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SXSW Music – A new economic model for bands?

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The following is a post by Bart Bohn, Director of ATI’s IT & Wireless Incubators.

On Wednesday night of SXSW 2011, I saw the band “She Wants Revenge” and it seemed clear that they had scoured the 80’s for the best rifts and tunes and reworked them into something sort of modern.  One of the other people at the show with me was able to quickly identify the corresponding 80’s song or inspiration, a very shocking skill.  This made me question what it takes to be a financially successful band.

First, a couple of assumptions:

  1. The vast majority of a band’s success is driven by two or three popular songs
  2. It is really hard to create exceptionally popular music (e.g., those two or three songs)

Contrary to popular messaging, the music industry is not collapsing, just the record labels.  Live music and synch (when a song gets played at a restaurant or on Gossip Girl) revenues have been growing and are each about the same size as music purchase revenue (downloads, CDs, etc.).  So, the question becomes, how to make money in live music, synch and merchandise – and a little bit on selling music.  My contention is a band really only needs 2 – 3 popular songs and a bunch of mediocre songs.

Based on fan reactions at the ACL Festival and SXSW, people only attend a show for the most popular 2-3 songs.  A normal live music show requires perhaps 15 songs, so a band needs to have about 12 “just good enough filler songs” that are consistent with and round out a band’s sound, but aren’t core to it.  The filler songs need to be a 5 out of 10 – your head bobs along, but you are not singing the lyrics.  A great way to do this is to sample or “be inspired by” prior successful music.

Merchandise is bought based on an emotional connection to either a band’s music (read the 2-3 popular songs) or an experience delivered by the band the fan wants to memorialize.  Aside from having the 2-3 popular songs, perhaps the best tactic a band can do to boost merchandise sales for memorialization reasons is to have an over-the-top show (think Flaming Lips) or a uniquely engaging show (think GirlTalk).

For synch, it is only the 2 – 3 songs that matter, but the power of getting placed in Gossip Girl or an Apple ad is incredible.  It will drive everything else if done right.  More downloads (of the 2-3 good songs), more live concert goers – both of which translate to more merchandising revenue and probably higher royalties for future synch placements.

The net is that a band really needs to focus all of its investment – both monetary and time, into just those 2-3 songs and be brutally cost-efficient on everything else.  They need to have good filler songs for live shows or albums, all the while pushing their 2 – 3 popular songs to generate revenue.