CAN THE MUSIC INDUSTRY BE TRUSTED TO NURTURE SUPERFANS?
The Superfan is shaping up to be the topic du jour in 2024, and the focus of numerous articles dissecting the commercial potential of the "fan economy". The multi-billion dollar opportunity has the corporate music industry frothing at the mouth, especially as annual streaming growth slows into single-digits in developed markets.
Goldman Sachs reported in July that there’s a $4.2BN addressable market opportunity for Superfan monetisation. Superfans could contribute an additional $2BN to streaming platforms by 2027, potentially even growing to $4BN by the close of the decade.
Mark Mulligan considers three key areas that the industry needs to truly master to unlock the “fan economy” opportunity in his recent blog post Fan economy: expanded rights are worth $3.5 billion, now what? But here’s a suggestion for a fourth - master and monetise the tools you already have. Whilst the prospect of unlocking this ‘new’ value is undeniably enticing, before we start circling the wagons around these poor souls, why don’t we make sure that we’re extracting maximum value from the channels already open to us?
As an industry, we have clung on to outdated models and formats for far too long - repeatedly. Over decades.
The business today largely operates on the same guiding principles that were established in the 1970s and 1980s, where success is measured by album sales, or ‘equivalents’ thereof (IFPI recently reported that streaming income was 67.3% of label revenues in 2023). So, if the dominant market driver is streaming, why on earth do we try to equate that with the sale of a product that has long be obsolete?
The so-called vinyl resurgence of the last decade produces nowhere near the level of income that streaming provides (although it does provide a tasty incremental revenue line). However both new release and catalogue reissues often come in multiple ‘limited edition’ vinyl variants, leaving existing Superfans exasperated with all the options, often with no tangible value exchange other than a differently coloured record, perhaps a sleeve variant or possibly a bonus track if you’re lucky.
We need to stop treating Superfans like walking credit cards.
So, as Superfans are already being fleeced and product price elasticity is continually being pushed (up, of course), it is hard to see, now that Superfan is the buzzword on earnings calls, how the music industry can genuinely innovate and come up with something that carries not only the perceived value that fans will want to pay extra for, but something that isn’t just more of the same - coloured vinyl, tour, merch, meet and greet – ad nauseum.
The success of the "fan economy" hinges on a fundamental shift in how the industry interacts with its artists' most dedicated supporters. It's about building genuine trust, fostering a sense of community and not just seeing them as a collective pile of 4.2 billion dollar bills.
Do we, as an industry, have the imagination and creativity to come up with compelling propositions that resonate with Superfans? Can we move beyond the transactional and offer them something truly meaningful – a sense of ownership, true community, a voice in the creative process, exclusive experiences?
Our historic mis-steps are a prescient reminder of what’s at stake here. The collective attempt to litigate Napster away was a miserable and expensive failure by any measure. Making the problem a lot worse was the launch of walled-garden download stores.
Sony Connect (Sony Music), pressplay (Universal & Sony), and MusicNet (old BMG & EMI) legally offered consumers a portion of what was freely available on piracy torrent sites. So you could legitimately download a U2 album, but not a Whitney Houston track on the same service. You could legally download Robbie Williams’ latest, but not Jamiroquai’s on the same service. Having to visit multiple destinations to find what you want was not a great fan experience. It was almost enough to make people visit record stores again!
Both pressplay and MusicNet were named in PC World’s 2006 list of the "25 Worst Tech Products of All Time", perfectly capturing the lunacy of it all with their no-holds-barred summation "the services' stunningly brain-dead features showed that the record companies still didn't get it". Not our finest hour.
The boardrooms of the majors will have been reverberating all year at the thought of that $4.2BN-shaped opportunity. Both UMG and WMG have announced moves to develop and invest in “Superfan platforms” already.
Reverse engineering that $4.2BN into business plans without a rigorous, honest and open approach to innovation and with input from creators and entrepreneurs from other sectors and feedback from real-life fans will mean that the opportunity will be at best, short-lived. If not utterly squandered.
Isn’t fan-centric innovation already at the centre of what we do, every day?
The tools for deeper fan engagement have been at our disposal for years – social media, direct-to-fan platforms, sophisticated data analytics and now, yes, blockchain. Yet, we've been slow to leverage and monetise them effectively, and have been left standing compared to how quickly other industries have embraced their possibilities and reaped the rewards. Look towards FMCG, travel and luxury goods for a masterclass.
The Superfan opportunity is real and can potentially revolutionise how the industry operates. But it comes with a hefty caveat: lessons from the past need to be heeded, and lessons from other sectors should provide guidance for what will work and what most definitely won’t.
To create something that will truly serve those most super of fans means not only financial upside, but harnessing the soft power those fans hold in terms of social media influence, word-of-mouth marketing, community culture, and support for associated artists. Truly leaning into the fan culture of each specific artist (versus the old favourite cookie-cutter) is the only way.
This isn’t only about juicing that $4.2BN - it’s about creating the conditions, the product, the brand offerings and yes, the community, that will make fulfilling the size of that fiscal opportunity a reasonable possibility. And that entails building sustainable, mutually beneficial relationships to intelligently monetise that fandom.
Comments