Lessons for creatives from the world’s fastest growing companies
Danny Quick
 on 8 min
“When the winds of change are blowing, some people are building shelters and some are building windmills” ~Chinese Proverb
Our concepts of ownership are rapidly changing. The quiet revolution that’s now getting noisy is the sharing economy. We’ve gotten a taste with Airbnb and Uber, but it’s just getting started.
This new mentality already affects the way we consume music. We’re entering a world where “access trumps ownership.” What’s the value in owning a single album when you can have access to an unlimited library? So as iTunes sales decrease, streaming services take the reigns.
Most artists see this is a problem, and they’re right. But almost all of them miss the bigger picture. Government regulations, shady deals, and other factors create a system where artists aren’t fairly compensated from streaming plays. No doubt, this needs to be fixed.
But the reality is, the days of making a living from selling music are deteriorating. Higher compensation for streaming music is only a temporary solution to a much bigger paradigm shift. The economics of all industries are being fundamentally disrupted thanks to the “copy machine” we call the internet.
“When copies are super abundant, they become worthless. When copies are super abundant, stuff which can’t be copied becomes scarce and valuable. When copies are free, you need to sell things which can not be copied.” ~Kevin Kelly
There is nothing more abundant online than music (except cat videos). Artists need to reevaluate the value they create and how to best monetize it. In a world where music becomes commoditized (and free), what do they sell?
The disruptive technologies and innovations that devalued music in the first place are the same ones laying the blueprint for the new music industry. In short, artists have a lot to learn from startups. The parallels run deep.
Both create value in the world and attempt to monetize a portion of that value. Both look to build a critical mass of users (fans), moving from early adopters to the mainstream. Eventually they aim to monetize in some liquidity event (album release, tour, etc). Both operate on love and sweat equity.
Let’s dive into some specific lessons artists can takeaway from disruptive startups.

Lesson 1: Innovate The Business Model

“Once scarce things become abundant, markets treat them differently—exploiting the cheap commodity to create something of more value” ~Chris Anderson
Instead of trying to copy and paste what used to work into the online world, it’s time to generate new business models that reflect current realities. We need to embrace the internet as the native platform it is, with the unique advantages and disadvantages it offers to creatives. Let’s enter the world of “freemium.” A short list of billion dollar companies currently thriving under this model include Dropbox, Evernote, and Spotify (touchy subject).
If you’re not familiar, freemium means that 90–95 % of people will consume your content for free, and the other 5–10 % will support everyone elses consumption by paying for premium access. This is already happening, but most seem to be fighting it rather than leveraging it.
The parallels between successful SaaS companies using freemium and artists are multi-faceted. Haroon Mokhtarzada, CEO of Webs, Inc. explains the pillars of a good freemium business:
1) “The time it takes for the customer to experience a lot of value in the product is fast.”
Make your music as easy as possible to find, stream, download, and enjoy. Reduce friction as much as possible. Instead of asking people to make five clicks to get to your music, how can you get it to one click.
2) “The premium component of the offering gets more and more compelling as time goes on… The more you use the product, the more you need to upgrade.”
The more you listen to the music, the deeper the connection you feel with the artist. The deeper the connection, the more likely you will be to attend shows, buy merchandise and spend money on experiences.
3 & 4) “Freemium models work well when you can accumulate a LOT of subscribers over time… Entry level price points are relatively LOW. Think of the freemium component as a replacement for typical marketing expenses.”
Giving away your music for free is a marketing strategy that a ton of artists are using successfully. You make music for the love, but times have changed. From a business perspective, think of your music as an arrow pointing fans upstream to monetize premium experiences. Your music is now the top of the sales funnel.
This is how you build a critical mass and leverage free. Google Executive Chairman Eric Schmidt uses a “max strategy,” that he thinks will come to define content markets.
“Take whatever you are doing and do it to the max in terms of distribution. The other way of saying this is that since the marginal costs of distribution is free, you might as well put things everywhere.”
In the entertainment industry, we’re going to see some interesting businesses models built on Freemium principles in the coming years. I plan on executing a couple myself. But that’s just one piece of the puzzle.

Lesson 2: Respect the Data