d2c

Selling music, tickets and merchandise direct to fans has been an exciting prospect for artists for a long time now, as well as the source of speculation on what it all means for labels. Can they capitalise too, or are they middlemen ripe for disintermediation?

A panel at AIM’s Music Connected conference in London today chewed over the issue. It included Ian Johnsen from Mythophonic Management; Chris Batten from Enter Shikari; Rowan Brand from RGB Management; and Charles Kirby Welch of Kartel. The moderator was Mark Meharry of Music Glue.

“The whole point here is to try and help on the education process,” he said. “It is actually a lot more complicated doing D2C than what everybody has got their head around.”

So, what IS D2C anyway? “I see it as the artist and their representatives – be that manager or label – selling and communicating and customer servicing with the fanbase, with the customers, directly. It’s as simple as that,” said Johnsen.

“From my perspective, it’s everything involved in our web-store, which could be selling our tickets, selling our music or our merchandising, which we’re selling direct to our fans,” added Batten. “You can do things like bundles as well, which gives people better deals: more for their money, so they’re happier.”

Kirby-Welch said D2C is a universal thing across labels, artists, management and promoters for all of them to engage directly with their customers.

“By doing that directly, the advantage immediately is you have access and ownership of a lot of that data,” he said, citing tickets as one area where the data has traditionally been closely guarded by the ticketing firms.

Meharry noted that traditionally, an artist’s website would be a “marketing expense” – usually footed by the label or management company – whereas now it’s a “retail income opportunity”. With this shift, who is the right person to be running the website?

“Whoever’s the best person for the job,” he said. “Some managers don’t wanna get involved, or don’t have the skillset required to get involved, or the patience, or the right artist. Whether the label can speak for the artist in the same way that the artist or the management can speak for the artist? It depends on the situation,” he said.

“If people can do it, and if the artist can’t, then it should be with someone who can. But I don’t think it should automatically fall into the hands of someone who doesn’t know what to do with it.” And he suggested that in the past this often happened, with labels often the culpable parties.

If you can’t action it efficiently, there’s little point in trying to retain the control,” agreed Kirby-Welch, suggesting that independents will “lead the charge” in the ongoing shifts around D2C – not least because many are very open to the necessary collaboration.

Brand said that everyone has a stake in the website working well, from promoters who want to make sure tour dates are prominently listed through to digital retailers.

“Sometimes as a manager I feel a little like a policeman,” he said. “So that everyone involved in the different and varying aspects of the band’s business, we can help them contribute and give them access to as many of he fans as possible. But the problems start to come when people start to put fences around it and say ‘this is mine’. And that includes managers and artists to some extent.”

The conversation turned to fulfilment, and the news that Enter Shikari have their own spin-off business helping other artists and even labels to run their own D2C operations. It started as a bedroom business for the band, and has grown ever since.

“We have a company called Remedy that has a large warehouse near Stevenage which deals with lots of artists,” said Batten. “We’re not actually in the warehouse actually picking the stock ourselves! But we’ve got brothers-in-laws, actual brothers involved…”

How about ticketing – a business that isn’t always financially rewarding for artists, when all the costs are factored in. Why sell tickets direct? “For the data. For Ticketmaster not charging you six quid on top of a 15 quid ticket. And being able to bundle: we sell tickets along with merch and CDs,” said Johnsen.

Brand argued that many artists feel a “duty of care” towards their fanbases. “The pillaging of data is a bit of a problem for a lot of fans,” he said, noting that fans of independent bands, for example, may be miffed if buying a ticket from a big outlet results in them receiving emails promoting shows they’re unlikely to enjoy.

“There’s a sense of responsibility: the artists I work with are all quite adamant: where possible we try to connect directly with the fans, and not expose them to a myriad of other marketing outlets that won’t be relevant to them. If they are relevant, of course, there’s a conversation to be had.”

Kirby-Welch talked ticket allocations, which can be a big factor when trying to sell tickets. “Your booking agent and promoter – particularly the national promoter – will want to hold on to as many tickets as they can,” he said. “The bigger the band, the more leverage you have.”

Johnsen – who manages Enter Shikari among other artists – said he pushes very hard to get a bigger allocation for his bands, not least because his marketing costs for selling tickets to fans are “minute” based on the hard work in building up a mailing list and community. “We trained the audience over the last six to seven years to trust EnterShikari.com as a retail outlet,” he said.

Johnsen also talked about having the confidence to deal directly with venues, proving that a self-promoted gig will pay off for them without unfair terms. “We self-promoted a tour, and that gave us the power to know we could do the tour ourselves… If people want to be in business with us, they can be in business with us. If they don’t, I don’t want to be in business with them!”

Batten talked about the direct relationship with fans, and why Enter Shikari likes to know about them, based on the data generated on their website. “If someone’s bought every release we’ve done, we maybe want to do something nice for them – bring them backstage,” he said.

Kirby-Welch pointed out that there is still value in data being held by ticketing firms, rather than just by individual artists or labels – for example, the potential to promote an emerging artist to “an audience of people who like going to gigs” rather than just their existing fanbase.

Partnership, rather than data warfare, seems the best way forward. “It’s a shame when you end up in competition with the people you’re supposed to be in partnership with,” added Johnsen.

Meharry said that Warner Music Group has said publicly that 20% of its sales in the UK go through artist websites rather than other retailers. “That rings very true,” said Kirby-Welch, citing figures for an independent label that works with Kartel showing one of their top five retail channels was direct-to-fan (D2F).

“The label is doing in the UK £35k turnover in sales on its D2F, and globally it’s doing £128k. It’s a significant market share for their global base, and it’s growing all the time,” he said, before making some margin comparisons.

If you’re retailing a CD at £10.99 on Amazon, this label sees a payback… of £5.23. When it sells through its own web-store, the payback is £6.62, so it’s about a 26% increase in margin.” Albeit with costs for fulfilment and customer service. “But over 1,000 CDs, that’s quite a significant increase in your margin.”

So, to the main question of the session: is D2C a friend or foe for the recording industry – for labels. “It has to be a friend, but it has to be down to how you use it. Certainly not a foe,” said Johnsen.

“Definitely a friend. When you look at the high-street retail landscape, which is in decline, what’s replacing that? Well, it’s Amazon. Do we want to give our money to Amazon?” said Kirby-Welch. “Amazon is a mail-order e-commerce solution. Why not make your own? Many people like to buy direct from the brand, be that the artist or label.”

Brand agreed. “I look at it as being an enormous, open opportunity,” he said, suggesting that where managers and artists work hand-in-hand with labels, they can make D2C a strong, sustainable business for both.

“We see very real income from it, so it’s only been an amazing thing for us, and from my discussions with the label at least, we’ve been able to sell more records through it. Definite friend.”

The panel were asked for their recommendations for D2C services to help artists and labels. Johnsen talked about Enter Shikari’s long-term partnership with Music Glue, while Meharry squirmed in his seat (“I promised not to do a stage-pitch!”).

“It’s been built around a management/artist team being able to do their own business without having to rely so much on other middlemen,” said Johnsen. “It does work for me, because it’s been designed to work for me…”

He praised Bandcamp, but said he sees the ticketing aspect as important, which he thinks is currently lacking from that service.

Meanwhile, Kirby-Welch talked about his experience working with various services, before deciding to build one within Kartel: “We felt the need to develop our own in-house platform so that we could have the flexibility to create the solutions that we needed for different projects… There isn’t a one-size-fits-all solution.”

Why does the industry focus on a 99p download when it could be selling £40 laminates for a soundcheck, wondered one audience member. Premium products or VIP experiences, in other words - an increasingly common side to the industry beyond Kickstarter rewards.

If people are concentrating on the 99p download they’re concentrating in the wrong place, because that’s where there isn’t anything to be gained,” said Johnsen, before noting that he’s not a fan of the “VIP experience” – preferring to let fans in to see soundchecks if they arrive early for gigs, rather than selling this access for a premium price.

“That’s what The Jam and Madness used to do, so it’s good enough for us!” he said, before noting that there are “no rules about what you can and can’t sell… if you know what your audience wants and will stand in terms of how often you can sell things to them, and how expensive they can be”.

“There’s a good margin in deluxe products, but there’s also a lot of work in making them, so you have to be realistic in terms of what content you can make and sell at a premium,” said Kirby-Welch. “There’s a big place for it, but it’s very time-consuming to do it well, and if you don’t do it well, your fans may get a bit hacked off that they’ve paid £60 for a cardboard box with a double-LP inside it.”