Ariel Hyatt has been writing a very interesting series on the 1,000 True Fans theory. For those who don’t know: it’s the idea that, in the digital age, you don’t necessarily need to attract the attention of millions of people and sell lots of records (at € 15 per piece?) to survive as an artist. If you appeal to a specific niche, it might be enough to have 1,000 really dedicated fans who are prepared to buy everything (or almost) that you offer. As an artist you must make an effort to keep this small group of fans happy, just by being a bit more personal and attentive, giving your fans the feeling ‘to be special’. To put it in economical terms: you give them more value, they are prepared to spend more money and in the end you can make a living with addressing a smaller market. Internet gave everybody the means to address this small audience of 1,000 true fans, so this theory/business model might be something that works (or, not according to others).

In the 5th episode (already!) Ariel talks to Brian Mazzafferri of I Fight Dragons, a band which succeeded to gather 10,000 ‘True Fans’ in one year. The interview is a very interesting read, because Brian makes some good, critical points.

I do think 1,000 true fans is possible, but currently only under very specific conditions. However, as more and more people spend more and more time and money on the internet, this can (and likely will) change over time.

Condition 1: You’ve got to be a solo artist. MAYBE a duo.

Condition 2: You’ve got to be both willing and able to do a lot of things yourself that traditional “professional” musicians don’t. Every member you add to your team (booker, manager, PR people,…) needs to eat.

For the record: I Fight Dragons is a 6-piece band and has a team around it. The title of this post meant to be provocative. However, it goes without saying that if you want to adopt a small-scale business model (small target market, small marketing budget), it’s also a good idea to reduce all your costs and you’re better off with a small team/band.

Further on, Brian gives some insights in the major revenue streams of the band during the first year of their existence:

• selling cd’s on gigs: 4,000 copies
• digital downloads: 10,000 tracks
• they are quite famous for a rather unique action: they sold 100 Lifetime Membership USB drives for $100 each (lifetime admission to any IFD show, free digital content for life), and earned $10,000.

Because they continued to try and play larger venues and to tour, they made very little money on live shows (except for the cd sales).

Let’s end with some last interesting observations of Brian:

My last big concern about the 1,000 true fans model is longevity. Most of the people using it work through the internet, and everything on the internet has an exponentially shorter shelf-life than it’s Real Life corollary. I just think there’s very little data right now on how long an internet music career can last.

I think we’re in a weird spot right now where the old model doesn’t work like it used to, but the new model isn’t powerful enough to take over yet, so there’s upsides and downsides to each one. I suppose my biggest goal is to combine them both.

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?