February 25, 2013 Premiumization 101 for Musicians
Written by Tommy Darker.
A few days ago, I stated on Facebook:
“We know that there’s no economical value in non-scarce things. Then how do musicians expect to make money out of digital music, especially now that’s it’s becoming more and more commodified and easy to have access to? Something abundant eventually becomes free at some point.
You create market value by selling scarce things. Get it right asap.”
There was reaction, as expected, so I wanted to write a little bit more about this subject and relate it with a term that most musicians are unfamiliar with: Premiumization.
The Value of Music in the Digital Age
Music is full of value, emotions and people LOVE listening to it everyday. It has become so much available that every person has a personal soundtrack now. Take a walk and you’ll see how many people listen to music while jogging, commuting or having a break from work. If you don’t see the signs, just check out some research conducted by Heartbeats International. And that’s great. Music is the fuel of life and we all know it.
However: the fact that it becomes abundant makes it more and more difficult to sell ‘music’ as a ‘product’. And if you cannon sustain something commercially and re-invest in its creation, it eventually faces decay.
Before we had CDs, vinyl, even cassettes, which were tangible objects to sell. You could do stuff with them, touch them, break them, gift them. Tangible objects are valuable for people, because they’re scarce.
What about digital?
A digital file or a streamed song are intangible. They’re music stripped to the bone. And they become more and more easy to have access to. Marginal costs for duplication are zero, which enables them to spread faster than ever without any surcharge for the creator. Something impossible by definition for a tangible product.
Along with the format, the perception of people for the value of digital music, thus music in its most popular form, has changed radically. ‘No cost to duplicate and spread, free feels right’, is a common argument, supported by the notion that ‘everybody’s doing it’.
One thing’s for sure. Gravity is changing and digital Mp3s cannot be considered to be the successor of the CD and vinyl empire. It’s just different. Culturally and practically.
But good music is notorious to produce and definitely not costless. It requires various arrangements, time and people to produce, execute and promote. And it’s cost is far from zero, opposed to the general perception, especially from the so called ‘digital natives’.
Considering the aforementioned parameters, if you want to make a living from your art, you need to ‘add value’ to your music. And by saying ‘add value’ I mean ‘add scarce value’.
Here we go, that’s a key insight you have to nail down in your head. I’ll be honest, the idea stuck in me after reading a piece from Mike Masnick’s Techdirt.
Music is valuable for triggering emotions and shaping our mood, but the market laws are different. There’s no silver bullet on how to add scarce value to a musical composition in order to make it marketable. There’s a yet unexplored territory though, and it lies in the power of perception. Brands resist commoditization by skillfully adding value to what they offer, changing people’s perception. In other words…
Enter Premium
I’ve been researching the issue lately, and I could understand why most musicians still believe vigorously they play the $ .99 game. Damn, you need to sell tons of those digital tracks to make a proper living. Almost impossible for a small niche musician.
I’m on the opposite side: sell a few and expensive. In other words: premium.
The idea of premiumization in music came up when I first encountered and collaborated with a founder of a food luxury brand.
Changing the perception about food and turning it into a luxury product that targets a small group of people was something fascinating and difficult for me to process in the beginning. Food is a commodity, something we cannot live without. Restricting food to increase its market value would be disastrous for human beings and wouldn’t make sense.
Now, where you see ‘food’, think ‘music’. It’s almost falls into the same mindset. Which means that, if food can get through the process of premiumization and obtain added value, the same is possible for music as well.
This way, music can be sold in the form of a product or experience that has value for the market and the people.
On my way to specify ‘premium’, I came down to the following characteristics. While reading the following paragraphs, open your mind and think of products that could combine these ‘anti-marketing laws’.
A premium product is scarce. There’s no abundance of it.
A digital download can be copied infinite times. It’s not premium. Can’t charge a lot for it. Races to the bottom prices.
In other words, if anyone can have it, why pay a lot for it?
An experience, on the other hand, is limited. You can’t experience the same concert twice. Once you’ve missed it, it’s gone. The same for handmade products (more on that later).
A premium product is unique.
Where unique I mean ‘exceptional quality not commonly found’. If you offer something crappy in limited edition, I don’t think it helps the value to rise.
What you offer has to be exceptional and unique. Something that people will definitely talk about.
Think of a Rammstein show, the Bum Bum Train, Cirque De Soleil and Matchboox. All of them are unique. I doubt there can be someone to copy what they offer.
The more automated the creation, the less valuable the product.
What does a newspaper, a stamp t-shirt, a blog feed and a MacDonalds burger have in common?
You guessed right - the procedure of their creation is heavily automated. And the more automated it becomes, the more the costs drop - the more the profit for them grows - the less valuable the product becomes for you. That’s why you’ll never really appreciate them and pay for more than the price. You’ll always look for cheaper alternatives, if possible.
What you’re looking for yourself is to invest some time in slowing down the procedure of creation. YES, that’s right. Slow down the creation. Put your personal touch in it (go handmade), put real (not cheap) materials in it, provide a twist and flaws that robots can’t.
That’s why it’s real, because it has flaws.
A premium product is difficult to create.
If you watch a show and then go home and prepare to do the same with your band, then the show was not really that worth paying for.
In general, the more difficult it is to create something - so not many can copy it - the more valuable it becomes.
Next time you think of watering down the experience of your act for the sake of ‘easier execution’, think about it twice. Easy-to-do things are me-too things that never impressed anyone.
Personalization is turning an ordinary product into premium.
Why would you pay more for a signed CD? It’s the same material. Because of the signature of course. Personalizing something can make people go far to purchase something; and pay premium of course.
That’s why a simple video or card for someone’s birthday (with his name in it) can be appreciated much more than any other expensive-to-impress generic gift.
We always want to feel one-of-a-kind and the sound of our name is the sweetest sound we can hear (they say). Invest on those principles and you won’t lose.
A premium product can never be discounted.
You always get what you pay when you buy a premium product. You can never give it away for free, and under no circumstances you give it in discounted price. You don’t create it to ‘sell out’, but to make the people who purchase it feel special and lucky to have it.
Research has shown that the more you raise the price of a premium product, the more demand it created. Likewise, a discounted price could drop the sales - and the value of the product itself!
So, beware.
A premium product carries some weird energy around it…
…similar with the one that symbols carry. Why do you feel proud riding a Harley and not just any motorcycle? Why do you want to have a Gucci instead of a Zara? You know why. Because of the vibes and prestige they convey.
I could safely say that a premium product could be turned into a symbol far easier than an ordinary product. It’s the perception, stupid.
It’s how the product makes you feel, not what problem it solves.
Emotionomics here.
When we buy an ordinary product, we tend to compare it with others from the same category to find the best solution for us. This is the way it’s marketed. They solve problems. We use the left brain hemisphere, the reason.
When we buy a premium product, we choose on how it makes us feel and how unique it is. It’s marketed by triggering people’s emotions. We use the right, artistic hemisphere.
That’s why we pay a lot for it, we don’t really use the reason within us ;)
A premium product is difficult to get.
You know what BAPE did? They hid their stores in small alleys without any signs on them, they gave only one pair of shoes to each buyer, once they were sold out, they were gone forever, their website was functioning only if you had downloaded and run a special .exe file.
Pain in the ass? Yes. People loved it. And the owner became rich.
The more you make people chase you for a purchase, the higher the value of your product goes. It’s like you state “I’m not desperate to sell you the product, I know its worth and YOU’ll come to me, not vice versa”. It shows confidence.
Think of a chick. Sex on the first date? Hmmm…
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After all the absurd, anti-marketing principles we just saw (for the ones that got intrigued, more inspiration can be found in Kapferer & Bastien’s book, ‘The Luxury Strategy’), it’s time to think.
How can we create a music-related product that matches the aforementioned criteria and highlights our music, our mindset, our brand?
Mind you, there’s no right or wrong answer to the question. Just be creative and tell me what you think in the comments below.
—-
I’m Tommy Darker, the writing alter ego of an imaginative independent musician. I started ‘Think Beyond The Band’ because I feel proud of what I’ve accomplished so far and I like helping other fellow musicians that struggle with the same problems.
I teach how to make Realistic Steps in Music in the Digital Age and I love starting conversations. If you share the same mindset, find me on Facebook and Twitter and let’s talk!
Reader Comments (18)
Nice post... However, "Think of a chick. Sex on the first date? Hmmm…" is a really sexist thing to say. Did you really think only men would read this article? Would you say the same about a guy? Bah.
I personally found reading this blog VERY intriguing and informative, definitely given me food for thought, I can;t disagree with anything you've said here!
Well put!
@Hannah
Hi Hannah. Is that the only thing of the article you disagree with? It's alright, and sorry if it did insult you, I just like describing my points in a vivid way. They end up sounding controversial sometimes. And it's alright for me, I would have no problem to hear one say the same about men.
Are you a musician or music businesswoman?
@ Rebekah & Brian
Thanks very much for stopping by! There is a lot that can be said and done on this subject, this does not even scratch the surface of the mindset we can take from other industries and incorporate in the music business. I'll try to make the start with my own band.
For musicians, one way to get the premium model can be with shows and touring, ie only playing a full house.
For recordings, perhaps you could go to albums only, but that won't stop anyone from grabbing a single but they may still want the whole album if they like at least one of the songs.
This bears some similarity to what Seth Godin says in Purple Cow. As a musician in the professional sense, you are also a businessperson. As such, if you want to succeed in a business with plenty of competition, you need to find a way to make your business (music) stand out! If that means adding more value to your music than just the listening experience, so be it. Premiumization is the way to turn your cow purple.
Great post and agree that if your product is premium it should not be treated as a commodity. I've worked in the industry in various levels for over 20 years and currently am professor of business studies at a local college. If my students (who want to remain Indie for the most part) didn't give music away for free to entice people to their performances...they would never spread the word. On the lower side of the socio-economical scale it doesn't make sense for new comers to charge a premium for work and artistry that's inchoate. My fear about this idea is that now young artists will feel they're entitled to charge premium prices for products that aren't worth it and to work less because they're putting out fewer songs. Young artists need to be prolific in composition....especially in the early stages of artist development. While I agree with what you're saying, my belief is that it only works for established acts and in order to establish an act, initially, in today's world, you are forced to give music for free. It's a sad state of affairs but, it's taken the industry since the early 80's when the decline of musical quality and artistry in the industry began. No one wanted to pay 18 bucks for a CD with 2 decent songs on it. The tangible thing that has remained - because it's visual and you CAN hold it in your memory as an experience - is live performance. The shift from paying premiums for music to live music events has been on the rise ever since and it doesn't appear to be different in the near or even distant future. That's why LiveNation is now offering some of the most lucrative deals to artists in the history of music. It's unfortunate but if I push my students to charge premiums for music at this stage in their careers...it'd kill their career before it ever has a chance.
Tommy, as a matter of fact, I thought the article was really interesting. Also, it's probably true that people hold you in higher esteem if you don't have sex on first dates... It's just a pity that this talk of "chicks" makes it seem as if the article is written solely for men (or possibly lesbians).
(And I'm a musician, by the way.)
I just love the concept!!!
Well said Tommy. Music is 'food' for soul & body, when making or producing music is not cheap (meaning is not in auto mode just full of loops & no personal effort) not only relating to economic value of process it takes -even you're indie with self-releases-but to human one too as it is full of emotions, a story to tell & share. A personal story is priceless, is unique for everyone. That's what is missing from current mp3, this format doesn't support the storytelling well. Sure there are people who just want to listen a piece & then move to next one and thats ok, not everyone likes the music at same level, like everything else, its natural. Still I believe with technology we will be able to share music stories again, even using more than one sense for music FANS. Not an easy task but that makes the difference, the process. I slightly disagree with quote 'its the product how it makes you feel, not the problem it solves' in music approach actually it solves a lot of problems, even sometimes when a person looks to change his/her feelings can be a problem.. Great piece!
@ Matt
I tend to disagree with the whole mindset you're projecting. I think the notion of selling and focusing on albums is not the right way to approach music anymore. Record sales was the old school way of the record labels, why still keep doing that? Because it's been going on for the past decades? Not smart anymore.
That's what I wanted to highlight in the current article, that we have to look further, not just an album, a t-shirt etc. Maybe I can follow up with another article suggesting some examples of what I mean. Premiumization is a mindset, not a tactic to have on your to-do list. If one doesn't get it, they can't follow it either.
About live performances: it's a nice way to get new fans, I reckon. If you're a small artist though, this is still something you cannot be sure of (talking about small venues with 30-50 people, something most artists face every day). Standalone, a simple live performance ('stage-instruments-music') can't be tagged as premium. It needs added scarce value to it.
@ Riley
That's a great analogy mate! Haven't really thought about it this way, but I've read Seth Godin's books and it makes sense to think of it this way. Since you like Godin, it's worth reading this book as well, it will shift your mindset: http://www.amazon.co.uk/Luxury-Strategy-Break-Marketing-Brands/dp/0749464917
@ Jen
Great points Jen, and it comes down to what I believe too. Let me break it down, because each of your sentence contains truth.
"If my students (who want to remain Indie for the most part) didn't give music away for free to entice people to their performances...they would never spread the word."
I agree. That's why I strongly believe that digital music has to be treated as a vehicle to get people on board and build a tribe around it. Not sell it.
"On the lower side of the socio-economical scale it doesn't make sense for new comers to charge a premium for work and artistry that's inchoate."
Exactly - perfect timing to get feedback from your early fans maybe?
"My fear about this idea is that now young artists will feel they're entitled to charge premium prices for products that aren't worth it and to work less because they're putting out fewer songs."
Raising the price is not premium. That's just a raised price! Premium is the added value, and it definitely can't happen with digital music (or you can try... but you won't get that far). I've said it before, premium is a mindset and it involves lots of things, price is merely the economical impact it has in our capitalistic system. In a few words, premiumization raises the price, a raised price doesn't make you premium.
"Young artists need to be prolific in composition....especially in the early stages of artist development."
Music has to be great, that's for sure. It all starts from there.
"While I agree with what you're saying, my belief is that it only works for established acts and in order to establish an act, initially, in today's world, you are forced to give music for free."
I hear you. And I agree, to some extend. You do need to have built an asset first, before you can start charging for what you do. That's an equivalent for a website charging for premium access without having built a proper platform first. Yet, if you have premiumization in mind while you build your band's asset (call it videos, artistic additions, apps, interactive shows etc), you will be way ahead of other bands after a year or so. Again, premiumization is a mindset, and it has to be incorporated in the procedure of building a b(r)and :)
"It's a sad state of affairs but, it's taken the industry since the early 80's when the decline of musical quality and artistry in the industry began. No one wanted to pay 18 bucks for a CD with 2 decent songs on it."
Well said, and that' the reason of the distrust consumers have on CDs now.
"The tangible thing that has remained - because it's visual and you CAN hold it in your memory as an experience - is live performance. The shift from paying premiums for music to live music events has been on the rise ever since and it doesn't appear to be different in the near or even distant future. That's why LiveNation is now offering some of the most lucrative deals to artists in the history of music."
Live gigs are experiences! That's what makes them valuable. Still, there's way for premiumization to be incorporated in live experiences as well. Just have a look at the aforementioned list in my article, and I'm sure you'll come up with some ideas yourself, right now.
"It's unfortunate but if I push my students to charge premiums for music at this stage in their careers...it'd kill their career before it ever has a chance."
Don't make them focus on putting a higher price tag, but direct them towards building something unique and unconventional, breaking the barriers of music as a form of creation. That's premium by definition!
Thanks a lot for your thoughtful and well-written comment! Let's talk some more.
@ Hannah
Sorry for using that word. I hoped it would not get between people and the point I was trying to make.
Can I have a link to your music please?
@ Bill
Cheers Bill! Glad to hear that.
@ JOANPi
Thanks for stopping by JOANPi. I believe music tells a story by itself, without additions such as visuals, lyrics and so on. Otherwise we would not have instrumental post-rock pieces that create so vivid images in our minds.
The key in your comment is this:
"A personal story is priceless, is unique for everyone."
It means that music is something personal and subjective. This is why it has value to so many people. Likewise, personalization in an object leads to the same value. The feeling that something is 'ours' is a strong inner-motive for human beings. It's up to us how we can enhance that story and make it even more valuable for people. This is premiumization.
About the quote you disagree with, its purpose was to describe the premium nature of a product, not music itself. Harley Davidson's lifestyle (or perception of lifestyle) is that lures you to buy the brand's products, not especially the fine quality of the products.
Thanks for your insights!
This is pretty interesting stuff and I do agree with the premiumisation concept - to make a living nowadays, it's simply not enough per se, apart from the top selling artists, to produce a set of songs and maximise their distribution. This, in my mind implies at least two things:
1. Premiumise your existing product (music): It could be something as simple as making a (truly) limited edition of your record (along with the standard release). My first thoughts went back to the vinyl era with some bands producing awesome album covers (think of Cream's Disraeli Gears) and modern day book shops where you might be tempted to buy a physical book at a higher price than the cheap e-book because of how delicious it looks (leather bound covers anyone?). What if an artist has painted your album cover and for CD's it's simply a printed picture but for vinyls (or ltd edition CD covers) it's actually a beautifully printed "mini painting"?
2. Use music sales as a vehicle to drive in revenue from other sources, not as a sole revenue source. Distribution of music is easy and fast, thanks to internet. Maybe the focus, earnings wise, should not be the distribution but using it as a vehicle to drive people to your "premium content", whatever it is? Is there something that you, as an artist, can offer to the people listening your music? If you're highly skilled and expect to sell, say, 500 records, netting maybe 5GBP per CD sold i.e. 2,500GBP (I'm just guessing here), think what else could bring you similar revenues? 500 record purchases means you have 500 people's attention (especially as they are investing in a relatively unknown artist's music in the times or abundant free content!) and you should add value to them. Online video lessons of your or other songs? 1-to-1 lessons? Acoustic gig at people's parties (no middle men here!)? Again, just saying whatever comes to the mind...