What the Music Industry Can Teach You About Launching a Business During the Pandemic Let the failures (and successes) of the music business' past provide a road map.
By Jeff Walker Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
For musicians and music fans alike, the past many months have proved one thing undoubtedly true: the most deafening is the unrelenting sound of silence. As venues shuttered around the globe, the impact of Covid-19 was far-reaching and financially devastating — after all, touring is the financial engine of the music industry. The disruption brought on by the pandemic was indeed unprecedented, but even a casual historian knows that big problems present powerful opportunities.
If you are considering launching a business or growing an existing one during this upheaval, go for it. Just be sure to learn from another recent disruption: the rise of digitization that brought the music industry to its knees.
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When record labels were focused elsewhere, a music file-sharing platform would soon shatter industry norms forever: Napster was not just a disruption, but an earthquake that would cripple the multi-billion dollar industry overnight. The music-tech start-up would change the creation, distribution, and marketing of music in profound and permanent ways. For those who tried to push back (mostly the major labels), the impact was severe. For those who optimistically embraced the new normal, as well as the challenges of new technologies with creativity and curiosity, the transition into the millennium stoked a period of artistic creation along with significant financial growth.
The shift wasn't easy. Artists after all need to be paid, and the piracy that came along with digital sharing was daunting. While the big five continued to wrestle in courts, an entertainment outsider leaped forward: Apple's iTunes platform offered a user and artist-friendly model for the legal, and profitable, consumption of music. There was no longer a need for the physical delivery of music — the primary business model for record labels at the time.
Sales metrics like SoundScan no longer provided an accurate measurement tool to value an artist's impact. As record stores withered and revenue streams dangled precariously, nimble leaders marched forward, carving new paths to sustainability.
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The social sharing of music encouraged a deeper intimacy between musicians and music fans, and the possibilities of online branding were broad. With lesser-known artists beginning to reap the rewards on the road, despite the lack of radio plays or CD sales, music consumption was at an all-time high. Soon enough, revenue opportunities that before only more established acts could enjoy were becoming available to smaller bands, albeit in different ways. The majors seemed stodgy and irrelevant.
So, as we all face further uncertainty during this global pandemic, what can we learn from the reactions or inactions of the record business?
1. Go boldly
Rather than trying to squeeze a new circle into your old box, be flexible with your boundaries. Consider revenue streams you may have ignored in the past or shrugged off as untried.
2. Embrace new metrics
Resist sole reliance on traditional methods of determining potential outcomes. Consider the unsigned artist of the early 2000's who sold a dismal number of CDs while streams skyrocketed. That artist would become Justin Bieber or The Weeknd or today, Billie Eilish.
3. Be inspired by the boundless creativity of others
Imagine if record labels embraced digital distribution and learned from Napster rather than resisting it and fighting teenagers in court. From the late 90s well into the decade that would follow, the music industry was playing catch up– and mostly losing.
4. Compensate artists (partners, customers) fairly
Artists, team members, partners – all are equal parts of a successful model. Sharing profits is not only ethically responsible but creative collaboration inspires growth. We are "all in this together," right?
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These lessons are paramount today. Just like when digitization disrupts an industry, the pandemic is now causing smart musicians and their teams to adapt and seek alternatives.
Newer platforms have emerged to present unexpected media collaborations, representing win-win revenue builders: Twitch and Minecraft, for example, have become virtual venues. Paid subscriptions for streaming channels are providing exclusive access to fans. Music publishing, and IP rights more broadly, have emerged as a hot income generator. With low-interest rates and easier entry into the publishing sphere, finance experts and leading private equity firms see real value in artist catalogs. In a new data-driven business world, proprietary models allow a more confident path to predict ROI on future earnings and even lesser-known artists can reap these benefits.
Someday, and hopefully soon, live music will once again shake the walls of Wembley Stadium and Tipitina's. It won't sound different, but it might look a bit different. The innovations of the last six months won't be gone when the first "real" ticket is sold; many are here to stay. Smart entrepreneurs and leaders, take note! History has taught us those who are tenacious, optimistic and willing to embrace change, are the true rock stars. Onward!
Jeff Walker is the Managing Director of Stellwagen Ventures, a strategic global venture firm working across music, sport, media, investments and entertainment. Our ethos is to promote a win/win model that supports a shared success thesis around everything we do. We are about winning — winning together. The artist, the buyer, the seller, the brand, the franchise, the broker.
