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The Ragdolls practice for their Saturday performance at the Riverside Arts Center - Ypsilanti
The Ragdolls practice for their Saturday performance at the Riverside Arts Center - Ypsilanti - Doug Coombe | Hide Photo

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Ron Suarez

Dr. Ron Suarez is our guest blogger this week. Ron is a serial entrepreneur and Arbor City Councilmember who recently founded Promovuz, offering digital music promotion, statistics and sales. He is also a Media Futurist at and the president of Object Insight, Inc., a software engineering firm. Ron uses his Ph.D. in Cognitive Science for his work with User Experience and Object Oriented Design.

The Politics of Change and Upheaval in the Music Industry

 Is politics a dirty word in business? Should someone writing a business plan stay away from controversy? Yesterday, here in Metromode, I blogged about the a GLEQ business plan competition where my company promoVUZ took second place. Feedback from one of the judges warned me to not refer to the exploitation of artists by the big labels. Another comment said I should get off my soapbox. In meeting with my team, we realized that what we did wrong in the plan was not the inclusion of music business politics, but our failure in clearly identifying why the politics are so important.

Good sales people will advise you to clearly define your target customer and identify their pain point. Our customer is the emerging artist who feels exploited by enterprises like the big record labels and also wants more control over their art form than a big label will offer. Given that one-tenth of one percent of artists who try to get on a big label end up being successful and that an artist might sell 500,00 CD's but still not make any royalties, we share the politics of the artist who feels exploited.

However, the way we covered this for the investor should have had less focus on our conclusions and more evidence that this is what the emerging artists think. An investor doesn't really care if artists are being exploited, but they should care that millions of artists will spend money to avoid this pain.

The value of the big label in the past was the money they spent on marketing for an artist. There is a tremendous shift going on in the way an artists can now market themselves. In subsequent posts, I'll go into disruptive technologies like podcasting. Here, I'd like to describe a bit about the changing nature of the relationship between the artist and the fans.

Two summers ago I attended a party at the home of Sam Valenti, who runs Ghostly International, an independent music label based in Ann Arbor, Michigan. I went up to Sam and told him how great is was that they had a fan group on Last.fm. Sam looked at me with a puzzled expression. Apparently, neither Sam nor anyone at the label had even heard of Last.fm at that time. For those of you who still don't know, Last.fm tracks listener behavior and helps you to discover music you've never heard, by helping you browse through the playlists of others, whose musical taste overlaps with yours.

Like other social networking sites, they also have the concepts of "friends" and "groups." So, a number of "friends," mostly in Europe has apparently formed a Ghostly "group." In the old business model a big record label would have spent a lot money creating fake fans so that they could eventually recruit real fans into a club. In the new music industry, fan groups seem to now form on their own with the artists and labels finding out after the fact. Note that the Ghostly label includes tech savvy staff and not many people knew about Last.fm two years ago. Last.fm is part of a general movement away from "taste makers" to folksonomy based music discovery and this phenomenon extends beyond just the music industry.

And, as is the case with research and development across many industries, small business innovates and then large companies buy them to gain the benefits. Last.fm was recently acquired by CBS for $280 Million. Read the press release.

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