Profiting in the Age of Free Music

When Napster hit the scene, I was living in the heart of technological change in Silicon Valley. My drum teacher there, who had been playing since the 1960s, regarded it as one of the most wonderful things ever invented. “I was like a kid in a candy store,” he said of his experience, “All these songs FOR FREE.”

The last part of what he said was what set off alarm bells in everyone’s head. One day I argued with a musician friend about the future of music. He thought Napster was a harbinger of doom – if artists couldn’t make money making it, music as we knew it would be wiped out.

I took a contrary view. Music wasn’t doomed, I said, but everything was about to change. Yes, CD sales were about to plummet to nothing but musicians would make up the difference in live shows and selling t-shirts, stickers, and the like.

This made basic economic sense to me. People only pay for things that are scarce and live shows are, by their nature, scarce. In the old model, bands toured to promote their new album but, in the age of free music, this would be flipped – bands of the future would  use their free recorded music to promote attendance at the money-making tour.

Over the years as music got more and more available, I started to question if my prediction was at all accurate. I read so many accounts of musicians getting fractions of a penny from streaming services for songs that would previously been huge money makers that I began to doubt everything I said in 2001.

So it was a relief to read this article from the New York Times. According to the data, there are now more people earning a living making music than there was in 2001. The live show industry has gone from $10 billion in 2001 to $30 billion in 2014.

While so busy fretting about the potential consequences of technological change, a lot of musicians didn’t see the advantages. Recording and distributing music used to require massive amounts of cash, now it can be handled with a laptop and an internet connection. As the indie producer and musician Steve Albini said: “When I started playing in bands in the ’70s and ’80s, most bands went through their entire life cycle without so much as a note of their music ever being recorded.”

The way I see it, when technological change is imminent you can either fixate on using it to your advantage or cry about all you stand to lose. It’s your choice but given these forces won’t be stopped, it’s clear which one is the wise course.

Debt

Seth Godin’s post today about the concept of debt is a good one. Citing this book, he points out that debt is, in fact, older than money. This makes a certain sense – it’s easier to make exchanges based on promises.

When I bought a bag of coffee this morning at Dunkin Donuts, the deal at the register was – I promise to give you this green paper if you promise to hand over the coffee. This happens every day without flaw because we live in a stable economy.

But what happens if that promise is broken? How tied are we to it? What if after I handed over my money, the Dunkin Donuts cashier said, “No, we changed our mind. No coffee for you, next customer.”

In this unlikely event, I would have reasonable grounds to say, “Hey, that’s not fair. You are indebted to me. I did my half of the bargain and you are failing on yours. Give me the coffee.” And everyone else in line would see this and say, “Yeah, give him the coffee or we’ll all leave.”

That would be very bad for Dunkin Donuts and it’s part of the reason you hear things like “The customer is king” at so many stores. The entire premise of a business is they uphold their end of deals.

This is understandable when you are dealing with small sums but it gets tricky, as Godin notes, when you start talking big numbers. John Paul Getty said it best, “If I owe you $100, I’ve got a problem. If I owe you $100 million, you’ve got a problem.”

And so it is with Greece and the student loan crisis.

Call me an idealist but I think people are intrinsically good and want to pay off their debts. It is an awful, nagging feeling to be indebted to someone and I loathe it. I cut up all my credit cards years ago.

But if I lend money to someone who I know is spending recklessly, I shouldn’t be surprised if I don’t get my money back. In that situation I am partly to blame for making a dumb loan.

DeJargonator Revived

Nandini Jammi’s post about bad writing at Medium inspired me to revive The DeJargonator™ – my personal crusade against bad writing. The excerpt she received from a freelance writer made me wince:

You try your best to deliver great service to your customers, but the bigger your company gets, the easier it is to make mistakes, especially as our technology gets complicated. One simple mistake in a line your engineers’ code easily leads to negative experiences that can destroy relationships. Handle that situation wrong and you can lose even your most valuable and loyal customers. With social media it doesn’t take many loud complaints for your company’s otherwise sterling reputation will be gone.

So what can you do to quickly cool down a hot situation before it erupts into a disaster?

Ouch. You can almost hear the person mouthing the words breathlessly as they type them. They tumble out there with no real plan or slavish obedience to making sense.

The first sentence catches our attention with its vicious comma abuse. The second forces readers to stumble with its omission of the word “of” in “line your engineers’.” The last sentence, oh man. How fast did this person type this? It reads like he typed it while trying to catch a plane.

Alright, enough beating up on this person. Here’s how I rewrote it:

As a company grows, it becomes more difficult to deliver outstanding customer service. A bug in the code or a tech support call that goes awry can now be amplified and broadcast to thousands over social media.

What can you do to prevent a bad customer service incident from escalating into the next “United Breaks Guitars“?

Last sentence is good in that it uses a funny example but I don’t know the audience so my reference might sail over their heads. It’s hard to write when you don’t know the context of the larger article – am I writing for a product or a service or is this a general “How to Avoid Social Media Disasters” piece?

Anyway, thank you Nandini Jammi for inspiring me to revive this project. That’s the official DeJargonator™ revision – use it if you want.

Rise of the Small Business

Because of complicating factors, I was in an unfamiliar part of town last week and had to find a place to take my kids for dinner. I chose a chain restaurant that looked clean and immediately regretted my choice.

It was clean and orderly but the food was terrible. The cashier upsold me on toppings to net the chain an bonus 50 cents. What does it say about a company that would choose such a small one-time profit instead of fostering long-term customer loyalty? Because that’s what that 50 cents netted them.

Also, the TV was tuned in to ESPN and it destroyed the possibility of any kind of conversation. Everyone who worked there looked bored and counting the minutes until their shift was over. Not a single person there was motivated by management to do anything outside of the bare minimum required. That’s what you get when you manage by the stick and not by using carrots.

It was near a high traffic mall and we were surrounded by other chain stores. I had the overwhelming feeling of being processed – lumped into a giant pack to be fed, clothed, and entertained in bulk. I didn’t fully grasp the scale and reach of these herd-processing corporations until I read that if McDonalds wanted to create a menu item featuring shrimp, they would deplete the world’s shrimp supply in 2-3 months.

Don’t get me wrong, this kind of processing is entirely preferable to the alternative. Given the choice of Big Mac or starvation, I’ll pick the Big Mac seven days a week. But it did give me insight into why small businesses, like mine, flourish in the face of enormous competition.

Small businesses can’t compete with the big chains when it comes to efficiency and a low, low price. But we can when it comes to not treating people like herd animals, or not using deceptive practices to net an additional 50 cents on a transaction. When running a small business, doing good work leads to more work. The best advertising route available to you is your good name.

Small businesses have to provide a good product that we are proud to serve and motivated to serve with a smile because we know our livelihoods depend on it. I’m all too aware of the competition out there and focus on delivering products to my clients with speed, quality, and a smile.

It’s David vs. Goliath all over again – you have to be fast, smart, and use technology to your advantage to succeed in this line of work. It’s a welcome change and I love it.