Fifty-one years ago, Harvard Business School professor Theodore Levitt changed business thinking when he explained that any industry’s failure was often a result of companies not understanding what business they were in.
His primary example was railroad companies in the first half of 20th-century America. They failed because they believed they were in the railroad business, making products for railroads, rather than understanding they were in the transportation business, the market for which was expanding rapidly and that was ultimately served by newer forms of transport such as cars and planes.
The key is where the focus of a company’s thinking lies. Levitt argued that a focus on products would lead to failure, while a focus on customers’ needs was the route to success. Businesses struggle when they are more concerned with the needs of the seller – themselves – rather than those of the buyer.
Bob Lefsetz wrote about this recently, using the example of Kodak, and citing a Wall Street Journal piece: “Sad that Kodak thought it was in the film business, when it was really in the memories, self expression and shared experience business.”
The second decade of the 21st century has seen an unprecedented demand and thirst for music. Yet many companies working within the music industry are struggling to survive, let alone grow.
Perhaps the issue is simple – do companies operating in today’s music industry deliver music in all the forms and on terms music fans want? And do companies satisfy all the needs of music fans?
Unfortunately, the answer to both is no.
European Commissioner for Digital Agenda Neelie Kroes‘ recent speech in Avignon included some wise words that brought this subject into sharp focus. Her vision of a music industry built around artists and their connections to fans is one we – the MMF and the FAC – have proposed previously.
Kroes described a future industry with “artists at the centre, not only of copyright law, but of our whole policy on culture and growth.”
This is a healthy dose of common sense. The most important people in the music industry are artists and their fans. Developing new ways to connect the two and removing as much friction as possible from the process is the start of a more prosperous future.
That doesn’t mean that artists don’t need help and advice from managers and other professional service providers, but that help must be in partnership with artists and focused on serving the needs of music fans.
Fans are willing to pay artists and their partners, but the process needs to be simple and trustworthy, and the offering compelling. Hand on heart, have we as an industry kept these fundamentals in focus?
How rights are managed in the digital age is one of the biggest causes for concern. For too long there has been a mindset that regards copyright as an instrument of control rather than as a remuneration right. Kroes nailed it when she said: “Sadly, many see the current system as a tool to punish and withhold, not a tool to recognise and reward“.
A specific area she highlighted for change is that of licensing. Companies involved in this process need to accept that ceding a degree of control is the first step to growth. License every viable service and the market will boom.
Ceding control over how fans consume music is necessary too. Even believing you can control consumer behaviour on the internet is a fallacy. Better to accept music fans’ behaviour and build businesses that make money from it. If this means completely re-thinking the business models of the past, so be it.
Kroes ended with a blueprint for a modern music industry and a stark warning of what will happen if we fail to heed the need for change: “Let’s get back to basics, and deliver a system of recognition and reward that puts artists and creators at its heart. Let’s not wait for a financial crisis in the creative sector to happen to finally adopt the right tools to tackle it.”
To survive and thrive we must embrace the enormous opportunities of the digital age.
A version of this article was originally published in Music Week in the UK in December 2011.
Brian Message is a partner in Courtyard Management, the business that manages Radiohead’s career. He is chairman of the UK *Music Managers Forum (MMF), and an advisor to the Featured Artists Coalition (FAC).