The Music Industry is Failing Because It’s Built Around the Top 20% “Hits”

By Andrew Meyer on March 4, 2008

The music industry is failing because it's built around the top 20% "hits".

I just got done reading Kevin Kelly's blog post titled "1000 True Fans" and it got me thinking about all kinds of things, especially my above statement.

In the article he delivers a fascinating concept that solo artists only need "1000 True Fans" to make a living. He defines a "True Fan" as...

"... Someone who will purchase anything and everything you produce. They will drive 200 miles to see you sing. They will buy the super deluxe re-issued hi-res box set of your stuff even though they have the low-res version. They have a Google Alert set for your name. They bookmark the eBay page where your out-of-print editions show up. They come to your openings. They have you sign their copies. They buy the t-shirt, and the mug, and the hat. They can't wait till you issue your next work. They are true fans."

He bases his "1000 True Fans" concept around the fact that The Long Tail (Wikipedia definition) doesn't provide much benefit to artists.

The Long Tail is the idea behind Amazon.com and the Internet. It's the idea that the bottom 80% "non-hits" can be more profitable than the top 20% "hits". It can be easily explained by comparing Best Buy to Amazon in regards to their selection of music CDs.

1000 true fans the long tail
Illustration: Kevin Kelly

When you go to Best Buy you will only find artists that have reached a certain recent popularity or who have a lot of demand for their back albums (the top 20% "hits"). The reason is that Best Buy only has so much space in their stores and wants to maximize their sales per foot. This is why you don't find too many CDs in Best Buy from independent labels, obscure artists or that new hipster band that's been getting plenty of blog buzz this week but hasn't been spun on MTV yet.

When you go to Amazon you will find both the top 20% "hits" plus the bottom 80% "non-hits". You will find artists from independent labels, obscure artists and that new hipster, blog buzz band (most of the time, unless they too hipster or independent for Amazon).

Amazon can provide the bottom 80% "non-hits" because they developed an innovative inventory and distribution model that lets them sell a lot of hard-to-find items in small volumes.

Note: Most of Amazon's revenues come from the fees they earn for providing referrals to small businesses who do their own inventory and distribution without Amazon even touching the book, CD or whatever they sell.

Back to the concept of "1000 True Fans" and what it got me thinking about.

I would say that the music industry is built around the top 20% "hits". Record labels, MTV, radio and retail stores are all built around the top 20% "hits". The top 20% "hits" are all they can handle.

Why are they built this way?

MTV, radio and retail store are all trying to maximize their "sales per foot". MTV can only fit so many music videos or reality shows into its network of stations per day, radio can only fit so many songs into its airwaves per day and retail stores like Best Buy can only fit so many CDs into their stores.

The big record labels are brick-and-mortar businesses that have huge buildings, employ thousands of people and spend millions on promoting and marketing their stable of bands. This means that they have huge overhead for the relatively small amount of artists in their stable.

They can't afford to cultivate bands for years and years. They can't help them grow their fan bases one member at a time.

They need the artists in their stable to pump out the hits. They need their albums to go gold and platinum. They need to sell high volumes of the albums they have in their stable.

Why?

Because if they don't they won't be able to cover their huge overhead and won't turn a profit.

This is why record labels love to work with other people in the music industry that are built around the top 20 "hits" model (i.e. MTV, radio, retail stores, Rolling Stone Magazine).

This is also why the music industry is failing. It's built around the top 20% "hits" model and it has failed to adapt and move to the Internet and its bottom 80% "non-hits" model.

The Internet with it's innovative inventory, distribution and viral capabilities is way more suited for music artists and their niche fan bases. Trent Reznor seems to get this.

That's why he personally is uploading his newest album to BitTorrent sites. He understands that he has a large number of "true fans" and that they will come to his site and buy his $5, $10, $75 and $300 album packages even though they already have his free BitTorrent upload. (I just blogged about Trent's new album and business model here).

I think Kevin Kelly is spot on with his "1000 True Fans" concept.

All go as far as to say that his concept is the future of the music industry. I think that music artists are going to start connecting more directly with their fans on the Internet like Trent is doing with his most recent album Ghosts I-IV. Artists will have their 500, 1000, or 2000 "true fans" that will buy $300 super deluxe album packages with original art (i.e. Trent Reznor).

The rest of the music industry will be built around anything beyond the 500, 1000 or 2000 "true fans" that the artist wants to do. Or they will provide platforms and services to help artists feed their "true fans".

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