Saturday, May 06, 2006

Each One Reach Two (or Three, or Four, or...)

OK, we gotta talk business for a while, bear with me, 'cuz y'all are an integral part of the path to ultimate success for our boys. Readers who come here obviously care deeply about the music and the future success of Santa Fe and The Fat City Horns. I posted back in January about a great book on the topic of the business aspects of music - see The "Future of Music by Dave Kusek and Gerd Leonhard. Ya really oughta buy a copy.

As I listen to the Santa Fe CD -- over and over and over and over and over... -- and Phil Wigfall's absolutely ass-kicking solo CD, and the works of Jerry's friends the Petersons, as I repeatedly go witness the guys throw down with the stunning Ronnie Foster, as I hope for steady gigs and success for Brother Lenny's new band Ritmo, etc., I keep thinking back to the insights provided in this book, along with all of the business financial and statistical modeling stuff I've learned since going White Collar after hanging up my axe 20 years ago (weary of schlepping crap gigs for fifty bucks a night. Not a lot has changed in the ensuing 20 years). So, I'm just gonna rant for a bit here, and I welcome any feedback.

Let's think about the online sales venue CD Baby for a sec. As of today, they tout the following:
  • 131,959 artists sell their CD at CD Baby.
  • 2,322,378 CDs sold online to customers.
  • $26,769,371.77 paid to artists.
OK, impressive aggregate Big Numbers, but that breaks down to an average of about a puny $203 in sales per artist. Now, maybe in terms of gross percentage return to the artist it's a better deal than any artist would likely get from the lifetime-servitude, one-sided, serfdom contracts typically offered by music labels, but I'll bet that most of the artists selling their music via CD Baby have yet to recoup their production costs (to be fair, I'd have to see the distribution of CD Baby payouts to artists -- e.g., maybe in unit and dollar deciles -- to better assess who's doing how well there).

In the traditional record business model, you turn over the marketing of your music (and, typically, the copyrights in perpetuity) to people who overwhelmingly don't give a shit about you -- you're just one more "product" in their account workload, and if you fail to catch fire pronto, well, you are toast (but we'll retain ownership of your copyrights, thank you).

Kusek and Leonhard, however, argue that we are returning to a music business model increasingly based on direct artist-to-audience long-term relationships. A fashionable buzzword here is "Viral Marketing." All of which got me thinking about the applicability of a math example I've often used on my students in my "Critical thinking" classes, to get them thinking about some of the ways in which numbers can be misleading (the core principle of our Nevada economy, haha!). Assume, then, betting just one dollar on a sports event. If your team or player loses, you double your bet. If there's yet another loss, you double your bet again. And, so on until he/she/they eventually win and you recoup and finally win some money...

OK, consider the following tabulation. What lengths of losing streaks could your wallet withstand?

LossBetCumulative bet
0$1$1
1$2$3
2$4$7
3$8$15
4$16$31
5$32$63
6$64$127
7$128$255
8$256$511
9$512$1,023
10$1,024$2,047
11$2,048$4,095
12$4,096$8,191
13$8,192$16,383
14$16,384$32,767
15$32,768$65,535
16$65,536$131,071
17$131,072$262,143
18$262,144$524,287
19$524,288$1,048,575
20$1,048,576$2,097,151

Had you started this way betting on the 1976 NFL Tampa Bay Bucs -- initially betting simply $1 -- you'd have been out $32,767 by the end of their 0-14 season if you'd stayed with your plan (assuming you had that much dough to fritter away). How about the hapless 1972-73 NBA 76'ers, who endured, in that one season, losing streaks of 13, 14, 15, and 20 games. Probably bankrupted a bunch of gamblers in the process.

The flip side

"Each one reach two." Pay it forward. The reverse of the betting loss scenario, under the same exponential math principle. What would likely happen if each of us Santa Fe crazies spread the love and healing to just two people (I know this is already happening ad hoc), and each of those two did likewise, and so on and so on, and kept it going...? Well, I put some stuff in a spreadsheet, and then saved it as a web page here (I hope you can view it, let me know). There are 3 tabs. The tab labeled "Exponential sales" displays a scenario that assumes [1] each of us reaches two others in turn, and [2] of those, let's say -- conservatively -- 10% of those reached overall will buy Santa Fe product, and that [3] the blended CD + DVD price of units bought is $35 (discounted from the $20 + $30 full price). Under this model, 20 iterations of "each reach two" would get us to $7.3 million in gross sales.
(Now, you can fiddle with my numbers to your hearts' content by just downloading the Excel spreadsheet here. Change the gross unit price, change the % expected to buy, -- change the "each one reach" to 3 and see what happens. Pretty amazing.)

The question then becomes: how do we share the wealth with those doing the person-to-person viral marketing for the band so that [1] they can just work on their awesome music full-time (which is what we all dream about them getting to do), and [2] not have to sell their souls to some corporate entity that would put their financial interests dead last (which our guys would never do anyway)? Some of us (uh, yours truly) will evangelize this band with no incentive other than our own admiration for what they continue to pull off, going totally against the economic grain. But, in general, those who help make an artist a success ought share in that success. People respond to incentives. I'm open to suggestion.**

UPDATE: Here's a simple scenario. Assume '"each one reaches two" on average, and of those two in turn -- again, on average -- you get one CD sale per iteration (ignoring the DVD for the moment for simplicity), so the "expected value" (probability times the payoff) is 50% x $20, or $10 per contact.

Iteration N, each iteration Cumulative N Potential
buyers
Expected sales, cumulative
0 1 1 1 $ 10
1 2 3 2 $ 30
2 4 7 4 $ 70
3 8 15 8 $ 150
4 16 31 16 $ 310
5 32 63 32 $ 630
6 64 127 64 $ 1,270
7 128 255 128 $ 2,550
8 256 511 256 $ 5,110
9 512 1,023 512 $ 10,230
10 1,024 2,047 1,024 $ 20,470
11 2,048 4,095 2,048 $ 40,950
12 4,096 8,191 4,096 $ 81,910
13 8,192 16,383 8,192 $ 163,830
14 16,384 32,767 16,384 $ 327,670
15 32,768 65,535 32,768 $ 655,350
16 65,536 131,071 65,536 $ 1,310,710
17 131,072 262,143 131,072 $ 2,621,430
18 262,144 524,287 262,144 $ 5,242,870
19 524,288 1,048,575 524,288 $ 10,485,750
20 1,048,576 2,097,151 1,048,576 $ 20,971,510
21 2,097,152 4,194,303 2,097,152 $ 41,943,030
22 4,194,304 8,388,607 4,194,304 $ 83,886,070
23 8,388,608 16,777,215 8,388,608 $ 167,772,150
24 16,777,216 33,554,431 16,777,216 $ 335,544,310

Twenty iterations of "each one reach two" at a 50% expectation gets you to a million units sold, grossing ~$21 million. How do we directly compensate those (the fans) who could make this happen without the usual costly intermediaries such as record labels, distributors, bricks & mortar stores -- and their online counterparts? Ask yourself, do you know two potential devoted Santa Fe Fans who each have two friends with the same tastes and appreciation for excellence? (hell, I can think of twenty right off the bat) Now, in the conventional record label model, the Suits and their supply chain middlemen would take nearly all of that $21 million. In fact, you might end up owing the label money even after selling a million+ units. Happens all the time. There's gotta be a better, workable, and just way. The potential worldwide market for Santa Fe and The Fat City Horns is huge.

I don't pretend to have the answers (just yet). But I think about this stuff all the time. I would love to see this band tour the world to spread their stunning music and healing goodness far and wide.

Together, we might just help make it happen.
_____
** some of you might recognize one mechanism here as akin to that of "Multi-level Marketing." But, in that model (and its unethical and illegal cousin the Pyramid scheme), those who get in early make big money off those getting in later (called the "downline," where you ostensibly get of cut of the revenue generated by everyone you bring in, and everyone they bring in, in turn all the way "down the line"), with the last to get in making nothing at all (and maybe losing their asses). That's not what I'm envisioning. I'm trying to come up with a viable business model that is a win-win, one that greases the considerable financial and logistical skids for Santa Fe to be a worldwide success (and selling physical product will continue to be a big part of that). What the guys do is a rare and precious phenomenon. I don't want to see it end any time soon. I'm sure y'all are with me in that sentiment.
_____
MONDAY MORNING OFF-TOPIC UPDATE: I just had the deliriously cool pleasure of again running several hours of full-court hoops with jazz pianist par exellance Ronnie Foster, yesterday at 24 Hour Fitness Sport at W. Sahara & Buffalo. I have never been around a more consistently pleasant and genuinely friendly man. Ronnie seems to know everyone in the gym, from the young kids to the old school dudes, and he exudes such happiness and good will that I have to wonder whether it's a reason that, when we're together on the court, I never seem to see/hear the usual trash-talking and angry arguing that is so irritatingly common in pickup ball. A great role model. Bro', I salute you.

Please do go hang at The Artisan on Thursdays and Saturdays starting at 10pm to hear Ronnie and the guys burn it up. Props to Drew Zingg for the fine guitar subbing for Jerry last Saturday, and also to Etsuko Mader, again filling in excellently for Jamie Hosmer.

10 comments:

Anonymous said...

I hear everything you are saying. It is very frustrating the music business and how "true talent and musicianship" often do not correlate directly to making a living and money in the biz!
I took notice of the band awhile back from friends who are TOP fans and talked about how fab Jerry is etc etc. Then when the band featured the Petersons, I took notice again , as I believe in their talent(Paul) and follow their gigs, CDs, DVDs, and music that they place in the industry.
I have been busy spreading the word and went so far as to book tickets out to Las Vegas for June 12th with complete faith that Jerry and the boys will have a place to play and I will finally have a chance to hear them live.
Many of my friends have since started following this blog and have taken notice and a couple are planning to meet me out in Vegas for the June 12th (our fingers are crossed) gig.
Has anyone in the band heard of Burnlounge for digital marketing of music......could add a link right to this site and customers could go right to the site to buy a download single or whole album and everybody gets a cut, because anyone can sign (fans)on and promote the band to friends and get a cut, as well as the artist having his or her own store and marketing or providing a link to his or her own store. Just an idea. Just go to burnlounge.com to get more info.
I have many ideas for venues in the mid-west that are smaller to start out with, and you could build from there. There are endless possibilities and getting the word out is the easy part....your fans would help and with computers, etc it is so easy for people to hook up and do this no matter where they live and in little bursts of time in between their other jobs.
I believe there are enough of us die hard music fans that truly appreciate what artists go through for their music and that many would join me in spreading the word without need for compensation, recogition. Just the feeling we get at seeing our guys in action is enough "payback" for the die hards out there like me.
Thanks for the reading recommendation......I also read the other one posted THe War...can't remember the full title, even though I teach, it helped me with my procrastination problem.
Here's to hoping that things get settled soon and I am so hoping to hear and meet the band on June 12th.
All my best to you all!!!!!

BobbyG said...

Thanks so much for your great input. Yeah, I will have to write some stuff about burnlounge." Need to examine that more closely.

The other book you refer to is Steven Pressfield's "Thar War of Art." A great little book.

Here's the blog post link:

http://santafeandthefatcityhorns.blogspot.com/2006/02/war-of-art.html

Anonymous said...

I really think burnlounge would be the way to go for Sante Fe, with really very little captital needed, great way to hook up fans with artists and work together on the same team. We like to help the musicians we respect and think are worth listening to and it is fun for them to work with us directly I would think. A great person to talk to about burnlounge would be Paul Peterson as he has experience dealing with this marketing tool for digital downloads and he might even have a team happening as we speak!

Could you give me input on any bands that play Sunday night, June 11th that are really worth the time to listen to? I want to go to something earlier and then head out to hear some quality music Sunday night! Any suggestions would be really appreciated!

Jerry I am counting on you for June the 12th!!!!! My fingers are so crossed!!!!!!!

BobbyG said...

The baddest action in town on Sunday nights is the "jazz" jam at the Hurricane Bar & Grill on S. Bermuda (there's a link in the blog). Host Tommy Alvarado is a MONSTER sax dude, and the venue attracts a lot of A-List players. Beyond that, I'll have to check and report back.

I will certainly look into Burnlounge, also.

Anonymous said...

Oh, wow that sounds really like something I would like to hear! Tell me about the bassist that usually shows, or is it a sit in thing that changes each SUnday.
Thank you for the tip and if you have any others for SUnday when you have time I'd love to hear.

This will be my first time to Vegas--I hardly ever leave the mid-west, so I am so ready. I am an instrumental music teacher and my last day of school is Sat. the 10th of June and then off for 3 days for live music in Vegas.

Keep up your excellent and informative blog.....I love to stop and read it....are you a teacher??? Math perhaps???

Any burnlounge questions you can also ask me as well as I joined up and am involved the past two months and am waiting for my favorite indies to get their new music up on it so I can download and spread the word.

BobbyG said...

The Hurricane jazz jam has a house group of great players (not sure of the complete lineup, Joel Richman is the drummer - fine player, and a very nice cat).

Thanks for the blog compliment. A labor of love for me. Teacher? I wish. Part time adjunct on and off at UNLV. See my website, www.bgladd.com

I work in outpatient medical information technology now, we assist doctors in installing Electronic Medical Records applications. I'd love to teach full-time, but can't afford it. Actually, I 'd love to gig full-time. REALLY can't afford that, LOL!

JC said...

Re: Making it! Recognition vs The Almighty Dollar!
I listen to the CD all the time; no need to ask why - great uplifting sounds!
Like it or not, 99.99% of the time it takes a hit single to "MAKE IT!"
The only exception that comes to mind was The Grateful Dead, but that was a Whole Nuther Musical Universe back in the sixties!
So - concentrate on writing guys! Be open to other people's original material! Concentrate on HOOKS! Write, Write, Write! Become an all original band, with the occasional, exceptional cover!
All it takes is one hit, and you're there! The world wants complete originality!
LOVE MUSIC HAPPINESS
JC
jcbluze@aol.com
ps - I write hit songs, already had one on the radio! Glad to help if you're open!

Anonymous said...

I hear you about teacher salaries...we could do a whole blog on that alone LOL I hear you about the gig thing as well....have to have at least 2-3 other jobs(or get married to someone who has a great stable job with bennies) along with gigging thing which is why I am out there supporting all my heroes that do the writing, performing, etc, wish it could be me but since it can't I will give my all to those who can--does that make any sense?

Hey, JC what was your one hit on the radio? How long have you been writing?
L

BobbyG said...

I am gratfied to see the blog post comments. I've sometimes wondered "is anyone reading is stuff? Does anyone give a flip?"

BG

Anonymous said...

Well, for what it counts I have been reading, and following and really enjoying some intelligent stuff to read about my favorite subject music. Have you ever gone to some of those other spots that are a bunch of people just looking for attention or trying to one up the other. What a bad vibe you can get....gets me down. It's not about them, but the musician and their music and showing them support.
Keep up the great work, I'll get my other music friends to check this out...although I am the most hard core.
I think I mostly like your tone and philosophy of people and music. Not many people out there like this, kudos and never stop. I promise I won't either!!!!
L