That means: 1) prototyping: start drawing different versions of his business model canvas for our own business, think about it together in group and then choose one model. 2) thinking customer-centric and develop customer relationships. Finally he talked about the blessings of ideation and he asked us to come up with new business models around cows, like advertising on cows or cow hugging (it appears to exist in the Netherlands…). These rather absurd exercises help you to think out of the box and to behave creatively. After all, we are in a creative industry, aren’t we?