Category: biz

Everyone who starts or runs a business, designs or markets a product will come across the necessity to create a value proposition. Something that adds values to the inputs of the business or product to the customer. Ideally that proposition is unique, and helps the business or product stand out. I’ll use the term business to mean both businesses and products from here on, for simplicity and because selling a product is a simple form of a whole business.

When this term comes up, it is often very abstract and diffuse. The business founder feels strongly about her idea and rationalizes the value to the customer. This sometimes gets a bad rap, and founders get told to start with what customers want, what solves their problems, and work backwards from there.

The result of this is what I’d call weak value propositions. This value propositions exist because the founder wants to be in business, or create an enterprise, and finds what looks good, or consults a business idea list or a trend list. While this can be a ‘smart’ choice, the resulting value proposition will have little to offer to help rally customers or employees into meaningful action. These value propositions can be humdrum to hack-ey or worse, downright scam-ey.

And this brings me to the core of this post. A real value proposition results from believing something about the world. From actually having values. These values compel the founder to action. They make writing copy or communicating your goals easy and meaningful.

For instance, Steve Jobs, to further beat a dead horse, valued beauty. He thought that computers have to be beautiful inside and out. That customers would value that, and pay a handsome premium. While this is conventional wisdom now, it certainly wasn’t then. In this regard, he won. His value proposition, coming from a deep believe in how the world should be, proved to be so right, that the resulting company is now so big and valuable, that some argue it should be broken up!

This illustrates the second kind of value propositions. Strong value propositions. Strong because they reflect a real value the founder has. This cannot be faked or rationalized. It comes from an authentic need to help change the world and make it better.

Dear reader, when you think about a value proposition for a business the next time, please stop, take a deep breath and ask yourself, how you’d want that business to impact the world. How it should change it. That will create a powerful start for the best work you ever did.

There has been a lot of press about Spotify lately. More specifically about what Spotify pays to artists (or doesn’t). Taylor Swift pulled her album from the music service and some others preceded her or followed suit. I often hear from musician friends of mine, that they receive mere cents for a couple of thousand plays. And if that was their sole revenue, they would have to quit making music professionally.

Now, I compared Spotify to what artists receive in royalties when played on terrestrial radio, and that compares quite favorably. Radio stations royalty payouts are quite complicated, and depend on a lot of factors. But divided by number of listeners the revenue for the artist per track, of she is also the composer or text author is less than a thousandth of a cent.

When you feel that Spotify competes with album sales, their payout seems frivolous.

So what is Spotify? Does it sell music? Or is it a radio station of sorts. The answer is: Neither! It’s something new. Spotify customers often play specific tracks or specific artists. This is an important distinction to a traditional radio station, because people discover less music on Spotify compared to listening consciously to a good radio station.

“But nobody consciously listens to radio”, I hear you say. Hot adult contemporary and other formats have made pretty sure about that. So maybe Spotify is better, in that it really helps people discover new music? Could be!

It certainly doesn’t sell music. Even if you use the offline feature music gets stored in a container, and the minute you stop subscribing, you lose access to the music that is stored on your computer!

So how much should artist get paid for a service like that?

One way to calculate that would be:

• Take average album price (say 15€)
• Divide by number of tracks (let’s say 15)
• Divide by times listened to a song on average

The last point is tricky. How many times does the average consumer listen to the average track on the average CD? Certainly, a 14 year old, infatuated with her new boy superstar will listen to his hit a couple of thousand times. While lesser, so called “album tracks”, get probably skipped after 10 secs for 3-4 times.

But let’s develop 3 scenarios:

1. afficionado = 200 listens per track
2. regular guy = 70 listens per track
3. indifferent = 10 listens per track

So here would be our payouts:

1. 0,5 cent per play
2. 1,4 cent per play
3. 10 cent per play

Here is what spotify does pay: Between 0.6 and $0.84 cents per play. (link here, skip to: “Wait I thought…”) I’d say we’re pretty much in the ballpark for the afficionado scenario, which in my view models the listening behaviour for the average spotify user (young) pretty well.

So do artists make less money then when selling albums? Yes! Because with an album you sell a whole block of tracks in one transaction, and you get all the plays paid up front.

In my opinion artists should stop making albums. That’s just a thing of the past, when physical mediums necessitated this format. With the exception of very few artists, mostly an album is just a bunch of tracks nowadays. Producing only those that an artists finds really promising would reduce his production cost (although not in a linear fashion. producing one track doesn’t cost a fifteenth of an album). At the same time this allows artists to fully concentrate on their strongest tracks. But that is a different topic for a different post.

For now, I’m pretty surprised that Spotify seems to pay as much as I thought made sense it should.

Remember a time, in a galaxy, not far away, when artists were given record contracts, that made them rich and famous, simultaneously with record companies, who had their longevity and best interest at heart?

Well, those times are gone! We live in a very different world now, that requires new modes of thinking about music, and new ways of approaching fans.

1.) Forget the Album

Once spelled out, it’s obvious: Who needs a physical medium for digital informartion. Nobody! Maybe very high quality movies are still somewhat bothersome to download. But not really, as Amazon Prime and Netflix prove.

2.) Forget the Album

Why 12 songs? Why 50+ minutes? Why? If you have a story to tell, go ahead, record it. If it takes 12 songs and 55 minutes, perfect! But if you have 2 great songs and a fantastic interlude – put those out. Stop agonising about album length and sequencing. People play songs in the order they want, or in the order algorithms like Genius music decide.

3.) Split bills

So you want an album to sell at shows? Makes sense. Why not split it with your favourite musician? Half the costs, double the fans. And while you’re at it, plan a tour together. Half the work, double the fans.

4.) Split bills

Stop seeing music in isolation. It never was. In the 60ies and 70ies it was part of a global political movement. In the 80ies it was part of fashion. Connect with dancers, visual artists, or programmers and web or app artists to design spectacular and unprecedented (… wait for it … disruptive! there, I said it.) experiences for your, now joint, audiences. Getting out of the music box also helps keeping the paralysis by analysis action in check.

5.) Connect

You need more $FB friends, more YouTube clicks, more email adresses. So get out there. On your merch table have an iPad where people can stream your YouTube vids. And get as near to requiring them to become your $FBriends as possible, whenever somebody comes near your table. This is way out of the comfort zone, so you may want to hire somebody who is capable of doing this.

6.) Conclusion

These, for me, are some of the best practices I have seen in the last years. Do they guarantee near-instant rock-stardom? You bet they do! And when you get there, be kind, drop a VIP pass to one of your shows.

Also, if you think I could help you out with more details or info, don’t hesitate to contact me.

In the last couple of days, I’ve been researching about crowdfunding and related internet sites. Kickstarter, IndieGogo, CrowdCube and Seedmatch, all very exciting platforms. Kickstarter and IndieGogo raise funds for small, creative projects mostly. Although IndieGogo is not so strict on letting just creatives raise funds there; as seen by Nicholas Merril – raising 43k$ in just one day for his privacy-protective ISP.

CrowdCube and Seedmatch (Germany) raise capital for business ventures mostly. Seedmatch only has one active project at this moment, and at CrowdCube I noticed a large gap between some (6-8) fully funded projects and active projects that had 46{bebb06f271259ca942a7887f5eb25673b4b02ba69cbc6ed6f7a39064dc6657a8} funding – max. That made me wonder if it’s really taking hold in the UK as a viable platform that attracts investors in the first place. Maybe the completed projects brought their own investors to CrowdCube, and just used it instead of a traditional investment bank, that wouldn’t have bothered with small amounts like that.

The House of Representatives in D.C. recently passed the JOBS Act or crowdfunding act, opening up regulation of who is allowed to invest in small startups. A domain that was closed to the public until now, potentially creating a multi-billion dollar investment market.

The pivotal point here is trust. How can Joe Doe, investor, be confident his investments aren’t just complete rip-offs? This question will no doubt get flaunted by banks and investment outfits (it’s already happening) fearing for their fund-dollars. But then, how can I be shure the money manager in my fund does well? Especially in times like these?

I personally think that whoever can create an environment of trust, that attracts masses of investors, has a goldmine on his hands.

Yesterday I had a very interesting conversation with Christian Pirkner, who told me that Amazon actually doesn’t reference it’s long tail as part of its suggestion mechanism. In case any of you are not completely clear as to what I mean, I refer to long tail as in the Blook by Malcom Gladwell, wired magazines chief editor.

Gladwell suggests that aggregator services like iTunes or Amazon increase their revenue as they sell ever more different items, because its customers know they can find almost everything.

But what about the items on the long tail, how do they get found? It turns out that Amazon doesn’t help those at the far end of the long tail to sell. It’s suggestion mechanism is based on actual shopping by prior customers. That means if an item is listed on Amazon, but bought only by very few customers, it almost never gets suggested.

Thereby leaving the far end of the long tail a dead end.