Sunday, December 15, 2013

Netflix: Beyond the Binge

“History has shown that minor changes in viewing patterns can have enormous cultural spillovers”, said legal and Internet scholar Tim Wuwriting recently in The New Republic.

And much has been made of Netflix facilitating our new living room demonstration sport of binge watching, or consuming the equivalent of an entire season of programming in less than a week. But to me the larger question revolves around the availability of a combination of a self-serve platform and endlessly fascinating niche content. I couldn't be the only one watching things like a documentary from 2007 about middle aged oddball males who also happen to be rabid fans of 80s teen star Tiffany, or a docudrama from 2009 about bizarro 60s British music producer Joe Meek on Netflix, could I? In the past tracking down such things on VHS or DVD could be difficult, if not near impossible, but now such films get a chance to reach a larger audience and to have a longer life. From Netflix' perspective, no shelf space is being taken up, so the more the merrier, and from the filmmakers' perspective it's often a 'fourth window' license, so while the revenue stream may be thin, it's still revenue.

In this environment of nearly infinite choices what then, becomes of mass appeal products, mass markets, and mass tastes? Could programming once thought to be marginal or niche now have a chance to rise beyond cult status?  Or as Tim Wu put it in his New Republic article: “Netflix’s gambit…is to replace the traditional TV model with one dictated by the behaviors and values of the Internet generation…a culture united by shared tastes rather than arbitrary time slots…a strategy that runs counter to many of Hollywood’s most deep-seated hierarchies and norms.”

Fortunately, to help me think about such questions, I was able to attend a Q&A session the other week featuring a writer from the New York Times and a member of the creative team of House of Cards (hereinafter to be referred to as HoC). HoC, as you may know, is Netflix’ runaway hit, which recently made history by scoring 9 Emmy nominations and winning three, a first for a non-broadcast/online-only program.

Less fortunately, the event I attended was off the record, which means I won't be naming names, but rather conveying the spirit of the conversation that took place. For that reason I’ll refer to the House of Cards person simply as HoC and the interviewer simply as NYT. The topic for the talk was future of the television and online media industries, in this new environment characterized by such major shifts as shows not originating on television becoming huge hits, more than a billion hours of video being watched weekly on YouTube, and the very notions of what television, film, and video entertainment are constantly evolving. 

And the conversation went something like this....

HoC: For the last several years there has been little distinction between film and television, this really took hold with box sets about 10 years ago and definitions are now more arbitrary than ever. Is TV something that is ½ hour, once a week? If I make a 110 minute episode of House of Cards is it then a movie? Movies needed 3 reels because that’s what projectors were capable of. The floodgates are now open. Kids with digital devices in their hands don’t distinguish between a phone, a 65” screen in living room, or a laptop – they just care about the story and the characters. A story doesn’t know whether it’s TV or it’s film. Many TV shows are closer to novels than they are to TV. And at the end of the day who gives a f!@#. 

NYT: I have not owned a TV for 4 or 5 years; I remember watching HoC on my laptop and having that moment: this is coming into my computer, I can’t get this on a TV even if I had one. When you sat down to write it you knew it had to be episodic, needed to conform more or less to TV lengths…so how did you think about it? 

HoC: None of us had done TV before, so we saw it as a big experiment. We were not bound by conventions, and if anything we thought of it as a 13-hour movie. We had 2 seasons guaranteed up front – and that was extremely liberating. That meant I didn’t have to play the game of “arbitrary forced cliff hangers”, fighting the ratings game week by week, fighting for our survival; I could work on this as chapters in a larger story.

Sex and the City box set,
suitable for marathon viewing

With the advent of box sets in the early 2000’s -- HBO series such as Sex and the City, The Sopranos -- people started binge watching then; box sets were often gifts and people would watch the whole thing in a weekend. The behavior was there but the notion of ‘binge watching’ wasn’t yet developed. Things really took off when it became a one-click proposition to get a whole season of a show. 

NYT: 10 years ago Arrested Development’s 7 million viewers per week was considered a weak showing. It was on Fox and was considered “cancellation quality”. DVD box sets had just started to become a thing and it was perfect for that format. It’s not a coincidence that the show died on broadcast TV and is a hit on Netflix.

Arrested Development existed before the right medium for it did

HoC: And today Arrested Development’s TV numbers would be considered a massive hit.

NYT: My understanding on Netflix and original content is that Netflix doubled down on House of Cards vs. a 2 hour movie, because their data showed that what people wanted was shows like Breaking Bad, that they could dive into and watch at their own pace.

HoC: I didn’t get into The Sopranos until Season 4. I thought I was too cool for a faddish show and then I wanted to see everything; I got the box set and it was like consuming a Tolstoy novel in a week. But at the time it wasn’t a Eureka moment, like, “this is a whole new way of watching TV!”

Netflix responded to an organic phenomenon and said this is already happening, so why don’t we just deliver our product in a way that allows people to accelerate this behavior? A perfect way of watching and adapting to your consumer. It has nothing to do with creating the story. Except episodes and seasons matter less. Especially. as the international market has streaming services available.

NYT: How soon do you think that will happen, the breakdown of the format barriers?

HoC: It’s incremental. We’re playing around with ‘cheating’ within the hour-long format. There are so many legalities and infrastructure – copyright law, bandwidth. Netflix has been working on this for 10 years so it’s not surprising that didn’t get it right the first time. Once Google gets into the game even Netflix, with its $12 or $13B market cap, Google could buy all of the major studios in Hollywood with one check. And their data goes way beyond viewing habits. It will all be determined by these large Internet companies deciding when and how they want to get into this game. The question becomes to what extent will they partner with and /or purchase existing companies, so you may have competitors to Netflix, for example in Europe: LoveFilm  (Ed. Note: LoveFilm is owned by Amazon)

NYT: How do you feel about Amazon, Netflix, and other technology or distribution companies getting into content?

HoC: I think it’s great. It’s total chaos. And chaos is good for artists. It lets them exploit the cracks and crevices companies haven’t figured out yet. Look at independent filmmaking. It came to the fore in the late 60s when the studios were dying. That has since faded away. Do you think Apocalypse Now or The Godfather would ever be made by the big studios now? Not a chance.

But over time everything becomes institutionalized. And that’s the death of creation. I do think we’re seeing the death of brands when it comes to entertainment. You probably don’t even know what channel your favorite shows are on, because you DVR them, or get them on Netflix. And why exactly is Duck Dynasty on A&E, which stands for Arts & Entertainment? And does it even matter?

NYT: How do you gauge success now, it’s not as easy as the number of people that watched it, is it?

HoC: I would say it’s not. Look at [the HBO show] Girls. The numbers are meager.

NYT: I think the first airing of Girls gets something like 600,000 viewers, which ranks 157th or so. Over the course of the week it gets over a million. In an old network model it would have lasted about one episode before getting cancelled.

HoC: The goal now isn’t getting 20 million viewers, it’s hitting particular niches. When you start redefining what success is you also get to redefine what risks you’re willing to take.

NYT: The old model is to sell audiences to advertisers. Now, Netflix sells to me vs. networks, which sell [time]to advertisers, so I can watch for free.

HoC: But networks can’t just put their shows online. The infrastructure and partnerships aren’t there for, e.g, A&E to throw up all of Duck Dynasty online. But this doesn’t mean the networks are going to go away.

NYT: In the future won’t Netflix be better positioned?

HoC: I would say the TV and film industries appear to be learning the lessons the music industry did not.

NYT: HBO’s “To Go” service makes no sense to me. To use it online you have to subscribe to HBO on cable already.

HoC: And the recent tiff between Time Warner and CBS affiliates in Los Angeles and New York. The affiliates went off the air, they couldn’t agree on a price. The cable companies are regional monopolies. But monopolies shift over time. No one thought in 1912 that film would become the dominant art form of the 20th century. Chaplin was considered a clown. You paid a nickel to see him. Now we think of him as a genius. And video games make a billion dollars in a few days.

But the moment you start saying “in the good old days…”, you’ve lost. You’re out of the picture. There’s no way you can possibly be forward thinking or on the cusp. Let it go. It doesn’t matter. It’s not what it is any more. Nostalgia is the biggest waste of time. Things will never be the way they were. It’s far more exciting to flesh out a new way and say ‘now what’, ‘what could be’?

The best thing you could do if you’re interested in getting into the business of entertainment is think about what you do, what you want. The big companies are now interested in what consumers are doing, what their preferences are; it’s now viewer-driven. Start with yourself. That’s thinking like an innovator. Data tells you nothing in the land of entertainment’. Because it is irrational. It is the things within us that we don’t know are there.

This is the era of the craziest f’ing thing possibly working.


Bonus link! Click here to learn about how a team of researchers reverse-engineered Netflix' algorithms to reveal genres within genres within genres. And here for an infographic that breaks down the economics of Netflix' original programming.

Related Post: Podcasting; Art, Craft, or Reaching the Niches  

Saturday, November 30, 2013

Nollywood: The Nigerian film industry without an industry

With budgets as low as a few thousand dollars, a digital camera, a laptop, and no sets, Nigeria's filmmakers have created the second largest film industry in the world. This means Nigeria is a bigger producer of movies than the U.S. and is second only to India's Bollywood in terms of number of productions per annum. And I should mention that while the film industries of India and the U.S. are each about 100 years old, the Nigerian film industry is a youthful 20.

We'll dig into these, and many other scintillating statistics in today's post. So grab your wheelie suitcase and climb aboard, because today on the blog, we're headed to the heart of the Nigerian film industry, aka Nollywood.

First, an overview of the Nigerian film industry:

  • On an annual basis there are between 1000 and 2000 new productions, with as many as 200 new productions per month 
  • Average budget of a Nollywood film: US$17,000 - US$23,000
  • Average number of copies sold (on DVD): 50,000
  • Average price per DVD: $3 - $6
  • Average Nollywood shoot is one week, with all shooting done on video, all on location (no sets, no studios)
  • Movies considered to be hits sell a few hundred thousand copies and can sell up to 150,000–200,000 units nationwide in one day.
  • Value of Nigerian film industry in 2013: $590M, up from $250M in 2010
  • Over 500 languages are spoken in Nigeria, but the dominant language is English and the majority of productions are in English

Much of what I'm reporting here was gleaned from a presentation I attended a few weeks ago by the Berkman Center's Colin Maclay and Aimee Corrigan, a writer and producer who splits her time between Boston and Nigeria, where she runs a program called Nollywood workshops. Aimee's program provides technical training and aims to build a community among the approximately one million people involved in film production in Nigeria (it's the second largest employer in the country, after the oil industry). The idea of a film industry is a new concept to the locals, as the system of filmmaking in Nigeria basically created itself, from the bottom up. There are no studios. There are no film schools. Everyone is self-taught. People use online tutorials or figure out how to use programs such as Avid and Final Cut Pro themselves. The industry started digital and remains digital. Everything is shot on video, and edited on desktops or laptops. The films are generally narrative/fictional films (vs. documentaries or non-fiction) and it is a truly national cinema, with Nigerians telling Nigerian stories. The environment is one in which the independent, self-financed spirit has been key to the growth of the sector, and where the prevailing idea is that anybody can do it. This is, perhaps, the ultimate creative democracy. And though barriers to entry are low and supply is high, the economics seem to be working. This is largely because rather than thinking of filmmaking as an activity carried out by an elite group of artists and producers, it is something that people believe can be done by anyone, financed with modest funds from personal contacts, and completed in the space of one week.

Market stalls as distribution & retail outlets
There are, of course, other key differences between the Hollywood market that most people are familiar with and the Nollywood market. For starters, Nollywood is 90% a DVD market. With broadband Internet penetration reported to be between 4% and 6% in Nigeria, downloading and streaming is not really an option within the country. Even more interesting is that piracy, in the form of pirated DVD's, is said to have contributed to Nollywood’s growth and success. Some say that without the unsanctioned copying and sale of counterfeit DVD's, Nollywood would not exist. This is because filmmakers can generally only make a small initial run of the discs, financed with 'friends and family' money. The pirated copies are said to be critical in growing the film's audience outside of the large production centers, such as Lagos, and ultimately to other countries with sizable Nigerian populations, and therefore an audience for the films. With virtually no budgets for marketing, the piracy, in essence, becomes the marketing. And to keep things tidily under one roof, the pirating often takes place in the same facility that did the run of the original DVDs; they just send 100,000 copies out the back door onto trucks, where they are later sold in other regions and countries for about $1, or less than one third of the price of the legally produced DVD. More distribution, whether legal or not, appears to be good for everyone. On average each film is seen by approximately 10 million people within the country, and another 8 million people outside of the country. To put these numbers into a bit of perspective: the city of Lagos has a population of 21 million, the country of Nigeria has a population of 169 million, and London, in particular South London, sometimes referred to as "little Lagos", has a Nigerian population of more than 1 million.

In terms of budgets and box office (if the term can be used, seeing that these films generally do not receive a theatrical release), as mentioned above the average budget for a Nollywood film is ~$20,000. By comparison, the average Hollywood film budget is $100 - $150 million. And realize that a marketing budget of tens of millions is not unusual for a Hollywood production. An example of a high budget Nollywood film is Last Flight to Abuja, which cost approximately $500,000 to make, or 20x the average budget. Atypically, this film received a theatrical release in England, -- with its sizable Nigerian community -- in the hope of recouping the larger outlay for production.

Of the approximately 1,000 films produced in Nigeria annually there may be about 20 made at this budget level. Though a budget of $500,000 sounds small, if not miniscule, to Western audiences, bear in mind that no Nollywood movie has yet generated revenues of $1 million. Also worth noting is that the average middle class Nigerian income is generally about $500 per month, so an expenditure of $3 to $6 on a non-pirated DVD is proportionately much higher than that of a U.S. consumer, where the average income hovers around $40,000 per annum. 

And though there is no centralized industry or studio system there is a star system at work. Actors such as Desmond Elliott and Genevieve Nnaji are prominent personalities, and generally appear in the films with the larger budgets in the low six figures. Genevieve's national stardom is such that multinational consumer goods company Unilever made her the face of their popular Lux soap product and Range Rover selected her as a celebrity endorser. Western culture may have its own foothold, but large brands are said to prefer to use Nollywood spokespeople whenever possible.

As the Nigerian diaspora grows so do new distribution channels for the films, such as online and mobile, via companies such as IrokoTV, AfriNolly, and Jumia. But how might the industry apparatus develop alongside these social and technological changes? Will new forms of financing emerge, will higher budget films necessarily yield higher quality, or more popular, films, and will the grassroots system through which Nigerian film has flourished for the past 20 years be replaced with a more industrial model? In other words, will Nollywood go Hollywood, or will it more or less stay true to its industry-without-an-industry configuration?

And for the extremely interested in this topic: An in depth look at the Nigerian film industry can be found in the full length documentary Nollywood Babylon, which can be seen in its entirety here.

Related Post: YouTube as a new platform for film & filmmakers

Monday, November 11, 2013

Music Hack Day 2013 Boston: Revenge of the NERD (New England Research & Development Center)

This weekend I attended the demo session of Music Hack Day. Hack Day is an annual event in which groups of coders voluntary fill themselves with pizza and energy drinks, pull an all-nighter and create the best 'music hacks', or apps, they can in the limited amount of time allotted, which in this case is 24 hours. It's kind of like a reality show for people with brains, but not televised.

The event took place at Microsoft's NERD (New England Research & Development Center), which is on the campus of MIT in Cambridge, MA. Which makes sense. A few things struck me while I watched the parade of ideas before me (there were 60 projects, and presenters had 2 minutes each to show their wares). Firstly, the speed with which people can go from idea to execution. Granted, it's not necessarily a ready-for-prime-time kind of execution but it certainly is a proof of concept. One that didn't exist on Saturday November 9th, but did exist on Sunday November 10th. 

The second thing that struck me is that the next big thing truly can come from anywhere. Sure there were some music hacks presented that were just for the heck of it art and science projects, such as an HTML 5 music visualizer and Spotify plug-in or one that turns an MP3 file into a video game. But there were also ones that could easily be the next Twitter. And let's face it, when 99.9% of us first encountered Twitter we thought to ourselves why would anyone bother, not this is going to become an all-access live in real time media platform that alters the landscape of news, marketing, and the way as many as a few hundred million people function, moment to moment. 

And as I looked around the room I thought to myself "this is what the new music industry might look like". With music available in digital, streaming form its value shifts from exclusively being with the object (LP, CD, etc) to the context in which it is placed. This is why services like Spotify, Pandora, and iTunes radio have caught on the way they have. And even YouTube offers a playlist and recommendation listening option. We can have a lean-back listening experience, or we can provide additional inputs. We move from music as something complete that exists within a closed system to music as something that can be experienced via a database, appended, remixed, and reshaped at will.

A few of my favorite hacks of the day:

PAPPA aka Paul's Awesome Party Playlisting app which you can see in action here.

The 'non-contiguous cartogram' that used streaming data to illustrate the most popular songs in each state. You can play with this one here, and note that the map rendered is clickable and listenable.

The Secret History of Music, which not only mashes sounds but also stories. Go ahead, play with it here. Faves include the behind the music stories that never were of Avril Perry and Biggie West aka Smalls Kanye.

And this all happened with just some facilities thrown in by Microsoft, some sponsorship from companies such as EchoNest and Rdio ...and substantial amounts of simple carbohydrates and beverages containing high fructose corn syrup. I'm happy to say the whole thing looked nothing like the music industry I remember from, gasp, the 80s and the 90s, where the system was based around, because at the time it largely needed to be based around, big budgets and tightly controlled formats, because the goal was to serve a mass market, and that's what mass markets were made of. Now, music is there to be streamed, to be downloaded, to be mashed, to be aggregated, and to be hacked. Coders are abundant and one or two people can bang out an app that plugs into Spotify and the next thing you know the experience of millions of tracks of music has been altered. It may turn into nothing, but it could turn into something. And the cost of trying can be as low as the willingness to stay up all night.

Blog Bonus! From San Francisco Music Hack Day 2013, held earlier this year: The Bonhamizer. This hack adds the tank force drumming of Led Zeppelin's John Bonham to your favourite songs. Try it out here (you can even link to the code).

Saturday, November 2, 2013

Uber vs. the cab industry

I'm writing during the lunch break at the annual Tech conference held at the Harvard Business School. (with the the oddly 90s relic name Cyberposium...note to conference may be time to tweak the name?) and just attended the mid-day keynote given by Travis Kalanick, CEO of Uber, the on-demand car service that started in San Francisco a few years ago. It's now in 53 cities in 21 countries and has a valuation over $3 billion. I'm less interested in the story of how this is a crazily successful startup making a bunch of people wealthy beyond beyond belief, and possibly reason, and more interested in how the company has worked around the embedded industry structures of transportation systems, and has done so with great agility, despite myriad legal and regulatory challenges. By offering an improved experience for riders, even though it was at a higher cost, Uber was able to demonstrate, and to do so unbelievably quickly, that the market was hungry for the solution. They had to circumvent the established system, and the challenges aren't over yet, but they have not just hockey stick growth but more like vertical skyscraper growth (okay maybe more like Leaning Tower of Pisa growth) to support their case. Riders are happy, drivers are happy, there's nothing being given away for free, and the monopoly that is the cab industry in many cities is shaking in its boots. Interesting to look at this in the context of how differently it is playing out from, e.g, technology innovation in the entertainment industry, and in particular in the music industry, where the upheavals started with the introduction of peer-to-peer technologies in 1999 and continue today, with many unhappy interested parties.

The idea for Uber came when a couple of guys got frustrated trying to get a cab in Paris, which was a frustration they knew well from trying to get a cab in San Francisco, trying to get a cab in New York, and by the way have you tried to get a cab in Boston? Don't get me started. Anyway, we all pretty much know the drill. You have somewhere to go, you don't have a whole bunch of time, and a projectile arm extension in the middle of a big city is your ammo. You will be passed by several times, you may get rained on in the process, but usually you eventually get picked up. The car probably smells a bit off and the driver is probably listening to a radio station you're not interested in while talking on his headset phone to a buddy from Chechnya. 20 minutes later you're fumbling for cash, trying to figure out the tip, and the stranger that picked you up wants to wrap up the transaction asap and get going with the next fare. There's very little about the experience that does not suck.

Travis Kalanick wanted to come up with something that created simplicity around getting from Point A to Point B, and to make it an elegant solution. He came up with Uber, the company that would become "everyone's private driver", on demand. And you wouldn't get that cab described above. You'd get things like a town car, a late model sedan, a Mercedes SUV.

Here, in point form (for the purposes of brevity & speed) is the story of Uber:

- Uber has been designed to  'feel like magic': you see the car on the map in the app, your credit card is on file,you make no payment in the car, you review the driver, the driver reviews you

- The plan was not to take over the world; it was to solve a problem for Travis and 100 of his friends

- What ended up happening: those 100 friends told their friends, who told their friends, and within months the company was growing at a rate of 16% per month

- Early on people said to Travis: "You're nuts"; "This will only work in San Francisco"

- What ended up happening: every market that Uber entered after San Francisco had an even steeper growth curve

Data from Uber showing traffic patterns in San Francisco
- Uber's maps know roads that Google Maps don't

- Heat maps show where demand is going to be in 20 minutes, Uber can adjust the supply of cars accordingly. Drivers are independent businesspeople, with single cars or fleets of cars.

- "Surge pricing" - when demand outstrips supply, prices go up; Uber's system then puts more cars on the road. Hotels can't do this....they can't just add more rooms.

- Uber drivers have been able to build out million dollar businesses. If a driver has 6 cars they're generally grossing over $1 million annually.

- In NYC there were 13,250 taxis in 1949. There are 13,250 taxis in NYC today.  The taxi medallion/license costs $1.1 million.

- Cab drivers pay $125 to essentially 'rent' the car for a 12 hour shift. That's $90k/year of revenue from one car for the cab company, a $45k out of pocket expenditure for the driver.

- Washington DC: Charged Uber with improper fare violation for charging for time & distance and not being a cab. DC created the "Uber Amendment" which stated that Uber would have to charge 5x as much as a cab. Uber emailed its user base in DC and 18 hours later: 104 million social media impressions, and the amendment was rescinded.

- Uber has introduced a lower-priced ride-sharing service, Uber X, with prices that are approximately 1/3 lower than regular Uber cars, to compete with ride-sharing and car-sharing startups.

- In San Francisco: Average Uber driver grosses $117K/year and nets $71k, Average Uber X driver: grosses $111k/year, nets $77k/year.

What does the future hold for rebel CEO Travis Kalanick? Sure, there will be more lawsuits, the wrath of the cab and limo industries, copycat companies looking to steal bits of the business, but as he said in his keynote today it's all about outcompeting with focus, operational efficiency, and speed. He just needs to watch out for another guy named Travis.


Holiday season 2013 updates: Uber proves it's more than just a better cab company by teaming up with Home Depot for home delivery of Christmas trees, and does so with Uber's trademark flair.

And you may also want to look at this article from the Daily Beast defending Uber's practice of 'surge pricing' during bad weather.

Monday, October 14, 2013

That David Byrne article about the Internet

Over the last few days the email inbox has been filling up with references to, or comments on, a piece written by David Byrne in The Guardian. The headline pulled no punches. "The internet will suck all creative content out of the world", Byrne contends in the piece. As we approach the 14th anniversary of peer-to-peer file sharing services such as Napster, we have unprecedented access -- legal and illegal -- to pretty much every piece of content that can be digitized. We also have a music industry that is worth approximately half of what it was in 2000. In the place of the old system of labels with A&R departments and marketing priorities, physical products in record stores, and radio stations with playlists, we have streaming services such as Rdio, Pandora, Spotify, and Rhapsody, and online retail outlets such as iTunes and Amazon. Those are the legal options. We also have the less than legal options, such as Pirate Bay, MegaUpload (RIP), and similar torrent sites, which are so popular they're said to be responsible for 40% of the Internet's traffic. Maybe that makes it less surprising to learn that as recently as 2009, 95% of music downloaded was done so illegally. The only thing that stemmed the tide, it turns out, was the rise of legal streaming services. The problem there is that they pay out miniscule sums to artists, fractions of pennies per stream, and hence all the debate. On the other hand, we went from zero to something; cold comfort perhaps, but at least it's a little bit of something.

From David Byrne's article:

As people know I spend a lot of time thinking about the nature of Internet economics, I received numerous emails on the Byrne article, and with the permission of those with whom I exchanged comments, I include them here (in other words, I'm not wiki-leaking).

First, from the producer of a successfully syndicated reality TV show.  He sent me the link to the article and I wrote:

i think people need to give up the ghost that things are going back to how they were in the 'good old days'. for better or for worse, they're not. low to barriers to entry, abundance of content (much of which is bad, but that's the nature of volume), and distribution systems made up of both market and increasingly non market actors. there will always be an 'industry' and there will always be things that are bona fide hits but i think that outside of that corner the systems and rules are just starting to be figured out, if not rewritten. time will tell i guess.

His response:

I think it's too easy to dismiss this as wanting to go back to the "good old days". It's like people realizing that they can't make any real money on youtube and trying to do "conventional" tv deals. I bet most of what's listened to on spotify was created under the "old" system. I don't mind "giving away" old episodes of my shows for cheap streaming because I've long since monetized them and at this point it's just gravy. Am I interested in creating more eps for youtube to make a thousand bucks? nope. It's easy to run netflix when there is a bunch of stuff that you can license cheaply but what if it's not being created any more? You going to want to subscribe to see old reality shows? Where are the new Beatles?

And back to me:  

it's a huge topic, obviously...and no easy answers. who knows...maybe we'll go back to  some combo of the mainstream industry as it stands, patrons of the arts, like they had in renaissance florence, people kicking in for kickstarter type things because they get special perks and limited edition things, and overall fewer people making big money and more people making less money.

And then...

do you really think the thrift shop guy or psy are going to leave the same kind of legacy as bob dylan? neil young? both of the latter required a huge investment of time, expertise and money to develop. it's not happening any more. what are people listening to on spotify? especially over a life time...seems to me they keep going back to the stuff from the "old system". My kids have recently discovered Floyd, the Stones and the Beatles and it had zero to do with me.

And back to me, one more time:

artist development takes time, and money, and expertise...whether it's in publishing or painting or music or wherever. i think one of the things we've been seeing is that the desire/impulse to be creative is so strong that millions are happy (enough) to participate either for free or for a little. i never would have predicted that. i never thought wikipedia would work as the world's greatest encyclopedia, written by nobody in particular. interestingly the ratio of crap to non-crap / hit to non-hit is about the same on platforms like youtube as it with labels, publishers, etc...i.e. at best in the low single digits. and even psy was not an overnight sensation. he'd been making albums for 10 years, as had macklemore. i don't think virality = success. in fact i think virality often means you can only do it once. and you can't build a career on doing it once. what interests me is the ways in which new systems can co-exist, with various levels of success (some are admittedly slim), in the same world as blockbusters and bruno mars. that's what's new and different and that's why i'm chronicling it.

And then from another friend, a veteran of the broadcasting industry, who also sent me the article. My response:

whether right or wrong i don't think it's going to change much. there has been a huge shift in where the value resides and i just don't see it going back to the 'old days'....content now equals marketing. the value of it has sunk to a fraction of what it once was and that's because you can't control bits and that it's better for bits to circulate as they then reach more people. so i'm kind of torn on the sucks that the $ have been drained from the content businesses (and repositioned with aggregators...a future blog post i'm working on), but stamping our feet and pounding our fists isn't going to change it as far as i can see.  what do you think?

I agree with you.  It seems useless to call for a return to the good old days because they're gone.  I also don't think it will kill creativity. Culture has always been 99.5 percent crap anyway, but somehow the good stuff always gets out. Plus it seems like most semi-successful musicians have horror stories about getting ripped off by record companies. Maybe there are positives to all this.  You should try to find footage of Roger McGuinn testifying in hearings about file sharing and talking about how he never made more than 10 thousand dollars on any of the Byrds albums.

Having talked to people about this topic over the years I'm more interested than ever in collecting more viewpoints, or data points, as researchers like to call them. Whether you're a musician or fan or just a vaguely interested civilian, do chime in. I think the situation we have, whether it's a question of music or podcasting or blogging or whatever the creative pursuit may be, is one in which so many people want in and it's never been easier to get in. That's both the reality and the problem. Or is it a problem? Will that which has some inherent quality make its way through the flotsam? And/or are we looking at a situation in which value has been radically that what has been considered the locus of value for hundred of years i.e. the piece of work and the right to reproduce it, has been replaced in this next phase of evolution by distribution and aggregation functions? Just as sites like Craigslist have had their effect on the business models of newspapers, perhaps the creative industries are being similarly, permanently, reconfigured, with the closest thing to an 'answer' being crowdfunding one year, some sort of group investor model the next, maybe throw in some patrons of the arts. More questions than answers, for sure, but to blame the Internet and think that we're somehow going to be able to go back to how things were seems like a waste of everyone's creative talents.

Saturday, October 5, 2013

Life after major labels: The case of Sloan, Part 3

Welcome to what I hope you find to be the thrilling conclusion of my conversation with Jay Ferguson of Sloan, with a special visit from Jay Coyle (aka JC in today's interview). Yes, stereo Jays today on the blog. If you missed the earlier posts in this 3-part series, you can see Part 1 here and Part 2 here.

Let's pick up the story where we left it off in Part 2, which was talking about how the band has charted its own sustainable course outside the major label system. Yes, they were on a major, briefly, in the early 90s, and yes, they did distribution deals with majors from the mid 90s on, but today theirs is largely a story of using readily available technologies for direct-to-fan engagement, and, of course, leveraging the benefits that accrued to the band from their days of being affiliated with labels and their marketing and promotional muscle.

One of the key figures in getting the band set up online has been Jay Coyle. Since 2009 he has been assisting the band with the various facets of their online presence and also goes out on the road with them, as the affable merch guy. I've seen him in action a number of times and gosh darn if people don't happily leave the gig loaded down with t-shirts, toques, and scarves.

LK: How would you characterize the bigger changes in the way the band has been operating in the last few years?

JC: The direct to fan route has really opened up the fan base while allowing [Sloan's own label] Murder Records to become more active, with the bootlegs, box sets, etc. So I feel that part of the story changed in 2009 when I came on board. Having this as my focus makes it much more about building a bigger bridge to both the fans and the band’s future legacy. I would even note that the labels would never know how to do direct-to-fan fully nor could they do it as authentically as Sloan does. Today, the band is now more focused on serving the fans than ever before.

LK: And how do you divide up the work? Who does the tweeting, facebooking, website updates, Instagram, etc

JC: Patrick does Twitter. Mike (Nelson, tour manager/business manager) generally updates the website, often with items written by himself or Chris or Jay. I handle a lot of the direct-to-fan conversation via e-mail. I get pretty busy with that around the tours and the limited editions releases and reissues, and on the road at the merch table which is the original direct-to-fan tool.

LK: What other online tools or platforms do you use?

JC: We use a variety of things. Topspin for fan engagement, Kill The 8 for merchanding.

Using direct-to-fan tools from a marketing perspective, like the Sloan singles collection we gave away through NoiseTrade, that's a perfect example where offering music to a free download/streaming-minded culture actually allowed the band to benefit by capturing the conversation with these fans, both old and new. I am a firm believer that some form of piracy and the rising streaming options helps fans move from casual listeners to core fans and that offering music 'for free' is actually speeding up the conversion process from first listen to music buyer/show attendee/merch buyer.

Thank You Jay Coyle. We now resume our conversation with Jay Ferguson.

LK: If you think of what we’ve been talking about as a pie chart…of the ‘old day’s of the music business of the 90s versus today, how would you say things break down, in terms of percentages for CD sales vs touring vs merchandise, etc?

JF: To be really general, I would say touring has opened up way bigger for us. Not bigger than in, say, 1996, when things were really big for us…

LK: Yes, I remember those days… getting mobbed on Front Street (in Toronto), with you and Chris.

JF: Really?

LK: Yes, by a group of 14 year-old girls…I have pictures somewhere …in a box somewhere, in storage, in Vancouver.

JF: Good. We’ll be calling you for those pictures when we do the One Chord to Another box set. But I would say that touring has taken over. The piece of pie that was albums…someone on a diet would take that piece now. But we have more songs getting played on the radio, the more records we put out. And we’re almost at the classification of ‘classic rock’ on Canadian radio.

Sloan rock pies, then & now, developed in consultation with both Jays

LK: Are you going to be like Five Man Electrical Band soon?

JF: Like being played every hour, on the hour?

LK: Yes.

JF: I hope so. It’s funny, the airplay portion has really grown…because back then, in the mid 90s we had three albums, now we have ten. Merch has always been good…but now we’ve got more to offer. Also, the t-shirts that were $15 or so in 1996 are now $25. Still, I would say the merch piece of the pie is about the same.

LK: But touring is expensive, isn’t it?

Sloan tour bus, Fall 2012, decorated for various band members' birthdays
JF: It’s expensive...we tour on a bus, and maybe we shouldn’t. but it also keeps our band alive, and sane, so we can tour for longer. If we were all in a van we wouldn’t tour, or not as much as we do. Chris says he would happily tour in a van…but…

LK: How many days in a year do you tour…roughly?

JF: I would do a ballpark of about 90 days or so..but it changes year to year. If we have an album out we’ll give ourselves a reason to tour. It’s almost like we’re putting an album out so we can tour. Which is another thing that’s good about running your own business. Because people in the band have families now. It’s not like being on a major label when you’re basically told when the tour is because ‘we got traction at a station in Kentucky’. We don’t have someone telling us we have to do this at a certain time. We can tell Outside or Yep Roc [Canadian and U.S. distributors] when we’re touring. They might say can you wait a month or two, because they might have congestion at that time. And we want to give the album to them at a good time for them so they can promote it properly. It’s like business planning. We knew we had a lot of goodwill coming from The Double Cross [Sloan's 2011 album release], so we said why not present the fans with a Twice Removed reissue so we’re thinking why not do a new album every other year and leapfrog with a reissue.

LK: How much of an anomaly are you guys, in terms of operating the band in the ways we've been talking about?

JF: I think it’s a matter of interest…like, how interested are you in your band? For some people it's a matter of how the money is split up. If the bass player makes less, why would he put effort into the band? Our band is run democratically, everything is split evenly. I’m so happy with the band, happy to promote it, to talk about it, and I’m a fan of the band. It’s something I’ve wanted to do since I was a kid. So it’s fun to do all these projects. To create the artwork, to do the boxsets. I love that stuff. And also…no one else is going to do it. Am I going to wait until somebody else does it? History or vanity, like I said….which one will tell your band’s story…and I guess vanity wins in this case (laughs). I’m doing it because I enjoy do it…but also…and I don’t want this to sound obnoxious…but there’s also money to be made. We can make 300 or 500 or 1000 of these limited edition things, and we can sell them out.

Chris and I will sit on the tour bus, looking through graphics annuals from 1968…and say 'let’s make an EP that uses that kind of cover'. We’re fans of art and graphic design and it’s fun to apply it to what you do. It’s fun to make things. It’s fun to engage with fans. It’s almost like imagining what would a fan like? Do I want Paul McCartney to make a box set of Band on the Run? Yes! We’re also lucky because we own our masters and we don’t have to talk to anybody about doing these things. I’m sure there are bands who would love do things like that, but they don’t own the master, they don’t own the publishing, and there would be so much red tape to go through, and they wouldn’t end up making very much, so they just say ah, forget it. With us, 90% of the stuff we need to do these projects is in my basement or in Chris’ attic.

LK: You had to buy back some of your publishing, right?

JF: For the first two albums, Smeared and Twice Removed, there’s a publisher that still owns those two, but all the rest of the catalogue is ours. And there was a deal with EMI for a while, that went sour. We ended up paying back the advance and I’m glad we did because Money City Maniacs was part of that and that paid for itself, just by licensing it to Future Shop and a beer commercial, and hockey games. That one song ended up paying for that whole deal.

For us it’s a combination of interest and survival…and ability, yes, but I think anybody can have the ability to operate Illustrator, and Chris learned how to do Photoshop and InDesign, and he has trouble using Google. But seriously, Chris went to NSCAD (Nova Scotia College of Art & Design) and he’s studied, for example, how books are laid out. Like the math of how layouts work…measuring the margins and columns and how that makes things look beautiful. (Ed. Note: Andrew Scott of the band also attended NSCAD , continues to be an artist today, and continues to exhibit. You may know his design work from things such as a band t-shirts, and now you can see his paintings here.)

Barney Bubbles exhibition, Chaumont, France, 2012
I have a great graphic design book by Barney Bubbles who did all the Stiff Records stuff…for Nick Lowe and Elvis Costello and all those people. It's gorgeous. And we used that as a template for the Twice Removed booklet. Chris basically mapped out the grid based on that. He’s highly motivated and he’s patient doing that kind of legwork and both of us are fans and we’re interested in the same things and we work well together. People just need to take things apart, learn how it’s made, and then you can do it yourself.

End Part 3.

To play catch up:  See Part 1 here and Part 2 here.

For a related post from Ari Herstand about the new tier of middle class musicians, working primarily as their own bosses, click here. 

Tuesday, October 1, 2013

Life after major labels: The case of Sloan, Part 2

Welcome to Part 2 of my interview with Jay Ferguson of Sloan. (You can find Part 1 here.) Today we'll talk about working the supply and demand angles as an independent band, Carly Simon's yard sale, and staking out a career in the middle ground of the 'long tail'.

The conversation continues with Jay talking about the turn toward self-curation in the Internet era.

JF: I do find that due to the Internet and artists curating their own material, their own websites, it’s more common. Take Beck, for example. His website is about communicating directly with fans. He’s got such a big fan base worldwide that he can curate fun things…like albums of covers, or an album of sheet music. And that’s something you can’t really do on a major. (Ed. note: Beck no longer on Geffen). He's curating fun things. And I find that’s what we’re trying to do…the hardcore 7”, with a digital hardcore covers album or limited edition vinyl bootleg albums. And they usually sell out in a day or in 2 days. It’s the stuff we’re doing in between album, and it's direct to the fans.

Sloan "1985" limited edition t-shirt
LK: You’re really tweaking the supply and demand; you know there’s an audience for these really cool things…like limited edition t-shirts and vinyl, and you seem to be able to figure out exactly what the size of that market is.

JF: Well, we made 1,000 of the Twice Removed box set. And it was a bit of a gamble. We made it in the fall and thought…okay, maybe people will buy it as a Christmas gift. We’ll do the tour behind it. I bet you we can sell 1,000. We’ve done some bootlegs before. We did 300, it sold out in an hour, then we did 500, it sold out in a day. So we wondered, if those went that fast, how many people are there who would buy a $90 album that’s actually curated by the band?  And we gambled on the 1,000.

LK: At that level is it profitable?

JF: Yes. It’s expensive to make each of the units but your profit margin is still about 40%. Plus it gives us a reason to tour. We went out and did all of Twice Removed…did you see it?

L to R: Chris Murphy, Jenn Hollett, Me, Jay Ferguson, Boston Oct. 2012
LK: Yes! I was there in Boston.

JF: Right! And in Canada the tour brought out a lot of the older fans out that hadn’t come out to see us in a while. We found a lot of couples who were struck by that album when they were in high school or in university and this time around they’re saying ‘honey, let’s get a babysitter and go see Sloan’. So when this came out they said we have to go see this. I had people come up to me and say: “I haven’t seen you guys play in 10 years but I had to come out and see this.” If you can measure how many people you can sell to, it's do-able. And I feel like there are a thousand people out there who will pay for anything we do that is of high quality. We won’t put out a piece of junk and charge $100 for it.

LK: I think you should try to do that…to test your theory.

JF: Yeah (laughs). I found that Carly Simon was selling an old DVD that didn’t sell, with things from her house…like she was getting rid of junk she didn’t want.

LK: Kind of like a yard sale?

JF: Yes, kind of like Carly Simon’s yard sale. Here’s my DVD…and… something from my trunk that I didn’t want.

LK: So who watches over the business concerns of the band? There’s no ‘manager’ per se…Mike (Nelson) is your tour manager, right?

JF: Yes, Mike is the tour manager, but does a lot more…and Chip Sutherland was our manager but he still handles some business stuff when it comes our way. If there’s something with a contract attached to it, or a licensing opportunity for a movie. He’s a lawyer, so he’s a bit of the overseer, even though he’s very busy with Leslie Feist, who he manages. Mike has, over the years, grown into more of a management role.

LK: I’m interested in the band's ‘org structure’. Who’s the CEO of your business? For example, who, at any point, knows what the inflows and outflows of cash are?

JF: That would be Mike. Sometimes, he has to be like a parent, like if something is going bad he won’t always tell us (laughs). He’ll say ‘oh we have all these theatre shows in the fall' because he doesn’t want to stress us out. If we have projects we want to do, like the Twice Removed box...we decided we wanted to do that in early 2012, and tour it in the fall. Chris & I thought "what do we want to put in the box set?…A 7”?  A booklet?" And then I went to a company that does vinyl manufacturing and asked how much it would cost and I got some numbers and said Mike, here’s the amount, and then we all decide if it’s a good idea. We dream up the project, figure out how much it’s going to cost, and tell Mike. And then it’s either yes, we can afford it, or can you scale things back…but usually it’s fine…and we just do it.

LK: We talked about this before we started recording this interview…You began to say “If I were starting out today…” and I said ‘wait!…hold onto that thought’…so now is the time for that thought. We’ve talked about the benefits of the ‘old system’ and now, how the members of the band can perform some of the functions of the label. What comes after the dot dot dot after “if I were starting out today...”

JF: I don’t know…I know how to record…I could make a professional sounding album in this room with the right microphone...I have all the tools to make cool graphics. I feel like oh great, I could do all that…and using Illustrator, and In Design, and finding the vinyl or CD manufacturer…but beyond that I don’t know how you get attention. You still have to get out there and play shows. Unless you “go viral”…but then look at the Lana Del Rey story…you go a bit behind the scenes and you see it’s not a new artist at all. She’d had an album out before, under a different name. So it’s all been hatched by some label people. If I was an indie artist today I don’t know how I’d get attention…other than Pitchfork randomly picking up on things. That’s what happened with Broken Social Scene. Pitchfork wrote about them, some guy at Polygram UK saw it, then thought ‘hey this is cool’, saw them at SXSW and then signed them to a UK deal. They had also been touring and they had a live show that really communicated with people and I think that was a big thing. But that’s something that happens 1 out of every 500,000 times.

For us, now, we have the benefit of doing our own thing, having been tied to a major label that took us to a wider audience. That audience has fluctuated over the years but it’s still enough of an audience that we can do stuff online, we have a mailing list of 20,000 people that get our email blasts. And when we did the limited edition box set 1/20th of them ended up buying it.

And in the states, where our audience tends to skew a bit older than in Canada -- where we still get kids who are just finding out about us, kids as young as 14 -- but in, say, Boston, we can play a club show to 200 people, and we can play to 700 people in Calgary and the merch numbers can be the same. It doesn’t happen all the time, obviously, but I’ve found that we can play a smaller place in the states and end up taking in $1000 at the merch table.

LK: Have you heard of the theory of the long tail?

JF: The long tail?

LK: OK, I’ll draw it out for you….(starts scribbling out diagram showing the ‘head’ of the market being approximately 20%, and where most the activity occurs, with the tail being the 80% where less activity occurs.) And people argue about this…about whether or not you can make a living in the ‘in between’ area…where before it was pretty much impossible. How much of a myth is it, the staking out of a career in this middle area?

JF: I feel like I only know our experience. Even though I know other bands that have dropped off, because with the new paradigm so few records are being sold…by anyone. Lady Gaga sells, like, 1.5 million and it’s a big deal. That would have been at least a 10 million seller in earlier decades. Sales have dropped so much that some artists are making more money from touring…and a lot of artists are taking over their own career. Some, like us, have benefitted from the marketing they received in the 90s, from the majors, or wherever they got it. But I think you can also utilize the goodwill of the audience, the interest of the audience, and somehow propel a small business using things like Topspin, by recording on your own. We recorded our last 4 albums at our practice space. But for us, our bread and butter is still touring. In the 90s when we were selling 90,000 copies of One Chord to Another, we were making a lot of money from CD sales. [Ed. Note: As broken out in this post, in the absence of a major label's involvement the percentage of an album sale that the band keeps jumps from about 10-15% to approximately 60-70%. Also note that in Canada, which is approximately 1/10th size of the US, albums go gold at 50,000 and platinum at 100,000.] Now it’s a fraction of that, for everyone, so a lot of people are turning to touring and you don’t need a major label to do that. So I think the long tail is true, especially for bands that have had attention from radio, and that have been exposed to a wider audience.

End Part 2. Click here for Part 3.