The business of music: It’s the relationship, stupid

November 1, 2007 | Tim Westergren | Comments | |

[Editor's note: This is an Op-Ed piece by Tim Westergren, founder of Pandora]

The big news on the music front is the Amazon launch of DRM-free music, and the Radiohead pay-what-you-want experiment. Things continue to move at a mile a minute.

As I reflect on these two major developments, I find myself thinking about relationships. More than anything else, these developments are about relationships. For Amazon, or perhaps more specifically the labels that signed on, it’s about the relationship between labels and music consumers. For Radiohead, it’s about the relationship between a band and their fans. In both cases the message is – ‘folks, our fate is in your hands.’

If there’s one thing the digital revolution has done, it’s to place the Relationship in stark relief. Digital is fundamentally about choice – customer choice, that is. If you don’t treat your customers well, don’t respect them or give them what they need and don’t build strong, loyal relationships, they’ll just take their business somewhere else. I believe the Relationship is the currency of the future for music. If you don’t have it, you won’t survive. Are you a band who’s pissed off your fans? Pack your bags, and say hi to eDonkey. Are you a label who screwed your artist? Say hi to Digidesign, IODA, DRA, the Orchard, CDBaby and Diskmakers. They’re not comin’ back. Are you a consumer service that won’t pick up the phone or answer email complaints? Good luck with your growth curve…there are at least ten other companies doing exactly what you do.

The abundance of alternatives makes digital music a very unforgiving business – and it’s a very dramatic change for an industry that has feasted for years on the buffet of controlled scarcity. This is no longer the monologue of broadcast media – it’s the dialogue of two-way unicast and Web2.0. We’ve all read about the Fortune 500 CEO who flies to Mobile to apologize to the elderly woman who had a lousy customer-service experience and who’s subsequent blog post wound up at the top of Slashdot. That same dynamic has permeated the entire industry.

On the one hand it’s maybe a little scary, but the directness of the relationships can also be a tremendous source of social capital. Focus on those relationships and they’ll lift you up. Fans will voluntarily pay for your music (Radiohead?); Artists will stick by their labels in the hard times; Customers will lend their personal support to your business challenges (Internet Radio Equality Act?); and users will provide immense amounts of invaluable product feedback. There are even a number of websites up now that are soliciting donations by fans to subsidize the recording of bands’ CDs.

I think the key to success in the future is deeply understanding this reality. I would argue that in essence we’re steadily heading towards a patronage business. Patronage is the ultimate expression of a strong Relationship. In one way or another, everyone in this business is going to rely on some form of patronage.

I promise to answer every single comment on this article personally.

Tim (Founder, Pandora).

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About the Author, Tim Westergren

Tim Westergren is founder and chief strategy officer of the online music company, Pandora. Tim is an award-winning composer, an accomplished musician and a record producer with 20 years of experience in the music industry. He has recorded with independent labels, managed artists, owned a commercial digital recording studio, scored feature films, produced albums, and performed extensively. His main instrument is the piano, but over the years he has played the bassoon, drums and clarinet and his musical background spans such genres as rock, blues, jazz and classical music.

Tim received his B.A. from Stanford University, where he studied computer acoustics and recording technology. A musician's musician, he is obsessed with helping talented emerging artists connect with the music fans most likely to appreciate their music. In addition to guiding Pandora's overall strategy and vision, Tim now spends most of his time as Pandora's chief evangelist - traveling the country to meet with listeners to collect feedback, research local music, and spread the word of the Music Genome Project.

  • Bravo Tim. I run a venture capital database, and we're fanatical about our customers and prospective customers. As a result, we now get 15-20% of new business from referrals...free business...

    I call it "Customer service as a sales channel." I like your "it's the relationship....", too.
  • I love that concept, Don - "customer service as a sales channel..." Completely agree with that philosophy... Thanks for sharing.

    Tim
  • Tim Westergren is founder and chief strategy officer of the online music company, Pandora. Tim is an award-winning composer, an accomplished musician and a record producer with 20 years of experience in the music industry. He has recorded with independent labels, managed artists, owned a commercial digital recording studio, scored feature films, produced albums, and performed extensively. His main instrument is the piano, but over the years he has played the bassoon, drums and clarinet and his musical background spans such genres as rock, blues, jazz and classical music. Tim received his B.A. from Stanford University, where he studied computer acoustics and recording technology. A musician's musician, he is obsessed with helping talented emerging artists connect with the music fans most likely to appreciate their music. In addition to guiding Pandora's overall strategy and vision, Tim now spends most of his time as Pandora's chief evangelist - traveling the country to meet with listeners to collect feedback, research local music, and spread the word of the Music Genome Project.
  • Relationships are certainly key. At Disc Makers we're fortunate to work with some of the most passionate customers in the world: releasing a CD or DVD is in many ways like giving birth. That passion makes establishing a relationship easy.

    But there's something even more basic than the relationship that's key to any entity's success: respecting your constituents - customers, vendors, employees, and yes, shareholders.

    If you build a base of respect into your business, that will result in the ethical treatment of all your constituents. When something goes wrong, you fix it. Things WILL go wrong. It's how you deal with it that determines success or failure.

    And, SURPRISE!, dealing with employees ethically will motivate to deal with customers (and vendors) the same way. And dealing with customers ethically - really doing right by the customer, including charging a fair price and offering real value - makes it super easy to establish lasting relationships.

    To build a lasting entity (whether a business, a friendship, or a marriage) it starts with what I call "360 degree respect."
  • Completely agree, Tony. Its a great point. The internal relationships are just as important - just as defining of a company's identity, and just as determining of their long term success. If you don't have this philosophy deep down in your bones, it's hard to do it right. You can really argue that the most basic 'relationship' is with your employees. Thats where it starts. That's your DNA.

    Tim
  • Tim -

    Don't completely agree. In music the fan can experience a profound relationship with the artist but the fan still wants the artist's music for free. Why did so many Radiohead fans download In Rainbows from P2P networks instead of giving them a nominal amount? So while music my be about relationships, the business of music is about price.

    Check out the Ad-Supported Music Central blog:
    http://ad-supported-music.blogspot.com/
  • Marc - I don't disagree that there will always be folks who don't honor the bargain. But that doesn't mean it can't work. From what I understand, the Radiohead site, in spite of having serious technical difficulties, and requiring an awful lot of personal data, still drove a tremendous volume of sales - completely voluntary. That's got to be taken seriously. ANd I do think there's going to be an education process. Something of a cultural shift where music fans no longer view labels/major artists as the enemy, from whom they're perfectly within their right to steal.

    T.
  • Hey Time, great article. I have recently read about your ups and downs with Pandora, and I have to say I am impressed with your ability to keep going. We have found that our site HookUps, found at www.ChristianRecordDeal.com, benefits almost entirely from relationships, no advertising whatsoever.
  • Thanks for the note, Chris. good luck with your website. The Christian music genre seems to be thriving...

    Tim