Saturday
26Jul
Bruce Warila | Sat, July 26, 2008 at 08:57 PM Music startups should consider the Digital Competence / Market Traction Matrix
I often wonder about the viability of the hundreds of music 2.0 startups that have launched over the last 24 to 36 months. It seems like one launches every day now.
Not only are music startups operating in a space where you can make more money selling nails, these companies have to contend with the Digital Competence / Market Traction Matrix.
Artist = the artist or the team supporting the artist. All the definitions occur along a spectrum.
High Digital Competence
For artists in this group, using a computer and the Internet is like riding a bike or driving a car. They know how to find the highest-quality, lowest-cost resources, and they can assemble sites, services and widgets like Lego kits. This group understands the cost tradeoffs involved in building, buying or renting anything offered on the Internet.
Low Digital Competence
Artists in this group are from the generation that missed the digital revolution, or they’re digitally challenged, or they were raised on a remote island in the pacific.
Significant Market Traction
Artists in this group have songs that have generated significant market traction within a broad demographic.
Insignificant Market Traction
Artists in this group are either targeting a small niche, or their music is not picking up market traction for one reason or another, and that reason does not have to be lack of quality.
THE MATRIX
1) Low Digital Competence - Insignificant Market Traction
If your business model is based upon selling music or ad impressions, this segment will generate the least amount of return for a startup. Low digital competence usually translates into an ugly, distracting and/or a tired Internet presence. Couple something that screams beginner to insignificant market traction, and you have a pile of non-performers populating your proposition.
2) High Digital Competence - Insignificant Market Traction
For artists in this quadrant, the income from your proposition will be so low, and their ability to do anything technical will be so high, that your value proposition will not matter as much as the fringe benefits this group is seeking. These artists may cost more to support than the revenue they generate for you. This is the customer segment in any business that consumes 80% of your effort, but generates 20% of your revenue.
3) High Digital Competence - Significant Market Traction
This group doesn’t need you for anything, but the traffic you generate. There’s almost nothing you can do for this group technically, that they can’t do on their own. In fact, you need them more than they need you. This group will ask you for the best deal and consume the most bandwidth. Furthermore, members of this group are hell bent on building a brand under their own URL; using tools, services and widgets that were handpicked, customized and negotiated down to the lowest price points offered.
4) Low Digital Competence - Significant Market Traction
If an artist has significant market traction, but exhibits low digital competence, then this is a temporary situation. Everything on the Internet is copycatted. Any artist with money is going to upgrade when he or she sees what everyone else is doing. Every artist in quadrant 4 will end up in quadrant 3.
THE SOLUTION
Here’s a quote from Google’s Chief Economist: “Provide a scarce complimentary service to something that is getting ubiquitous and cheap.” I don’t care what your slogan is, or what your value proposition is, or how many artists you have in your system today, if the technology you supply can be quickly built by most of the companies in Silicon Valley, or if variations of what you offer are multiplying like rabbits, than you have something that is becoming, or already is…ubiquitous and cheap. The secret truly is, to offer a scarce complimentary service to the artists in quadrants 2 (somewhat), 3 and 4, that they can’t buy, build, rent and/or assemble like Legos on their own.
Not only are music startups operating in a space where you can make more money selling nails, these companies have to contend with the Digital Competence / Market Traction Matrix.
Artist = the artist or the team supporting the artist. All the definitions occur along a spectrum.
High Digital Competence
For artists in this group, using a computer and the Internet is like riding a bike or driving a car. They know how to find the highest-quality, lowest-cost resources, and they can assemble sites, services and widgets like Lego kits. This group understands the cost tradeoffs involved in building, buying or renting anything offered on the Internet.
Low Digital Competence
Artists in this group are from the generation that missed the digital revolution, or they’re digitally challenged, or they were raised on a remote island in the pacific.
Significant Market Traction
Artists in this group have songs that have generated significant market traction within a broad demographic.
Insignificant Market Traction
Artists in this group are either targeting a small niche, or their music is not picking up market traction for one reason or another, and that reason does not have to be lack of quality.
THE MATRIX
1) Low Digital Competence - Insignificant Market Traction
If your business model is based upon selling music or ad impressions, this segment will generate the least amount of return for a startup. Low digital competence usually translates into an ugly, distracting and/or a tired Internet presence. Couple something that screams beginner to insignificant market traction, and you have a pile of non-performers populating your proposition.
2) High Digital Competence - Insignificant Market Traction
For artists in this quadrant, the income from your proposition will be so low, and their ability to do anything technical will be so high, that your value proposition will not matter as much as the fringe benefits this group is seeking. These artists may cost more to support than the revenue they generate for you. This is the customer segment in any business that consumes 80% of your effort, but generates 20% of your revenue.
3) High Digital Competence - Significant Market Traction
This group doesn’t need you for anything, but the traffic you generate. There’s almost nothing you can do for this group technically, that they can’t do on their own. In fact, you need them more than they need you. This group will ask you for the best deal and consume the most bandwidth. Furthermore, members of this group are hell bent on building a brand under their own URL; using tools, services and widgets that were handpicked, customized and negotiated down to the lowest price points offered.
4) Low Digital Competence - Significant Market Traction
If an artist has significant market traction, but exhibits low digital competence, then this is a temporary situation. Everything on the Internet is copycatted. Any artist with money is going to upgrade when he or she sees what everyone else is doing. Every artist in quadrant 4 will end up in quadrant 3.
THE SOLUTION
Here’s a quote from Google’s Chief Economist: “Provide a scarce complimentary service to something that is getting ubiquitous and cheap.” I don’t care what your slogan is, or what your value proposition is, or how many artists you have in your system today, if the technology you supply can be quickly built by most of the companies in Silicon Valley, or if variations of what you offer are multiplying like rabbits, than you have something that is becoming, or already is…ubiquitous and cheap. The secret truly is, to offer a scarce complimentary service to the artists in quadrants 2 (somewhat), 3 and 4, that they can’t buy, build, rent and/or assemble like Legos on their own.
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Reader Comments (5)
Ha - I was raised on a remote island in the Pacific... :)
I agree. Every time I hear of another music-oriented social community, I wonder how many people really want to create yet ANOTHER band profile. Enough already! Sometimes smaller, newer ones do offer greater visibility to different crowds, and novel features. But I wouldn't want to be fighting the uphill battle of convincing people they need another one...
Bruce -- when I read this over, it seems immediately applicable to the other "music startup" -- artists themselves. Do you think this would apply to bands, too, or would you change the system up?
Hey Justin,
I thought about that, but I don't think it applies to bands in a helpful way. I believe bands/artists should decide which basket to put most of their eggs in. If it's a choice of focusing on song quality or website design (and other things Internet), I would go with song quality (doing whatever it takes to get it right) hands down. I don't believe anything anyone does on the Internet will get them the same traction as creating a great song will. I realize I am echoing myself here, as I say this stuff all of the time... I am going to give it some more thought.
When I originally saw the image -- before I got your context -- I assumed that it was a rubric for investing in artists. For instance, World-Around would be in the 2nd bracket: we're working hard online but in terms of actual traffic, we're still in the low hundreds on downloads, and website traffic averages just over 100 hits per day. Outside of word-of-mouth from fans, and our own in-house media, we really have zero traction with magazines, college radio, or even 99% of hip hop blogs.
Obviously, we're working on changing that daily, but it's what came to mind. I think artists would be wise to think of themselves as self-contained businesses -- which is something you've recommended before, so I guess I can stop rambling. Cheers.